<PAGE>
MANAGEMENT'S DISCUSSION & ANALYSIS
Our discussion and analysis is intended to give our stockholders a summary of
the major topics relevant to our financial performance and condition. This
discussion should be read in conjunction with our financial statements and
related notes. Years cited in this discussion refer to ConAgra's May-ending
fiscal years.
In 1999, ConAgra announced Operation Overdrive, a series of initiatives designed
to accelerate growth in sales and profit by aligning ConAgra's resources by
customer channel, increasing investment in brands and market position and
removing excess costs and capital. The implementation of Operation Overdrive
contributed to the performance of all ConAgra's business segments in 2000, most
notably through cost savings and efficiency gains. A portion of the cost savings
associated with Operation Overdrive has been reinvested, as planned, in
ConAgra's marketing programs in an effort to build for the future. ConAgra
expects this trend of increased marketing investment to continue in the
foreseeable future.
2000 vs. 1999
BUSINESS SEGMENT HIGHLIGHTS
<TABLE>
<CAPTION>
--------------------- ------------------- --------------------- ---------------------
FY 2000 Operating
Profit Excluding
Restructuring FY 2000
DOLLARS IN MILLIONS FY 2000 Sales Charges Operating Profit
===================== =================== ===================== =====================
% Change % Change % Change
Segment From FY From FY From FY
$ 1999 $ 1999 $ 1999
--------------------- ------------------- --------------------- ---------------------
<S> <C> <C> <C>
Packaged Foods $ 7,713.5 4% $ 1,087.9 11% $ 778.4 (17%)
--------------------- ------------------- --------------------- ---------------------
Refrigerated Foods 12,522.2 8% 490.7 33% 322.7 3,333%
--------------------- ------------------- --------------------- ---------------------
TOTAL FOOD BUSINESS 20,235.7 6% 1,578.6 17% 1,101.1 16%
--------------------- ------------------- --------------------- ---------------------
Agricultural Products 5,150.1 (8%) 331.1 (8%) 187.2 (41%)
--------------------- ------------------- --------------------- ---------------------
CONAGRA TOTAL $25,385.8 3% $ 1,909.7 12% $1,288.3 2%
===================== =================== ===================== =====================
</TABLE>
Packaged Foods sales grew 4% for the fiscal year to reach $7,714 million,
largely the result of gains in ConAgra's french fry and specialty meat
operations, both of which focus on the foodservice channel. Sales growth was
also driven by gains for ConAgra's shelf-stable grocery snack products,
including Slim Jim, Orville Redenbacher's, Act II, and Hunt's Snack Pack, as
well as some of ConAgra's most significant frozen foods brands, specifically
Banquet and Marie Callender's. Segment sales growth was slowed by declines for
Wesson Oil, Healthy Choice, and ConAgra's commodity cheese operations. ConAgra
has recently introduced several new Healthy Choice items to address the sales
declines. Sales declines for commodity cheese were expected as ConAgra divested
commodity cheese assets during the fiscal year. ConAgra expects to continue
increasing its marketing investment for the Packaged Foods segment for the
foreseeable future in an effort to grow sales in the segment's most promising
categories.
Refrigerated Foods sales grew 8% for the year to reach $12,522 million,
reflecting gains for the beef, pork, poultry, and processed meat operations.
Strong consumer demand fueled the segment's sales growth, as did ConAgra's
increased emphasis on value-added products and increased marketing investment.
The best-performing brands for 2000 in ConAgra's processed meat operations
included Butterball, Cook's, Eckrich, and Hebrew National.
Agricultural Products sales declined 8% to $5,150 million for the year, mostly
due to the impact of lower grain volumes and prices on ConAgra's Trade Group.
Sales for United Agri Products, the segment's largest sales contributor, were
essentially flat for the year.
ConAgra's cost of goods sold for 2000 includes $223 million of
restructuring-related charges resulting in a consolidated gross profit of $4,180
million in 2000. Cost of goods sold in 1999 did not include any
restructuring-related charges. Excluding restructuring-related charges, overall
gross profit (sales less cost of goods sold) grew 9% to $4,403 million and gross
margin (gross profit as a percent of sales) improved to 17%, as compared to 16%
in 1999, primarily due to increased food volumes, a better product mix, more
efficient processes, and favorable industry conditions for the beef operations.
