News Release
ConAgra Foods Reports Solid Sales Performance and Double-Digit EPS Growth; Reaffirms Guidance for Fiscal Year 2009 EPS and Improved Outlook for Consumer Foods Profits
Second Quarter Highlights:
Strong EPS growth from continuing operations, as reported and on a comparable basis
Consumer Foods Segment (62% of Year-to-date sales)
Branded consumer products sold in retail and foodservice channels.
Consumer Foods' comparable sales growth was 4%, reflecting price increases necessitated by higher input costs as well as a 4% decline in unit volume. Brand details and subsegment performance can be found in the financial information and Q&A document accompanying this release.
Consumer Foods' comparable operating profit declined 8% to
The company expects comparable year-over-year profit growth for this segment in the back half of the fiscal year due to benefits from adjustments to merchandising programs, favorable cost savings trends and an expected moderation of input cost increases.
Commercial Foods Segment (38% of Year-to-date sales)
Specialty potato, dehydrated vegetable, seasonings, blends, flavors, and milled grain products sold to foodservice, retail and commercial channels worldwide.
During the quarter, sales for the
Hedging Activities - This language primarily relates to operations other than the company's milling operations.
The company uses hedging activities to manage the risk in its plans for
the cost of various commodity inputs and, to a lesser extent, foreign
exchange. To improve the transparency of segment operating results, the
company began utilizing a new methodology for presenting derivative
gains and losses in the first quarter of fiscal 2009. This methodology
temporarily classifies mark-to-market gains and losses as unallocated
Corporate expense. The company later transfers the gains or losses to
segment operating profit when the underlying item being hedged is
expensed in cost of goods sold for the applicable operating segment.
Prior-year amounts utilized a different methodology, which classified
the hedge gain or loss in the segment operating results regardless of
when the underlying item was expensed. Prior year second-quarter results
include
For the quarter, the company experienced a net increase of
Other Items
-- Corporate expense was $111 million for the quarter and $126 million in
the year-ago period. Current year amounts include $48 million related to
net derivative losses; excluding this amount, unallocated Corporate
expense was $64 million in the quarter vs. $126 million last year.
-- Equity method investments generated a $2 million profit for the second
quarter, down from $13 million in the year-ago period; the decline
primarily reflects higher short-term potato costs for an international
potato joint venture.
-- Net interest expense was $43 million in the current quarter and $62
million in the year-ago period. Current-quarter amounts include income
on the note receivable held in connection with the recent divestiture of
the company's Trading & Merchandising operations.
-- The effective tax rate for continuing operations for the quarter was
33%, slightly lower than planned. The EPS impact of the
lower-than-planned tax rate is listed among the items impacting
comparability. Going forward, the company expects an effective tax rate
of approximately 34%-35% for continuing operations, excluding items
impacting comparability.
Capital Items
-- Dividends paid during the quarter totaled $86 million versus $88 million
last year, reflecting fewer shares outstanding.
-- For the quarter, capital expenditures from continuing operations for
property, plant, and equipment were $115 million , compared with $104
million in the year-ago period. Depreciation and amortization expense
from continuing operations was approximately $79 million for the
quarter; this compares with a total of $74 million in the year-ago
period. The company continues to expect capital expenditures for the
fiscal year in the range of $475 million .
Outlook
The company expects improved
Major Items Affecting Second-quarter Fiscal 2009 EPS Comparability
Included in the
-- 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 later be
reclassified to the operating segments when underlying items are
expensed in segment results. This methodology was implemented in the
first quarter of fiscal 2009; prior-year amounts used a different
methodology that expensed such costs in segment results regardless of
when the related item was utilized or the related derivative liquidated.
-- Approximately $0.01 per diluted share of net benefit from a
lower-than-planned effective income tax rate.
Included in the
-- Expense of approximately $0.03 per diluted share, or $27 million pretax,
for costs related to the pot pie recall. Approximately $19 million
impacted gross profit for the Consumer Foods segment, and approximately
$8 million is reflected within SG&A expense for the Consumer Foods
segment. The tax rate associated with this expense is approximately 38%.
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 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, product pricing, future economic circumstances,
industry conditions, the company's ability to execute its operating and
restructuring plans, 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
Regulation G Disclosure
Consumer Foods Segment
Below is a reconciliation of segment operating profit exclusive of the pot pie recall costs.
