-----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, LXkHogTAgKGT6jW2fnksyOuQ+SLncI+ODlzJissLwFkSpTS0aRZ+jUMRt+CjBfXn nbl4EYlfWqoh1zYrgz2Aaw== 0001047469-98-014051.txt : 19980408 0001047469-98-014051.hdr.sgml : 19980408 ACCESSION NUMBER: 0001047469-98-014051 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980222 FILED AS OF DATE: 19980407 SROS: NYSE 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: 98589199 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 22, 1998 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 22, 1998, was 480,409,454. 1 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 ----------------------- ------------------------ FEB. 22, FEB. 23, FEB. 22, FEB. 23, 1998 1997 1998 1997 -------- -------- -------- -------- Net sales $5,385.0 $5,459.1 $17,959.0 $18,206.8 Costs and expenses Cost of goods sold 4,538.3 4,581.5 15,271.2 15,579.1 Selling, administrative and general expenses 549.9 561.2 1,716.8 1,689.4 Interest expense, net 75.9 73.3 224.2 216.1 -------- -------- --------- --------- 5,164.1 5,216.0 17,212.2 17,484.6 -------- -------- --------- --------- Income before income taxes 220.9 243.1 746.8 722.2 Income taxes 82.3 98.0 287.5 293.7 -------- -------- --------- --------- Net income before cumulative effect of change in accounting for systems reengineering costs $ 138.6 $ 145.1 $ 459.3 $ 428.5 Cumulative effect of change in accounting for systems reengineering costs (14.8) - (14.8) - -------- -------- --------- --------- Net income $ 123.8 $ 145.1 $ 444.5 $ 428.5 -------- -------- --------- --------- -------- -------- --------- --------- BASIC EARNINGS PER SHARE Earnings per share before cumulative effect of change in accounting $ 0.30 $ 0.32 $ 1.02 $ 0.95 Cumulative effect of change in accounting for systems reengineering costs (0.03) - (0.03) - -------- -------- --------- --------- Basic earnings per share $ 0.27 $ 0.32 $ 0.99 $ 0.95 -------- -------- --------- --------- Weighted average shares outstanding - basic 452.0 451.6 449.5 451.6 -------- -------- --------- --------- -------- -------- --------- --------- DILUTED EARNINGS PER SHARE Earnings per share before cumulative effect of change in accounting $ 0.30 $ 0.32 $ 1.00 $ 0.93 Cumulative effect of change in accounting for systems reengineering costs (0.03) - (0.03) - -------- -------- --------- --------- Diluted earnings per share $ 0.27 $ 0.32 $ 0.97 $ 0.93 -------- -------- --------- --------- Weighted average shares outstanding - diluted 461.5 459.7 459.5 459.0 -------- -------- --------- --------- -------- -------- --------- --------- Cash dividends declared per common share $ 0.1563 $ 0.1363 $ 0.4488 $ 0.3913 -------- -------- --------- --------- -------- -------- --------- ---------
See notes to the condensed consolidated financial statements. 2 CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions except share amounts) (unaudited)
FEB. 22, MAY 25, FEB. 23, 1998 1997 1997 -------- ------- -------- ASSETS Current assets Cash and cash equivalents $ 39.6 $ 105.8 $ 64.5 Receivables, less allowance for doubtful accounts of $84.3, $67.2 and $75.4 2,211.6 1,367.6 2,053.0 Inventories 3,936.7 3,342.9 3,692.0 Prepaid expenses 403.7 388.7 434.1 --------- --------- --------- Total current assets 6,591.6 5,205.0 6,243.6 --------- --------- --------- Property, plant and equipment Cost 5,518.6 5,274.3 5,321.2 Less Accumulated depreciation (2,247.9) (2,031.8) (2,091.2) Valuation reserve related to restructuring - - (152.0) --------- --------- --------- Property, plant and equipment, net 3,270.7 3,242.5 3,078.0 Brands, trademarks and goodwill, at cost less accumulated amortization 2,387.3 2,434.0 2,446.4 Other assets 394.3 395.6 409.6 --------- --------- --------- Total assets $12,643.9 $11,277.1 $12,177.6 --------- --------- --------- --------- --------- ---------
See notes to the condensed consolidated financial statements. 3 CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions except share amounts) (unaudited)
