-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N7QQWXKOLUlzf8aCCISqIhDAn1xHEnq2cwu7JZBOmaXOJG7+fEp6gHjErb+qypM2 1tm90dHAfyPcE7Br89IDFw== 0000912057-00-017403.txt : 20000412 0000912057-00-017403.hdr.sgml : 20000412 ACCESSION NUMBER: 0000912057-00-017403 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000227 FILED AS OF DATE: 20000411 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONAGRA INC /DE/ CENTRAL INDEX KEY: 0000023217 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 470248710 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07275 FILM NUMBER: 598511 BUSINESS ADDRESS: STREET 1: ONE CONAGRA DR CITY: OMAHA STATE: NE ZIP: 68102 BUSINESS PHONE: 4025954000 FORMER COMPANY: FORMER CONFORMED NAME: NEBRASKA CONSOLIDATED MILLS CO DATE OF NAME CHANGE: 19721201 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 27, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File Number 1-7275 -------------------------------------------------------------- CONAGRA, INC. -------------------------------------------------------------- (Exact name of registrant, as specified in charter) Delaware 47-0248710 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One ConAgra Drive, Omaha, Nebraska 68102-5001 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (402) 595-4000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NA - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / / Number of shares outstanding of issuer's common stock, as of March 26, 2000 was 492,238,619. PART I - FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (in millions except per share amounts) (unaudited) - -------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net sales $ 5,797.8 $ 5,693.3 $ 18,994.3 $ 18,581.1 Costs and expenses Cost of goods sold * 4,780.2 4,686.2 15,859.0 15,550.6 Selling, administrative and general expenses * 678.3 640.4 2,142.4 1,962.6 Interest expense 80.3 88.0 233.9 255.4 Restructuring/Impairment charges 27.7 - 61.4 - ----------- ----------- ----------- ----------- 5,566.5 5,414.6 18,296.7 17,768.6 ----------- ----------- ----------- ----------- Income before income taxes 231.3 278.7 697.6 812.5 Income taxes 87.9 107.3 265.1 312.8 ----------- ----------- ----------- ----------- Net income $ 143.4 $ 171.4 $ 432.5 $ 499.7 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income per share - basic $ .30 $ .36 $ .91 $ 1.06 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income per share - diluted $ .30 $ .36 $ .90 $ 1.05 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- - --------------------------------------------------------------------------------
* Other restructuring-related items for the thirteen weeks and thirty-nine weeks ended February 27, 2000 include: accelerated depreciation of $19.6 million and $84.4 million, respectively, included in cost of goods sold; $18.8 million and $30.3 million, respectively, of accelerated depreciation included in selling, administrative and general expenses; inventory markdowns of $7.7 million and $41.4 million, respectively, included in cost of goods sold, and restructuring plan implementation costs of $10.8 million and $18.6 million, respectively, included in selling, administrative and general expenses. For the thirteen weeks and thirty-nine weeks ended February 27, 2000, total restructuring and restructuring-related charges were $84.6 million and $236.1 million, respectively. See notes to the condensed consolidated financial statements. 2 CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited) - --------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 143.4 $ 171.4 $ 432.5 $ 499.7 Other comprehensive income/(loss): Currency translation adjustment (9.2) (4.2) (13.6) 1.0 ----------- ----------- ----------- ----------- Comprehensive income $ 134.2 $ 167.2 $ 418.9 $ 500.7 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
- -------------------------------------------------------------------------------- See notes to the condensed consolidated financial statements. 3 CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in millions except per share amount) (unaudited) - --------------------------------------------------------------------------------
