OMAHA, Neb., Dec 20, 2007 (BUSINESS WIRE) -- ConAgra Foods, Inc., (NYSE:CAG) one of North America's leading
packaged food companies, today reported results for the fiscal 2008
second quarter ended Nov. 25, 2007. Diluted EPS from continuing
operations was $0.50, which includes $0.03 per diluted share of costs
related to the recent pot pie recall. Prior-year diluted EPS from
continuing operations of $0.39 included net $0.01 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,
"While we will continue to face a very challenging input cost
environment for the near term, we do expect full year fiscal 2008 EPS
to be higher than previously communicated due to the strong
year-to-date EPS performance. I am very pleased with the momentum in
our Food and Ingredients segment and how well our Trading and
Merchandising segment is capitalizing on market opportunities."
Rodkin continued, "Although sales and profits for our Consumer
Foods segment are not as strong as they should be, I am encouraged by
continuing progress for a number of Consumer Foods brands as well as
the results of innovation and marketing efforts underway. We expect
profits and margins for this segment to improve toward the end of this
fiscal year."
Pot pie recall: On October 11, the company voluntarily recalled
all of its Banquet and private label pot pies out of concern for
salmonella. Direct recall costs were approximately $27 million in the
second quarter, or $0.03 per diluted share; the company does not
expect any additional significant expenses related to this recall.
After a thorough review of the pot pie plant with the USDA, the
company restarted production and shipping product in early December.
Consumer Foods Segment (52% of year-to-date sales)
Branded consumer products sold in retail and foodservice channels;
excludes international consumer operations.
----------------------------------------------------------------------
Volume & Sales Data Year-Over-Year % Change
----------------------------------------------------------------------
As Reported Comparable(a)
----------------------------------------------------------------------
Unit Volumes -1% 3%
----------------------------------------------------------------------
Overall Sales 2% 3%
----------------------------------------------------------------------
Sales for Priority Investment Brands 1% 2%
----------------------------------------------------------------------
Sales for Enabler Brands 3% 5%
----------------------------------------------------------------------
(a) Comparable sales calculations exclude the impact of 1) sales
contributed by the peanut butter business in the current and prior
year, 2) sales contributed by the Banquet and private label pot pie
business in the current and prior year, 3) sales for Alexia Foods,
which was acquired during Q1 of fiscal 2008, 4) sales for Lincoln
Snacks, which was acquired during Q2 of fiscal 2008, and 5) the
prior-year sales contribution from a refrigerated pizza business since
divested. See page 9 for Regulation G reconciliations.
The Consumer Foods segment posted sales of $1.8 billion and
operating profit of $234 million this quarter, and $1.8 billion of
sales and $277 million of operating profit in the year-ago period. The
following segment commentary relates to comparable performance unless
otherwise indicated.
Comparable unit volumes increased 3% and comparable sales
increased 3%. Despite price increases, sales growth did not outpace
unit growth because of: 1) protecting trade deal commitments to
customers on several heavily promoted categories, a situation which
will moderate in the back half of the fiscal year, and 2) negative
sales mix resulting from the higher rate of growth for the enabler
brands.
-- Comparable sales for priority investment brands, which
represent more than 70% of segment sales, increased 2%,
reflecting the benefit of new products as well as more
effective marketing. Major priority investment brands posting
sales increases for the quarter include Chef Boyardee, Egg
Beaters, Healthy Choice, Hebrew National, Marie Callender's,
PAM, Reddi-wip, Slim Jim, and Snack Pack. More details about
brand results can be found in the Q&A document accompanying
this release.
-- Enabler brands comparable sales increased 5%.
Operating profit declined 16% as reported and 17% on a comparable
basis. Comparable operating profit excludes pot pie recall costs in
the current year as well as restructuring charges in the prior year.
See page 9 for Regulation G reconciliations. The current quarter's
high operating costs reflect a challenging input cost environment,
which negatively impacted cost of goods sold by nearly $100 million,
or slightly more than 8% versus year-ago amounts. The production and
start-up inefficiencies experienced earlier in the fiscal year did not
have a significant effect on this quarter's operating costs. Due to
ongoing pricing actions, comparable operating profit and margin
results for this segment are expected to improve as the fiscal year
progresses, most notably in the fiscal fourth quarter.
