<PAGE>
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
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CONAGRA, INC.
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(Exact Name of Registrant, as Specified in Charter)
Delaware 47-0248710
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One ConAgra Drive, Omaha, Nebraska 68102-5001
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(Address of Principal Executive Offices) (Zip Code)
(402) 595-4000
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(Registrant's telephone number, including area code)
NA
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(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
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PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In millions except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------- ------------------------
FEB. 22, FEB. 23, FEB. 22, FEB. 23,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
See notes to the condensed consolidated financial statements.
2
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CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except share amounts)
(unaudited)
<TABLE>
<CAPTION>
FEB. 22, MAY 25, FEB. 23,
1998 1997 1997
-------- ------- --------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions except share amounts)
(unaudited)
<TABLE>
<CAPTION>
FEB. 22, MAY 25, FEB. 23,
1998 1997 1997
-------- ------- --------
<S> <C> <C> <C>
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
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to the condensed consolidated financial statements.
4
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------
FEB. 22, FEB. 23,
1998 1997
-------- --------
<S> <C> <C>
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
--------- ---------
--------- ---------
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
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
-------- -------- -------- --------
<S> <C> <C> <C> <C>
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
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
8
<PAGE>
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):
<TABLE>
<CAPTION>
FEB. 22, MAY 25, FEB. 23,
1998 1997 1997
-------- ------- --------
<S> <C> <C> <C>
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
-------- -------- --------
-------- -------- --------
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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).
<TABLE>
<CAPTION>
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
------ ------- ------ -------
<S> <C> <C> <C> <C>
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
------ ----- ------- ----
------ ----- ------- ----
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
12 Statement regarding 17
computation of ratio of
earnings to fixed charges
16
<PAGE>
EXHIBIT 12
CONAGRA, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
THIRTY-NINE WEEKS
ENDED
FEBRUARY 22, 1998
-----------------
<S> <C>
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
</TABLE>
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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS YEAR
<FISCAL-YEAR-END> MAY-25-1997 MAY-25-1997 MAY-25-1997 MAY-25-1997
<PERIOD-START> MAY-27-1996 MAY-27-1996 MAY-27-1996 MAY-27-1996
<PERIOD-END> AUG-25-1996 NOV-24-1996 FEB-23-1997 MAY-25-1997
<CASH> 34,500 78,400 64,500 105,800
<SECURITIES> 0 0 0 0
<RECEIVABLES> 2,438,200 2,538,900 2,128,400 1,434,800
<ALLOWANCES> 61,500 69,800 75,400 67,200
<INVENTORY> 3,426,700 4,080,000 3,692,000 3,342,900