ASSETS FEBRUARY 27, MAY 30, FEBRUARY 28, 2000 1999 1999 ---------- ----------- ---------- Current assets Cash and cash equivalents $ 17.4 $ 62.8 $ 22.9 Receivables, less allowance for doubtful accounts of $82.2, $60.0 and $85.1 1,973.9 1,637.5 2,447.8 Inventories 4,236.7 3,639.9 4,008.5 Prepaid expenses 307.3 315.9 320.7 ---------- ----------- ---------- Total current assets 6,535.3 5,656.1 6,799.9 ---------- ----------- ---------- Property, plant and equipment 6,766.1 6,213.8 6,227.6 Less accumulated depreciation (3,013.3) (2,599.6) (2,579.9) ---------- ----------- ---------- Property, plant and equipment, net 3,752.8 3,614.2 3,647.7 ---------- ----------- ---------- Brands, trademarks and goodwill, net 2,404.2 2,408.7 2,627.3 Other assets 423.0 467.1 462.0 ---------- ----------- ---------- $ 13,115.3 $ 12,146.1 $ 13,536.9 ---------- ----------- ---------- ---------- ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 2,406.3 $ 837.9 $ 2,653.7 Current installments of long-term debt 19.0 21.1 19.2 Accounts payable 2,130.3 2,036.5 2,225.4 Advances on sales 156.2 1,191.7 180.7 Other accrued liabilities 1,354.9 1,299.2 1,376.9 ---------- ----------- ---------- Total current liabilities 6,066.7 5,386.4 6,455.9 ---------- ----------- ---------- Senior long-term debt, excluding current installments 1,871.7 1,793.1 1,888.0 Other noncurrent liabilities 809.5 782.8 787.8 Subordinated debt 750.0 750.0 750.0 Preferred securities of subsidiary company 525.0 525.0 525.0 Common stockholders' equity Common stock of $5 par value, authorized 1,200,000,000 shares; issued 524,129,789, 519,648,673 and 519,621,865 2,620.6 2,598.2 2,598.1 Additional paid-in capital 38.3 219.4 298.9 Retained earnings 1,537.2 1,369.8 1,595.2 Foreign currency translation adjustment (79.5) (65.9) (66.6) Less treasury stock, at cost, common shares 31,883,927, 31,475,678 and 30,991,229 (759.3) (749.9) (735.5) ---------- ----------- ---------- 3,357.3 3,371.6 3,690.1 Less unearned restricted stock and value of 15,602,138, 17,184,831 and 18,089,367 common shares held in Employee Equity Fund (264.9) (462.8) (559.9) ---------- ----------- ---------- Total common stockholders' equity 3,092.4 2,908.8 3,130.2 ---------- ----------- ---------- $ 13,115.3 $ 12,146.1 $ 13,536.9 ---------- ----------- ---------- ---------- ----------- ----------
- -------------------------------------------------------------------------------- See notes to the condensed consolidated financial statements. 4 CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited) - --------------------------------------------------------------------------------
THIRTY-NINE WEEKS ENDED FEBRUARY 27, FEBRUARY 28, 2000 1999 --------- --------- Cash flows from operating activities: Net income $ 432.5 $ 499.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and other amortization 339.7 321.1 Goodwill amortization 47.8 51.7 Restructuring/impairment charges and other restructuring-related charges (includes accelerated depreciation) 236.1 - Other noncash items (includes nonpension postretirement benefits) 60.6 66.1 Change in assets and liabilities before effects from business acquisitions (2,052.9) (1,804.1) --------- --------- Net cash flows from operating activities (936.2) (865.5) --------- --------- Cash flows from investing activities: Additions to property, plant and equipment (333.8) (439.9) Payment for business acquisitions (374.8) (401.4) Sale of businesses and property, plant and equipment 46.0 13.3 Notes receivable and other items (31.6) 4.4 --------- --------- Net cash flows from investing activities (694.2) (823.6) --------- --------- Cash flows from financing activities: Net short-term borrowings 1,553.5 1,793.1 Proceeds from issuance of long-term debt 71.4 595.2 Repayment of long-term debt (16.8) (495.9) Cash dividends paid (278.6) (240.8) Cash distributions of pooled companies - (1.2) Employee Equity Fund stock transactions - 7.0 Other items 255.5 (53.8) --------- --------- Net cash flows from financing activities 1,585.0 1,603.6 --------- --------- Net change in cash and cash equivalents (45.4) (85.5) Cash and cash equivalents at beginning of period 62.8 108.4 --------- --------- Cash and cash equivalents at end of period $ 17.4 $ 22.9 --------- --------- --------- ---------
- ------------------------------------------------------------------------------- See notes to the condensed consolidated financial statements. 5 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTY-NINE WEEKS ENDED FEBRUARY 27, 2000 (COLUMNAR DOLLARS IN MILLIONS) 1. ACCOUNTING POLICIES The unaudited interim financial information included herein reflects normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company's fiscal 1999 annual report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results to be expected for other interim periods or the full year. Certain prior year amounts have been reclassified in order to conform to current year classifications. 