Food and Ingredients Segment (29% of year-to-date sales)
Specialty potato, dehydrated vegetable, seasonings, blends,
flavors, and milled grain products sold to foodservice and commercial
channels worldwide.
During the quarter, sales for the Food and Ingredients segment
were almost $1 billion, 14% ahead of last year. The increase reflects
stronger prices and solid volumes for the Lamb Weston specialty potato
and appetizer operations, as well as higher flour prices for ConAgra
Mills necessitated by higher wheat input costs. Segment operating
profit was $131 million for the quarter, 13% ahead of $117 million
last year. Excluding an $18 million gain on the sale of noncore assets
and an $8 million benefit from insurance proceeds in the year-ago
period, comparable profits in the segment increased more than 40% in
the current quarter, an outstanding performance. These results reflect
Lamb Weston's export and appetizer sales growth, as well as growth for
milled products due to expanded value-added product lines, better mix,
and efficiency gains.
Trading and Merchandising Segment (14% of year-to-date sales)
Trading and merchandising agricultural commodities, fertilizer,
and energy worldwide.
During the quarter, sales for the Trading and Merchandising
segment were $546 million, more than 80% ahead of year-ago amounts;
operating profit was $165 million, more than four times the dollar
amount earned in the year-ago period. Fertilizer and agricultural
merchandising operations posted a very strong quarter, successfully
capitalizing on rising prices and continued strong domestic and export
demand. Agricultural trading results improved over the prior year, and
energy trading results, while strong, were slightly below year-ago
amounts.
International Foods Segment (5% of year-to-date sales)
Branded consumer products sold internationally to retail channels.
During the quarter, sales for the International Foods segment were
$176 million, 13% ahead of year-ago amounts. The improved sales
performance reflects strong volume and pricing trends for products in
Mexico, Puerto Rico, the Caribbean, and Latin America, along with 6
points of sales increase from a weaker dollar. Popcorn and canned
pasta products were particularly strong. Operating profit of $15
million was slightly below $19 million last year, but in line with
year-ago amounts after adjusting for a $4 million gain in the prior
year from divesting a noncore asset.
Other Items
-- Corporate expense was $127 million for the quarter and $92
million in the year-ago period. Year-ago amounts included $4
million of expense related to restructuring charges and a $7
million benefit resulting from a favorable resolution of
franchise tax matters.
-- Equity method investment earnings were $23 million for the
second quarter, ahead of the $13 million in the year-ago
period, reflecting strong results for a potato processing
joint venture and a grain export joint venture.
-- Net interest expense was $64 million in the current quarter
and $52 million in the year-ago period; the increase largely
reflects the higher working capital associated with the
extremely strong Trading and Merchandising profit performance.
-- The effective tax rate was 35%, in line with expectations for
the full fiscal year; the company continues to project fiscal
2008's effective tax rate to be in the range of 34%-35% for
continuing operations, excluding items impacting
comparability.
Capital Items
-- Dividends paid during the quarter totaled $88 million versus
$92 million last year.
-- For the quarter, capital expenditures from continuing
operations for property, plant, and equipment were $111
million compared with $66 million in the year-ago period. The
increase largely relates to planned improvements throughout
the manufacturing and logistics network as part of the ongoing
supply chain initiatives as well as planned capacity
expansion. Depreciation and amortization expense from
continuing operations was approximately $77 million for the
quarter; this compares with a total of $87 million in the
year-ago period.
-- During the quarter the company purchased Lincoln Snacks, a
snacks manufacturer whose brands include Poppycock and Fiddle
Faddle.
Outlook
The company expects fiscal 2008 EPS from continuing operations to
be slightly above $1.55, excluding the recent pot pie recall expenses
and other items impacting comparability. The revised EPS expectations
largely reflect:
-- the very strong performance from the Trading and Merchandising
segment so far this fiscal year, along with plans for more
conservative levels of Trading and Merchandising profits in
the back half of the year,
-- a likely continuation of severe inflation, and
-- ongoing price increases in the Consumer Foods segment, the
timing of which is planned to benefit the fiscal fourth
quarter more than the fiscal third quarter.