<CURRENT-ASSETS> 6,277,300 7,061,200 6,243,600 5,205,000
<PP&E> 5,022,300 5,192,600 5,321,200 5,274,300
<DEPRECIATION> 2,125,700 2,175,300 2,243,200 2,031,800
<TOTAL-ASSETS> 12,021,600 12,954,500 12,177,600 11,277,100
<CURRENT-LIABILITIES> 6,062,400 6,820,700 5,987,700 4,989,600
<BONDS> 2,252,300 2,307,200 2,333,500 2,355,700
0 0 0 0
525,000 525,000 525,000 525,000
<COMMON> 1,265,100 1,265,300 1,265,300 1,265,400
<OTHER-SE> 956,900 1,097,900 1,154,600 1,206,300
<TOTAL-LIABILITY-AND-EQUITY> 12,021,600 12,954,500 12,177,600 11,277,100
<SALES> 6,404,300 13,168,800 18,803,800 24,002,100
<TOTAL-REVENUES> 6,404,300 13,168,800 18,803,800 24,002,100
<CGS> 5,612,400 11,418,700 16,176,100 20,441,800
<TOTAL-COSTS> 5,612,400 11,418,700 16,176,100 20,441,800
<OTHER-EXPENSES> 559,000 1,128,200 1,689,400 2,265,400
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 70,100 142,800 216,100 277,200
<INCOME-PRETAX> 162,800 479,100 722,200 1,017,700
<INCOME-TAX> 66,700 195,700 293,700 402,700
<INCOME-CONTINUING> 96,100 283,400 428,500 615,000
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 96,100 283,400 428,500 615,000
<EPS-PRIMARY> 0.21 0.63 0.95 1.36
<EPS-DILUTED> 0.21 0.62 0.93 1.34
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS YEAR YEAR
<FISCAL-YEAR-END> MAY-31-1998 MAY-31-1998 MAY-26-1996 MAY-28-1995
<PERIOD-START> MAY-26-1997 MAY-26-1997 MAY-29-1995 MAY-30-1994
<PERIOD-END> AUG-24-1997 NOV-23-1997 MAY-26-1996 MAY-28-1995
<CASH> 26,000 62,200 113,700 60,100
<SECURITIES> 0 0 0 0
<RECEIVABLES> 2,450,100 2,579,200 1,480,500 1,603,900
<ALLOWANCES> 72,800 78,500 52,100 63,900
<INVENTORY> 3,624,300 4,095,500 3,573,400 3,167,300
<CURRENT-ASSETS> 6,443,600 7,040,100 5,566,900 5,140,200
<PP&E> 5,272,900 5,342,500 4,971,300 4,537,800
<DEPRECIATION> 2,065,300 2,129,400 2,150,800 1,741,800
<TOTAL-ASSETS> 12,445,700 13,060,000 11,196,600 10,801,000
<CURRENT-LIABILITIES> 6,286,200 6,696,000 5,193,700 3,964,900
<BONDS> 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
<COMMON> 2,531,200 2,532,000 1,264,900 1,264,300
<OTHER-SE> 137,800 26,200 990,600 1,231,100
<TOTAL-LIABILITY-AND-EQUITY> 12,445,700 13,060,000 11,196,600 10,801,000
<SALES> 6,140,400 12,574,000 24,821,600 24,108,900
<TOTAL-REVENUES> 6,140,400 12,574,000 24,821,600 24,108,900
<CGS> 5,298,400 10,732,800 21,322,200 29,778,400
<TOTAL-COSTS> 5,298,400 10,732,800 21,322,200 20,778,400
<OTHER-EXPENSES> 586,900 1,166,900 2,785,900 2,229,900
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 73,100 148,300 304,900 278,100
<INCOME-PRETAX> 182,000 526,000 408,600 825,900
<INCOME-TAX> 71,900 205,200 219,700 330,300
<INCOME-CONTINUING> 110,100 320,800 188,900 495,600
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 110,100 320,800 188,900 495,600
<EPS-PRIMARY> 0.25 0.72 0.40 1.04
<EPS-DILUTED> 0.24 0.70 0.39 1.02
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-26-1997
<PERIOD-END> FEB-22-1998
<CASH> 39,600
<SECURITIES> 0
<RECEIVABLES> 2,295,900
<ALLOWANCES> 84,300
<INVENTORY> 3,936,700
<CURRENT-ASSETS> 6,591,600
<PP&E> 5,518,600
<DEPRECIATION> 2,247,900
<TOTAL-ASSETS> 12,643,900
<CURRENT-LIABILITIES> 6,105,700
<BONDS> 2,442,500
0
525,000
<COMMON> 2,551,400
<OTHER-SE> 117,200
<TOTAL-LIABILITY-AND-EQUITY> 12,643,900
<SALES> 17,959,000
<TOTAL-REVENUES> 17,959,000
<CGS> 15,271,200
<TOTAL-COSTS> 15,271,200
<OTHER-EXPENSES> 1,716,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 224,200
<INCOME-PRETAX> 746,800
<INCOME-TAX> 287,500
<INCOME-CONTINUING> 459,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 14,800
<NET-INCOME> 444,500
<EPS-PRIMARY> 0.99
<EPS-DILUTED> 0.97
</TABLE>