2. OPERATION OVERDRIVE During the fourth quarter of fiscal 1999, the Company approved a 36-month restructuring plan in connection with its previously announced initiative, "Operation Overdrive." The restructuring plan is aimed at eliminating overcapacity, streamlining operations and improving profitability through margin improvement and expense reductions. The total pre-tax charge of the plan is presently estimated at $880 million, with a pre-tax charge recorded to date of $676.9 million. In accordance with generally accepted accounting principles, the remaining cost will be recognized when employees are notified of separation or when appropriate restructuring plan costs result in accruable expenses. Of the $676.9 million recognized to date, $440.8 million ($337.9 million net of tax) was recognized in fiscal 1999, $47.1 million ($29.2 million net of tax) was recognized in the first quarter of fiscal 2000, $104.4 million ($64.7 million net of tax) was recognized in the second quarter of fiscal 2000, and the remaining $84.6 million ($52.5 million net of tax) was recognized in the third quarter of fiscal 2000. Fiscal 2000 third quarter charges were as follows:
Packaged Refrigerated Agricultural Foods Foods Products Total ------- ------- ------ ------- Accelerated depreciation $ 37.1 $ 1.3 $ - $ 38.4 Inventory markdowns .4 3.2 4.1 7.7 Restructuring plan implementation costs 4.0 5.1 1.7 10.8 Restructuring/Impairment charges 10.5 2.1 15.1 27.7 ------- ------- ------ ------- Total $ 52.0 $ 11.7 $ 20.9 $ 84.6 ------- ------- ------ ------- ------- ------- ------ -------
6 For the thirty-nine weeks ended February 27, 2000, the Company has recognized $236.1 million ($146.4 million net of tax) for restructuring/impairment charges and other restructuring-related charges as follows:
Packaged Refrigerated Agricultural Foods Foods Products Total ------- ------- ------ ------- Accelerated depreciation $ 104.5 $ 10.2 $ - $ 114.7 Inventory markdowns 15.0 3.2 23.2 41.4 Restructuring plan implementation costs 6.7 9.5 2.4 18.6 Restructuring/Impairment charges 23.1 14.8 23.5 61.4 ------- ------- ------ ------- Total $ 149.3 $ 37.7 $ 49.1 $ 236.1 ------- ------- ------ ------- ------- ------- ------ -------
The third quarter and year-to date charges are reflected in the Company's Consolidated Statements of Earnings as follows: accelerated depreciation of $19.6 million and $84.4 million, respectively, is included in cost of goods sold; accelerated depreciation of $18.8 million and $30.3 million, respectively, is included in selling, administrative and general expenses; inventory markdowns are included in cost of goods sold; plan implementation costs (primarily third-party consulting costs) are included in selling, administrative and general expenses; and restructuring/impairment charges are reflected as such and result from asset impairments, employee related costs and contractual termination costs. Certain assets to be disposed of that are not immediately removed from operations are depreciated on an accelerated basis over their remaining useful lives. Inventory markdowns represent losses on the carrying value of non-strategic inventory resulting from the closure of facilities and discontinuation of certain products. In association with the restructuring plan, the Company has, to date, closed a total of 13 production facilities, 70 non-production locations (e.g., storage, distribution, administrative, etc.) and sold nine non-core businesses. The historical operating results and gains/losses associated with sold businesses or facilities were not material. Approximately 7,000 employee separations will occur as a result of the restructuring plan, primarily in manufacturing and operating facilities. This total represents an increase of approximately 300 individuals from the original estimate, and results from updated estimates associated with existing restructuring initiatives. In addition, other exit costs (consisting of lease termination and other contractual termination costs) will occur as a result of the restructuring plan. Such activity recognized to date is as follows:
Severance Other Exit Amount Headcount Costs -------- --------- ---------- Fiscal 1999 activity: Charges to income $ 45.1 3,160 $ 7.3 Utilized (6.1) (260) - -------- --------- ---------- Balance, May 30, 1999 39.0 2,900 7.3 Fiscal 2000 activity, to date: Charges to income 23.4 2,340 15.2 Utilized (33.7) (4,130) (12.4) -------- --------- ---------- Balance, February 27, 2000 $ 28.7 1,110 $ 10.1 -------- --------- ---------- -------- --------- ----------
7 3. INCOME PER SHARE The following table reconciles the income and average share amounts used to compute both basic and diluted income per share (amounts in millions):
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED ------------------------- ------------------------- FEB. 27, FEB. 28, FEB. 27, FEB. 28, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- NET INCOME $ 143.4 $ 171.4 $ 432.5 $ 499.7 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- INCOME PER SHARE - BASIC Weighted average shares outstanding - basic 476.5 470.8 475.3 469.8 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- INCOME PER SHARE - DILUTED Weighted average shares outstanding - basic 476.5 470.8 475.3 469.8 Add shares contingently issuable upon exercise of stock options 2.3 7.8 3.4 7.2 ----------- ----------- ----------- ----------- Weighted average shares outstanding - diluted 478.8 478.6 478.7 477.0 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