Although all of ConAgra's business segments reported an increase in gross
margin, ConAgra's fresh beef and pork operations experienced the most dramatic
increases. Due to declines in sales, gross profit for the Agricultural Products
segment declined modestly compared to last year, although gross margin for the
segment improved due to more efficient operations. ConAgra's gross margin has
steadily grown over the last few years, reflecting an improving business mix and
efficiency gains.
Selling, general and administrative (SG&A) expenses for 2000 include $76 million
of restructuring-related charges resulting in consolidated SG&A expenses of
$2,888 million. SG&A of $2,598 million in 1999 did not include any
restructuring-related charges. Excluding restructuring-related charges, SG&A
expenses increased 8% to $2,812 million, primarily as a result of increased
investment in Operation Overdrive related personnel, services, and marketing
support. Advertising and promotion expense increased at a double-digit rate,
reflecting ConAgra's commitment to building for the future. SG&A expenses were
11% of sales during 2000, unchanged compared to 1999.
32 ConAgra, Inc. 2000 Annual Report
49
<PAGE>
Packaged Foods operating profit (earnings before interest, goodwill
amortization, general corporate expense, and income taxes) for 2000 decreased
17% to $778 million due to increased restructuring and restructuring-related
charges. Excluding restructuring and restructuring-related charges, operating
profit grew 11% to $1,088 million as ConAgra's french fry and specialty meat
businesses, which are focused on the foodservice channel, posted improvement in
profitability. Gains were also made in the frozen foods and grocery products
businesses; profit growth in frozen foods was primarily driven by growth for
Banquet and Marie Callender's, while growth for the grocery products division
was mostly the result of gains for Hunt's pudding products as well as other
snack items, including Slim Jim and Act II. Volume and profit declines for
Healthy Choice, certain non-core nonperishable products, and ConAgra's commodity
cheese operations slowed the rate of overall segment operating profit growth. In
addition to sales gains and product mix improvement, cost savings and efficiency
gains favorably impacted operating profit growth.
Operating profit for Refrigerated Foods grew to $323 million in 2000 due to
significantly lower restructuring and restructuring-related charges. Excluding
restructuring and restructuring-related charges, operating profit grew 33% to
$491 million as results for beef and pork showed significant improvement over
the prior year. Strong consumer demand for fresh red meat as well as operating
improvements drove the profitability gains for beef and pork. Processed meat
profitability improved over last year due to increased volumes and operating
efficiencies. Butterball, Cook's, Eckrich, and Hebrew National were the
strongest performing processed meat brands. Profitability for poultry declined
compared to last year, mostly as a result of unfavorable industry conditions due
to oversupply of poultry inventories.
Agricultural Products operating profit for 2000 declined 41% to $187 million due
primarily to increased restructuring and restructuring-related charges.
Excluding restructuring and restructuring-related charges, operating profit
declined 8% to $331 million, as lower grain volumes and prices negatively
influenced the results for the ConAgra Trade Group. Profits for United Agri
Products and ConAgra's grain processing business increased for the year,
primarily due to operating improvements.
ConAgra's total operating profit for 2000 grew 2% to $1,288 million. Excluding
restructuring and restructuring-related charges, operating profit grew 12% to
$1,910 million.
As part of Operation Overdrive, ConAgra implemented restructuring initiatives
that resulted in pre-tax total charges of $621 million and $441 million during
2000 and 1999, respectively. These restructuring initiatives are part of
ConAgra's efforts to improve margins by streamlining operations and becoming
more efficient. When originally announced in May of 1999, the restructuring plan
was expected to span three fiscal years and result in total charges of up to
$1,300 million. However, during 2000, ConAgra moved rapidly to capture
operational efficiencies and cost savings by accelerating the implementation of
the restructuring plan. Accordingly, ConAgra incurred the final charges
associated with its restructuring plan during 2000, thus completing its
restructuring plan in only two fiscal years with restructuring plan charges
(2000 and 1999) totaling less than $1,100 million. On both a pre-tax and after
tax-basis, less than 20% of these charges result in cash outlays.