FEB. 22, MAY 25, FEB. 23, 1998 1997 1997 -------- ------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 2,404.5 $ 529.0 $ 1,992.8 Current installments of long-term debt 80.3 352.9 340.6 Accounts payable 2,062.2 1,894.7 2,025.1 Advances on sales 173.5 766.5 217.4 Other accrued liabilities 1,385.2 1,446.5 1,411.8 --------- --------- --------- Total current liabilities 6,105.7 4,989.6 5,987.7 Senior long-term debt, excluding current installments 1,692.5 1,605.7 1,583.5 Other noncurrent liabilities 902.1 935.1 911.5 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 510,284,030, 506,161,530 and 506,120,014 2,551.4 1,265.4 1,265.3 Additional paid-in capital 310.7 643.3 573.0 Retained earnings 1,228.8 2,061.2 1,935.8 Foreign currency translation adjustment (59.8) (31.5) (25.8) Less treasury stock, at cost, common shares 29,871,431, 30,036,626 and 26,844,802 (700.7) (655.1) (556.8) --------- --------- --------- 3,330.4 3,283.3 3,191.5 Less unearned restricted stock and value of 22,601,229, 26,202,608 and 27,708,352 common shares held in Employee Equity Fund (661.8) (811.6) (771.6) --------- --------- --------- Total common stockholders' equity 2,668.6 2,471.7 2,419.9 --------- --------- --------- $12,643.9 $11,277.1 $12,177.6 --------- --------- --------- --------- --------- ---------
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 ----------------------- FEB. 22, FEB. 23, 1998 1997 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities Net income $ 444.5 $ 428.5 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and other amortization 283.0 261.4 Goodwill amortization 52.1 52.2 Cumulative effect of change in accounting 24.0 - Other noncash items (includes nonpension postretirement benefits) 67.9 (6.6) Change in assets and liabilities before effects from business acquisitions (2,101.2) (1,593.7) --------- --------- NET CASH FLOWS FROM OPERATING ACTIVITIES (1,229.7) (858.2) --------- --------- Cash flows from investing activities Additions to property, plant and equipment (313.6) (446.1) Payment for business acquisitions - (197.8) Sale of businesses and property, plant and equipment 140.1 24.6 Notes receivable and other items (25.6) (31.7) --------- --------- NET CASH FLOWS FROM INVESTING ACTIVITIES (199.1) (651.0) --------- --------- Cash flows from financing activities Net short-term borrowings 1,875.5 1,561.2 Proceeds from issuance of long-term debt 305.0 397.5 Repayment of long-term debt (495.4) (130.2) Cash dividends paid (192.5) (168.5) Treasury stock purchases (148.1) (160.0) Other items 18.1 (40.0) --------- --------- NET CASH FLOWS FROM FINANCING ACTIVITIES 1,362.6 1,460.0 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (66.2) (49.2) Cash and cash equivalents at beginning of period 105.8 113.7 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 39.6 $ 64.5 --------- --------- --------- ---------
See notes to the condensed consolidated financial statements. 5 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 AND FEBRUARY 23, 1997 (UNAUDITED) 1. ACCOUNTING POLICIES The unaudited interim financial information included herein reflects the adjustments (consisting solely of 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. Such interim information should be read in conjunction with the financial statements and notes thereto included in the Company's 1997 annual report to stockholders, which are incorporated by reference into the Company's annual report on Form 10-K for the fiscal year ended May 25, 1997. 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. CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING - For the quarter ended February 22, 1998, the Company recorded a one-time, after-tax, non-cash charge of $14.8 million to comply with a recently issued ruling by the Financial Accounting Standards Board's Emerging Issues Task Force: (EITF) No. 97-13. This EITF requires business process reengineering costs associated with computer systems development to be expensed as incurred. Previously, the Company had capitalized such costs as development costs. DERIVATIVE INSTRUMENTS - The Securities and Exchange Commission is requiring expanded disclosure for derivative instruments which is fully effective for the Company's annual financial statements for the fiscal year ended May 31, 1998. As required for this interim report, specific information on the Company's accounting policies for derivatives is provided below. The Company uses derivatives for the purpose of hedging commodity price and, to a lesser extent, interest rate exposure, which exist as a part of its ongoing business operations. In general, derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Accordingly, changes in market values of derivative instruments must be highly correlated with changes in market values of underlying hedged items both at inception of the hedge and over the life of the hedge contract. Deferred gains or losses related to any instrument 1) designated but ineffective as a hedge of existing assets, liabilities, or firm commitments, or 2) designated as a hedge of an anticipated transaction which is no longer likely to occur, are recognized immediately in the statement of earnings. Interest Rate