ConAgra Foods, Inc., (NYSE: CAG) one of North America’s leading
packaged food companies, today reported results for the fiscal 2010
second quarter ended Nov. 29, 2009. Diluted EPS from continuing
operations was $0.55 compared with $0.38 a year ago. Current
quarter results include $0.03 per diluted share of net benefit, and
prior year amounts included $0.05 of net expense, from items
impacting comparability. Diluted EPS from continuing operations was
up 45% as reported and 21% on a comparable basis.
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,
“Our strong performance this quarter reflects continued momentum in
the Consumer Foods segment and gives us heightened confidence in
our fiscal 2010 EPS outlook. Success with innovation and marketing
drove significantly improved market shares and top-line progress in
the Consumer Foods segment for the quarter, while a more favorable
input cost environment and strong cost savings substantially
contributed to profit growth. We are very pleased with our success
this year and with the increased EPS outlook, and expect to
continue demonstrating the earnings power of our company with
consistent and sustainable growth.”
Consumer Foods Segment (64% of
year-to-date sales)
Branded and non-branded food sold in
retail and foodservice channels.
The Consumer Foods segment posted sales of $2,078 million and
operating profit of $330 million for the quarter. Top-line progress
was broad-based. Sales increased 3% as reported, which includes an
approximate 1% negative impact from lower sales of Slim Jim
products given that brand’s ongoing recovery. SKU rationalization
negatively impacted sales growth by approximately 1%.
Unit volumes increased 2% as reported, which includes an
approximate 1% negative impact from lower sales of Slim Jim
products and 1% negative impact from SKU rationalization
efforts.
- Large brands that posted strong
sales growth include Banquet, Chef Boyardee, Healthy Choice,
Hunt’s, Marie Callender’s, Orville Redenbacher’s, Peter Pan, Snack
Pack, and several others.
- More brand details can be found
in the Q&A document accompanying this release.
Operating profit of $330 million was 31% ahead of last year’s
$251 million; this significant growth occurred even with $24
million of increased marketing investment. The year-over-year
profit improvement was due to a more favorable input cost
environment, strong productivity savings, and good sales results.
The company expects continued year-over-year operating profit
growth for this segment for the rest of the fiscal year. The
company estimates that Consumer Foods profitability was negatively
impacted by approximately $7 million due to lower Slim Jim volumes
and higher Slim Jim production costs in the fiscal second
quarter.
Commercial Foods Segment (36% of
year-to-date 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 $1,095 million, 11%
below last year’s $1,235 million; approximately $110 million of the
sales decline was due to lower flour milling sales, which reflect
the pass-through impact of lower underlying wheat costs. Segment
operating profit was $160 million, 1% above last year’s $158
million. Lamb Weston profits improved, reflecting the positive
impacts of higher prices necessitated by increased input costs, as
well as plant efficiencies and a refinement to its product cost
allocation process; these were partially offset by the negative
impact on sales and volume of difficult food service industry
conditions. Flour milling profitability increased due to mill
efficiencies and favorable wheat market conditions. Profits for the
rest of the segment were below year-ago amounts, reflecting
continued difficult market conditions for key vegetable items.
Although the segment posted profit growth for the first half of
the fiscal year largely due to higher-than-planned flour milling
profits, on a full-year basis the company continues to expect the
Commercial Foods segment to deliver operating profits in line with
year-ago amounts due, in part, to expectations for continued
softness in the food service industry.
Hedging Activities – This language primarily relates to
operations other than the company’s milling operations.
The company recorded $6 million of net hedging benefit as
unallocated Corporate expense in the current quarter, versus $48
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 recognized in segment cost of
goods sold.
Other Items
- Corporate expense was $94
million for the quarter and $111 million in the year-ago period.
Current quarter amounts include $6 million of benefit due to
hedging activities, and prior year amounts include $48 million of
hedge loss. Excluding these amounts, Corporate expense was $101
million for the quarter and $64 million in the year-ago period,
with the year-over-year increase largely reflecting higher
incentive accruals.
- Equity method investment
earnings were $6 million for the second quarter, up from $2 million
in the year-ago period.
- Net interest expense was $41
million in the current quarter compared with $43 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 the year-ago period by
approximately $20 million and $18 million, respectively.
- The effective tax rate for
continuing operations for the quarter rounded to 33%, lower than
planned due to the benefit of certain income tax credits and
deductions that relate to previous periods. The benefit from this
lower rate is cited as an item impacting comparability. 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 $84 million versus $86 million last year, reflecting fewer
shares outstanding.