Total pre-tax cost savings associated with the restructuring plan are currently
projected to approximate $180 million in each of the next two fiscal years,
while 2000 cost savings approximated $100 million. These actual and planned cost
savings are primarily a result of reducing duplicative efforts, lowering
employee-related expenses and, to a lesser degree, reducing future depreciation
and amortization costs. Accordingly, these cost savings positively impact
ConAgra's "cost of goods sold" and "selling, general and administrative" line
items within its consolidated statements of earnings.
The following is a breakdown of the restructuring and restructuring-related
charges by segment and category for 2000.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
Packaged Refrigerated Agricultural
DOLLARS IN MILLIONS Foods Foods Products Total
===========================================================================
<S> <C> <C> <C> <C>
Restructuring/Impairment
charges $ 109.9 $ 131.3 $ 81.0 $ 322.2
Accelerated Depreciation 128.2 10.9 - 139.1
Inventory Markdowns 46.2 11.2 57.1 114.5
Other 25.2 14.6 5.8 45.6
---------------------------------------------------------------------------
Total $ 309.5 $ 168.0 $ 143.9 $ 621.4
===========================================================================
</TABLE>
Of the $621 million of pre-tax charges incurred in 2000, $223 million is
included in cost of goods sold, $76 million is included in SG&A expense, and the
remaining $322 million is reflected as restructuring and impairment charges on
ConAgra's consolidated statements of earnings.
In 2000, the pre-tax charges of $621 million reduced net income by $385 million,
or $.81 per diluted share. Essentially all of the restructuring and
restructuring-related charges in 2000 resulted in a
33 ConAgra, Inc. 2000 Annual Report
50
<PAGE>
tax benefit. Of the pre-tax charges incurred in 2000, $154 million represents a
cash expense. Reflecting the tax deductibility of these cash expenses, the
after-tax cash expense related to the 2000 charges totals $95 million.
Of the $441 million of pre-tax charges incurred in 1999, $39 million related to
the Packaged Foods segment, $359 million related to the Refrigerated Foods
segment, and $43 million related to the Agricultural Products segment. The $441
million charge is classified as restructuring and impairment charges in
ConAgra's consolidated statements of earnings.
In 1999, the pre-tax charges of $441 million reduced net income by $338 million,
or $.71 per diluted share. Of the $441 million charge, $277 million resulted in
a tax benefit. Of the charges incurred in 1999, $52 million represented a cash
expense. Reflecting the tax deductibility of this cash expense, the after-tax
cash expense of the restructuring charges totaled $32 million.
For the restructuring initiative as a whole (amounts reported in 2000 and 1999),
the total charges of $1,062 million reduced after-tax earnings for 1999 and
2000, combined, by $723 million. Of the $1,062 million of pre-tax charges, $206
million represents a cash expense, while the after-tax cash expense related to
the restructuring initiative totals $127 million.
Of the total $1,062 million of charges incurred during 2000 and 1999, $223
million is included in cost of goods sold, $76 million is included in SG&A
expense, and the remaining $763 million is reflected as restructuring and
impairment charges on the consolidated statements of earnings for these years.
As part of the restructuring initiative associated with Operation Overdrive,
approximately 8,450 employees received notification of their termination. Of
this amount, approximately 5,250 have been terminated. In addition, 31
production facilities were closed, 106 non-production facilities were closed,
and 18 non-core businesses were divested. For more detail on the restructuring
and restructuring-related charges related to Operation Overdrive, refer to Note
3 to the consolidated financial statements.
For 2000, interest expense was $303 million, a decline of $13 million, or 4%,
over the prior year, primarily due to better management of accounts receivable,
inventory, and capital expenditures. During the fourth quarter of 2000, interest
expense grew compared to the fourth quarter of 1999 due to higher interest
rates, as well as a debt-financed acquisition that was completed in January of
2000.
Income before taxes declined 2% to $666 million in 2000 as a result of increased
restructuring and restructuring-related charges. Excluding restructuring and
restructuring-related charges, income before taxes grew 15% to $1,288 million.
The effective tax rate for 2000 was 38% both before and after the impact of
restructuring and restructuring-related charges. Net income in 2000 reached $413
million, or $.86 per diluted share, a 15% increase as compared to 1999.
Excluding restructuring charges, net income was $798 million, or $1.67 per
share, representing 14% growth in diluted earnings per share over 1999.