Swap Agreements - The Company utilizes interest rate swap agreements to alter the impact of changes of interest rates. Interest differentials to be paid or received on the swap are recognized in income as incurred, as a component of interest expense. Commodity Contracts - Commodities are subject to price fluctuations that create price risk. Generally, the Company intends to hedge commodities to mitigate this price risk. The Company uses commodity futures, options, forwards and swaps to manage price fluctuations of the 6 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 AND FEBRUARY 23, 1997 (UNAUDITED) underlying commodity. While this may tend to limit the Company's ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity prices. Commodity price risk can be hedged by selling (or buying) the underlying commodity, or by using an appropriate derivative instrument. The particular hedging methods employed by the Company depend on a number of factors, including availability of appropriate derivative contracts. The Company may, at times, utilize non-exchange traded derivatives, in which case the Company monitors the amount of associated credit risk. ConAgra's board of directors has established policies that limit the amount of unhedged inventory positions permissible for ConAgra's independent operating companies. Trading businesses are generally limited to dollar risk exposure stated in relation to equity capital. Processing company limits are expressed in terms of weeks of commodity usage. In the trading businesses, commodity contracts are marked-to-market with net amounts due to or from brokers recorded in accounts receivable or payable and the related gains or losses recorded in the statement of earnings. In the processing companies, commodity contract gains and losses are deferred and recognized as an adjustment to the basis of the underlying hedged commodity purchased; gains or losses are recognized in the statement of earnings as a component of cost of goods sold. The cash flows related to derivative financial instruments are classified in the statement of cash flows in a manner consistent with those of the transactions being hedged. EARNINGS PER SHARE - The Company adopted the provisions of Statement of Financial Accounting Standards No. 128 (SFAS No. 128), EARNINGS PER SHARE, as of the third quarter, fiscal 1998. SFAS 128 requires presentation of basic and diluted earnings per share, replacing prior presentation of primary and fully diluted earnings per share. Basic earnings per share is calculated on the basis of weighted average outstanding common shares, after giving effect to preferred stock dividends. Diluted earnings per share is computed on the basis of weighted average outstanding common shares, outstanding options that are dilutive, and equivalent shares assuming conversion of outstanding convertible securities. Earnings per share amounts have been computed and restated in accordance with SFAS No. 128 for the thirteen and thirty-nine week periods ended February 22, 1998 and February 23, 1997. 7 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 AND FEBRUARY 23, 1997 (UNAUDITED) The following table sets forth the computation of basic and diluted earnings per share in accordance with the provisions of SFAS No. 128:
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED ----------------------- ----------------------- (in millions except per share amounts) FEB. 22, FEB. 23, FEB. 22, FEB. 23, 1998 1997 1998 1997 -------- -------- -------- -------- Net income before cumulative effect of change in accounting for systems reengineering costs $138.6 $145.1 $459.3 $428.5 Cumulative effect of change in accounting for systems reengineering costs (14.8) - (14.8) - ------ ------ ------ ------ Net income $123.8 $145.1 $444.5 $428.5 ------ ------ ------ ------ ------ ------ ------ ------ BASIC EARNINGS PER SHARE Weighted average shares outstanding - basic 452.0 451.6 449.5 451.6 ------ ------ ------ ------ ------ ------ ------ ------ Earnings per share before cumulative effect of change in accounting $ 0.30 $ 0.32 $ 1.02 $ 0.95 Cumulative effect of change in accounting for systems reengineering costs (0.03) - (0.03) - ------ ------ ------ ------ Basic earnings per share $ 0.27 $ 0.32 $ 0.99 $ 0.95 ------ ------ ------ ------ ------ ------ ------ ------ DILUTED EARNINGS PER SHARE Weighted average common shares outstanding 452.0 451.6 449.5 451.6 Effect of dilutive securities: Stock options 9.5 8.1 10.0 7.4 ------ ------ ------ ------ Weighted average shares outstanding - diluted 461.5 459.7 459.5 459.0 ------ ------ ------ ------ ------ ------ ------ ------ Earnings per share before cumulative effect of change in accounting $ 0.30 $ 0.32 $ 1.00 $ 0.93 Cumulative effect of change in accounting for systems reengineering costs (0.03) - (0.03) - ------ ------ ------ ------ Diluted earnings per share $ 0.27 $ 0.32 $ 0.97 $ 0.93 ------ ------ ------ ------ ------ ------ ------ ------