4. INVENTORIES The major classes of inventories are as follows:
FEB. 27, MAY 30, FEB. 28, 2000 1999 1999 ------------ ------------ ------------ Hedged commodities $ 1,290.7 $ 1,306.2 $ 1,308.5 Food products and livestock 1,382.4 1,144.7 1,321.5 Agricultural chemicals, fertilizer and feed 788.5 597.4 682.1 Other, principally ingredients and supplies 775.1 591.6 696.4 ------------ ------------ ------------ $ 4,236.7 $ 3,639.9 $ 4,008.5 ------------ ------------ ------------ ------------ ------------ ------------
5. CONTINGENCIES In fiscal 1991, ConAgra acquired Beatrice Company ("Beatrice"). As a result of the acquisition and the significant pre-acquisition contingencies of the Beatrice businesses and its former subsidiaries, the consolidated post-acquisition financial statements of ConAgra reflect significant liabilities associated with the estimated resolution of these contingencies. These include various litigation and environmental proceedings related to businesses divested by Beatrice prior to its acquisition by ConAgra. The environmental proceedings include litigation and administrative proceedings involving Beatrice's status as a potentially responsible party at 42 Superfund, proposed Superfund or state-equivalent sites. Beatrice has paid or is in the process of paying its liability share at 37 of these sites. Substantial reserves for these matters have been established based on the Company's best estimate of its undiscounted remediation liabilities, which estimates include evaluation of investigatory studies, extent of required cleanup, the known volumetric contribution of Beatrice and other potentially responsible parties and its experience in remediating sites. 8 ConAgra is a party to a number of other lawsuits and claims arising out of the operation of its businesses. After taking into account liabilities recorded for all of the foregoing matters, management believes the ultimate resolution of such matters should not have a material adverse effect on ConAgra's financial condition, results of operations or liquidity. 6. ACQUISITIONS On January 3, 2000, ConAgra acquired Seaboard Farms, the poultry division of Seaboard Corporation, for approximately $360 million. Seaboard Farms produces and markets value-added poultry products primarily to foodservice customers and has annual sales of approximately $480 million. The acquisition was accounted for as a purchase. 7. BUSINESS SEGMENTS The Company has three segments, which are organized based upon similar economic characteristics and the similarity of products and services offered, the nature of production processes, the type or class of customer and distribution methods. Packaged Foods includes companies that produce shelf-stable and frozen foods. Refrigerated Foods includes companies that produce and market branded processed meats, beef, pork, chicken and turkey. Both the Packaged Foods and Refrigerated Foods segments market products in retail and foodservice channels. Agricultural Products includes companies involved in distribution of agricultural inputs and procurement, processing, trading and distribution of commodity food ingredients and agricultural commodities. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less all identifiable operating expenses and includes the related equity in earnings of companies included on the basis of the equity method of accounting. General corporate expenses, goodwill amortization, interest expense and income taxes have been excluded from segment operations. The Company operates principally in the United States. 9
THIRTEEN WEEKS ENDED FEBRUARY 27, FEBRUARY 28, 2000 1999 ------------ ------------ Sales to unaffiliated customers Packaged Foods $ 1,920.0 $ 1,894.6 Refrigerated Foods 3,046.0 2,808.9 Agricultural Products 831.8 989.8 ------------ ------------ Total $ 5,797.8 $ 5,693.3 ------------ ------------ ------------ ------------ Intersegment sales Packaged Foods $ 9.9 $ 4.1 Refrigerated Foods 97.5 55.1 Agricultural Products 47.6 43.0 ------------ ------------ 155.0 102.2 Intersegment elimination (155.0) (102.2) ------------ ------------ Total $ - $ - ------------ ------------ ------------ ------------ Net sales Packaged Foods $ 1,929.9 $ 1,898.7 Refrigerated Foods 3,143.5 2,864.0 Agricultural Products 879.4 1,032.8 Intersegment elimination (155.0) (102.2) ------------ ------------ Total $ 5,797.8 $ 5,693.3 ------------ ------------ ------------ ------------ Operating profit* Packaged Foods $ 238.3 $ 267.4 Refrigerated Foods 98.7 83.7 Agricultural Products 47.0 76.9 ------------ ------------ Total operating profit 384.0 428.0 Interest expense 80.3 88.0 General corporate expenses 56.5 43.8 Goodwill amortization 15.9 17.5 ------------ ------------ Income before tax $ 231.3 $ 278.7 ------------ ------------ ------------ ------------
