ConAgra Foods, Inc., (NYSE: CAG) one of North America’s leading
packaged food companies, today reported results for the fiscal 2012
first quarter ended Aug. 28, 2011. Diluted EPS from continuing
operations was $0.20, including $0.09 per diluted share of expense
from items impacting comparability. Adjusting for those items,
diluted EPS from continuing operations was $0.29. For the same
period a year ago, diluted EPS from continuing operations as
reported was $0.32, and was $0.34 after adjusting for $0.02 of
expense from items impacting comparability. The company planned for
a year-over-year decline in fiscal first-quarter EPS due to the
timing of inflation and pricing. Items impacting comparability in
the current year and prior year are summarized toward the end of
this release and reconciled for Regulation G purposes starting on
page 9.
Gary Rodkin, ConAgra Foods’ chief executive officer, said,
“Despite a very challenging environment and high inflation, we
delivered accelerating price/mix contribution and robust cost
savings. The first-quarter EPS reflects the negative impact of
short-term wheat market dynamics in our Commercial Foods segment
and severe inflation in our Consumer Foods segment. We took pricing
actions in the first quarter in both of our operating segments, and
more pricing actions will soon be implemented in both segments. Our
EPS goal for the full year remains unchanged.”
Consumer Foods Segment (62% of first-quarter
sales)Branded and non-branded food sold in retail and
foodservice channels.
The Consumer Foods segment posted sales of $1,892 million and
operating profit of $196 million for the first quarter. Sales
increased 4%, reflecting flat volumes and 4% contribution from
price/mix. Additional increases are planned for the second
quarter.
- Brands posting sales growth for the
quarter include DAVID, Healthy Choice, Hebrew National, Manwich,
Marie Callender’s, Orville Redenbacher’s, PAM, Parkay, Peter Pan,
Reddi-wip, Slim Jim, Swiss Miss, Wesson, and others.
- The company posted strong sales results
for several key sales channels.
- More brand details can be found in the
Q&A document accompanying this release.
Operating profit of $196 million was 6% below last year’s $208
million as reported. Restructuring charges of $16 million in the
current quarter and $8 million in the year-ago period are included
in reported results; adjusting for these amounts, current quarter
operating profit of $212 million was 1% below $216 million in the
year-ago period. The slight comparable operating profit decline
reflects very high input cost inflation (approximately 11%) in the
current quarter, which, as expected, more than offset strong cost
savings and the benefit of pricing.
Because of pricing actions already taken, as well as additional
pricing actions under way, the company expects this segment to post
year-over-year operating profit growth, adjusted for items
impacting comparability, in the second half of fiscal 2012.
Commercial Foods Segment (38% of
first-quarter sales)Specialty potato, seasonings, blends,
flavors, and milled grain products sold to foodservice and
commercial channels worldwide.
Sales for the Commercial Foods segment were $1,180 million, 19%
above year-ago amounts. Segment operating profit was $98 million,
14% below year-ago amounts; adjusting for $4 million of
restructuring charges in the current quarter, the comparable
year-over-year decline in operating profit was 10%.
The sales increase largely reflects the pass-through of higher
year-over-year wheat costs in the form of higher flour prices for
the milling operations. The sales performance also reflects Lamb
Weston’s price increases, which were necessitated by higher input
costs, and volume gains. Lamb Weston’s price/mix is expected to
continue to improve throughout the balance of the year.
The segment’s profit decline reflects the negative impact of
wheat market dynamics related to the transition from the old crop
to the new crop; this impact more than offset the benefits of mix
and efficiencies throughout the segment. This segment is expected
to post improved year-over-year profitability in the balance of
this fiscal year, driven by improved performance at Lamb
Weston.
Hedging Activities – This language primarily relates to
operations other than the company’s milling operations.
The company recorded $34 million of net hedging loss as
unallocated Corporate expense in the current quarter, and $6
million of net hedging loss as unallocated Corporate expense in the
year-ago period. The company identifies these amounts as items
impacting comparability. Those amounts are reclassified from
unallocated Corporate expense to the operating segments when the
underlying commodity or foreign currency being hedged is expensed
in segment cost of goods sold.
