ConAgra Foods, Inc., (NYSE: CAG) one of North America’s leading
packaged food companies, today reported results for the fiscal 2010
first quarter ended Aug. 30, 2009. Diluted EPS from continuing
operations was $0.37, including $0.01 per diluted share of net
expense from items impacting comparability. Excluding those items,
diluted EPS from continuing operations was $0.38. For the same
period a year ago, diluted EPS from continuing operations of $0.23
included net $0.04 of expense from items impacting comparability.
Items impacting comparability in the current year and prior year
are summarized toward the end of this release.
Gary Rodkin, ConAgra Foods’ chief executive officer, commented,
“We are off to a strong start in fiscal 2010. The Consumer Foods
segment posted significantly improved operating profits, along with
good sales trends across the consumer branded portfolio, and we
expect the balance of the year to show strong profits for this
segment due to manageable inflation, good cost savings, sales
growth, and favorable mix. Our Commercial Foods segment is poised
for a solid profit performance in line with our expectations, and
we are confident we will deliver our raised EPS guidance for this
fiscal year.”
Minor Segment Change: During the quarter, the company
transferred the Alexia frozen operations from the Consumer Foods
segment to the Commercial Foods segment, resulting in slightly
changed historical amounts for segment sales and profits. The
Q&A document related to this release gives the current
presentation of historical segment amounts, reflecting this
change.
Consumer Foods Segment (63% of
first-quarter sales)
Branded and non-branded food sold in
retail and foodservice channels.
The Consumer Foods segment posted sales of $1,860 million and
operating profit of $250 million for the quarter. Sales increased
1% as reported, which includes an approximate 2% negative impact
from lower sales of Slim Jim products resulting from the June 9,
2009, Garner, North Carolina, plant accident. Additionally, as part
of ongoing initiatives, the company intentionally eliminated a
number of low-margin SKUs and scaled back on some low-margin
customer channels and geographic markets, which negatively impacted
sales by approximately 1%, but which improved profit margins.
Unfavorable foreign exchange rates negatively impacted sales growth
by approximately 1%.
Unit volumes declined 1% as reported, which includes an
approximate 2% negative impact from lower sales of Slim Jim
products. Additionally, the company’s SKU rationalization actions
and customer and market changes referenced above negatively
impacted unit volumes by approximately 1%.
- Big brands that posted strong
sales growth and market share gains included Healthy Choice,
Hunt’s, Marie Callender’s, Orville Redenbacher’s, and Snack Pack.
The company continues to benefit from innovation introduced in the
second half of fiscal 2009 as well as stronger and more effective
marketing.
- More brand details can be found
in the Q&A document accompanying this release.
Operating profit of $250 million was 34% ahead of last year’s
$186 million, as reported. Excluding $11 million of net benefit in
the year-ago period from items impacting comparability, operating
profit of $250 million in the current quarter was 43% above the
comparable year-ago amount of $175 million. Despite lower
profitability from the Slim Jim business, the segment posted
year-over-year profit improvement due to strong cost savings,
improved mix and pricing, as well as more manageable input cost
inflation. The company notes that significantly higher commodity
costs in the year-ago period created a favorable profit comparison
in the current quarter. Advertising and promotion expense increased
slightly versus the year-ago period.
Note: Slim Jim production volume and service levels are
in the process of being restored following the Garner, North
Carolina, accident. Aside from unusual costs and insurance
reimbursement related to such, which are discussed in the section
on Major Items Impacting First-quarter Fiscal 2010 EPS
Comparability toward the end of this document, the company
estimates that Consumer Foods profitability was negatively impacted
by approximately $10 million due to lower Slim Jim volumes. A
substantial portion of this amount, as well as any additional
foregone operating profit in the remaining quarters this fiscal
year, is expected to be reimbursed to the company later in the
fiscal year as part of its business interruption insurance
coverage. The company will comment on the timing of the expected
reimbursement when details are finalized, and will consider such
payments to be part of ongoing operating profitability for the
segment.
Commercial Foods Segment (37% of
first-quarter sales)
Specialty potato, dehydrated
vegetable, seasonings, blends, flavors, and milled grain products
sold to foodservice and commercial channels worldwide.