8 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 AND FEBRUARY 23, 1997 (UNAUDITED) 2. CAPITAL STOCK On July 11, 1997, the Company's Board of Directors declared a two-for-one split of the Company's common stock in the form of a stock dividend. This was paid October 1, 1997, to shareholders of record as of September 5, 1997. All share and per share data have been restated to reflect the stock split for the periods presented. 3. INVENTORIES The composition of inventories is as follows (in millions):
FEB. 22, MAY 25, FEB. 23, 1998 1997 1997 -------- ------- -------- Hedged commodities $1,346.6 $1,169.8 $1,143.6 Food products and livestock 1,374.6 1,191.0 1,252.2 Agricultural chemicals, fertilizer and feed 596.4 381.4 498.4 Retail merchandise 3.4 127.5 106.0 Other, principally ingredients and supplies 615.7 473.2 691.8 -------- -------- -------- $3,936.7 $3,342.9 $3,692.0 -------- -------- -------- -------- -------- --------
4. CONTINGENCIES In fiscal 1991, ConAgra acquired Beatrice Company ("Beatrice"). As a result of the acquisition and the significant pre-acquisition tax and other contingencies of the Beatrice businesses and its former subsidiaries, the consolidated post-acquisition financial statements of ConAgra reflected significant liabilities and valuation allowances associated with the estimated resolution of these contingencies. The material pre-acquisition tax contingencies were resolved in fiscal 1995. Beatrice is also engaged in 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 46 Superfund, proposed Superfund or state-equivalent sites. Beatrice has paid or is in the process of paying its liability share at 40 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. 9 CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTEEN AND THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 AND FEBRUARY 23, 1997 (UNAUDITED) 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. 5. SENIOR LONG-TERM DEBT On August 1, 1997, the Company issued $300 million of senior notes with an interest rate of 6.70% due August 1, 2027 and redeemable at the option of the holders on August 1, 2009. The notes were priced at par. 6. ACQUISITIONS In December 1997, the Company acquired Hester Industries, Inc. in a stock transaction. Hester, headquartered in Winchester, Virginia, is a manufacturer of a wide variety of value-added poultry products marketed primarily to foodservice clients. Annual sales are about $136 million. In January 1998, the Company acquired Zoll Foods Corporation in a stock transaction. Zoll Foods, based in Chicago, is a processor and marketer of custom-cut pork ribs and other pork products for the foodservice industry. Annual sales are about $100 million. In February 1998, the Company acquired Gilardi Foods, Inc., in a stock transaction. Gilardi, based in Sidney, Ohio, is a manufacturer and marketer of refrigerated and frozen pizzas and other dough-based products sold in retail channels. Annual sales are about $157 million. 10 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 consolidated condensed financial statements. Results for the thirteen and thirty-nine week periods ended February 22, 1998 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. FINANCIAL CONDITION The Company's capital investment (working capital plus noncurrent assets) increased $250.7 million compared to May 25, 1997. Working capital increased $270.5 million and noncurrent assets decreased $19.8 million. The increase in working capital was primarily caused by normal seasonal increases in accounts receivable and inventory financed primarily by a related increase in short-term debt. The decrease in noncurrent assets was primarily caused by the sale of businesses and normal depreciation and amortization partially offset by property, plant and equipment additions. The Company's objective is that senior long-term debt normally will not exceed 30 percent of total long-term debt plus equity. This objective was met for all periods presented. 11 CONAGRA, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATING RESULTS A summary of the period to period increases (decreases) in the principal components of operations is shown below (dollars in millions, except per share amounts).
