News Release
ConAgra Foods Reports Fiscal 2014 First-Quarter Performance
Fiscal 2014 First-quarter Highlights (% cited vs. year-ago period amounts, where applicable):
-
Diluted EPS from continuing operations of
$0.33 as reported and$0.37 adjusted for items impacting comparability, down 46% as reported and down 16% on a comparable basis. - Consumer Foods’ sales and operating profit declined on a comparable basis, reflecting soft volumes and significant investment in new products. Changes in merchandising and promotion support, as well as additional cost reduction activities, are under way to improve volume and profit performance as the fiscal year progresses.
- Commercial Foods’ sales were in line with year-ago amounts, and segment operating profit decreased, as expected, due to previously discussed customer transition issues at Lamb Weston potato products. The impact of the customer transition issues is expected to lessen as the fiscal year progresses.
-
Ralcorp business performance is on track to contribute
approximately
$0.25 of diluted EPS from continuing operations in fiscal 2014, adjusted for items impacting comparability. Long-term synergy expectations from Ralcorp remain unchanged at$300 million by fiscal 2017. -
Full-year diluted EPS is expected to be in the range of
$2.34 -$2.38 , adjusted for items impacting comparability. In terms of full-year EPS performance, the company expects a more favorable input cost environment, higher selling, general, and administrative (SG&A) cost savings throughout the remainder of the fiscal year, as well as some volume recovery in the second half of the fiscal year, to offset a portion of the EPS softness seen in the fiscal first quarter. - Debt reduction and other capital allocation goals are unchanged.
Consumer Foods Segment
Branded and non-branded food sold
in retail and foodservice channels.
- Brands posting sales growth for the quarter include ACT II, Egg Beaters, Hunt’s, Reddi-wip, Rosarita, Swiss Miss, Van Camp’s, Wesson, and others. More brand details are in the Q&A document accompanying this release.
Operating profit of
Commercial Foods Segment
Specialty potato, seasonings,
blends, flavors, and milled grain products sold to foodservice and
commercial channels worldwide.
Sales for the
Lamb
Flour milling operations posted growth in sales and operating profits, reflecting the pass-through of changing wheat costs as well as good product mix and efficiencies.
The company is currently preparing for the formation of Ardent Mills,
into which the company expects to contribute its milling operations. The
details of that transaction, which is expected to close in the fourth
quarter of calendar 2013, were announced on
Ralcorp
Ralcorp businesses contributed a total of
Hedging Activities – This language primarily relates to operations other than the company’s milling operations.
Hedge gains and losses are aggregated, and net 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. The net of these activities resulted in
Other Items
-
Unallocated Corporate amounts were
$127 million of expense in the current quarter and$43 million of benefit in the year-ago period. Current-quarter amounts include$21 million of unfavorable hedge-related impact and$34 million of net expense from other items impacting comparability (details starting on page 7 of this release). Year-ago period amounts include$130 million of favorable hedge-related impact and$12 million of expense related to other items impacting comparability. Excluding these amounts, unallocated Corporate expense was$72 million for the current quarter and$75 million in the year-ago period. -
Equity method investment earnings were
$4 million for the current quarter and$8 million in the year-ago period; the year-over-year decline largely reflects difficult market conditions for a European potato joint venture. -
Net interest expense was
$96 million in the current quarter and$49 million in the year-ago period; the increase reflects the incremental interest related to the debt incurred to fund acquisitions, principally Ralcorp.
Capital Items
-
Dividends for the current quarter totaled
$105 million versus$98 million in the year-ago period. -
The company repurchased approximately 876,000 shares of common stock
during the quarter for approximately
$31 million , as it deployed proceeds from stock option exercises. -
For the current quarter, capital expenditures for property, plant and
equipment were
$181 million , compared with$98 million in the year-ago period;$34 million of the increase relates to Ralcorp. The comparable increase reflects several significant planned plant expansions and improvements. Depreciation and amortization expense was approximately$147 million for the fiscal first quarter; this compares with a total of$91 million in the year-ago period. Approximately$50 million of the increase in depreciation and amortization relates to Ralcorp. -
The company recently announced the divestiture of Lightlife, one of
ConAgra Foods’ smaller brands and product lines that includes
vegetarian-based burgers, hotdogs and other meatless frozen and
refrigerated items. The brand, which was part of the
Consumer Foods segment, was sold onSept. 16 , after the end of the fiscal first quarter, toBrynwood Partners for an undisclosed amount. Results for Lightlife for the fiscal first quarter and all prior periods are classified as discontinued operations. - After the quarter-end, the company purchased certain dessert production assets from Harlan Bakeries, a former co-manufacturing partner who made frozen fruit and cream pies as well as pastry shells under the Marie Callender’s and Claim Jumper brand names.
