<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 August 29, 1999
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
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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
- -------------------------------------------------------------------------------
(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 September 26, 1999
was 523,928,351.
<PAGE>
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
AUGUST 29, AUGUST 30,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 6,593.6 $ 6,483.4
Costs and expenses
Cost of goods sold (1) 5,617.4 5,565.9
Selling, administrative and general expenses (1) 732.3 663.3
Interest expense 76.2 76.4
Non-recurring charges (1) 3.5 -
----------- -----------
6,429.4 6,305.6
----------- -----------
Income before income taxes 164.2 177.8
Income taxes 62.4 68.5
----------- -----------
Net income $ 101.8 $ 109.3
=========== ===========
Income per share - basic $ .22 $ .23
=========== ===========
Income per share - diluted $ .21 $ .23
=========== ===========
- ------------------------------------------------------------------------------------
</TABLE>
(1) Non-recurring charges reflect $3.5 million related to restructuring
activities. Other restructuring-related items include accelerated
depreciation of $31.0 million included in cost of goods sold, inventory
markdowns of $8.6 million included in cost of goods sold and $4.0 million
of accelerated depreciation included in selling, administrative and general
expenses.
See notes to the condensed consolidated financial statements.
2
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
THIRTEEN WEEKS ENDED
AUGUST 29, AUGUST 30,
1999 1998
----------- -----------
<S> <C> <C>
Net income $ 101.8 $ 109.3
Other comprehensive loss:
Currency translation adjustment (6.5) (17.9)
----------- -----------
Comprehensive income $ 95.3 $ 91.4
=========== ===========
- -------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ASSETS AUGUST 29, MAY 30, AUGUST 30,
1999 1999 1998
----------- ----------- ----------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 10.7 $ 62.8 $ 10.8
Receivables, less allowance for doubtful accounts
of $78.7, $60.0 and $78.3 2,615.5 1,637.5 2,688.6
Inventories 4,012.1 3,639.9 3,806.4
Prepaid expenses 334.8 315.9 367.6
----------- ----------- -----------
Total current assets 6,973.1 5,656.1 6,873.4
----------- ----------- -----------
Property, plant and equipment 6,389.1 6,213.8 5,912.6
Less accumulated depreciation (2,783.7) (2,599.6) (2,390.8)
----------- ----------- -----------
Property, plant and equipment, net 3,605.4 3,614.2 3,521.8
----------- ----------- -----------
Brands, trademarks and goodwill 2,396.0 2,408.7 2,694.9
Other assets 404.1 467.1 438.6
----------- ----------- -----------
$ 13,378.6 $ 12,146.1 $ 13,528.7
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,415.7 $ 837.9 $ 4,187.5
Current installments of long-term debt 19.9 21.1 28.5
Accounts payable 1,645.1 2,036.5 1,051.9
Advances on sales 125.3 1,191.7 106.6
Other accrued liabilities 1,348.0 1,299.2 1,384.0
----------- ----------- -----------
Total current liabilities 6,554.0 5,386.4 6,758.5
----------- ----------- -----------
Senior long-term debt, excluding current installments 1,810.1 1,793.1 1,781.8
Other noncurrent liabilities 790.9 782.8 830.7
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 523,852,872, 519,648,673 and 519,448,104 2,619.2 2,598.2 2,597.2
Additional paid-in capital 175.0 219.4 212.0
Retained earnings 1,397.2 1,369.8 1,373.9
Foreign currency translation adjustment (72.4) (65.9) (85.5)
Less treasury stock, at cost, common
shares 31,645,189, 31,475,678 and 30,155,200 (754.3) (749.9) (708.9)
----------- ----------- -----------
3,364.7 3,371.6 3,388.7
Less unearned restricted stock and value of 16,379,449,
17,184,831 and 19,830,815 common shares held in
Employee Equity Fund (416.1) (462.8) (506.0)
----------- ----------- -----------
Total common stockholders' equity 2,948.6 2,908.8 2,882.7
----------- ----------- -----------
$ 13,378.6 $ 12,146.1 $ 13,528.7
=========== =========== ===========
- ----------------------------------------------------------------------------------------------------------------
</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>