Sales for the Commercial Foods segment were $1,101 million, 9%
below last year’s $1,207 million; more than $100 million of the
sales decline was the result of lower flour prices resulting from
lower underlying wheat costs. Segment operating profit was $141
million, 5% above last year’s $134 million. While the difficult
restaurant environment negatively impacted volumes for Lamb Weston
specialty potato products, those operations posted a slight
improvement in sales and profits due to the impact of an
acquisition, improved mix, pricing necessitated by higher input
costs, and operating efficiencies. Flour milling profitability
increased, reflecting modest profits in the year-ago period and
thus a favorable comparison; the current-quarter profit improvement
also reflects milling efficiencies and favorable market conditions.
Profits for the seasonings, blends, flavorings, and dehydrated
products operations were below year-ago amounts which included a $5
million gain from a sale of property. The company expects full-year
fiscal 2010 operating profit for this segment to be in line with
that of fiscal 2009.
Hedging Activities – This language primarily relates to
operations other than the company’s milling operations.
The company recorded $8 million of net hedging loss as
unallocated Corporate expense in the current quarter, and $33
million of net hedging loss as unallocated Corporate expense in the
year-ago period. The company identifies both of these amounts as
items impacting comparability. Those amounts are reclassified from
unallocated Corporate expense to the operating segments when the
underlying commodity being hedged is expensed in segment cost of
goods sold.
Other Items
- Corporate expense was $101
million for the quarter and $97 million in the year-ago period.
Current quarter amounts include $8 million due to hedge losses, and
prior-year amounts include $33 million of hedge losses. Excluding
these amounts, Corporate expense was $93 million for the quarter
and $64 million in the year-ago period; the increase was due
largely to higher incentive compensation costs.
- Equity method investment
earnings were $9 million for the first quarter, up from $1 million
in the year-ago period, reflecting better results for specialty
potato joint ventures.
- Net interest expense was $42
million in the current quarter compared with $50 million in the
year-ago period; interest income from the notes receivable held in
connection with the divestiture of the Trading & Merchandising
operations benefited the current quarter and a portion of the
year-ago period.
- The effective tax rate for
continuing operations for the quarter was 35%. Going forward, the
company expects an effective tax rate of approximately 35% for
continuing operations, excluding items impacting
comparability.
Capital Items
- Dividends for the quarter
totaled $85 million versus $92 million last year, reflecting fewer
shares outstanding.
- For the quarter, capital
expenditures from continuing operations for property, plant, and
equipment were $119 million, compared with $106 million in the
year-ago period. Depreciation and amortization expense from
continuing operations was approximately $82 million for the
quarter; this compares with a total of $76 million in the year-ago
period.
- During the quarter, the company
announced plans to build a state-of-the art sweet potato processing
plant in Delhi, Louisiana; the plant is expected to be fully
operational by the end of calendar 2010. This plant will
significantly expand the company’s presence in the sweet potato
fries market and is expected to enable additional significant sales
and profit growth opportunities for the Lamb Weston specialty
potato operations over time.
Discontinued Operations
Year-ago amounts included $0.71 of diluted EPS from discontinued
operations, reflecting the gain from the June 2008 divestiture of
the Trading & Merchandising operations. There was no diluted
EPS contribution from discontinued operations in the current
quarter.
Outlook
The company expects fiscal 2010 full-year diluted EPS from
continuing operations, excluding items impacting comparability, to
approach $1.70, reflecting the strong performance of the Consumer
Foods segment in the first quarter and expectations for continued
progress for this segment throughout the balance of the fiscal
year.
Major Items Impacting First-quarter Fiscal 2010 EPS
Comparability
Included in the $0.37 diluted EPS from continuing operations for
the first quarter of fiscal 2010 (EPS amounts rounded and after
tax):
- Approximately $0.01 per diluted
share of net expense related to the mark-to-market impact of
derivatives used to hedge input costs, temporarily classified in
unallocated Corporate expense. This expense will later be
reclassified to the operating segments when underlying commodities
are expensed in segment cost of goods sold.
- Although the net impact of the
following items was immaterial to Consumer Foods’ operating profit
for the quarter, Consumer Foods’ results in the first quarter of
fiscal 2010 include approximately $37 million of expense ($6
million in cost of goods sold, $31 million in SG&A expense) and
approximately that same amount of insurance reimbursement (all of
which is classified as a reduction of Consumer Foods SG&A
expense) related to the Garner, North Carolina, accident. These
items are separate from any foregone operating profit due to lower
Slim Jim product volumes, and related reimbursement from business
interruption insurance, which is expected to be received later in
the fiscal year.
Included in the $0.23 diluted EPS from continuing operations for
the first quarter of fiscal 2009 (EPS amounts rounded and after
tax):
- Approximately $0.04 per diluted
share of net expense related to the mark-to-market impact of
derivatives used to hedge input costs, temporarily classified in
unallocated Corporate expense. This expense is reclassified to the
operating segments as the underlying commodities are expensed in
segment cost of goods sold.