-
The company has extended the termination date for its
$1.5 billion revolving credit facility by another two years; the facility will now terminate onSept. 14, 2018 .
Outlook
The company currently expects fiscal 2014 diluted EPS, adjusted for
items impacting comparability, to be approximately
Given the gradual nature of the anticipated recovery from the volume
challenges, the company expects its fiscal 2014 second-quarter diluted
EPS to be in the range of
The company continues to expect approximately
The company’s long-term EPS growth rates, and multi-year synergy goals
related to the Ralcorp acquisition, are unchanged from prior estimates.
The company expects at least 10% annual comparable EPS growth in fiscal
2015-2017 period, and expects the synergies from the Ralcorp transaction
to reach
Major Items Impacting First-quarter Fiscal 2014 EPS Comparability
Included in the
-
Approximately
$0.05 per diluted share of net expense, or$37 million pretax, resulting from restructuring, integration, and transaction costs (including acquisition-related restructuring).$34 million of this is classified as unallocated Corporate expense (SG&A),$2 million is classified within theConsumer Foods segment (essentially all SG&A), and$1 million is classified within theRalcorp Food Group segment (essentially all SG&A). -
Approximately
$0.03 per diluted share of net expense, or$21 million pretax, related to the mark-to-market impact of derivatives used to hedge input costs, temporarily classified in unallocated Corporate expense. Hedge gains and losses are aggregated, and net 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. -
Approximately
$0.05 per diluted share of net benefit related to unusual tax matters, primarily resulting from a change in estimate related to the tax methods used for certain international sales.
Included in the
-
Approximately
$0.20 per diluted share of net benefit, or$130 million pretax, related to the mark-to-market impact of derivatives used to hedge input costs, temporarily classified in unallocated Corporate expense. Hedge gains and losses are aggregated, and net 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. -
Approximately
$0.02 per diluted share of net expense, or$8 million pretax, related to historical legal matters, classified as unallocated Corporate expense. This amount is not tax-deductible. -
Approximately
$0.01 per diluted share of net expense, or$4 million pretax, related to restructuring activities designed to improve efficiencies.$3 million of these are in theConsumer Foods segment ($2 million cost of goods sold (COGS) /$1 million SG&A), and$1 million is in unallocated Corporate expense (SG&A). -
Approximately
$0.01 per diluted share of net expense, or$7 million pretax, from acquisition and related costs.$4 million is classified within theConsumer Foods segment ($2 million COGS,$2 million in SG&A) and$3 million is classified within unallocated Corporate expense (SG&A).
Discussion of Results
A rebroadcast of the conference call will be available after
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.