- For the quarter, capital
expenditures from continuing operations for property, plant, and
equipment were $123 million, compared with $115 million in the
year-ago period. Depreciation and amortization expense from
continuing operations was approximately $83 million for the
quarter; this compares with a total of $79 million in the year-ago
period.
Raised EPS Outlook
The company now expects fiscal 2010 full-year diluted EPS from
continuing operations, excluding items impacting comparability, to
approach $1.73, reflecting the strong performance in the first half
of the fiscal year. In a change from prior guidance, the company
now expects the Slim Jim business interruption insurance recovery,
estimated in the range of $0.05 per diluted share, to be recognized
in fiscal 2011 instead of fiscal 2010.
Major Items Impacting Second-quarter Fiscal 2010 EPS
Comparability
Included in the $0.55 diluted EPS from continuing operations for
the second quarter of fiscal 2010 (EPS amounts rounded and after
tax):
- Approximately $0.02 per diluted
share of net benefit from a lower-than-planned effective income tax
rate.
- Approximately $0.01 per diluted
share of net benefit related to the net gains on derivatives used
to hedge input costs, temporarily classified in unallocated
Corporate expense. This benefit will be reclassified to the
operating segments when underlying items are recognized in segment
results.
Included in the $0.38 diluted EPS from continuing operations for
the second quarter of fiscal 2009 (EPS amounts rounded and after
tax):
- Approximately $0.06 per diluted
share of net expense related to the net losses on derivatives used
to hedge input costs, temporarily classified in unallocated
Corporate expense. This expense will be reclassified to the
operating segments when underlying items are recognized in segment
results.
- Approximately $0.01 per diluted
share of net benefit from a lower-than-planned effective income tax
rate.
Discussion of Results
ConAgra Foods will host a conference call at 9:30 a.m. EST 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 1-888-806-6215 and
1-913-312-6677, 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. EST 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 9314857. 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.
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.
Q2 FY10 EPS from Continuing
Operations Reconciliation for Regulation G Purposes
Year-over-year
Q2 FY10
Q2 FY09
% change Diluted EPS* $ 0.55
$ 0.38 45 % Items impacting
comparability: (Benefit)/Expense related to mark-to-market
impact of derivatives (0.01 ) 0.06 (Benefit)/Expense of
lower-than-planned effective income tax rate (0.02 )
(0.01 )
Diluted EPS excluding items impacting
comparability $ 0.52 $ 0.43
21 % *Items impacting comparability
are each rounded to the nearest penny
ConAgra Foods, Inc. Segment
Operating Results (in millions) SECOND QUARTER 13 Weeks
Ended 13 Weeks Ended
November 29, 2009
November 23, 2008 Percent Change
SALES
Consumer Foods $ 2,078 .1 $ 2,017 .0 3 .0% Commercial Foods
1,094 .5 1,234 .7 (11 .4)% Total 3,172 .6
3,251 .7 (2 .4)%
OPERATING PROFIT
Consumer Foods $ 330 .0 $ 251 .2 31 .4% Commercial Foods 159
.7 157 .7 1 .3% Total operating profit for segments 489 .7
408 .9 19 .8%
Reconciliation of total operating profit to
income from continuing operations before income taxes and equity
method investment earnings Items excluded from segment
operating profit: General corporate expense (94 .4) (111 .4) (15
.3)% Interest expense, net (40 .6) (42 .7) (4 .9)%
Income from continuing operations before income taxes and equity
method investment earnings $ 354 .7 $ 254 .8 39 .2%
Segment operating profit excludes
general corporate expense, equity method investment earnings, 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. Segment Operating Results (in millions) SECOND QUARTER
26 Weeks Ended 26 Weeks Ended
November 29, 2009
November 23, 2008 Percent Change
SALES
Consumer Foods $ 3,938 .2 $ 3,866 .3 1 .9% Commercial Foods
2,195 .8 2,441 .9 (10 .1)% Total 6,134 .0
6,308 .2 (2 .8)%
OPERATING PROFIT
Consumer Foods $ 579 .9 $ 437 .5 32 .5% Commercial Foods 300
.5 291 .6 3 .1% Total operating profit for segments 880 .4
729 .1 20 .8%
Reconciliation of total operating profit to
income from continuing operations before income taxes and equity