Comparison of the Periods Ended February 22, 1998 and February 23, 1997 -------------------------------------------------- Thirteen Weeks Thirty-nine Weeks -------------------------------------------------- Dollar Percent Dollar Percent Change Change Change Change ------ ------- ------ ------- Net sales $(74.1) (1.4) $(247.8) (1.4) Costs and expenses Cost of goods sold (43.2) (0.9) (307.9) (2.0) Selling, administrative and general expenses (11.3) (2.0) 27.4 1.6 Interest expense, net 2.6 3.5 8.1 3.7 ------ ----- ------- ---- Income before income taxes (22.2) (9.1) 24.6 3.4 Income taxes (15.7) (16.0) (6.2) (2.1) ------ ----- ------- ---- Net income before cumulative effect of change in accounting for systems reengineering costs (6.5) (4.5) 30.8 7.2 Cumulative effect of change in accounting for systems reengineering costs (14.8) - (14.8) - ------ ----- ------- ---- Net income $(21.3) (14.7) $ 16.0 3.7 ------ ----- ------- ---- ------ ----- ------- ---- Diluted earnings per share before cumulative effect of change in accounting $(0.02) (6.3) $ 0.07 7.5 ------ ----- ------- ---- ------ ----- ------- ---- Diluted earnings per share $(0.05) (15.6) $ 0.04 4.3 ------ ----- ------- ---- ------ ----- ------- ----
In ConAgra's Grocery & Diversified Products industry segment, operating profit was up 7 percent in the third quarter and 6 percent in the first nine months of fiscal 1998 versus the same periods in fiscal 1997. Segment sales increased 2 percent in the third quarter and first nine months. ConAgra Frozen Foods achieved operating profit growth in fiscal 1998's third quarter and first nine months, with increases in sales volume. Operating profit improved in both the third quarter and nine months for potato products and seafood businesses. In shelf-stable foods, Golden Valley increased third quarter and nine month operating earnings over the same periods last year, while Hunt-Wesson's earnings declined in both periods. 12 CONAGRA, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In ConAgra's Food Inputs & Ingredients industry segment, operating profit rose 11 percent in the third quarter and 20 percent in the first nine months of fiscal 1998 versus the same periods in fiscal 1997. Segment sales increased 1 percent in the third quarter and were up slightly in the first nine months. ConAgra's major crop inputs business, United Agri Products, had sales and operating profit growth in fiscal 1998's third quarter and first nine months versus fiscal 1997. Commodity services and specialty food ingredients contributed to segment operating profit growth in both periods. Earnings declined in grain merchandising and fertilizer trading due to soft international demand. In ConAgra's Refrigerated Foods industry segment, operating profit decreased 92 percent in the third quarter and 29 percent in the first nine months of fiscal 1998 versus the same periods in fiscal 1997. Segment sales decreased 4 percent in the third quarter and 3 percent for nine months. The branded processed meats, Australia beef and cheese businesses all increased earnings in the third quarter and first nine months versus the same periods last year. Poor results in the U.S. fresh meat and poultry businesses more than offset those gains. An increase in industry production, compounded by lower Asian export demand, reduced earnings in pork, poultry and U.S. beef in both periods. The earnings decline was severe in beef because the beef processing and cattle feeding businesses, which tend to hedge each other's results, both suffered price and margin compression. For ConAgra in total, fiscal 1998 third quarter sales decreased 1.4 percent to $5.39 billion