<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 November 29, 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.
---------------------------------------------------
(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 December 27, 1998
was 489,334,935.
<PAGE>
<TABLE>
<CAPTION>
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 TWENTY-SIX WEEKS ENDED
NOVEMBER 29, NOVEMBER 23, NOVEMBER 29, NOVEMBER 23,
1998 1997 1998 1997
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 6,404.4 $ 6,548.1 $ 12,887.8 $ 12,810.9
Costs and expenses
Cost of goods sold 5,298.5 5,510.9 10,864.4 10,890.3
Selling, administrative and general expenses 658.9 609.8 1,322.2 1,228.1
Interest expense 91.0 75.5 167.4 149.1
----------- ------------ ------------ ------------
6,048.4 6,196.2 12,354.0 12,267.5
----------- ------------ ------------ ------------
Income before income taxes 356.0 351.9 533.8 543.4
Income taxes 137.0 134.7 205.5 207.9
----------- ------------ ------------ ------------
Net income $ 219.0 $ 217.2 $ 328.3 $ 335.5
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Income per share - basic $ .47 $ .47 $ .70 $ .72
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
Income per share - diluted $ .46 $ .46 $ .69 $ .71
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
- --------------------------------------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
NOVEMBER 29, NOVEMBER 23, NOVEMBER 29, NOVEMBER 23,
1998 1997 1998 1997
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net income $ 219.0 $ 217.2 $ 328.3 $ 335.5
Other comprehensive income/(loss):
Currency translation adjustment 23.1 (5.0) 5.2 (16.5)
------------ ------------ ------------- ------------
Comprehensive income $ 242.1 $ 212.2 $ 333.5 $ 319.0
------------ ------------ ------------- ------------
------------ ------------ ------------- ------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amount)
(unaudited)
- -------------------------------------------------------------------------------------------------------
ASSETS NOVEMBER 29, MAY 31, NOVEMBER 23,
1998 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 44.3 $ 108.4 $ 64.2
Receivables, less allowance for doubtful accounts
of $80.6, $68.2 and $79.8 2,687.0 1,546.9 2,523.5
Inventories 4,189.6 3,540.8 4,129.5
Prepaid expenses 318.7 341.6 390.5
------------ ------------ ------------
Total current assets 7,239.6 5,537.7 7,107.7
------------ ------------ ------------
Property, plant and equipment 6,086.7 5,761.1 5,515.9
Less accumulated depreciation (2,486.0) (2,311.4) (2,201.6)
------------ ------------ ------------
Property, plant and equipment, net 3,600.7 3,449.7 3,314.3
------------ ------------ ------------
Brands, trademarks and goodwill 2,640.7 2,391.7 2,403.7
Other assets 465.9 429.4 406.8
------------ ------------ ------------
$ 13,946.9 $ 11,808.5 $ 13,232.5
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,432.1 $ 858.1 $ 3,007.1
Current installments of long-term debt 16.4 52.7 78.8
Accounts payable 1,823.9 1,971.0 1,893.5
Advances on sales 253.9 829.7 245.4
Other accrued liabilities 1,456.0 1,382.2 1,511.5
------------ ------------ ------------
Total current liabilities 6,982.3 5,093.7 6,736.3
------------ ------------ ------------
Senior long-term debt, excluding current installments 1,854.0 1,753.5 1,662.0
Other noncurrent liabilities 784.6 847.3 894.0
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 519,547,668, 519,424,034 and 522,683,194 2,597.7 2,597.1 2,613.4
Additional paid-in capital 350.3 320.0 528.0
Retained earnings 1,507.7 1,337.7 1,276.6
Foreign currency translation adjustment (62.4) (67.6) (48.2)
Less treasury stock, at cost, common
Shares 30,197,659, 30,011,958 and 34,328,054 (710.6) (705.2) (800.2)
------------ ------------ ------------
3,682.7 3,482.0 3,569.6
Less unearned restricted stock and value of 19,168,681,
21,376,632 and 23,726,267 common shares held
In Employee Equity Fund (631.7) (643.0) (904.4)
------------ ------------ ------------
Total common stockholders' equity 3,051.0 2,839.0 2,665.2