The company does not expect the previously discussed recalls to
result in any significant expenses in the remainder of the fiscal
year. The company expects EPS, excluding items impacting
comparability, to be slightly higher in the fiscal third quarter than
in the fiscal fourth quarter.
Major Items Affecting Second-Quarter Fiscal 2008 EPS Comparability
Included in the $0.50 diluted EPS from continuing operations for
the second quarter of fiscal 2008 (EPS amounts rounded and after tax):
-- Expense of approximately $0.03 per diluted share, or $27
million pretax, for costs related to the pot pie recall.
Approximately $19 million impacts gross profit for the
Consumer Foods segment, and approximately $8 million is
reflected within selling, general and administrative expense
for the Consumer Foods segment. The tax rate associated with
this expense is approximately 38%.
Included in the $0.39 diluted EPS from continuing operations for
the second quarter of fiscal 2007 (EPS amounts rounded and after tax):
-- Expense of $0.05 per diluted share, or $44 million pretax, for
restructuring charges related to programs designed to reduce
the company's ongoing operating costs. These primarily include
$38 million (COGS of $17 million and SG&A of $21 million) of
expense within the Consumer Foods segment, and $4 million of
expense within corporate.
-- Gain of $0.03 per diluted share, or $21 million pretax,
resulting from the sale of an oat milling operation,
classified within the results of the Food and Ingredients
segment, and the sale of a non-core asset within the
International Foods segment.
-- Benefit of $0.02 per diluted share, largely the result of
favorable tax outcomes relating to the sale of the company's
interest in a malt joint venture. There is a $4 million pretax
gain classified within the results of equity method investment
earnings (loss), and other related tax benefits reflected in
income taxes.
-- Gain of $0.01 per diluted share, or $8 million pretax,
resulting from an insurance settlement related to a fire,
classified within the results of the Food and Ingredients
segment.
-- Benefit of $0.01 per diluted share, or $7 million pretax,
resulting from a favorable resolution of franchise tax
matters, classified within corporate expense.
-- Expense of $0.02 per diluted share resulting from net
unfavorable tax settlements and changes in estimates.
-- Negative rounding impact of $0.01 related to the restructuring
charges described above.
Discussion of Results
ConAgra Foods will host a conference call at 9:30 a.m. EST today
to discuss second-quarter 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 1-800-818-7543 and
1-913-981-5542, 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. To access the digital replay, a pass code will be required.
Domestic participants should dial 1-888-203-1112 and international
participants should dial 1-719-457-0820 and enter pass code 4961886. 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
packaged food companies, serving grocery retailers, as well as
restaurants and other foodservice establishments. Popular ConAgra
Foods consumer brands include: Banquet, Chef Boyardee, Egg Beaters,
Healthy Choice, Hebrew National, Hunt's, Marie Callender's, Orville
Redenbacher's, PAM, Reddi-wip, and many others. 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 to
update 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,
future economic circumstances, industry conditions, the company's
ability to execute its operating and restructuring plans, availability
and prices of raw materials, product pricing, 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
Consumer Foods Segment
Below is a reconciliation of segment sales and operating profit
exclusive of the pot pie business, the peanut butter business, Alexia
Foods business, Lincoln Snacks business, divested business sales and
restructuring charges.