from $5.46 billion. Nine month sales decreased 1.4 percent to $17.96 billion from $18.21 billion. ConAgra's effective tax rates were 37.3 percent in fiscal 1998's third quarter versus 40.3 percent last year and 38.5 percent in fiscal 1998's first nine months versus 40.7 percent in the same period last year. The rate was 39.6 percent for the full fiscal year 1997. In fiscal 1998's third quarter, diluted earnings per share, before the cumulative effect of the change in accounting for systems reengineering costs, decreased 6.3 percent to 30.0 cents from 32.0 cents in last year's third quarter. Net income, before the cumulative effect of the change in accounting, decreased 4.5 percent to $138.6 million from $145.1 million. Including the $14.8 million cumulative effect of change in accounting, fiscal 1998 third quarter diluted earnings per share were 27.0 cents. In fiscal 1998's first nine months, diluted earnings per share, before the cumulative effect of the change in accounting, rose 7.5 percent to $1.00 from 93.0 cents a year ago, and net income, before the cumulative effect of the change in accounting, increased 7.2 percent to $459.3 million from $428.5 million. Including the $14.8 million cumulative effect of change in accounting, fiscal 1998 nine months diluted earnings per share were 97.0 cents. 13 CONAGRA, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS YEAR 2000 The Year 2000 computer software compliance issues affect ConAgra and many companies in the U.S. industry. Historically, certain computer programs were written using two digits rather than four to define the applicable year. As a result, software may recognize a date using the two digits "00" as 1900 rather than the year 2000. Computer programs which do not recognize the proper date could generate erroneous data or cause systems to fail. The Company has performed an assessment of major information technology systems and expects that all necessary modifications and/or replacements will be completed in a timely manner to ensure that systems are Year 2000 compliant. ConAgra continues to evaluate the estimated costs associated with these effects based on its experience to date. Based on current estimates, the costs of addressing this issue are not expected to have a material adverse effect on the company's financial position, results of operations or cash flows. 14 CONAGRA, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES ConAgra issued an aggregate of 8,689,088 shares of its common stock during the third quarter of fiscal 1998 in connection with the acquisition through merger of (i) Hester Industries, Inc., (ii) A.M. Gilardi & Sons, Inc. and a related corporation, and (iii) Zoll Foods Corporation and a related entity. The common stock was issued in these transactions in reliance on the exemption from registration provided by Section 4 (2) of the Securities Act of 1933 and Regulation D thereunder. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits 12 - Statement regarding computation of ratio of earnings to fixed charges. (B) Reports on Form 8-K ConAgra filed a report on Form 8-K dated February 17, 1998 reporting the issuance of a press release relating to its earnings outlook for the fiscal year ending May 31, 1998. ConAgra filed a report on Form 8-K dated February 20, 1998 reflecting the increase of the number of shares of ConAgra Common Stock registered under various S-8 registration statements to reflect the effect of the two-for-one stock split on October 1, 1997. CONAGRA, INC. By: /s/James P. O'Donnell _______________________ James P. O'Donnell Executive Vice President, Chief Financial Officer and Corporate Secretary By: /s/Kenneth W. DiFonzo _______________________ Kenneth W. DiFonzo Senior Vice President and Controller Dated this 7th day of April, 1998. 