- ------------------------------------------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED
AUGUST 29, AUGUST 30,
1999 1998
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 101.8 $ 109.3
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and other amortization 114.4 102.9
Goodwill amortization 16.1 17.2
Non-recurring and other restructuring-related
charges (includes accelerated depreciation) 47.1 -
Other noncash items (includes nonpension postretirement benefits) 32.6 35.1
Change in assets and liabilities before effects
from business acquisitions (2,751.2) (3,127.9)
--------- ---------
Net cash flows from operating activities (2,439.2) (2,863.4)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (111.6) (112.2)
Payment for business acquisitions - (400.0)
Sale of businesses and property, plant and equipment 6.1 4.9
Notes receivable and other items 8.5 (2.1)
--------- ---------
Net cash flows from investing activities (97.0) (509.4)
--------- ---------
Cash flows from financing activities:
Net short-term borrowings 2,550.9 3,329.4
Proceeds from issuance of long-term debt 17.2 45.9
Repayment of long-term debt (5.9) (42.2)
Cash dividends paid (84.0) (71.5)
Cash distributions of pooled companies - (1.2)
Employee Equity Fund stock transactions - 6.4
Other items 5.9 8.4
--------- ---------
Net cash flows from financing activities 2,484.1 3,275.2
--------- ---------
Net change in cash and cash equivalents (52.1) (97.6)
Cash and cash equivalents at beginning of period 62.8 108.4
--------- ---------
Cash and cash equivalents at end of period $ 10.7 $ 10.8
========= =========
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED AUGUST 29, 1999
(COLUMNAR DOLLARS IN MILLIONS)
1. ACCOUNTING POLICIES
The unaudited interim financial information included herein reflects
normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of operations,
financial position, and cash flows for the periods presented. These
consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and related
notes included in the Company's fiscal 1999 annual report on Form 10-K.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for other interim periods or
the full year.
Certain prior year amounts have been reclassified in order to conform
with current year classifications.
2. NON-RECURRING AND OTHER RESTRUCTURING-RELATED CHARGES
During the fourth quarter of fiscal 1999, the Company approved a
36-month restructuring plan aimed at eliminating overcapacity,
streamlining operations and improving profitability through margin
improvement and expense reductions. The total pre-tax charge of the
plan is presently estimated at $880 million, with a pre-tax charge
recorded to-date of $487.9 million. In accordance with generally
accepted accounting principles, the remaining cost will be recognized
when employees are notified of separation or when other costs result in
accruable expenses.
Of the $487.9 million recognized to-date, $440.8 million ($337.9
million net of tax) was recognized in fiscal 1999 with the remaining
$47.1 million recognized in the first quarter of fiscal 2000, as
follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Accelerated depreciation $ 27.4 $ 7.6 $ - $ 35.0
Inventory markdowns - .1 8.5 8.6
Non-recurring charges 1.4 .4 1.7 3.5
-------- -------- -------- --------
Total $ 28.8 $ 8.1 $ 10.2 $ 47.1
======== ======== ======== ========
</TABLE>
The $47.1 million charge ($29.2 million net of tax) recognized in the
first quarter of fiscal 2000 consisted of the following: $31.0 million
included in cost of goods sold resulting from accelerated depreciation
on certain assets; $8.6 million included in cost of goods sold for
inventory markdowns; $4.0 million included in selling, general and
administrative expenses resulting from accelerated depreciation on
certain assets; and $3.5 million included in non-recurring charges
resulting primarily from contractual termination and employee related
costs.
Certain assets to be disposed of that are not immediately removed from
operations are depreciated on an accelerated basis over their remaining
useful lives. Inventory markdowns represent losses to write down the
carrying value of non-strategic inventory resulting from the closure of
facilities and discontinuation of certain products or product lines.