Note on Forward-looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on management’s current
expectations and are subject to uncertainty and changes in
circumstances. These risks and uncertainties include, among other
things: ConAgra Foods’ ability to realize the synergies and benefits
contemplated by the acquisition of Ralcorp and its ability to promptly
and effectively integrate the business of Ralcorp; the timing to
consummate the potential joint venture combining the flour milling
businesses of
Regulation G Disclosure | |||||||||||
Below is a reconciliation of Q1 FY14 and Q1 FY13 diluted earnings per share from continuing operations, Consumer Foods segment operating profit, Q1 FY14 Ralcorp (Ralcorp Food Group and Ralcorp Frozen Bakery Products segments combined) segment operating profit, and FY13 diluted earnings per share from continuing operations, adjusted for items impacting comparability. Amounts may be impacted by rounding. | |||||||||||
Q1 FY14 & Q1 FY13 Diluted EPS from Continuing Operations | |||||||||||
Q1 FY14 | Q1 FY13 | % change | |||||||||
Diluted EPS from continuing operations | $ | 0.33 | $ | 0.61 | -46% | ||||||
Items impacting comparability: | |||||||||||
Restructuring, integration, and transactions costs (including acquisition-related restructuring) | 0.05 | 0.02 | |||||||||
Net expense (benefit) related to unallocated mark-to-market impact of derivatives | 0.03 | (0.20 | ) | ||||||||
Net benefit related to unusual tax matters | (0.05 | ) | - | ||||||||
Net expense related to historical legal matters | - | 0.02 | |||||||||
Rounding | 0.01 | (0.01 | ) | ||||||||
Diluted EPS adjusted for items impacting comparability | $ | 0.37 | $ | 0.44 | -16% | ||||||
Consumer Foods Segment Operating Profit Reconciliation | |||||||||||
(Dollars in millions) | Q1 FY14 | Q1 FY13 | % change | ||||||||
Consumer Foods Segment Operating Profit | $ | 186 | $ | 236 | -21% | ||||||
Restructuring, integration, and transactions costs (including acquisition-related restructuring) | 2 | 7 | |||||||||
Consumer Foods Segment Adjusted Operating Profit | $ | 189 | $ | 243 | -22% | ||||||
Ralcorp Segment Operating Profit Reconciliation | |||||||||||
(Dollars in millions) | Q1 FY14 | ||||||||||
Ralcorp Food Group Segment Operating Profit | $ | 61 | |||||||||
Ralcorp Frozen Bakery Products Segment Operating Profit | 21 | ||||||||||
Ralcorp Segment Operating Profit | $ | 82 | |||||||||
Restructuring, integration, and transactions costs (including acquisition-related restructuring) | 1 | ||||||||||
Ralcorp Segment Adjusted Operating Profit | $ | 83 | |||||||||
FY13 Diluted EPS from Continuing Operations | |||||||||||
Total FY13 | |||||||||||
Diluted EPS from continuing operations | $ | 1.85 | |||||||||
Items impacting comparability: | |||||||||||
Acquisition expenses, including restructuring, and integration costs | 0.26 | ||||||||||
Expense related to restructuring charges | 0.05 | ||||||||||
Net expense related to acquisition-related tax expense | 0.04 | ||||||||||
Net expense related to impairment charges for assets within Commercial Foods | 0.02 | ||||||||||
Net expense related to year-end remeasurement of pensions and early retirement of debt | 0.02 | ||||||||||
Net benefit related to unallocated mark-to-market impact of derivatives | (0.07 | ) | |||||||||
Rounding | (0.01 | ) | |||||||||
Diluted EPS adjusted for items impacting comparability | $ | 2.16 | |||||||||
ConAgra Foods, Inc. | |||||||||||
Segment Operating Results | |||||||||||
(in millions) | |||||||||||
(unaudited) | |||||||||||
FIRST QUARTER | |||||||||||
13 Weeks Ended | 13 Weeks Ended | ||||||||||
August 25, 2013 |
August 26, 2012 | Percent Change | |||||||||
SALES |