Consumer Foods Segment Reconciliations
For Regulation G Purposes
(impacted by rounding)
(Dollars in millions) Q2 FY08 Q2 FY07 % Change
-------- -------- ---------
Consumer Foods Net Sales $ 1,795 $ 1,766 2%
Pot Pie Net Sales (6) (28)
Net Sales of Acquired Businesses (Alexia &
Lincoln Snacks) (27) -
Peanut Butter Net Sales (12) (38)
Refrigerated Pizza Business Net Sales - (5)
-------- -------- ---------
Adjusted Consumer Foods Net Sales $ 1,750 $ 1,695 3%
======== ======== =========
(Dollars in millions) Q2 FY08 Q2 FY07 % Change
-------- -------- ---------
Priority Investment Brands Net Sales $ 1,265 $ 1,252 1%
Banquet Pot Pie Net Sales (3) (22)
Net Sales of Acquired Businesses (Alexia &
Lincoln Snacks) (23) -
Peter Pan Net Sales (12) (31)
-------- -------- ---------
Priority Investment Brands Adjusted Net
Sales $ 1,227 $ 1,199 2%
======== ======== =========
(Dollars in millions) Q2 FY08 Q2 FY07 % Change
-------- -------- ---------
Enabler Brands Net Sales $ 530 $ 514 3%
Private Label Pot Pie Net Sales (3) (6)
Private Label Net Sales of Acquired
Businesses (4) -
Private Label Peanut Butter Net Sales - (7)
Refrigerated Pizza Business Net Sales - (5)
-------- -------- ---------
Enabler Brands Adjusted Net Sales $ 523 $ 496 5%
======== ======== =========
(Dollars in millions) Q2 FY08 Q2 FY07 % Change
-------- -------- ---------
Consumer Foods Segment Operating Profit $ 234 $ 277 -16%
Pot Pie Recall Costs 27 -
Restructuring Plan Charges/Benefits - 38
-------- -------- ---------
Consumer Foods Segment Adjusted Operating
Profit $ 261 $ 315 -17%
======== ======== =========
ConAgra Foods, Inc.
Segment Operating Results
In millions
SECOND QUARTER
-------------------------------------------
13 Weeks Ended 13 Weeks Ended
----------------- ----------------- -------
Percent
November 25, 2007 November 26, 2006 Change
----------------- ----------------- -------
SALES
---------------------------
Consumer Foods $1,794.8 $1,766.4 1.6%
Food and Ingredients 995.0 869.6 14.4%
Trading and Merchandising 545.5 297.3 83.5%
International Foods 175.7 155.4 13.1%
----------------- -----------------
Total 3,511.0 3,088.7 13.7%
----------------- -----------------
OPERATING PROFIT
---------------------------
Consumer Foods $234.0 $277.3 (15.6)%
Food and Ingredients 131.3 116.7 12.5%
Trading and Merchandising 164.5 38.9 322.9%
International Foods 14.7 18.6 (21.0)%
----------------- -----------------
Total operating profit
for segments 544.5 451.5 20.6%
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 (126.6) (91.6) 38.2%
Interest expense, net (64.3) (52.1) 23.4%
----------------- -----------------
Income from continuing
operations before income
taxes and equity method
investment earnings $353.6 $307.8 14.9%
================= =================
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
----------------- ----------------- -------
Percent
November 25, 2007 November 26, 2006 Change
----------------- ----------------- -------
SALES
---------------------------
Consumer Foods $3,362.1 $3,288.6 2.2%
Food and Ingredients 1,903.7 1,686.6 12.9%
Trading and Merchandising 873.4 502.7 73.7%
International Foods 327.4 299.4 9.4%
----------------- -----------------
Total 6,466.6 5,777.3 11.9%
----------------- -----------------
OPERATING PROFIT
---------------------------
Consumer Foods $410.4 $460.0 (10.8)%
Food and Ingredients 251.5 220.8 13.9%
Trading and Merchandising 240.1 54.5 340.6%
International Foods 26.0 31.8 (18.2)%
----------------- -----------------
Total operating profit
for segments 928.0 767.1 21.0%
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 (201.0) (181.4) 10.8%
Interest expense, net (122.8) (110.1) 11.5%
----------------- -----------------
Income from continuing
operations before income
taxes and equity method
investment earnings $604.2 $475.6 27.0%
================= =================
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
----------------- ----------------- --------
Percent
November 25, 2007 November 26, 2006 Change
----------------- ----------------- --------
Net sales $3,511.0 $3,088.7 13.7%
Costs and expenses:
Cost of goods sold 2,565.9 2,278.4 12.6%
Selling, general and
administrative
expenses 527.2 450.4 17.1%
Interest expense, net 64.3 52.1 23.4%
----------------- -----------------
Income from continuing
operations before income
taxes and equity method
investment earnings 353.6 307.8 14.9%
Income tax expense 132.9 119.1 11.6%
Equity method investment
earnings 23.1 12.6 83.3%
----------------- -----------------
Income from continuing
operations 243.8 201.3 21.1%
Income from discontinued
operations, net of tax 1.0 12.0 (91.7)%
----------------- -----------------
Net income $244.8 $213.3 14.8%
================= =================
Earnings per share -
basic
Income from continuing
operations $0.50 $0.40 25.0%
Income from discontinued
operations - 0.02 (100.0)%
----------------- -----------------
Net income $0.50 $0.42 19.0%
================= =================
Weighted average shares
outstanding 487.3 508.3 (4.1)%
================= =================
Earnings per share -
diluted
Income from continuing
operations $0.50 $0.39 28.2%
Income from discontinued
operations - 0.03 (100.0)%
----------------- -----------------
Net income $0.50 $0.42 19.0%
================= =================
Weighted average share
and share equivalents
outstanding 490.7 511.3 (4.0)%
================= =================
ConAgra Foods, Inc.