Consumer Foods Segment Reconciliation
(impacted by rounding)
(Dollars in millions) Q2 FY09 Q2 FY08 % Change
Consumer Foods Segment Operating Profit $ 253 $ 247 2%
Banquet Pot Pie Recall Costs - 27 NA
Consumer Foods Segment Adjusted $ 253 $ 274 (8)%
Operating Profit
ConAgra Foods, Inc. Segment Operating Results (in millions) SECOND QUARTER 13 Weeks Ended 13 Weeks Ended November 23, 2008 November 25, 2007 Percent Change SALES Consumer Foods $ 2,042.8 $ 1,956.2 4.4% Commercial Foods 1,221.5 995.0 22.8% Total 3,264.3 2,951.2 10.6% OPERATING PROFIT Consumer Foods $ 252.5 $ 247.1 2.2% Commercial Foods 155.5 131.8 18.0% Total operating profit 408.0 378.9 7.7% for segments 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 (111.4) (126.0) (11.6)% Interest expense, net (42.7) (62.2) (31.4)% Income from continuing operations before income $ 253.9 $ 190.7 33.1% taxes and equity method investment earnings 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 23, 2008 November 25, 2007 Percent Change SALES Consumer Foods $ 3,911.2 $ 3,667.2 6.7% Commercial Foods 2,418.7 1,905.1 27.0% Total 6,329.9 5,572.3 13.6% OPERATING PROFIT Consumer Foods $ 439.6 $ 434.4 1.2% Commercial Foods 288.3 252.4 14.2% Total operating profit 727.9 686.8 6.0% for segments 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 (208.8 ) (196.6 ) 6.2% Interest expense, net (92.8 ) (117.0 ) (20.7)% Income from continuing operations before income $ 426.3 $ 373.2 14.2% taxes and equity method investment earnings 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 23, 2008 November 25, 2007 Change Net sales $ 3,264.3 $ 2,951.2 10.6 % Costs and expenses: Cost of goods sold 2,577.8 2,209.0 16.7 % Selling, general and 389.9 489.3 (20.3 )% administrative expenses Interest expense, net 42.7 62.2 (31.4 )% Income from continuing operations before income taxes 253.9 190.7 33.1 % and equity method investment earnings Income tax expense 84.4 68.6 23.0 % Equity method investment 1.9 12.5 (84.8 )% earnings Income from continuing 171.4 134.6 27.3 % operations Income from discontinued (3.3 ) 110.2 NA operations, net of tax Net income $ 168.1 $ 244.8 (31.3 )% Earnings per share - basic Income from continuing $ 0.38 $ 0.28 35.7 % operations Income from discontinued - 0.22 (100.0 )% operations Net income $ 0.38 $ 0.50 (24.0 )% Weighted average shares 447.1 487.3 (8.3 )% outstanding Earnings per share - diluted Income from continuing $ 0.38 $ 0.27 40.7 % operations Income from discontinued (0.01 ) 0.23 NA operations Net income $ 0.37 $ 0.50 (26.0 )% Weighted average share and share equivalents 449.5 490.7 (8.4 )% outstanding
ConAgra Foods, Inc. Consolidated Statements of Earnings (in millions, except per share amounts) SECOND QUARTER 26 Weeks Ended 26 Weeks Ended Percent November 23, 2008 November 25, 2007 Change Net sales $ 6,329.9 $ 5,572.3 13.6 % Costs and expenses: Cost of goods sold 5,051.9 4,211.3 20.0 % Selling, general and 758.9 870.8 (12.9 )% administrative expenses Interest expense, net 92.8 117.0 (20.7 )% Income from continuing operations before income taxes 426.3 373.2 14.2 % and equity method investment earnings Income tax expense 150.3 129.7 15.9 % Equity method investment 2.8 22.1 (87.3 )% earnings Income from continuing 278.8 265.6 5.0 % operations Income from discontinued 331.7 154.6 114.6 % operations, net of tax Net income $ 610.5 $ 420.2 45.3 % Earnings per share - basic Income from continuing $ 0.61 $ 0.54 13.0 % operations Income from discontinued 0.72 0.32 125.0 % operations Net income $ 1.33 $ 0.86 54.7 % Weighted average shares 458.5 488.4 (6.1 )% outstanding Earnings per share - diluted Income from continuing $ 0.60 $ 0.54 11.1 % operations Income from discontinued 0.72 0.31 132.3 % operations Net income $ 1.32 $ 0.85 55.3 % Weighted average share and share equivalents 461.0 491.9 (6.3 )% outstanding
ConAgra Foods, Inc. Consolidated Balance Sheets (in millions) November 23, 2008 November 25, 2007 ASSETS Current assets Cash and cash equivalents $ 132.1 $ 140.8 Receivables, less allowance for doubtful 972.1 957.1 accounts of$14.4 and$16.5 Inventories 2,280.8 2,048.8 Prepaid expenses and other current assets 455.5 347.2 Current assets held for sale - 2,314.1 Total current assets 3,840.5 5,808.0 Property, plant and equipment, net 2,565.7 2,267.3 Goodwill 3,477.6 3,463.2 Brands, trademarks and other intangibles, 824.3 803.4 net Other assets 1,062.6 240.8 Noncurrent assets held for sale - 229.3 $ 11,770.7 $ 12,812.0 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 300.1 $ 321.7 Current installments of long-term debt 316.8 15.4 Accounts payable 1,019.5 920.5 Accrued payroll 175.5 238.9 Other accrued liabilities 860.0 781.5 Current liabilities held for sale - 1,126.0 Total current liabilities 2,671.9 3,404.0 Senior long-term debt, excluding current 2,856.6 3,173.7 installments Subordinated debt 195.9 200.0 Other noncurrent liabilities 1,271.7 1,213.4 Noncurrent liabilities held for sale - 16.5 Common stockholders' equity 4,774.6 4,804.4 $ 11,770.7 $ 12,812.0
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