|||||||||||
Consumer Foods | $ | 1,995.9 | $ | 2,033.0 | (1.8)% | ||||||
Commercial Foods | 1,263.9 | 1,269.3 | (0.4)% | ||||||||
Ralcorp Food Group | 703.4 | - | N/A | ||||||||
Ralcorp Frozen Bakery Products | 238.6 | - | N/A | ||||||||
Total | 4,201.8 | 3,302.3 | 27.2% | ||||||||
OPERATING PROFIT |
|||||||||||
Consumer Foods | $ | 186.5 | $ | 236.0 | (21.0)% | ||||||
Commercial Foods | 129.8 | 139.6 | (7.0)% | ||||||||
Ralcorp Food Group | 61.0 | - | N/A | ||||||||
Ralcorp Frozen Bakery Products | 20.7 | - | N/A | ||||||||
Total operating profit for segments | 398.0 | 375.6 | 6.0% | ||||||||
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) income | (126.5 | ) | 42.5 | N/A | |||||||
Interest expense, net | (95.6 | ) | (49.3 | ) | 93.9% | ||||||
Income from continuing operations before income taxes and equity method investment earnings | $ | 175.9 | $ | 368.8 | (52.3)% | ||||||
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 25, 2013 |
August 26, 2012 |
Percent Change |
|||||||||
Net sales | $ | 4,201.8 |
$ |
3,302.3 |
27.2% | ||||||
Costs and expenses: | |||||||||||
Cost of goods sold | 3,370.9 | 2,433.7 | 38.5% | ||||||||
Selling, general and administrative expenses | 559.4 | 450.5 | 24.2% | ||||||||
Interest expense, net | 95.6 | 49.3 | 93.9% | ||||||||
Income from continuing operations before income taxes and equity method investment earnings | 175.9 | 368.8 | (52.3)% | ||||||||
Income tax expense | 33.9 | 123.8 | (72.6)% | ||||||||
Equity method investment earnings | 4.1 | 7.6 | (46.1)% | ||||||||
Income from continuing operations | 146.1 | 252.6 | (42.2)% | ||||||||
Income (loss) from discontinued operations, net of tax | 1.1 | (0.4 | ) |
N/A |
|||||||
Net income | $ | 147.2 |
$ |
252.2 |
(41.6)% | ||||||
Less: Net income attributable to noncontrolling interests | 2.9 | 2.1 | 38.1% | ||||||||
Net income attributable to ConAgra Foods, Inc. | $ | 144.3 |
$ |
250.1 |
(42.3)% | ||||||
Earnings per share – basic | |||||||||||
Income from continuing operations | $ | 0.34 |
$ |
0.61 |
(44.3)% | ||||||
Income from discontinued operations | - | - | - | ||||||||
Net income attributable to ConAgra Foods, Inc. | $ | 0.34 |
$ |
0.61 |
(44.3)% | ||||||
Weighted average shares outstanding | 421.1 | 407.1 | 3.4% | ||||||||
Earnings per share – diluted | |||||||||||
Income from continuing operations | $ | 0.33 |
$ |
0.61 |
(45.9)% | ||||||
Income from discontinued operations | 0.01 | - |
N/A |
||||||||
Net income attributable to ConAgra Foods, Inc. | $ | 0.34 |
$ |
0.61 |
(44.3)% |
||||||
Weighted average share and share equivalents
outstanding |
428.2 | 412.0 | 3.9% | ||||||||
ConAgra Foods, Inc. | |||||||||
Consolidated Balance Sheets | |||||||||
(in millions) | |||||||||
(unaudited) | |||||||||
August 25, 2013 |
May 26, 2013 |
||||||||
ASSETS | |||||||||
Current assets | |||||||||
Cash and cash equivalents | $ | 194.2 | $ | 183.9 | |||||
Receivables, less allowance for doubtful accounts of $7.6 and $7.6 |
1,246.1 | 1,286.2 | |||||||
Inventories | 2,549.8 | 2,390.3 | |||||||
Prepaid expenses and other current assets | 463.8 | 515.6 | |||||||
Current assets held for sale | 3.5 | 3.8 | |||||||
Total current assets | (4,457.4 | ) | (4,379.8 | ) | |||||
Property, plant and equipment, net | 3,905.8 | 3,850.4 | |||||||
Goodwill | 8,417.0 | 8,444.1 | |||||||
Brands, trademarks and other intangibles, net | 3,383.0 | 3,418.1 | |||||||
Other assets | 286.4 | 293.5 | |||||||
Noncurrent assets held for sale | 19.2 | 19.4 | |||||||
$ | 20,468.8 | $ | 20,405.3 | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
Current liabilities | |||||||||
Notes payable | $ | 282.2 | $ | 185.0 | |||||
Current installments of long-term debt | 585.4 | 517.9 | |||||||