method investment earnings Items excluded from segment
operating profit: General corporate expense (195 .0) (208 .8) (6
.6)% Interest expense, net (82 .1) (92 .8) (11 .5)%
Income from continuing operations before income taxes and equity
method investment earnings $ 603 .3 $ 427 .5 41 .1%
Segment operating profit excludes
general corporate expense, equity method investment earnings, 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)
SECOND QUARTER 13 Weeks Ended 13 Weeks Ended
November 29, 2009
November 23, 2008
Percent Change
Net sales $ 3,172 .6
$
3,251
.7
(2 .4)% Costs and expenses: Cost of goods sold 2,317 .3 2,565 .2 (9
.7)% Selling, general and administrative expenses 460 .0 389 .0 18
.3% Interest expense, net 40 .6 42 .7 (4 .9)% Income
from continuing operations before income taxes and equity method
investment earnings 354 .7 254 .8 39 .2% Income tax expense 117 .4
84 .6 38 .8% Equity method investment earnings 5 .9 1
.9 210 .5% Income from continuing operations 243 .2 172 .1 41 .3%
Loss from discontinued operations, net of tax (4 .0)
(3 .6) 11 .1% Net income $ 239 .2
$
168
.5
42 .0% Less: Net income (loss) attributable to noncontrolling
interests (0 .5) 0 .4 N/A Net income attributable to
ConAgra Foods, Inc. $ 239 .7
$
168
.1
42 .6% Earnings per share – basic Income from
continuing operations $ 0 .55
$
0
.38
44 .7% Loss from discontinued operations (0 .01) -
(100 .0)% Net income $ 0 .54
$
0
.38
42 .1% Weighted average shares outstanding 443 .2
447 .1 (0 .9)% Earnings per share – diluted
Income from continuing operations $ 0 .55
$
0
.38
44 .7% Loss from discontinued operations (0 .01)
(0
.01)
-
Net income $ 0 .54
$
0
.37
45 .9% Weighted average share and share equivalents
outstanding
446 .2 449 .5 (0 .7)%
ConAgra Foods, Inc. Consolidated Statements of
Earnings
(in millions, except per share
amounts)
SECOND QUARTER 26 Weeks Ended 26 Weeks Ended
November 29, 2009
November 23, 2008
Percent Change
Net sales $ 6,134 .0
$
6,308
.2
(2 .8)% Costs and expenses: Cost of goods sold 4,562 .2 5,030 .2 (9
.3)% Selling, general and administrative expenses 886 .4 757 .7 17
.0% Interest expense, net 82 .1 92 .8 (11 .5)% Income
from continuing operations before income taxes and equity method
investment earnings 603 .3 427 .5 41 .1% Income tax expense 208 .4
150 .6 38 .4% Equity method investment earnings 14 .8
2 .8 428 .6% Income from continuing operations 409 .7 279 .7 46 .5%
Income (loss) from discontinued operations, net of tax
(5 .3) 331 .2 N/A Net income $ 404 .4
$
610
.9
(33 .8)% Less: Net income (loss) attributable to noncontrolling
interests (1 .2) 0 .4 N/A Net income attributable to
ConAgra Foods, Inc. $ 405 .6
$
610
.5
(33 .6)% Earnings per share – basic Income from
continuing operations $ 0 .93
$
0
.61
52 .5% Income (loss) from discontinued operations (0 .02)
0 .72 N/A Net income $ 0 .91
$
1
.33
(31 .6)% Weighted average shares outstanding 443 .2
458 .5 (3 .3)% Earnings per share – diluted
Income from continuing operations $ 0 .92
$
0
.61
50 .8% Income (loss) from discontinued operations (0 .01)
0 .71 N/A Net income $ 0 .91
$
1
.32
(31 .1)%
Weighted average share and share
equivalents outstanding
445 .8 461 .0
(3
.3)%
ConAgra Foods, Inc.
Consolidated Balance Sheets (in millions)
November 29, 2009
November 23, 2008
ASSETS Current assets Cash and cash
equivalents $ 490.2 $ 132.1
Receivables, less allowance for
doubtful accounts of $10.2 and $14.4
861.6 972.1 Inventories 2,192.2 2,275.3 Prepaid expenses and other
current assets 307.9 455.5 Current assets held for sale -
5.5 Total current assets (3,851.9 ) (3,840.5 )
Property, plant and equipment, net 2,690.0 2,558.2 Goodwill
3,494.0 3,474.4 Brands, trademarks and other intangibles, net 834.7
824.3 Other assets 695.9 1,062.6 Noncurrent assets held for sale
- 10.7 $ 11,566.5 $ 11,770.7
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Notes payable $ 1.2 $ 300.1 Current installments of
long-term debt 260.5 316.8 Accounts payable 956.4 1,019.5 Accrued
payroll 184.1 175.5 Other accrued liabilities 605.3
860.0 Total current liabilities 2,007.5 2,671.9
Senior long-term debt, excluding current installments
3,027.2 2,856.6 Subordinated debt 195.9 195.9 Other noncurrent
liabilities 1,351.3 1,271.7 Common stockholders' equity
4,984.6 4,774.6 $ 11,566.5 $ 11,770.7
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