* Thirteen weeks ended February 27, 2000 includes before-tax restructuring/ impairment charges and other restructuring-related charges of $84.6 million. The charges were included in operating profit as follows: $52.0 million in Packaged Foods; $11.7 million in Refrigerated Foods; and $20.9 million in Agricultural Products. 10
THIRTY-NINE WEEKS ENDED FEBRUARY 27, FEBRUARY 28, 2000 1999 ------------ ------------ Sales to unaffiliated customers Packaged Foods $ 5,743.9 $ 5,580.8 Refrigerated Foods 9,276.9 8,589.2 Agricultural Products 3,973.5 4,411.1 ------------ ------------ Total $ 18,994.3 $ 18,581.1 ------------ ------------ ------------ ------------ Intersegment sales Packaged Foods $ 34.5 $ 29.2 Refrigerated Foods 221.7 166.5 Agricultural Products 140.3 193.5 ------------ ------------ 396.5 389.2 Intersegment elimination (396.5) (389.2) ------------ ------------ Total $ - $ - ------------ ------------ ------------ ------------ Net sales Packaged Foods $ 5,778.4 $ 5,610.0 Refrigerated Foods 9,498.6 8,755.7 Agricultural Products 4,113.8 4,604.6 Intersegment elimination (396.5) (389.2) ------------ ------------ Total $ 18,994.3 $ 18,581.1 ------------ ------------ ------------ ------------ Operating profit* Packaged Foods $ 645.0 $ 730.7 Refrigerated Foods 332.1 261.9 Agricultural Products 195.4 274.4 ------------ ------------ Total operating profit 1,172.5 1,267.0 Interest expense 233.9 255.4 General corporate expenses 193.2 147.4 Goodwill amortization 47.8 51.7 ------------ ------------ Income before tax $ 697.6 $ 812.5 ------------ ------------ ------------ ------------
* Thirty-nine weeks ended February 27, 2000 includes before-tax restructuring/impairment charges and other restructuring-related charges of $236.1 million. The charges were included in operating profit as follows: $149.3 million in Packaged Foods; $37.7 million in Refrigerated Foods; and $49.1 million in Agricultural Products. 11 CONAGRA, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and operating results for the periods included in the accompanying condensed consolidated financial statements. Results for the thirteen and thirty-nine week periods ended February 27, 2000 are not necessarily indicative of results that may be attained in the future. This report contains forward-looking statements. The statements reflect management's current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. The statements are based on many assumptions and factors including availability and prices of raw materials, product pricing, competitive environment and related market conditions, operating efficiencies, access to capital and actions of governments. Any changes in such assumptions or factors could produce significantly different results. OPERATION OVERDRIVE During fiscal 1999, ConAgra commenced an initiative ("Operation Overdrive") to improve financial results by aligning the Company's resources by customer channel, eliminate duplicative costs and capital, and increase investment in market position. A major focus of Operation Overdrive is to ensure that each of ConAgra's operating companies works together to increase the level of sales captured internally. Year-to-date, total sales between ConAgra operating companies (both intersegment and intrasegment sales) have increased by approximately $150 million, or 21.3 percent, over the same period in the prior fiscal year. In the fourth quarter of fiscal 1999, as part of Operation Overdrive, the Company announced a restructuring plan covering a 36-month period aimed at consolidating capacity, streamlining operations and improving profitability through margin improvement and expense reductions. The total pre-tax charge of the plan is presently estimated at $880 million. Pretax savings associated with the Company's restructuring plan are currently projected to be approximately $460 million during the plan's first three years ($95 million in fiscal 2000, $155 million in fiscal 2001, and $210 million in fiscal 2002). These planned savings are primarily a result of reducing duplicative efforts, lowering employee-related expense, and reducing future depreciation and amortization costs. Accordingly, the Company anticipates these savings will positively impact the Company's "cost of goods sold" and "selling, administrative and general" line items within its Consolidated Statements of Earnings. In connection with its 36-month restructuring plan, the Company anticipates incurring cash expenses of $195 million, offset partially by approximately $70 million in cash proceeds from business and facility dispositions. The Company expects to fund this $125 million pre-tax net cash outlay through cash generated by its ongoing operations. The approximate pre-tax net cash outlay, by year of associated expense, is as follows (dollars in millions): 1999 $ 36 2000 42 2001 38 2002 9 -------- Total $ 125 -------- --------