15 CONAGRA, INC. AND SUBSIDIARIES EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE 12 Statement regarding 17 computation of ratio of earnings to fixed charges 16 EXHIBIT 12 CONAGRA, INC. AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions) THIRTY-NINE WEEKS ENDED FEBRUARY 22, 1998 ----------------- Fixed charges Interest expense $ 270.5 Capitalized interest 9.5 Interest in cost of goods sold 13.8 One third of non-cancellable lease rent 33.5 -------- Total fixed charges (A) $ 327.3 -------- -------- Earnings Pretax income $ 746.8 Add fixed charges 327.3 Less capitalized interest (9.5) -------- Earnings and fixed charges (B) $1,064.6 -------- -------- Ratio of earnings to fixed charges (B/A) 3.3
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. 17 EX-27.1 2 EXHIBIT 27.1
5 1,000 3-MOS 6-MOS 9-MOS YEAR MAY-25-1997 MAY-25-1997 MAY-25-1997 MAY-25-1997 MAY-27-1996 MAY-27-1996 MAY-27-1996 MAY-27-1996 AUG-25-1996 NOV-24-1996 FEB-23-1997 MAY-25-1997 34,500 78,400 64,500 105,800 0 0 0 0 2,438,200 2,538,900 2,128,400 1,434,800 61,500 69,800 75,400 67,200 3,426,700 4,080,000 3,692,000 3,342,900 6,277,300 7,061,200 6,243,600 5,205,000 5,022,300 5,192,600 5,321,200 5,274,300 2,125,700 2,175,300 2,243,200 2,031,800 12,021,600 12,954,500 12,177,600 11,277,100 6,062,400 6,820,700 5,987,700 4,989,600 2,252,300 2,307,200 2,333,500 2,355,700 0 0 0 0 525,000 525,000 525,000 525,000 1,265,100 1,265,300 1,265,300 1,265,400 956,900 1,097,900 1,154,600 1,206,300 12,021,600 12,954,500 12,177,600 11,277,100 6,404,300 13,168,800 18,803,800 24,002,100 6,404,300 13,168,800 18,803,800 24,002,100 5,612,400 11,418,700 16,176,100 20,441,800 5,612,400 11,418,700 16,176,100 20,441,800 559,000 1,128,200 1,689,400 2,265,400 0 0 0 0 70,100 142,800 216,100 277,200 162,800 479,100 722,200 1,017,700 66,700 195,700 293,700 402,700 96,100 283,400 428,500 615,000 0 0 0 0 0 0 0 0 0 0 0 0 96,100 283,400 428,500 615,000 0.21 0.63 0.95 1.36 0.21 0.62 0.93 1.34
EX-27.2 3 EXHIBIT 27.2
5 1,000 3-MOS 6-MOS YEAR YEAR MAY-31-1998 MAY-31-1998 MAY-26-1996 MAY-28-1995 MAY-26-1997 MAY-26-1997 MAY-29-1995 MAY-30-1994 AUG-24-1997 NOV-23-1997 MAY-26-1996 MAY-28-1995 26,000 62,200 113,700 60,100 0 0 0 0 2,450,100 2,579,200 1,480,500 1,603,900 72,800 78,500 52,100 63,900 3,624,300 4,095,500 3,573,400 3,167,300 6,443,600 7,040,100 5,566,900 5,140,200 5,272,900 5,342,500 4,971,300 4,537,800 2,065,300 2,129,400 2,150,800 1,741,800 12,445,700 13,060,000 11,196,600 10,801,000 6,286,200 6,696,000 5,193,700 3,964,900 2,322,200 2,392,600 2,262,900 2,520,000 0 0 0 354,900 525,000 525,000 525,000 525,000 2,531,200 2,532,000 1,264,900 1,264,300 137,800 26,200 990,600 1,231,100 12,445,700 13,060,000 11,196,600 10,801,000 6,140,400 12,574,000 24,821,600 24,108,900 6,140,400 12,574,000 24,821,600 24,108,900 5,298,400 10,732,800 21,322,200 29,778,400 5,298,400 10,732,800 21,322,200 20,778,400 586,900 1,166,900 2,785,900 2,229,900 0 0 0 0 73,100 148,300 304,900 278,100 182,000 526,000 408,600 825,900 71,900 205,200 219,700 330,300 110,100 320,800 188,900 495,600 0 0 0 0 0 0 0 0 0 0 0 0 110,100 320,800 188,900 495,600 0.25 0.72 0.40 1.04 0.24 0.70 0.39 1.02
EX-27.3 4 EXHIBIT 27.3
5 1,000 9-MOS MAY-31-1998 MAY-26-1997 FEB-22-1998 39,600 0 2,295,900 84,300 3,936,700 6,591,600 5,518,600 2,247,900 12,643,900 6,105,700 2,442,500 0 525,000 2,551,400 117,200 12,643,900 17,959,000 17,959,000 15,271,200 15,271,200 1,716,800 0 224,200 746,800 287,500 459,300 0 0 14,800 444,500 0.99 0.97
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