Approximately 6,700 employee separations will occur as a result of the
restructuring plan, primarily in manufacturing and operating
facilities. In addition, other exit costs (consisting of
6
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED AUGUST 29, 1999
(COLUMNAR DOLLARS IN MILLIONS)
lease termination and other contractual termination costs) will occur
as a result of the restructuring plan. Activity recognized to-date is
as follows:
<TABLE>
<CAPTION>
Severance Other Exit Assets to be
Amount Headcount Costs Disposed of
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Fiscal 1999 activity:
Charges to income $ 45.1 3,160 $ 7.3 $ 69.4
Utilized (6.1) (260) - (69.4)
-------- ------ -------- --------
Balance, May 30, 1999 39.0 2,900 7.3 -
Fiscal 2000 activity:
Charges to income .8 40 2.0 -
Utilized (8.4) (1,050) (5.0) -
-------- ------ -------- --------
Balance, August 29, 1999 $ 31.4 1,890 $ 4.3 $ -
======== ====== ======== ========
</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
AUGUST 29, AUGUST 30,
1999 1998
----------- -----------
<S> <C> <C>
NET INCOME $ 101.8 $ 109.3
=========== ===========
INCOME PER SHARE - BASIC
Weighted average shares outstanding - basic 473.1 468.7
=========== ===========
INCOME PER SHARE - DILUTED
Weighted average shares outstanding - basic 473.1 468.7
Add shares contingently issuable upon
exercise of stock options 4.6 6.7
----------- -----------
Weighted average shares outstanding - diluted 477.7 475.4
=========== ===========
</TABLE>
4. INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
AUGUST 29, MAY 30, AUGUST 30,
1999 1999 1998
------------ ------------ ------------
<S> <C> <C> <C>
Hedged commodities $ 1,108.0 $ 1,306.2 $ 1,152.6
Food products and livestock 1,346.0 1,144.7 1,291.6
Agricultural chemicals, fertilizer and feed 922.9 597.4 831.2
Other, principally ingredients and supplies 635.2 591.6 531.0
------------ ------------ ------------
$ 4,012.1 $ 3,639.9 $ 3,806.4
============ ============ ============
</TABLE>
7
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED AUGUST 29, 1999
(COLUMNAR DOLLARS IN MILLIONS)
5. CONTINGENCIES
In fiscal 1991, ConAgra acquired Beatrice Company ("Beatrice"). As a
result of the acquisition and the significant pre-acquisition
contingencies of the Beatrice businesses and its former subsidiaries,
the consolidated post-acquisition financial statements of ConAgra
reflect significant liabilities associated with the estimated
resolution of these contingencies. These include various litigation and
environmental proceedings related to businesses divested by Beatrice
prior to its acquisition by ConAgra. The environmental proceedings
include litigation and administrative proceedings involving Beatrice's
status as a potentially responsible party at 43 Superfund, proposed
Superfund or state-equivalent sites. Beatrice has paid or is in the
process of paying its liability share at 39 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. BUSINESS SEGMENTS
The Company has three segments, which are organized based upon similar
economic characteristics and are similar in the nature of products and
services offered, the nature of production processes, the type or class
of customer and distribution methods. Packaged Foods includes companies
that produce shelf-stable and frozen foods. This segment markets food
products in retail and foodservice channels. Refrigerated Foods
includes companies that produce and market branded processed meats,
beef, pork, chicken and turkey. Agricultural Products includes
companies involved in distribution of agricultural inputs and
procurement, processing, trading and distribution of commodity food
ingredients and agricultural commodities.
Intersegment sales have been recorded at amounts approximating market.
Operating profit for each segment is based on net sales less all
identifiable operating expenses and includes the related equity in
earnings of companies included on the basis of the equity method of
accounting. General corporate expenses, goodwill amortization, interest
expense and income taxes have been excluded from segment operations.
The Company operates principally in the United States.
8
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTEEN WEEKS ENDED AUGUST 29, 1999
(COLUMNAR DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
AUGUST 29, AUGUST 30,
1999 1998
------------ ------------
<S> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 1,736.0 $ 1,648.0
Refrigerated Foods 3,121.3 2,874.3
Agricultural Products 1,736.3 1,961.1
------------ ------------
Total $ 6,593.6 $ 6,483.4
============ ============
Intersegment sales
Packaged Foods $ 12.0 $ 13.1
Refrigerated Foods 84.4 53.2
Agricultural Products 129.2 83.3
------------ ------------
225.6 149.6
Intersegment elimination (225.6) (149.6)
------------ ------------
Total $ - $ -
============ ============
Net sales
Packaged Foods $ 1,748.0 $ 1,661.1
Refrigerated Foods 3,205.7 2,927.5
Agricultural Products 1,865.5 2,044.4
Intersegment elimination (225.6) (149.6)
------------ ------------
Total $ 6,593.6 $ 6,483.4
============ ============
Operating profit *
Packaged Foods $ 170.3 $ 171.1
Refrigerated Foods 109.7 64.3
Agricultural Products 59.2 98.0
------------ ------------
Total operating profit 339.2 333.4
Interest expense 76.2 76.4
General corporate expenses 82.7 62.0
Goodwill amortization 16.1 17.2
------------ ------------
Income before tax $ 164.2 $ 177.8
============ ============
</TABLE>
* Thirteen weeks ended August 29, 1999 includes before-tax non-recurring
and restructuring-related charges of $47.1 million. The charges were
included in operating profit as follows: $28.8 million in Packaged
Foods; $8.1 million in Refrigerated Foods; and $10.2 million in
Agricultural Products.