Net cash outlays associated with the restructuring plan were previously estimated to be $90 million over the 36-month restructuring plan. The increase is primarily due to a decrease in the estimated proceeds from asset dispositions, coupled with additional costs associated with existing restructuring initiatives. 12 During the third quarter of fiscal 2000, the Company recognized restructuring/impairment charges and other restructuring-related costs ("restructuring charges") of $84.6 million ($52.5 million net of tax), bringing total restructuring charges recorded from fiscal 1999 to date to $676.9 million ($484.3 million net of tax). Of the $84.6 million charge recognized in the third quarter, $26.3 million will require cash expenditures resulting from contractual terminations, employee-related costs and third-party consulting costs. The remaining $58.3 million are non-cash charges resulting from asset impairments, accelerated depreciation and inventory markdowns associated with the Company's restructuring plan. For fiscal 2000 year-to date, the Company recognized restructuring charges of $236.1 million ($146.4 million net of tax). Of the $236.1 million charge, $57.2 million will require cash expenditures resulting from contractual terminations, employee-related costs and third-party consulting costs. The remaining $178.9 million are non-cash charges resulting from asset impairments, accelerated depreciation and inventory markdowns associated with the Company's restructuring plan. In association with the restructuring plan, the Company has, to date, closed a total of 13 production facilities, 70 non-production locations (e.g., storage, distribution, administrative, etc.) and sold nine non-core businesses. The historical operating results and gains/losses associated with sold businesses or facilities were not material. The Company recorded net income of $143.4 million or $.30 diluted income per share for the third quarter of fiscal 2000. Excluding restructuring charges, the Company's net income was $195.9 million or $.41 diluted income per share. Accordingly, the after-tax effect of restructuring charges on the Company's third quarter of fiscal 2000 was $52.5 million or $.11 diluted income per share. Fiscal 2000 year-to date, the Company recorded net income of $432.5 million or $.90 diluted income per share. Excluding restructuring charges, the Company's net income was $578.9 million or $1.21 diluted income per share. Accordingly, the after-tax effect of restructuring charges for fiscal 2000 year-to date was $146.4 million or $.31 diluted income per share. FINANCIAL CONDITION ConAgra's earnings are generated principally from its capital investment, which consists of working capital (current assets less current liabilities) plus all noncurrent assets. Capital investment is financed with stockholders' equity, long-term debt and other noncurrent liabilities. Capital investment increased $288.9 million, or 4.3 percent, compared to May 30, 1999. Working capital increased $198.9 million, and noncurrent assets increased $90.0 million. The increase in working capital was primarily caused by normal seasonal increases in accounts receivable and inventory which were partially funded by short-term debt, as well as current year acquisitions. Year-to-date, ConAgra has invested $333.8 million in property, plant and equipment compared to $439.9 million for the same period in fiscal 1999. The decrease of $106.1 million, or 24.1 percent, is reflective of the Company's ongoing efforts to critically analyze its capital expenditure process. Year-to-date, investments in business acquisitions were $374.8 million as compared to $401.4 million for the same period in fiscal 1999. The Company's objective is that senior long-term debt normally will not exceed 30 percent of total long-term debt plus equity. For purposes of computing the ratio, preferred securities of subsidiary company are treated as equity due to their preferred stock characteristics. This objective was met for all periods presented. 13 OPERATING RESULTS A summary of the period to period increases (decreases) in the principal components of operations, both before and after restructuring charges, is shown below (dollars in millions, except per share amounts).