During the year, ConAgra's largest acquisition was Seaboard Farms, the poultry
division of Seaboard Corporation. The company paid approximately $360 million in
cash for this acquisition. During 2000, ConAgra made other smaller acquisitions
and paid for these acquisitions in cash and ConAgra common stock. The effect of
these acquisitions on ConAgra's operating results for 2000 was not significant.
In June 2000, ConAgra signed a definitive agreement to acquire International
Home Foods. International Home Foods' reported net sales for the most recent
twelve months were approximately $2.1 billion. ConAgra expects the results of
operations from International Home Foods to be reported in its Packaged Foods
segment for 2001.
1999 VS. 1998 - 1999 had 52 weeks versus 53 weeks in 1998. The effect on
earnings was not material.
BUSINESS SEGMENT HIGHLIGHTS
<TABLE>
<CAPTION>
------------------------ ---------------- -------------------- ---------------------
FY 1999 Operating
Profit Excluding
Restructuring FY 1999
Dollars in millions FY 1999 Sales Charges Operating Profit
======================== ================ ==================== =====================
% Change % Change % Change
Segment From FY From FY From FY
$ 1998 $ 1998 $ 1998
------------------------ ---------------- -------------------- ---------------------
<S> <C> <C> <C>
Packaged Foods $ 7,426.6 3% $ 980.3 - $ 941.3 (4%)
Refrigerated Foods 11,591.4 2% 368.0 80% 9.4 (95%)
------------------------ ---------------- -------------------- ---------------------
TOTAL FOOD BUSINESS 19,018.0 2% 1,348.3 14% 950.7 (20%)
------------------------ ---------------- -------------------- ---------------------
Agricultural Products 5,576.3 (1%) 358.0 (8%) 314.8 (19%)
------------------------ ---------------- -------------------- ---------------------
CONAGRA TOTAL $24,594.3 2% $1,706.3 8% $1,265.5 (20%)
======================== ================ ==================== =====================
</TABLE>
Packaged Foods sales grew 3% to $7,427 million, mostly due to the tablespreads
and Egg Beaters acquisition. Gains in cheese, frozen foods, value-added
foodservice chicken, and pizza products also contributed to the segment's sales
growth. Shelf-stable products experienced a downturn in sales, mainly as a
result of lower volumes due to the intense competitive environment.
34 ConAgra, Inc. 2000 Annual Report
51
<PAGE>
Sales rose 2% in Refrigerated Foods to $11,591 million as domestic beef, pork,
and poultry experienced volume gains and as the meat trading business expanded.
The Australian beef business and branded processed meats contributed
significantly to the sales improvement. Continued low commodity prices in
protein markets slowed the rate of segment sales growth.
Sales for the Agricultural Products segment declined 1% to $5,576 million,
mostly due to low commodity prices and reduced volume in the grain merchandising
and trading businesses. Crop inputs, however, posted solid sales growth.
Excluding the impact of dispositions, Agricultural Products' sales were up
slightly in 1999 compared to 1998. For ConAgra in total, lower commodity selling
prices reduced 1999 sales by $275 million (1%). This was more than offset by the
impact of acquisitions, net of dispositions.
In 1999, gross profit (net sales minus cost of goods sold) increased 6% to
$4,038 million, while gross margin (gross profit as a percent of sales) for 1999
and 1998 was 16%. Gross profit and margin gains in Refrigerated Foods were the
major factors in the improvement. Gross profit from Packaged Foods rose, largely
due to the tablespreads and Egg Beaters acquisition, while the segment's gross
margin was relatively unchanged from 1998. Excluding the impact of dispositions,
Agricultural Products experienced gross profit and gross margin gains over 1998.
SG&A expenses increased $130 million, or 5%, in 1999, while SG&A as a percent of
sales was 11% in 1999 and 10% in 1998. Increases occurred in all segments, as
well as in the general corporate component. Business expansion, mainly in crop
inputs, and the tablespreads and Egg Beaters acquisition accounted for most of
the increase. Corporate expenses were impacted by Y2K spending, increased
staffing for new systems initiatives, and higher expenses associated with
Operation Overdrive initiatives.
Packaged Foods 1999 operating profit (earnings before interest, goodwill
amortization, general corporate expense and income taxes) decreased 4% to $941
million. Excluding restructuring charges, operating profit for Packaged Foods
was $980 million, essentially unchanged from the prior year. Meat snacks,
microwave popcorn, potato products, value-added foodservice chicken, and pizza
products all improved operating profits in 1999, while frozen foods,
shelf-stable products, cheese and seafood operating profits declined. The
tablespreads and Egg Beaters acquisition was a key contributor of operating
profit to the segment.