------------ ------------ ------------
$ 13,946.9 $ 11,808.5 $ 13,232.5
------------ ------------ ------------
------------ ------------ ------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
- ---------------------------------------------------------------------------------------------------------------
TWENTY-SIX WEEKS ENDED
NOVEMBER 29, NOVEMBER 23,
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 328.3 $ 335.5
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and other amortization 210.8 189.6
Goodwill amortization 34.2 34.9
Other noncash items (includes nonpension postretirement benefits) 50.0 46.4
Change in assets and liabilities before effects
from business acquisitions (2,494.7) (2,521.8)
------------ ------------
Net cash flows from operating activities (1,871.4) (1,915.4)
------------ ------------
Cash flows from investing activities
Additions to property, plant and equipment (274.2) (206.2)
Payment for business acquisitions (401.4) -
Sale of businesses and property, plant and equipment 7.2 140.6
Notes receivable and other items (10.6) (53.2)
------------ ------------
Net cash flows from investing activities (679.0) (118.8)
------------ ------------
Cash flows from financing activities
Net short-term borrowings 2,571.5 2,466.2
Proceeds from issuance of long-term debt 595.2 310.8
Repayment of long-term debt (532.1) (553.4)
Cash dividends paid (144.7) (122.4)
Cash distributions of pooled companies (1.2) (3.0)
Treasury stock purchases - (145.7)
Employee Equity Fund stock transactions 6.4 28.0
Other items (8.8) 11.0
------------ ------------
Net cash flows from financing activities 2,486.3 1,991.5
------------ ------------
Net increase (decrease) in cash and cash equivalents (64.1) (42.7)
Cash and cash equivalents at beginning of period 108.4 106.9
------------ ------------
Cash and cash equivalents at end of period $ 44.3 $ 64.2
------------ ------------
------------ ------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 29, 1998
(COLUMNAR DATA IN MILLIONS)
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 report on
Form 8-K dated September 29, 1998.
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.
ACCOUNTING CHANGES
In the first quarter of fiscal 1999, ConAgra adopted Statement of Financial
Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS No.
130), which establishes standards for reporting comprehensive income in
financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by or distributions
to stockholders. The adoption of this statement had no impact on net income
or shareholders' equity.
Comprehensive income for all periods presented consists of net income and
foreign currency translation adjustments. Amounts in prior year financial
statements have been reclassified to conform to SFAS No. 130 requirements.
ConAgra deems its foreign investments to be permanent in nature and does
not provide for taxes on currency translation adjustments arising from
converting the investment in a foreign currency to U.S. dollars. There are
no reclassification adjustments to be reported in periods presented.
2. BUSINESS COMBINATIONS
On July 31, 1998, GoodMark Foods, Inc. (GoodMark) merged with ConAgra
through an exchange of shares. ConAgra issued approximately 7.8 million
shares of common stock for all outstanding shares of GoodMark. On July 31,
1998, Fernando's Foods Corporation (Fernando's) merged with ConAgra through
an exchange of shares. ConAgra issued approximately 1.3 million shares of
common stock for all outstanding shares of Fernando's.
During fiscal 1998, ConAgra completed mergers with Hester Industries, Inc.
(Hester) and A.M. Gilardi & Sons, Inc. (Gilardi), exchanging 3.7 million
and 3.8 million shares of ConAgra stock, respectively, for all outstanding
shares of Hester and Gilardi.
The above business combinations have been accounted for as poolings of
interest. The historical financial statements of the Company have been
restated to give effect to all of the above acquisitions as though the
companies had operated together from the beginning of the earliest period
presented.