- Gain of $0.02 per diluted share,
or $19.4 million pretax ($10.6 million after tax), resulting from
the sale of the Pemmican brand, classified as a reduction in
SG&A expense within the results of the Consumer Foods
segment.
- Approximately $0.02 per diluted
share of net expense related to restructuring efforts to improve
operating efficiencies in continuing operations; this $8.6 million
of pretax expense ($7.7 million after tax) is largely reflected in
the Consumer Foods segment ($7.8 million of SG&A).
Discussion of Results
ConAgra Foods will host a conference call at 9:30 a.m. EDT today
to discuss the results. Following the company’s remarks, the call
will include a question-and-answer session with the investment
community. Domestic and international participants may access the
conference call toll-free by dialing 1-888-791-4326 and
1-913-905-3164, respectively. No confirmation or pass code is
needed. This conference call also can be accessed live on the
Internet at http://investor.conagrafoods.com.
A rebroadcast of the conference call will be available after 1
p.m. EDT today. To access the digital replay, a pass code number
will be required. Domestic participants should dial 1-888-203-1112,
and international participants should dial 1-719-457-0820 and enter
pass code 2506640. A rebroadcast also will be available on the
company’s Web site.
In addition, the company has posted a question-and-answer
supplement relating to this release at
http://investor.conagrafoods.com. To view recent company news,
please visit http://media.conagrafoods.com.
Annual Stockholders’ Meeting Webcast
The company will webcast its 2009 Annual Stockholders’ Meeting
on Friday, Sept. 25, 2009. This event will be webcast live
beginning at 2:30 p.m. EDT. The webcast will be archived starting
at 4:30 p.m. EDT on Friday, Sept. 25, and can be accessed at
http://investor.conagrafoods.com.
ConAgra Foods, Inc., (NYSE: CAG) is one of North America’s
leading food companies, with brands in 97 percent of America’s
households. Consumers find Banquet, Chef Boyardee, Egg Beaters,
Healthy Choice, Hebrew National, Hunt’s, Marie Callender’s, Orville
Redenbacher’s, PAM, Peter Pan, Reddi-wip and many other ConAgra
Foods brands in grocery, convenience, mass merchandise, and club
stores. ConAgra Foods also has a strong business-to-business
presence, supplying potato, other vegetable, spice and grain
products to a variety of well-known restaurants, foodservice
operators and commercial customers. For more information, please
visit us at www.conagrafoods.com.
Note on Forward-looking Statements
This release contains forward-looking statements. These
statements are based on management’s current views and assumptions
of future events and financial performance and are subject to
uncertainty and changes in circumstances. The company undertakes no
responsibility for updating these statements. Readers of this
release should understand that these statements are not guarantees
of performance or results. Many factors could affect the company’s
actual financial results and cause them to vary materially from the
expectations contained in the forward-looking statements. These
factors include, among other things: availability and prices of raw
materials; the impact of the accident at the Garner manufacturing
facility, including the ultimate costs incurred and the amounts
received under insurance policies; product pricing; future economic
circumstances; industry conditions; the company’s ability to
execute its operating plans; the success of the company’s
innovation, marketing, and cost-savings initiatives; the
competitive environment and related market conditions; operating
efficiencies; the ultimate impact of the company’s recalls; access
to capital; actions of governments and regulatory factors affecting
the company’s businesses and other risks described in the company’s
reports filed with the Securities and Exchange Commission. The
company cautions readers not to place undue reliance on any
forward-looking statements included in this release, which speak
only as of the date made.
Regulation G Disclosure
Continuing Operations
Below is a reconciliation of diluted earnings per share
exclusive of items impacting comparability.
Q1 FY10 EPS from Continuing
Operations
Reconciliation for Regulation G
Purposes
Year-over-year
Q1 FY10
Q1 FY09
% change
Diluted EPS $
0.37
$ 0.23 61 % Items impacting
comparability: Restructuring charges - 0.02
*
Expense related to mark-to-market impact of derivatives 0.01 0.04
*
Gain on Sale of Pemmican
- (0.02 )
*
Diluted EPS excluding items impacting comparability $
0.38 $ 0.27 41 %
*Items impacting comparability are each rounded to the nearest
penny Consumer Foods Segment Below is a
reconciliation of segment operating profit exclusive of items
impacting comparability.