Other Items
- Corporate expense was $118 million for
the quarter and $80 million in the year-ago period. Current-quarter
amounts include $34 million due to hedge losses and $3 million of
restructuring charges, and year-ago amounts include $6 million of
hedge losses. Excluding these amounts, Corporate expense was $81
million for the current quarter and $74 million in the year-ago
period.
- Equity method investment earnings were
$6 million for the first quarter, in line with year-ago
amounts.
- Net interest expense was $53 million in
the current quarter, compared with $37 million in the year-ago
period; interest income from the notes receivable held in
connection with the divestiture of the Trading & Merchandising
operations benefited year-ago period amounts by $18 million.
- The effective tax rate for continuing
operations for the quarter was 34%. The company expects the
effective tax rate for the full fiscal year 2012 to be
approximately 34%, excluding items impacting comparability.
Capital Items
- Dividends for the current quarter
totaled $94 million versus $88 million in the year-ago period; the
increase reflects a higher dividend rate partially offset by fewer
shares outstanding.
- The company did not repurchase any
shares during the quarter. The company has approximately $125
million remaining on its current share repurchase
authorization.
- For the current quarter, capital
expenditures from continuing operations for property, plant, and
equipment were $96 million, compared with $129 million in the
year-ago period. Depreciation and amortization expense from
continuing operations was approximately $91 million for the
quarter; this compares with a total of $86 million in the year-ago
period.
- On September 14, 2011, subsequent to
the fiscal first quarter, the company entered into an unsecured
revolving credit agreement, which replaces the company’s prior
revolving credit agreement that was to mature in December 2011. The
new Credit Agreement provides for a revolving credit facility in a
maximum aggregate principal amount outstanding at any one time of
$1.5 billion (subject to increase to a maximum aggregate principal
amount of $2.0 billion), matures on September 14, 2016, and may be
extended for additional one-year periods on an annual basis.
- Subsequent to quarter end, the company
repaid $343 million of current portion of long-term debt.
Fiscal 2012 Guidance Reaffirmed
The company continues to expect fiscal 2012 full-year diluted
EPS, adjusted for items impacting comparability, to grow at a low-
to mid-single-digit rate over the comparable $1.75 earned last
fiscal year. The company has revised its full-year inflation
expectations for the Consumer Foods segment to 9-10% from its
original estimate of 7-8%. As previously communicated, given the
timing of pricing and inflation, the fiscal year’s EPS growth is
expected to occur in the second half of the fiscal year. The
company expects fiscal 2012 second-quarter EPS to reflect high
inflation as well as increased marketing investments, and therefore
to be below comparable year-ago amounts.
Major Items Impacting First-quarter Fiscal 2012 EPS
Comparability
Included in the $0.20 diluted EPS from continuing operations for
the first quarter of fiscal 2012 (EPS amounts rounded and after
tax):
- Approximately $0.05 per diluted share
of net expense, or $34 million pretax, 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 hedged items are expensed in segment cost of goods
sold.
- Approximately $0.04 per diluted share
of net expense, or $24 million pretax, related to restructuring
activities designed to improve efficiencies. $16 million of these
are in the Consumer Foods segment ($3 million in cost of goods sold
(COGS), $13 million in selling, general, and administrative
(SG&A) expense), $4 million are in the Commercial Foods segment
(all SG&A), and $3 million are unallocated Corporate expense
(SG&A).
Included in the $0.32 diluted EPS from continuing operations for
the first quarter of fiscal 2011 (EPS amounts rounded and after
tax):
- Approximately $0.01 of expense, or $8
million pretax, related to restructuring plans; this expense is
classified within the Consumer Foods segment ($4 million in COGS,
$4 million in SG&A).
- Approximately $0.01 per diluted share
of net expense, or $6 million pretax, 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
hedged items are expensed in segment cost of goods sold.
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 1-877-741-4248 and
1-719-325-4901, 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 2666729. A rebroadcast also will be available on the
company’s website.
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 2011 Annual Stockholders’ Meeting
on Friday, Sept. 23, 2011. 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. 23, 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, Slim Jim, Snack Pack 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 frozen potato and sweet
potato products as well as 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 within the
meaning of the Private Securities Litigation Reform Act of 1995.
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 effectiveness of its 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-saving 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, including the Patient
Protection and Affordable Care Act; the amount and timing of
repurchases of the company's common stock, if any; 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 Below is a reconciliation of
Q1 FY12 and Q1 FY11 diluted earnings per share, Consumer Foods
segment operating profit, Commercial Foods segment operating
profit, and FY11 diluted earnings per share, adjusted for items
impacting comparability. Amounts may be impacted by rounding.