9
<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-week period ended August 29, 1999 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.
INTRODUCTION
During fiscal 1999, ConAgra commenced an initiative ("Operation Overdrive") to
improve margins and sales, streamline operations and to combine and utilize
ConAgra's strengths. In the fourth quarter of fiscal 1999, as part of Operation
Overdrive, the Company announced a restructuring plan covering a 36-month period
aimed at consolidating capacity, streamlining operations and improving
profitability through margin improvement and expense reductions. The total
pre-tax charge of the plan is presently estimated at $880 million with about
$130 million of the charge expected to be a cash expense. In addition, the
restructuring plan includes the elimination of 6,700 jobs through closure of
numerous manufacturing, processing, storage and distribution facilities. During
the fourth quarter of fiscal 1999, the Company recognized a $440.8 million
charge ($337.9 million net of tax) related to the restructuring plan, of which
$52.4 million requires cash expenditures.
During the first quarter, the Company recognized additional non-recurring and
other restructuring-related costs of $47.1 million, bringing the total
non-recurring and other restructuring-related charge recorded to-date to $487.9
million. Of the $47.1 million charge ($29.2 million net of tax) recognized in
the first quarter, $2.8 million will require cash expenditures resulting
primarily from contractual termination and employee related costs. The remaining
$44.3 million is a non-cash charge resulting primarily from accelerated
depreciation and inventory markdowns associated with the Company's restructuring
plan.
The Company recorded net income of $101.8 million or $.21 per share for the
first quarter of fiscal 2000. The after-tax effect of the non-recurring and
other restructuring-related charge on the Company's first quarter of fiscal 2000
was $29.2 million or $.06 diluted income per share. Excluding the non-recurring
and other restructuring-related charges, the Company's net income was $131.0
million or $.27 diluted income per share.
FINANCIAL CONDITION
ConAgra's earnings are generated principally from its capital investment, which
consists of working capital (current assets less current liabilities) plus all
noncurrent assets. Capital investment is financed with stockholders' equity,
long-term debt and other noncurrent liabilities.
Capital investment increased $64.9 million, or 1%, compared to May 30, 1999.
Working capital increased $149.4 million, and noncurrent assets decreased $84.5
million. The increase in working capital was primarily caused by normal seasonal
increases in accounts receivable and inventory which was funded by short-term
debt.
10
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ConAgra invested $111.6 million in property, plant and equipment in the first
quarter of fiscal 2000 compared to $112.2 million in additions to property,
plant and equipment and $400 million for business acquisitions in the same
quarter of fiscal 1999. Depreciation and amortization totaled $149.4 million in
the first quarter compared to $102.9 million in the same quarter last year. The
increase of $46.5 million was primarily caused by accelerated depreciation on
certain assets, as previously discussed.
The Company's objective is that senior long-term debt normally will not exceed
30 percent of total long-term debt plus equity. For purposes of computing the
ratio, long-term subordinated debt is treated as equity due to its preferred
stock characteristics. This objective was met for all periods presented.
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
AUGUST 29, 1999 AND AUGUST 30, 1998
-----------------------------------
DOLLAR PERCENT
CHANGE CHANGE
----------- -----------
<S> <C> <C>
Net sales $ 110.2 1.7%
Costs and expenses
Cost of goods sold 51.5 0.9
Selling, administrative and general expenses 69.0 10.4
Interest expense (0.2) (0.3)
Non-recurring charges 3.5 N/A
----------- -----------
123.8 2.0
----------- -----------
Income before income taxes (13.6) (7.6)
Income taxes (6.1) (8.9)
------------ ------------
Net income $ (7.5) (6.9)%
============ ============
Income per share - basic $ (.01) (4.3)%
============ ============
Income per share - diluted $ (.02) (8.7)%
============ ============
</TABLE>
For the first quarter of fiscal 2000, diluted income per share was $.21, a
decrease of $.02 from the first quarter of fiscal 1999. Excluding non-recurring
and other restructuring-related items, diluted income per share was $.27, an
increase of $.04 versus the first quarter fiscal 1999. The first quarter of
fiscal 1999 did not include non-recurring or other restructuring-related items.