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED FEB. 27, 2000 AND FEB. 28, 1999 FEB. 27, 2000 AND FEB. 28, 1999 ------------------------------- ------------------------------- POST- PRE- POST- PRE- RESTRUCTURING RESTRUCTURING RESTRUCTURING RESTRUCTURING DOLLAR CHANGE DOLLAR CHANGE DOLLAR CHANGE DOLLAR CHANGE ------------- ------------- ------------- ------------- Net sales $ 104.5 $ 104.5 $ 413.2 $ 413.2 Costs and expenses Cost of goods sold 94.0 66.7 308.4 182.6 Selling, administrative and general expenses 37.9 8.3 179.8 130.9 Interest expense (7.7) (7.7) (21.5) (21.5) Restructuring/Impairment charges 27.7 - 61.4 - ------------- ------------- ------------- ------------- 151.9 67.3 528.1 292.0 ------------- ------------- ------------- ------------- Income before income taxes (47.4) 37.2 (114.9) 121.2 Income taxes (19.4) 12.7 (47.7) 42.0 ------------- ------------- ------------- ------------- Net income $ (28.0) $ 24.5 $ (67.2) $ 79.2 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Income per share - basic $ (.06) $ .05 $ (.15) $ .16 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Income per share - diluted $ (.06) $ .05 $ (.15) $ .16 ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
In ConAgra's Packaged Foods segment, third quarter sales increased 1.3 percent to $1,920.0 million. Operating profit decreased 10.9 percent to $238.3 million, down from last year's third quarter operating profit of $267.4 million. Excluding restructuring charges, operating profit increased 8.6 percent, or $22.9 million. For the first nine months, sales increased 2.9 percent to $5,743.9 million. Operating profit decreased 11.7 percent to $645.0 million from last year's first nine months operating profit of $730.7 million. Excluding restructuring charges, the segment's operating profit increased 8.7 percent, or $63.6 million. The segment's third quarter and first nine months operating profit improvement, excluding restructuring charges, were primarily driven by strong year-to-year performance improvement in ConAgra's foodservice and grocery products units. In the Company's Refrigerated Foods segment, third quarter sales increased 8.4 percent to $3,046.0 million. Operating profit for the quarter increased 17.9 percent to $98.7 million from $83.7 million in fiscal 1999's third quarter. Excluding restructuring charges, operating profit increased 31.9 percent, or $26.7 million. For the first nine months sales increased 8.0 percent, and operating profit increased 26.8 percent to $332.1 million from $261.9 million. Excluding restructuring charges, operating profit for the segment's first nine months increased 41.2 percent, or $107.9 million. The segment's beef, pork and prepared meats units achieved sales and operating profit increases for both the third quarter and first nine months of fiscal 2000, and were the primary drivers of the segment's improved performance over the same period in fiscal 1999. 14 In ConAgra's Agricultural Products segment, third quarter sales decreased 16.0 percent to $831.8 million. Operating profit decreased 38.9 percent from $76.9 million to $47.0 million for the quarter. Excluding restructuring charges, operating profit decreased 11.7 percent, or $9.0 million. For the first nine months sales in this segment decreased 9.9 percent, and operating profit decreased 28.8 percent from $274.4 million to $195.4 million. Excluding restructuring charges, the segment's first nine months operating profit decreased 10.9 percent, or $29.9 million. The segment's results were negatively impacted by low grain prices and volumes. For the Company in total, net income was $143.4 million for the third quarter, while diluted earnings per share was $.30, a decrease of $.06 from the third quarter of fiscal 1999. Excluding restructuring charges, net income was $195.9 million, while diluted earnings per share was $.41, an increase of $.05, as compared to prior year's third quarter. Interest expense for the third quarter decreased by $7.7 million, or 8.8 percent, as compared to the third quarter