Q1 FY12 & Q1 FY11
Diluted EPS from Continuing Operations - Reconciliation for
Regulation G Purposes Year-over- year % Q1
FY12 Q1 FY11 change Diluted EPS from
continuing operations $ 0.20 $ 0.32
-38%
Items impacting comparability:
Net expense related to unallocated mark-to-market impact of
derivatives 0.05 0.01 Expense related to restructuring charges
0.04 0.01
Diluted EPS adjusted for items
impacting comparability $ 0.29 $
0.34 -15% Consumer Foods Segment Operating
Profit Reconciliation Year-over- year % (Dollars
in millions)
Q1 FY12 Q1 FY11 change
Consumer Foods Segment Operating Profit $ 196
$ 208 -6% Expense related to restructuring
charges 16 8
Consumer Foods Segment
Adjusted Operating Profit $ 212 $
216 -1% Commercial Foods Segment Operating
Profit Reconciliation Year-over- year % (Dollars
in millions)
Q1 FY12 Q1 FY11 change
Commercial Foods Segment Operating Profit $ 98
$ 113 -14% Expense related to restructuring
charges 4 -
Commercial Foods Segment
Adjusted Operating Profit $ 102 $
113 -10% FY11 EPS - Reconciliation
for Regulation G Purposes Total FY11 Diluted EPS from
continuing operations $ 1.90 Items impacting
comparability: Expense related to restructuring charges 0.08
(Benefit) related to unallocated mark-to-market impact of
derivatives (0.05 ) (Benefit) related to receipt of insurance
proceeds from Garner, N.C., accident (0.15 ) (Benefit) of gain on
early repayment of Trading & Merchandising divestiture-related
PIK note (0.04 ) Rounding 0.01
Diluted EPS
adjusted for items impacting comparability $ 1.75
ConAgra Foods, Inc. Segment Operating Results
(in millions) (unaudited) FIRST QUARTER
13 Weeks Ended 13 Weeks Ended
August 28, 2011
August 29, 2010 Percent Change
SALES
Consumer Foods $ 1,891.7 $ 1,811.5 4.4 % Commercial Foods
1,180.3 992.8 18.9 % Total 3,072.0
2,804.3 9.5 %
OPERATING
PROFIT
Consumer Foods $ 196.2 $ 207.7 (5.5 )% Commercial Foods 97.5
113.1 (13.8 )% Total operating profit for
segments 293.7 320.8 (8.4 )%
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 (117.9 ) (79.5 ) 48.3 % Interest expense, net (52.9
) (37.3 ) 41.8 %
Income from continuing operations before
income taxes and equity method investment earnings
$ 122.9 $ 204.0 (39.8 )%
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) (unaudited) FIRST QUARTER
13 Weeks Ended 13 Weeks Ended
August 28, 2011 August 29, 2010
Percent Change
Net sales $ 3,072.0
$
2,804.3
9.5 % Costs and expenses: Cost of goods sold 2,473.3 2,153.0 14.9 %
Selling, general and administrative expenses 422.9 410.0 3.1 %
Interest expense, net 52.9 37.3 41.8 %
Income from continuing operations before income taxes and equity
method investment earnings 122.9 204.0 (39.8 )% Income tax expense
43.6 66.9 (34.8 )% Equity method investment earnings 6.2
6.2 --- % Income from continuing operations
85.5 143.3 (40.3 )% Income from discontinued operations, net
of tax 0.1 3.0 (96.7 )% Net
income $ 85.6
$
146.3
(41.5 )% Less: Net income (loss) attributable to
noncontrolling interests 0.3 (0.1 )
N/A
Net income attributable to ConAgra Foods, Inc. $ 85.3
$
146.4
(41.7 )% Earnings per share – basic Income
from continuing operations $ 0.21
$
0.32
(34.4 )% Income from discontinued operations -
0.01 (100.0 )% Net income attributable to ConAgra Foods,
Inc. $ 0.21
$
0.33
(36.4 )% Weighted average shares outstanding
412.7 441.5 (6.5 )% Earnings per share
– diluted Income from continuing operations $ 0.20
$
0.32
(37.5 )% Income from discontinued operations -
0.01 (100.0 )% Net income attributable to ConAgra Foods,
Inc. $ 0.20
$
0.33
(39.4 )% Weighted average share and share equivalents
outstanding
418.1
446.0
(6.3 )% ConAgra Foods,