In ConAgra's Packaged Foods segment, sales increased $88.0 million, or 5.3
percent, as compared to first quarter fiscal 1999. The sales increase was
achieved, in part, by Operation Overdrive selling initiatives. Operating profit
decreased by $.8 million, or .5 percent, as compared to the same period in
fiscal 1999. Excluding non-recurring and other restructuring-related charges,
operating profit increased 16.4 percent over the same period in fiscal 1999 to
$199.1 million for the quarter.
In the Company's Refrigerated Foods segment, sales increased $247.0 million, or
8.6 percent compared to the same period in fiscal 1999. Operating profit
increased $45.4 million, or 70.6 percent, versus the same
11
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
period in fiscal 1999. Excluding non-recurring and other
restructuring-related charges, first quarter operating profit increased 83.2
percent, or $53.5 million, as compared to fiscal 1999 first quarter. Positive
segment results can be attributed to improvement in industry fundamentals,
versus the same period in fiscal 1999, as well as increased operational
efficiencies gained with Operation Overdrive.
In ConAgra's Agricultural Products segment, sales decreased $224.8 million, or
11.5 percent over the same period in fiscal 1999 primarily as a result of
continuing slow conditions in the agricultural industry coupled with
historically low commodity prices. Operating profit decreased $38.8 million, or
39.6 percent versus the same period in fiscal 1999. Excluding non-recurring and
other restructuring-related charges, first quarter operating profit declined
29.2 percent, or $28.6 million, versus first quarter fiscal 1999.
For the Company in total, fiscal 2000 first quarter net sales for all three
segments were $6,593.6 million, up 1.7 percent from $6,483.4 million in fiscal
1999 first quarter. Cost of goods sold increased $51.5 million, or .9 percent,
over the same period in fiscal 1999 primarily due to accelerated depreciation on
certain assets. Selling, administrative and general expenses were up 10.4
percent over fiscal 1999 first quarter, in part due to implementation costs
associated with Operation Overdrive.
In comparison to fiscal 1999 first quarter, the Company's fiscal 2000 first
quarter diluted income per share was $.21, down 8.7 percent; operating profit
was $339.2 million, an increase of $5.8 million, or 1.7 percent; and net income
declined $7.5 million, or 6.9 percent, to $101.8 million. Excluding
non-recurring and other restructuring-related charges, the Company's fiscal 2000
first quarter diluted income per share increased 17.4 percent to $.27 from $.23;
operating profit was $386.3 million, up 15.9 percent; and net income was $131.0
million, up 19.9 percent from $109.3 million.
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. The Company has
established a Y2K project office and contracted with an independent consulting
group to provide assistance with regard to Y2K compliance. The Company'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. As a result of this independent IOC structure, there are few IT
systems and non-IT systems, the failure of which could have a material effect on
the Company as a whole. Such material systems include general ledger, payroll,
fixed assets and cash management systems.
The Y2K project status varies by IOC. For both IT and non-IT systems, the status
of the project generally ranges from validation to implementation. The Company
has completed the implementation phase for all material systems. The Company
anticipates completion of the implementation phase for all core applications,
plants and hardware/software infrastructure systems by November 1999.
ConAgra's Y2K project also considers the readiness of significant customers and
suppliers. The Company 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.
12
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ConAgra's Y2K project includes contingency plans that focus on processes
exposed to potential risk, and critical high availability systems. Joint
contingency plans between IOC's and several major customers are also being
coordinated to prevent uninterrupted service.
ConAgra has incurred approximately $50 million of Y2K project expenses to date.
Future expenses are expected to approximate $2 million to $3 million. Such cost
estimates are based upon presently available information and may change as the
Company continues with its Y2K project.
13
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the company's market risk during the
first quarter ended August 29, 1999. For additional information, refer to pages
38 through 40 of the Company's 1999 Annual Report to Stockholders, incorporated
by reference into the Company's annual report on Form 10-K for the fiscal year
ended May 30, 1999.
14
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
ConAgra issued 3,266,667 shares of its common stock during the first
quarter of fiscal 2000 in connection with the merger with Choice One Foods
Corporation. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
ConAgra's annual meeting of stockholders was held on September 23, 1999.