Accounts payable | 1,552.0 | 1,501.6 | |||||||
Accrued payroll | 161.3 | 287.2 | |||||||
Other accrued liabilities | 882.4 | 909.6 | |||||||
Total current liabilities | 3,463.3 | 3,401.3 | |||||||
Senior long-term debt, excluding current installments | 8,622.2 | 8,691.0 | |||||||
Subordinated debt | 195.9 | 195.9 | |||||||
Other noncurrent liabilities | 2,735.6 | 2,754.1 | |||||||
Total stockholders' equity | 5,451.8 | 5,363.0 | |||||||
$ | 20,468.8 | $ | 20,405.3 | ||||||
ConAgra Foods, Inc. | |||||||||
Condensed Consolidated Statements of Cash Flows | |||||||||
(in millions) | |||||||||
(unaudited) | |||||||||
Thirteen weeks ended | |||||||||
|
August 25, 2013 |
August 26, 2012 |
|||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 147.2 | $ | 252.2 | |||||
Income (loss) from discontinued operations |
1.1 | (0.4 | ) | ||||||
Income from continuing operations | 146.1 | 252.6 | |||||||
Adjustments to reconcile income from continuing operations to net cash flows from operating activities: | |||||||||
Depreciation and amortization | 147.0 | 91.2 | |||||||
Asset impairment charges | 2.1 | 0.3 | |||||||
Earnings of affiliates less than distributions | 1.7 | 1.2 | |||||||
Pension expense | (2.2 | ) | 6.1 | ||||||
Contributions to pension plans | (4.5 | ) | (3.8 | ) | |||||
Share-based payments expense | 17.2 | 13.1 | |||||||
Other items | (6.7 | ) | (1.5 | ) | |||||
Change in operating assets and liabilities excluding effects of business acquisitions and dispositions: | |||||||||
Accounts receivable | 43.6 | (35.8 | ) | ||||||
Inventory | (158.0 | ) | (148.5 | ) | |||||
Deferred income taxes and income taxes payable, net | 14.5 | 113.3 | |||||||
Prepaid expenses and other current assets | (2.8 | ) | (33.9 | ) | |||||
Accounts payable | 46.8 | 53.3 | |||||||
Accrued payroll | (125.8 | ) | (30.1 | ) | |||||
Other accrued liabilities | 44.9 | 50.1 | |||||||
Net cash flows from operating activities – continuing operations | 163.9 | 327.6 | |||||||
Net cash flows from operating activities – discontinued operations | 2.2 | (3.7 | ) | ||||||
Net cash flows from operating activities | 166.1 | 323.9 | |||||||
Cash flows from investing activities: | |||||||||
Additions to property, plant and equipment | (181.1 | ) | (98.4 | ) | |||||
Sale of property, plant and equipment | 3.7 | 1.9 | |||||||
Purchase of businesses | — | (268.6 | ) | ||||||
Net cash flows from investing activities – continuing operations | (177.4 | ) | (365.1 | ) | |||||
Net cash flows from investing activities – discontinued operations | (0.2 | ) | (0.2 | ) | |||||
Net cash flows from investing activities | (177.6 | ) | (365.3 | ) | |||||
Cash flows from financing activities: | |||||||||
Net short-term borrowings | 97.2 | 232.0 | |||||||
Repayment of long-term debt | (2.3 | ) | (16.9 | ) | |||||
Repurchase of ConAgra Foods, Inc. common shares | (30.9 | ) | (75.0 | ) | |||||
Cash dividends paid | (104.8 | ) | (97.9 | ) | |||||
Exercise of stock options and issuance of other stock awards | 62.9 | 10.8 | |||||||
Other items | 0.5 | 0.2 | |||||||
Net cash flows from financing activities | 22.6 | 53.2 | |||||||
Effect of exchange rate changes on cash and cash equivalents | (0.8 | ) | 1.7 | ||||||
Net change in cash and cash equivalents | 10.3 | 13.5 | |||||||
Cash and cash equivalents at beginning of period | 183.9 | 103.0 | |||||||
Cash and cash equivalents at end of period | $ | 194.2 | $ | 116.5 | |||||
Source:
ConAgra Foods, Inc.
Media
Teresa Paulsen,
402-240-5210
Vice President, Communication & External Relations
or
Analysts
Chris
Klinefelter, 402-240-4154
Vice President, Investor Relations
www.conagrafoods.com
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