Operating profit for the Refrigerated Foods segment decreased 95% to $9 million
for 1999 due to restructuring charges. Excluding restructuring charges,
operating profit for Refrigerated Foods was $368 million, an improvement of 80%
over 1998. Operating profit increased in all of the major businesses: branded
processed meats, beef, pork, and poultry. Volume growth and stabilization of
commodity prices drove the improvement.
Agricultural Products 1999 operating profit decreased 19% to $315 million
primarily due to restructuring charges. Excluding restructuring charges,
operating profit for Agricultural Products declined 8% to $358 million.
Increased profitability for specialty food ingredients, crop inputs, and
international agricultural operations was more than offset by operating profit
decreases in grain merchandising and trading operations. Low commodity prices
and low volume caused most of the decrease.
ConAgra's total operating profit for 1999 was $1,266 million as compared to
$1,573 million in 1998. Excluding restructuring charges, ConAgra's total
operating profit for 1999 was $1,706 million, up 8% over the prior year.
In 1999, net interest expense increased 5% to $317 million. Higher borrowings
were somewhat offset by lower short-term interest rates and the impact of
one-week's reduction in interest due to the 52- versus 53-week year. Income
before taxes in 1999 was $682 million, a decrease of 34% from 1998. Excluding
restructuring charges, pre-tax income was $1,123 million, up 8%. The effective
tax rate for 1999 was 47.5% as compared to 38.3% for 1998. The increase was a
result of the non-deductibility of certain intangible asset write-downs incurred
in conjunction with ConAgra's restructuring plan. Excluding the impact of the
restructuring charges in 1999, ConAgra's effective tax rate was 38%, essentially
unchanged from 1998.
Net income in 1999 was $358 million, a decrease of 43% as compared to 1998.
Fiscal 1998 did not reflect any restructuring charges. Excluding restructuring
charges, 1999 net income was $696 million, up 11% as compared to 1998. Net
income for 1998 included a $15 million charge for the cumulative effect of a
change in accounting principle.
Diluted earnings per share in 1999 were $.75, down 43% as compared to 1998.
Fiscal 1998 includes a charge of $.03 per diluted share for the cumulative
effect of a change in accounting principle. Excluding restructuring charges,
1999 diluted earnings per share were $1.46, up 11% over 1998.
FINANCIAL CONDITION AND CASH FLOW
CAPITAL RESOURCES - 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.
35 ConAgra, Inc. 2000 Annual Report
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<PAGE>
CAPITAL INVESTMENT
<TABLE>
<CAPTION>
----------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999 % Change
----------------------------------------------------------
<S> <C> <C> <C>
Working capital $ 477.3 $ 269.7 77%
---------------------------------------------------------
Property, plant &
equipment, net 3,584.0 3,614.2 (1%)
Intangible assets, net 2,366.0 2,408.7 (2%)
Other noncurrent assets 379.3 467.1 (19%)
---------------------------------------------------------
Total noncurrent assets 6,329.3 6,490.0 (2%)
---------------------------------------------------------
Capital investment $ 6,806.6 $ 6,759.7 1%
---------------------------------------------------------
</TABLE>
During 2000, capital investment increased $47 million, or 1%. The $208 million
increase in working capital was partially offset by a $161 million decrease in
noncurrent assets. Investments in property, plant and equipment, including
acquisitions, totaled $829 million. The investments were offset by $593 million
of depreciation expense (including $139 million of accelerated depreciation),
$168 million in asset write-downs in connection with the 2000 restructuring
charges, and net asset retirements of $98 million.
Intangible assets are mainly goodwill related to acquisitions, principally
associated with ConAgra's acquisition of Beatrice Company in 1991. This goodwill
represents valuable assets such as respected brands with significant marketplace
acceptance. In 2000, increases in intangible assets were more than offset by
amortization and write-downs of impaired assets. Goodwill amortization was $63
million in 2000 and $69 million in 1999.