6
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 29, 1998
(COLUMNAR DATA IN MILLIONS)
Results of operations of the acquired businesses prior to acquisition
date were as follows:
<TABLE>
<CAPTION>
THIRTEEN TWENTY-SIX
WEEKS ENDED WEEKS ENDED
NOVEMBER 23, NOVEMBER 23,
1997 1997
------------ ------------
<S> <C> <C>
Net sales $ 114.5 $ 236.9
Net income $ 6.6 $ 14.8
</TABLE>
3. INCOME PER SHARE
The following table reconciles the income and average share amounts used to
compute both basic and diluted income per share:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------- -----------------------
NOV. 29, NOV. 23, NOV. 29, NOV. 23,
1998 1997 1998 1997
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
INCOME PER SHARE - BASIC
Net income $ 219.0 $ 217.2 $ 328.3 $ 335.5
--------- --------- --------- ----------
--------- --------- --------- ----------
Weighted average shares outstanding - basic 469.8 464.0 469.3 464.6
--------- --------- --------- ----------
--------- --------- --------- ----------
INCOME PER SHARE - DILUTED
Net income $ 219.0 $ 217.2 $ 328.3 $ 335.5
--------- --------- --------- ----------
--------- --------- --------- ----------
Weighted average shares outstanding - basic 469.8 464.0 469.3 464.6
Add shares contingently issuable upon
exercise of stock options 7.1 10.5 6.8 10.7
--------- --------- --------- ----------
Weighted average shares outstanding - diluted 476.9 474.5 476.1 475.3
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
4. INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
NOV. 29, MAY 31, NOV. 23,
1998 1998 1997
---------- --------- -----------
<S> <C> <C> <C>
Hedged commodities $ 1,531.3 $ 1,199.3 $ 1,454.8
Food products and livestock 1,271.8 1,263.3 1,480.9
Agricultural chemicals, fertilizer and feed 660.8 581.4 539.7
Other, principally ingredients and supplies 725.7 496.8 654.1
---------- ---------- -----------
$ 4,189.6 $ 3,540.8 $ 4,129.5
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
7
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 29, 1998
(COLUMNAR DATA IN MILLIONS)
5. 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 44 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.
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 August 17, 1998, ConAgra acquired the Egg Beaters and Tablespreads
businesses from Nabisco, Inc. for $400 million. The Tablespreads business
manufactures and markets margarine under Parkay, Blue Bonnet,
Fleischmann's, Touch of Butter, Chiffon and Move Over Butter brand names.
Egg Beaters is an egg alternative product. Annual sales of the combined
businesses are approximately $480 million. The acquisition was accounted
for as a purchase.
8
<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 condensed consolidated financial
statements. Results for the thirteen and twenty-six week periods ended
November 29, 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.
All prior period results have been restated to give effect to mergers accounted
for as poolings of interest. See Note 2 above.
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 $249.8 million, or 3.7%, compared to May 31, 1998.
Working capital decreased $186.7 million, and noncurrent assets increased $436.5
million. The decrease in working capital was primarily caused by normal seasonal
increases in accounts receivable and inventory and was funded by short-term
debt. The increase in noncurrent assets was primarily caused by the Egg Beaters
and Tablespreads acquisitions.
ConAgra invested $274.2 million in property, plant and equipment and $401.4
million for business acquisitions in the first half of fiscal 1999 compared to
$206.2 million in additions to property, plant and equipment in the same half of
fiscal 1998. Sales of property and businesses totaled $7.2 million in the first
half of fiscal 1999 versus $140.6 million in the first half of fiscal 1998.
Depreciation and amortization totaled $245.0 million in the first half compared
to $224.5 million in the same half last year.
In the second quarter of fiscal 1999, ConAgra issued $400 million of 7.0%
senior notes, due October 1, 2028 and $200 million of 5.5% senior notes, due
October 15, 2002. In the first half of fiscal 1999, ConAgra repaid $61
million of senior long-term debt and reduced the amount of short-term
borrowings backed by long-term credit agreements and classified as long-term
by $471 million. In the first half of fiscal 1998, ConAgra repaid $327
million of senior long-term debt and reduced the amount of short-term
borrowings backed by long-term credit agreements and classified as long-term
by $226 million. During the first half of fiscal 1998, ConAgra issued $311
million of senior long-term notes, with $300 million issued at 6.70%.
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.