Inc. Consolidated Balance Sheets (in millions) (unaudited)
August 28, 2011
May 29, 2011
ASSETS Current assets Cash and cash equivalents $ 1,095.2 $
972.4 Receivables, less allowance for doubtful accounts of $7.7 and
$7.8 922.0 849.4 Inventories 1,815.3 1,803.4 Prepaid expenses and
other current assets 261.1 274.1
Total current assets
4,093.6
3,899.3
Property, plant and equipment, net 2,638.0 2,670.1 Goodwill
3,609.0 3,609.4 Brands, trademarks and other intangibles, net 989.3
936.3 Other assets 280.8 293.6
$ 11,610.7 $ 11,408.7
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities
Current installments of long-term debt $ 376.8 $ 363.5 Accounts
payable 1,165.5 1,083.7 Accrued payroll 125.7 124.1 Other accrued
liabilities 666.2 554.3
Total current liabilities 2,334.2 2,125.6 Senior long-term
debt, excluding current installments 2,659.8 2,674.4 Subordinated
debt 195.9 195.9 Other noncurrent liabilities 1,690.5 1,704.3 Total
stockholders' equity 4,730.3
4,708.5 $ 11,610.7 $ 11,408.7
ConAgra Foods, Inc. Condensed Consolidated Statements
of Cash Flows (in millions) (unaudited)
Thirteen weeks ended August 28,
August 29, 2011 2010 Cash flows from
operating activities: Net income $ 85.6 $ 146.3 Income from
discontinued operations
0.1
3.0 Income from continuing operations 85.5
143.3 Adjustments to reconcile income from continuing operations to
net cash flows from operating activities: Depreciation and
amortization 91.5 85.8 Asset impairment charges 7.1 0.2 Insurance
recoveries recognized related to Garner accident — (1.3 ) Advances
from insurance carriers related to Garner accident — 3.0
Distributions from affiliates less than current earnings (2.2 )
(2.6 ) Contributions to pension plans (3.0 ) (110.1 ) Share-based
payments expense 12.3 8.4 Non-cash interest income on
payment-in-kind notes — (18.5 ) Other items (6.7 ) 24.0 Change in
operating assets and liabilities before effects of business
acquisitions and dispositions: Accounts receivable (63.1 ) (2.2 )
Inventory (12.1 ) (148.3 ) Prepaid expenses and other current
assets 12.9 37.8 Accounts payable 108.9 81.1 Accrued payroll 1.6
(131.9 ) Other accrued liabilities
79.3
135.5 Net cash flows from operating
activities – continuing operations 312.0 104.2 Net cash flows from
operating activities – discontinued operations
3.1 4.6 Net cash
flows from operating activities
315.1
108.8 Cash flows from investing
activities: Additions to property, plant and equipment (95.6 )
(129.1 ) Sale of property, plant and equipment 3.8 1.0 Advances
from insurance carriers related to Garner accident — 2.5 Purchase
of businesses and intangible assets
(57.5
) (129.7 ) Net cash flows from
investing activities – continuing operations (149.3 ) (255.3 ) Net
cash flows from investing activities – discontinued operations
— 248.9 Net
cash flows from investing activities
(149.3 )
(6.4 ) Cash flows from financing
activities: Repayment of long-term debt (2.5 ) (38.4 ) Repurchase
of ConAgra Foods common shares — (100.0 ) Cash dividends paid (94.3
) (88.5 ) Exercise of stock options and issuance of other stock
awards 55.7 10.9 Other items
—
(0.3 ) Net cash flows from financing activities –
continuing operations (41.1 ) (216.3 ) Net cash flows from
financing activities – discontinued operations
— (0.1 ) Net cash flows
from financing activities
(41.1 )
(216.4 ) Effect of exchange rate changes on cash and
cash equivalents (1.9 ) 1.7 Net change in cash and cash equivalents
122.8 (112.3 ) Cash and cash equivalents at beginning of period
972.4 953.2
Cash and cash equivalents at end of period
$
1,095.2 $ 840.9
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