ConAgra financed its capital investment as shown in the following table:
CAPITALIZATION
<TABLE>
<CAPTION>
---------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999 % Change
=========================================================
<S> <C> <C> <C>
Senior long-term debt $ 1,816.8 $ 1,793.1 1%
Other noncurrent
liabilities 750.7 782.8 (4%)
Subordinated
long-term debt 750.0 750.0 -
Subsidiary's preferred
securities 525.0 525.0 -
Common stockholders'
equity 2,964.1 2,908.8 2%
---------------------------------------------------------
Total capitalization $ 6,806.6 $ 6,759.7 1%
---------------------------------------------------------
</TABLE>
In 2000, senior long-term debt, excluding the current portion of long-term debt,
increased $24 million. There were no significant issuances or retirements of
debt.
Other noncurrent liabilities consist of estimated postretirement health care and
pension benefits, and to a lesser extent, deferred income taxes and reserves for
estimated legal and environmental liabilities Beatrice Company incurred before
its acquisition by ConAgra. It will require a number of years to resolve
remaining issues related to the Beatrice liabilities. Resolution over time will
use cash, but is not expected to affect earnings adversely because ConAgra
believes reserves are adequate.
ConAgra's long-standing policy is to purchase on the open market shares of
ConAgra's common stock to replace shares issued for employee incentive and
benefit programs and smaller acquisitions accounted for as purchases if such
issuances will dilute earnings per share. In 2000, ConAgra made no purchases of
ConAgra's common stock on the open market. Common stockholders' equity increased
$55 million in 2000 mainly because net income and the value of shares issued
exceeded cash dividends declared and the foreign currency translation
adjustment.
CASH FLOW - Cash provided by operating activities was $691 million in 2000,
compared to $1,180 million in 1999. The decrease in 2000 versus 1999 was
primarily the result of lower advances on sales in Agricultural Products and
Refrigerated Foods, offset in part by a lower level of receivables increases,
mainly in Agricultural Products. The restructuring and restructuring-related
charges did not have a significant impact on cash flow in 2000. Depreciation and
other amortization increased $43 million in 2000 as compared to 1999.
Cash provided by operating activities was $1,180 million in 1999, compared to
$623 million in 1998. The increase in 1999 versus 1998 was primarily the result
of higher advances on sales in Agricultural Products and Refrigerated Foods and
a lower level of inventory increases, mainly in Refrigerated Foods. The
restructuring charges had minimal impact on cash flow in 1999, since the
majority of the charges related to write-downs of assets. Depreciation and other
amortization increased $41 million in 1999 as compared to 1998.
Cash used for investing activities was $811 million in 2000. ConAgra invested
$539 million in property, plant and equipment and its investment in businesses
acquired, net of disposals, totaled $236 million in 2000. This was mainly due to
the $360 million acquisition of the assets of Seaboard Farms.
Cash used for investing activities was $1,010 million in 1999. ConAgra invested
$662 million in property, plant and equipment and its investment in businesses
acquired, net of disposals, totaled $373 million in 1999. This was mainly due to
the $400 million acquisition of the tablespreads and Egg Beaters business.
36 ConAgra, Inc. 2000 Annual Report
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<PAGE>
In 1998, cash used for investing activities was $395 million. ConAgra invested
$584 million in property, plant and equipment, down from the prior year.
Proceeds from businesses sold in 1998 exceeded cash acquisition expenditures by
$192 million as ConAgra issued common stock for certain acquisitions.
In 2001, ConAgra expects to invest $525 million to $550 million in additions to
property, plant and equipment of present businesses. Capital projects in 2000
and planned for 2001 are broadly based investments in modernization, efficiency
and capacity expansion. In addition, capital (excluding assumption of debt and
issuance of common stock) required in connection with the International Home
Foods' acquisition is estimated at $900 million for 2001.
Cash provided by financing activities in 2000 was $215 million. ConAgra
increased short-term borrowings $403 million and accounts receivable sold by
$165 million. Long-term debt repayments totaled $33 million in 2000. Cash
dividends paid totaled $375 million, up 20%. The dividend rate was up 14% in
2000 over the prior year and the remaining increase was caused by a larger
number of shares outstanding, mainly issued for acquisitions. No stock was
repurchased in 2000.