9
<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>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
NOV. 29, 1998 AND NOV. 23, 1997 NOV. 29, 1998 AND NOV. 23, 1997
------------------------------- -------------------------------
DOLLAR PERCENT DOLLAR PERCENT
CHANGE CHANGE CHANGE CHANGE
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Net sales $ (143.7) (2.2)% $ 76.9 0.6%
Costs and expenses
Cost of goods sold (212.4) (3.9) (25.9) (0.2)
Selling, administrative and general expenses 49.1 8.1 94.1 7.7
Interest expense 15.5 20.5 18.3 12.3
--------- ------- --------- -------
(147.8) (2.4) 86.5 0.7
--------- ------- --------- -------
Income before income taxes 4.1 1.2 (9.6) (1.8)
Income taxes 2.3 1.7 (2.4) (1.2)
--------- ------- --------- -------
Net income $ 1.8 0.8% $ (7.2) (2.1)%
--------- ------- --------- -------
--------- ------- --------- -------
Income per share - basic $ - 0.0% $ (.02) (2.8)%
--------- ------- --------- -------
--------- ------- --------- -------
Income per share - diluted $ - 0.0% $ (.02) (2.8)%
--------- ------- --------- -------
--------- ------- --------- -------
</TABLE>
In ConAgra's Grocery & Diversified Products business segment, operating profit
increased 1.5 percent in the second quarter and 4.5 percent in the first half.
Segment sales increased 2 percent in the second quarter and 1 percent in the
first half. ConAgra's frozen foods businesses increased unit volumes and
operating profit in fiscal 1999's second quarter and first half. In ConAgra
Foodservice Sales Company, which includes Lamb-Weston potato products, operating
profit was down slightly in the second quarter and up in the first half. ConAgra
Grocery Products, the shelf-stable foods group, equaled prior year operating
profit in both periods.
In ConAgra's Food Inputs & Ingredients business segment, operating profit was
down 16 percent in the second quarter and 3 percent in the first half of fiscal
1999 versus the same periods in fiscal 1998. Segment sales decreased 14 percent
in the second quarter and 1 percent in the first half. Business dispositions,
lower commodity selling prices and sales reclassification reduced segment sales
over 4 percent in both periods. A shift in crop input sales from the second
quarter to the first quarter of fiscal 1999 also was a factor in the segment's
second quarter sales decline. ConAgra's major crop inputs business, United Agri
Products, increased operating profit in fiscal 1999's second quarter and first
half. In the ingredients sector, second quarter and first half operating growth
in international operations, specialty food ingredients and corn processing was
more than offset by a sharp decline in grain merchandising and commodity
services operating profit in both periods.
In ConAgra's Refrigerated Foods business segment, operating profit was up 46
percent in the second quarter and 9 percent in the first half of fiscal 1999
versus the same periods in fiscal 1998. Segment sales increased 2 percent in the
second quarter and 1 percent in the first half. Net of sales added by
acquisitions, lower pork and beef raw materials prices passed through as lower
selling prices reduced segment sales nearly 2 percent in the second quarter and
over 2 percent in the first half.
10
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The branded packaged meats business increased unit volumes and operating
profit in fiscal 1999's second quarter and first half. An acquisition
contributed to strong second quarter and first half operating profit growth
in the cheese and tablespreads business. Pork products, poultry products and
Australia beef raised operating profit in fiscal 1999's second quarter and
first half. U.S. beef operating profit was down in both periods, though the
year-over-year profit decline in dollars narrowed in the second quarter.
For ConAgra in total, fiscal 1999 second quarter net income was $219.0 million,
up 1 percent from $217.2 million in fiscal 1998's restated second quarter, and
up 4 percent from $210.6 million before restatement. Fiscal 1999 first half net
income was $328.3 million, down 2 percent from $335.5 million in fiscal 1998's
restated first half, and up 2 percent from $320.8 million before restatement.
Fiscal 1999 second quarter net sales were $6.40 billion, down 2 percent from
$6.55 billion in fiscal 1999's restated second quarter, and down .5 percent from
$6.43 billion before restatement. Fiscal 1999 first half net sales were $12.89
billion, up .6 percent from $12.81 billion in fiscal 1998's restated first half,
and up 2.5 percent from $12.57 billion before restatement.
YEAR 2000
The Year 2000 ("Y2K") computer software compliance issues affect ConAgra and
most companies in the world. 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 that do not recognize the proper date
could generate erroneous data or cause systems to fail. ConAgra has established
a Y2K project office and has retained an independent consulting group to provide
assistance with regard to ConAgra's Y2K compliance. ConAgra's Y2K project covers
both traditional computer systems and infrastructure ("IT systems") and
computer-based manufacturing, logistical and related systems ("non-IT systems").