The stockholders elected three directors to serve three-year terms,
ratified the appointment of Deloitte & Touche LLP to audit ConAgra's
financial statements for fiscal year 2000, approved the Executive Incentive
Plan and did not approve a stockholder proposal. Voting on these items was
as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors
FOR WITHHELD
Ronald W. Roskens 382,924,266 13,121,734
Kenneth E. Stinson 383,690,132 12,355,868
Clayton K. Yeutter 382,179,014 13,866,986
2. Ratification of Accountants
FOR: 393,770,910
AGAINST: 861,308
ABSTAIN: 1,413,782
BROKER/NON-VOTES: -0-
3. Approval of the ConAgra Executive Incentive Plan
FOR: 352,256,881
AGAINST: 39,485,484
ABSTAIN: 4,303,635
BROKER/NON-VOTES: -0-
4. Stockholder Proposal on Political Contributions
FOR: 28,523,120
AGAINST: 292,040,073
ABSTAIN: 18,252,257
BROKER/NON-VOTES: 57,230,550
</TABLE>
ITEM 5. OTHER INFORMATION
On September 23, 1999, ConAgra's Board of Directors authorized a 14 percent
increase in the Company's common stock dividend and declared a quarterly
common stock cash dividend of 20.35 cents per share, payable December 1,
1999 to stockholders of record November 5, 1999. The prior quarterly
dividend was 17.85 cents per share. The new indicated annual dividend rate
is 81.4 cents per share, up from the previous 71.4 cents per share.
15
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter covered by this
report.
(A) Exhibits
12 - Statement regarding computation of ratio of earnings to fixed
charges.
27 - Financial Data Schedule
CONAGRA, INC.
By:
/s/ James P. O'Donnell
----------------------------------
James P. O'Donnell
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
By:
/s/ Jay D. Bolding
----------------------------------
Jay D. Bolding
Vice President and Controller
Dated this 12th day of October, 1999.
16
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
12 Statement regarding computation of ratio of 18
earnings to fixed charges
27 Financial Data Schedule
</TABLE>
17
<PAGE>
EXHIBIT 12
CONAGRA, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
<CAPTION>
THIRTEEN
WEEKS ENDED
AUGUST 29,
1999
---------
<S> <C>
Fixed Charges
Interest expense $ 85.9
Capitalized interest 1.6
Interest in cost of goods sold 5.3
One-third of noncancelable lease rent 10.9
---------
Total fixed charges (A) $ 103.7
=========
Earnings
Pretax income $ 164.2
Adjustment for unconsolidated subsidiaries (.2)
Add fixed charges 103.7
Less capitalized interest (1.6)
---------
Earnings and fixed charges (B) $ 266.1
=========
Ratio of earnings to fixed charges (B/A) 2.6*
</TABLE>
*Pretax income includes $47.1 million of non-recurring and other
restructuring-related charges. Excluding the charges, the "ratio of earnings
to fixed charges" was 3.0. See note 2 to the condensed consolidated financial
statements.
For the purpose of computing the above ratio of earnings to fixed charges,
earnings consist of income before taxes and fixed charges. Fixed charges, for
the purpose of computing earnings, are adjusted to exclude interest
capitalized. Fixed charges include interest on both long and short-term debt
(whether said interest is expensed or capitalized and including interest
charged to cost of goods sold), and a portion of noncancelable rental expense
representative of the interest factor. The ratio is computed using the
amounts for ConAgra as a whole, including its majority-owned subsidiaries,
whether or not consolidated, and its proportionate share of any 50% owned
subsidiaries, whether or not ConAgra guarantees obligations of these
subsidiaries.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-28-2000
<PERIOD-START> JUN-01-1999
<PERIOD-END> AUG-29-1999
<CASH> 10,700
<SECURITIES> 0
<RECEIVABLES> 2,694,200
<ALLOWANCES> 78,700
<INVENTORY> 4,012,100
<CURRENT-ASSETS> 6,973,100
<PP&E> 6,398,100
<DEPRECIATION> 2,783,700
<TOTAL-ASSETS> 13,378,600
<CURRENT-LIABILITIES> 6,554,000
<BONDS> 2,560,100
0
0
<COMMON> 2,619,300
<OTHER-SE> 329,300
<TOTAL-LIABILITY-AND-EQUITY> 13,378,600
<SALES> 6,593,600
<TOTAL-REVENUES> 6,593,600
<CGS> 5,617,400
<TOTAL-COSTS> 5,617,400
<OTHER-EXPENSES> 735,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,200
<INCOME-PRETAX> 164,200
<INCOME-TAX> 62,400
<INCOME-CONTINUING> 101,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 101,800
<EPS-BASIC> 0.22
<EPS-DILUTED> 0.21
</TABLE>