Cash used for financing activities in 1999 was $215 million. ConAgra issued $595
million of senior notes, with $396 million issued at 7% and $199 million issued
at 5.5%. Long-term debt repayments totaled $70 million in 1999, and ConAgra
reduced the amount of short-term borrowings backed by long-term credit
agreements, and classified as long-term, by $532 million. Accounts receivable
sold increased by $126 million during 1999. Cash dividends paid totaled $312
million, up 19%. The dividend rate was up 14% in 1999 over the prior year and
the remaining increase was caused by a larger number of shares outstanding,
mainly issued for acquisitions. The cost of stock repurchased in 1999 totaled
$31 million. Short-term debt decreased slightly during 1999.
In 1998, cash used for financing activities was $226 million. ConAgra repaid
$368 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 $123 million. ConAgra issued $312 million of senior long-term notes, with
$300 million issued at 6.7%. The cost of stock repurchased by ConAgra was $153
million in 1998. Cash dividends paid totaled $263 million, up 14%. Short-term
borrowings, used primarily to fund working capital needs, increased $318 million
in 1998.
FINANCING OBJECTIVES - ConAgra's primary financing objective is to maintain a
conservative balance sheet that provides the flexibility to pursue ConAgra's
growth objectives. This is defined as using appropriate levels of equity and
long-term debt to finance noncurrent assets and permanent working capital needs.
Short-term debt is used to finance liquid and seasonal asset requirements.
ConAgra's long-term debt objective is that senior long-term debt will not
normally exceed 30% of total long-term debt plus equity. Long-term subordinated
debt is treated as equity due to its preferred stock characteristics. ConAgra's
policy has been that it would temporarily exceed this self-imposed limit for a
major strategic acquisition that is intended to create value for shareholders
over the long term. In management's view, the fiscal 2001 acquisition of
International Home Foods, represents such an opportunity.
ConAgra's short-term debt objective is that, at the end of their natural fiscal
year, most ConAgra businesses will eliminate short-term debt used to finance
assets other than hedged commodity inventories.
ConAgra met its long-term debt objective every year from 1976 through 2000,
except 1991 and 1992 when it temporarily exceeded its self-imposed long-term
debt limitation to acquire Beatrice. ConAgra has met its short-term debt
objective for the past 25 years.
ConAgra has access to a wide variety of financing markets. Public debt offerings
and private debt placements provide long-term financing. At the end of 2000,
ConAgra's senior debt ratings were BBB+ (Fitch), Baa1 (Moody's), and BBB+
(Standard & Poor's), all investment grade ratings.
Short-term credit is provided by the sale of commercial paper and bank
financing. Commercial paper borrowings are backed by multiyear bank credit
facilities. During 2000, short-term borrowing continued at interest rates below
the prime rate. Short-term debt averaged $2.74 billion in 2000 compared to $3.05
billion in 1999, excluding short-term borrowings classified as long-term. Lower
working capital requirements for most of the year caused the decrease in
short-term debt. ConAgra uses cancelable and noncancelable leases in its
financing activities, particularly for transportation equipment. In 2000,
cancelable lease expense was $189 million versus $155 million in 1999, and
noncancelable lease expense was $97 million versus $118 million in 1999.
To maintain a conservative financial position, ConAgra focuses on cash flow as
well as its balance sheet. ConAgra's plans incorporate cash flow sufficient to
meet financing obligations, maintain capital investment, and pay stockholder
dividends even if a severe and unexpected decline in earnings occurs. This
measure of cash-flow adequacy provides an effective tool for managing ConAgra's
leverage.
37 ConAgra, Inc. 2000 Annual Report
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<PAGE>
ASSET LIQUIDITY - Many of ConAgra's businesses are current asset intensive.
Inventory and accounts receivable were 1.5 times property, plant and equipment
at the end of 2000 and 1999. The seasonal nature and liquidity of ConAgra's
current asset investments explain ConAgra's significant use of short-term debt
and emphasis on repaying short-term debt at year end. From time to time, ConAgra
also obtains product financing for certain commodity inventories, classified as
advances on sales in the Consolidated Balance Sheets.
As in prior years, ConAgra's reported net sales understate the degree to which
current assets turn over during the year. For 2000, total sales invoiced to
customers were approximately $33.1 billion versus $25.4 billion reported net
sales. This is because commodity trading transactions reflect margin accounting
whereby only gross profit is reported in sales.