Consolidated Statements of Earnings
In millions, except per
share amounts SECOND QUARTER
--------------------------------------------
26 Weeks Ended 26 Weeks Ended
----------------- ----------------- --------
Percent
November 25, 2007 November 26, 2006 Change
----------------- ----------------- --------
Net sales $6,466.6 $5,777.3 11.9%
Costs and expenses:
Cost of goods sold 4,807.4 4,304.0 11.7%
Selling, general and
administrative
expenses 932.2 887.6 5.0%
Interest expense, net 122.8 110.1 11.5%
----------------- -----------------
Income from continuing
operations before income
taxes and equity method
investment earnings 604.2 475.6 27.0%
Income tax expense 220.3 180.6 22.0%
Equity method investment
earnings 35.4 14.8 139.2%
----------------- -----------------
Income from continuing
operations 419.3 309.8 35.3%
Income from discontinued
operations, net of tax 0.9 70.2 (98.7)%
----------------- -----------------
Net income $420.2 $380.0 10.6%
================= =================
Earnings per share -
basic
Income from continuing
operations $0.86 $0.61 41.0%
Income from discontinued
operations - 0.14 (100.0)%
----------------- -----------------
Net income $0.86 $0.75 14.7%
================= =================
Weighted average shares
outstanding 488.4 509.2 (4.1)%
================= =================
Earnings per share -
diluted
Income from continuing
operations $0.85 $0.61 39.3%
Income from discontinued
operations - 0.13 (100.0)%
----------------- -----------------
Net income $0.85 $0.74 14.9%
================= =================
Weighted average share
and share equivalents
outstanding 491.9 511.8 (3.9)%
================= =================
ConAgra Foods, Inc.
Consolidated Balance Sheets
In millions
November 25, 2007 November 26, 2006
----------------- -----------------
ASSETS
Current assets
Cash and cash equivalents $128.1 $803.5
Receivables, less allowance for
doubtful accounts of $26.9 and
$25.0 1,489.5 1,115.5
Inventories 3,349.1 2,587.7
Prepaid expenses and other
current assets 828.6 1,213.3
----------------- -----------------
Total current assets 5,795.3 5,720.0
Property, plant and equipment, net 2,382.2 2,154.7
Goodwill 3,505.3 3,442.4
Brands, trademarks and other
intangibles, net 804.5 796.5
Other assets 312.0 242.9
----------------- -----------------
$12,799.3 $12,356.5
================= =================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Notes payable $321.7 $5.6
Current installments of long-term
debt 15.7 20.8
Accounts payable 1,458.0 992.7
Other accrued liabilities 1,595.9 1,938.1
----------------- -----------------
Total current liabilities 3,391.3 2,957.2
Senior long-term debt, excluding
current installments 3,175.1 3,131.7
Subordinated debt 200.0 400.0
Other noncurrent liabilities 1,228.5 1,130.0
Common stockholders' equity 4,804.4 4,737.6
----------------- -----------------
$12,799.3 $12,356.5
================= =================
SOURCE: ConAgra Foods, Inc.
ConAgra Foods, Inc.
Media:
Teresa Paulsen, 402-595-5210
Vice President, Corporate Communication
or
Analysts:
Chris Klinefelter, 402-595-4154
Vice President, Investor Relations
www.conagrafoods.com