of fiscal 1999 due to the Company carrying lower short-term debt balances. For the first nine months of fiscal 2000, ConAgra's net income was $432.5 million, while diluted earnings per share was $.90, a decrease of $.15 as compared to the first nine months of fiscal 1999. Excluding restructuring charges, net income was $578.9 million, while diluted earnings per share was $1.21, an increase of $.16 as compared to the first nine months of fiscal 1999. As compared to the first nine months of fiscal 1999, selling, administrative and general expenses, excluding restructuring charges, increased $130.9 million, or 6.7 percent, due in part to an increase in advertising and promotion costs and information systems' integration costs. Interest expense for the first nine months of fiscal 2000 decreased by $21.5 million, or 8.4 percent, as compared to the first nine months of fiscal 1999 due to the Company carrying lower short-term debt balances. 15 CONAGRA, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in the Company's market risk during the thirty-nine weeks ended February 27, 2000. For additional information, refer to pages 38 through 40 of the Company's 1999 Annual Report to Stockholders, incorporated by reference into the Company's annual report on Form 10-K for the fiscal year ended May 30, 1999. 16 CONAGRA, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 12 - Statement regarding computation of ratio of earnings to fixed charges 27 - Financial Data Schedule (B) Reports on Form 8-K There were no reports on Form 8-K filed during the quarter covered by this report. CONAGRA, INC. By: /s/ James P. O'Donnell ----------------------------- James P. O'Donnell Executive Vice President, Chief Financial Officer and Corporate Secretary By: /s/ Jay D. Bolding ----------------------------- Jay D. Bolding Vice President and Controller Dated this 11th day of April, 2000. 17 CONAGRA, INC. AND SUBSIDIARIES EXHIBIT INDEX EXHIBIT DESCRIPTION PAGE 12 Statement regarding computation of ratio of 19 earnings to fixed charges 27 Financial Data Schedule 20 18 EX-12 2 EXHIBIT 12 EXHIBIT 12 CONAGRA, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (in millions)
THIRTY-NINE WEEKS ENDED FEBRUARY 27, 2000 ------------ Fixed Charges Interest expense $ 258.4 Capitalized interest 3.9 Interest in cost of goods sold 22.3 One-third of noncancelable lease rent 29.7 ------------ Total fixed charges (A) $ 314.3 ------------ ------------ Earnings Pretax income* $ 697.6 Adjustment for unconsolidated subsidiaries (1.0) Add fixed charges 314.3 Less capitalized interest (3.9) ------------ Earnings and fixed charges (B) $ 1,007.0 ------------ ------------ Ratio of earnings to fixed charges (B/A) 3.2
*Pretax income includes $236.1 million of restructuring/impairment charges and other restructuring-related charges. Excluding these charges, the "ratio of earnings to fixed charges" was 4.0. See note 2 to the condensed consolidated financial statements. For the purpose of computing the above ratio of earnings to fixed charges, earnings consist of income before taxes and fixed charges. Fixed charges, for the purpose of computing earnings, are adjusted to exclude interest capitalized. Fixed charges include interest on both long and short-term debt (whether said interest is expensed or capitalized and including interest charged to cost of goods sold), and a portion of noncancelable rental expense representative of the interest factor. The ratio is computed using the amounts for ConAgra as a whole, including its majority-owned subsidiaries, whether or not consolidated, and its proportionate share of any 50% owned subsidiaries, whether or not ConAgra guarantees obligations of these subsidiaries. 19 EX-27 3 EXHIBIT 27
5 1,000 9-MOS MAY-28-2000 MAY-31-1999 FEB-27-2000 17,400 0 2,056,100 82,200 4,236,700 6,535,300 6,766,100 3,013,300 13,115,300 6,066,700 2,621,700 0 0 2,620,600 471,800 13,115,300 18,994,300 18,994,300 15,859,000 15,859,000 2,203,800 0 233,900 697,600 265,100 432,500 0 0 0 432,500 0.91 0.90
-----END PRIVACY-ENHANCED MESSAGE-----