Consumer Foods Segment
Reconciliation (impacted by rounding)
Year-over-year (Dollars in millions)
Q1 FY10
Q1 FY09
% change
Consumer Foods Segment
Operating Profit
$ 250 $ 186 34 %
Restructuring charges - 8
Gain on Sale of Pemmican
- (19 )
Consumer Foods Segment Adjusted
Operating Profit $ 250 $ 175
43 % ConAgra Foods, Inc.
Segment Operating Results (in millions) FIRST QUARTER
13 Weeks Ended 13 Weeks Ended
August 30, 2009
August 24, 2008 Percent Change
SALES
Consumer Foods $ 1,860.1 $ 1,849.3 0.6% Commercial Foods
1,101.3 1,207.2 (8.8)% Total 2,961.4
3,056.5 (3.1)%
OPERATING PROFIT
Consumer Foods $ 249.9 $ 186.3 34.1% Commercial Foods 140.8
133.9 5.2% Total operating profit for segments
390.7 320.2 22.0%
Reconciliation of total operating
profit for segments to income from continuing operations before
income taxes and equity method investment earnings Items
excluded from segment operating profit: General corporate expense
(100.6 ) (97.4 ) 3.3% Interest expense, net (41.5 )
(50.1 ) (17.2)% Income from continuing operations before income
taxes and equity method investment earnings $ 248.6 $ 172.7
43.9%
Segment operating profit excludes
general corporate expense and net interest expense. Management
believes such amounts are not directly associated with segment
performance results for the period. Management believes the
presentation of total operating profit for segments facilitates
period-to-period comparison of results of segment operations.
ConAgra Foods, Inc. Consolidated
Statements of Earnings (in millions, except per share amounts)
FIRST QUARTER
13 Weeks Ended
13 Weeks Ended
Percent August 30, 2009
August 24, 2008
Change Net sales $ 2,961.4
$
3,056.5
(3.1)% Costs and expenses: Cost of goods sold 2,244.9
2,465.0
(8.9)% Selling, general and administrative expenses 426.4
368.7
15.6% Interest expense, net 41.5
50.1
(17.2)% Income from continuing operations before income
taxes and equity method investment earnings 248.6
172.7
43.9% Income tax expense 91.0
66.0
37.9% Equity method investment earnings 8.9
0.9
888.9% Income from continuing operations 166.5
107.6
54.7% Income (loss) from discontinued operations, net of tax
(1.3 )
334.8
N/A Net income $ 165.2
$
442.4
(62.7)% Less: Net income (loss) attributable to
noncontrolling interests (0.7 ) - N/A Net
income attributable to ConAgra Foods, Inc. $ 165.9
$
442.4
(62.5)% Earnings per share – basic Income from
continuing operations $ 0.38
$0.23
65.2% Income (loss) from discontinued operations (0.01 )
0.72
N/A Net income $ 0.37
$
0.95
(61.1)% Weighted average shares outstanding
443.2
467.1
(5.1)% Earnings per share – diluted Income
from continuing operations $ 0.37
$
0.23
60.9% Income (loss) from discontinued operations -
0.71
(100.0)% Net income $ 0.37
$
0.94
(60.6)% Weighted average share and share equivalents
outstanding
445.6
469.6
(5.1)% ConAgra Foods, Inc.
Consolidated Balance Sheets (in millions)
August 30, 2009
August 24, 2008
ASSETS Current assets Cash and cash
equivalents $ 289.7 $ 296.4
Receivables, less allowance for
doubtful accounts of $11.5 and $14.4
886.1 961.3 Inventories 2,013.3 2,040.1 Prepaid expenses and other
current assets 373.6 353.9 Current assets held for sale -
6.0 Total current assets
3,562.7
3,657.7
Property, plant and equipment, net 2,663.2 2,485.3 Goodwill
3,491.3 3,477.3 Brands, trademarks and other intangibles, net 836.5
820.6 Other assets 676.7 1,074.8 Noncurrent assets held for sale
- 10.6 $ 11,230.4 $ 11,526.3
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
Notes payable $ 2.7 $ 25.2 Current installments of long-term debt
15.8 314.8 Accounts payable 875.0 942.2 Accrued payroll 148.7 147.8
Other accrued liabilities 608.8 1,023.3 Total
current liabilities
1,651.0
2,453.3
Senior long-term debt, excluding current installments
3,274.7 2,848.7 Subordinated debt 195.9 200.0 Other noncurrent
liabilities 1,309.0 1,250.4 Common stockholders' equity
4,799.8 4,773.9 $ 11,230.4 $ 11,526.3
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