The Y2K project has six phases: systems inventory, assessment, renovation,
validation, implementation, and contingency planning.
ConAgra operates on a decentralized independent operating company ("IOC")
structure. Consequently, the Y2K project efforts may vary by IOC. For IT
systems, the status of the project generally ranges from renovation to
implementation. For non-IT systems, the status of the project generally
ranges from assessment to implementation. Based on its assessment of its
major information technology systems, ConAgra expects that necessary
modifications and/or replacements will be completed in a timely manner to
insure that each IOC's systems are Y2K compliant.
ConAgra's Y2K project also considers the readiness of significant customers
and suppliers. ConAgra does not have any suppliers or customers that are
material to its operations as a whole. Each IOC is verifying the readiness of
suppliers and customers that may be significant for such IOC.
Due to the decentralized IOC structure, there are few IT systems and non-IT
systems, the failure of which would have a material effect on ConAgra as a
whole. Such material systems include general ledger, payroll, fixed assets
and cash management systems. ConAgra's Y2K project includes contingency plans
for these systems that involve, among other things, manual workarounds and
extra staffing. ConAgra's Y2K project includes the development of a full
contingency plan for each IOC and ConAgra presently expects to have such
contingency arrangements completed by June 1999.
ConAgra has incurred approximately $19 million of Y2K project expenses to
date. Future expenses are expected to include $40 to $50 million of
additional costs, plus approximately $10 million of systems initiatives that
have been accelerated in connection with the Y2K project. Such cost estimates
are based upon presently available information and may change as ConAgra
continues with its Y2K project.
11
<PAGE>
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
twenty-six weeks ended November 29, 1998. For additional information, refer
to pages 6-8 of the Company's report on Form 8-K, dated September 29, 1998.
12
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ConAgra previously reported an action filed by the Environmental Protection
Agency in March 1996 in Federal District Court in Idaho against the Company
as owner and operator of a beef packing plant in Nampa, Idaho seeking civil
monetary penalties for alleged violations of the Clean Water Act. The
matter was completed with the entry of a consent decree in the second
quarter of fiscal 1999, which consent decree provides for the payment of $1
million by the Company and the implementation of certain remediation
measures at the Nampa facility.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
ConAgra issued 94,859 shares of its common stock during the second quarter
of fiscal 1999 in connection with the acquisition of Lovette Company, Inc.
The common stock was issued 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
None
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
Corporate Controller
Dated this 12th day of January, 1999.
13
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
12 Statement regarding computation of ratio of 15
earnings to fixed charges
</TABLE>
14
<PAGE>
EXHIBIT 12
CONAGRA, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS
ENDED
NOVEMBER 29, 1998
-----------------
<S> <C>
Fixed charges
Interest expense $ 193.5
Capitalized interest 3.2
Interest in cost of goods sold 8.7
One third of noncancelable lease rent 17.1
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Total fixed charges (A) $ 222.5
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-------
Earnings
Pretax income $ 533.8
Add fixed charges 222.5
Less capitalized interest (3.2)
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Earnings and fixed charges (B) $ 753.1
-------
-------
Ratio of earnings to fixed charges (B/A) 3.4
</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.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-30-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> NOV-29-1998
<CASH> 44,300
<SECURITIES> 0
<RECEIVABLES> 2,767,600
<ALLOWANCES> 80,600
<INVENTORY> 4,189,600
<CURRENT-ASSETS> 7,239,600
<PP&E> 6,086,700
<DEPRECIATION> 2,486,000
<TOTAL-ASSETS> 13,946,900
<CURRENT-LIABILITIES> 6,982,300
<BONDS> 2,604,000
0
525,000
<COMMON> 2,597,700
<OTHER-SE> 453,300
<TOTAL-LIABILITY-AND-EQUITY> 13,946,900
<SALES> 12,887,800
<TOTAL-REVENUES> 12,887,800
<CGS> 10,864,400
<TOTAL-COSTS> 10,864,400
<OTHER-EXPENSES> 1,322,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167,400
<INCOME-PRETAX> 533,800
<INCOME-TAX> 205,500
<INCOME-CONTINUING> 328,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328,300
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.69
</TABLE>