ConAgra's current ratio (current assets divided by current liabilities) was 1.09
to 1 at the end of 2000 and 1.05 to 1 at the end of 1999. ConAgra's consolidated
current ratio is a composite of various current ratios appropriate for its
individual businesses. ConAgra focuses more on appropriate use of short-term
debt and trade credit financing than on the absolute level of its current ratio.
Some ConAgra businesses are able to generate substantial trade credit that does
not result in financing costs.
MARKET RISK - The principal market risks affecting ConAgra are exposure to
changes in commodity or energy prices and interest rates on debt. While ConAgra
does have international operations, and operates in international markets, it
considers its market risk in such activities to be immaterial.
COMMODITIES - ConAgra operates in many areas of the food industry, from basic
agricultural inputs to production and sale of branded consumer products. As a
result, ConAgra uses various raw materials, many of which are commodities. Raw
materials are generally available from several different sources, and ConAgra
presently believes that it can obtain them as needed.
Commodities are subject to price fluctuations that may create price risk.
Generally, it is ConAgra's intent to hedge commodities in order to mitigate this
price risk. While this may tend to limit ConAgra's ability to participate in
gains from commodity price fluctuations, it also tends to reduce the risk of
loss from changes in commodity prices.
ConAgra has established policies that limit the amount of unhedged inventory
positions permissible for ConAgra's operating companies. ConAgra's operating
companies are generally limited to a dollar risk exposure stated in relation to
equity capital.
ConAgra typically purchases certain commodities such as wheat, corn, oats,
soybeans, soybean meal, soybean oil, cattle, and hogs for use in its processing
businesses. In addition, ConAgra purchases and sells certain commodities such as
wheat, corn, soybeans, soybean meal, soybean oil, and oats in its trading
businesses. The commodity price risk associated with these activities can be
hedged by selling (or buying) the underlying commodity, or by using an
appropriate derivative commodity instrument. The particular hedging instrument
used by ConAgra depends on a number of factors, including availability of
appropriate derivative instruments. ConAgra utilizes exchange-traded futures and
options as well as non-exchange-traded derivatives, in which case ConAgra
monitors the amount of associated credit risk.
The following table presents one measure of market risk exposure using
sensitivity analysis. Market risk exposure is defined as the change in the fair
value of the derivative commodity instruments assuming a hypothetical change of
10% in market prices. Actual changes in market prices may differ from
hypothetical changes. Fair value was determined using quoted market prices and
was based on ConAgra's net derivative position by commodity at each month end
during the fiscal year. The market risk exposure analysis excludes the
underlying commodity positions that are being hedged. The underlying commodities
hedged have a high inverse correlation to price changes of the derivative
commodity instrument.
Effect of 10% Change in Fair Value
<TABLE>
<CAPTION>
----------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999
==========================================================
<S> <C> <C>
Processing Businesses
Grains/Food
High $ 38.0 $ 24.4
Low 24.3 12.8
Average 30.2 17.1
Meats
High 49.5 48.8
Low 22.8 13.4
Average 34.5 32.3
Trading Businesses
Grains
High 18.6 21.9
Low 11.1 12.6
Average 15.7 16.4
Meats
High 7.6 5.9
Low 1.2 -
Average 3.1 1.4
----------------------------------------------------------
</TABLE>
38 ConAgra, Inc. 2000 Annual Report
55
<PAGE>
ENERGY - ConAgra's operating companies incur substantial energy costs in their
manufacturing facilities and incur higher operating expenses as a result of
increases in energy costs. ConAgra hedges its operations against adverse price
movements in energy costs, primarily natural gas and electricity. In addition,
ConAgra's energy subsidiary may trade derivative commodity and financial
instruments when markets are favorable for such activity. Trading is limited in
terms of maximum dollar exposure and monitored to ensure compliance with these
limits. Exchange-traded derivative commodity instruments and non-exchange-traded
swaps and options are used. ConAgra monitors the amount of associated
counter-party credit risk for non-exchange-traded transactions.
The following presents one measure of market risk exposure using sensitivity
analysis. Market risk exposure is defined as the change in the fair value of the
derivative commodity and financial instruments assuming a hypothetical change of
10% in market prices. Actual changes in market prices may differ from
hypothetical changes. Fair value was determined using quoted market prices, if
available, and was based on the subsidiary's net derivative position by
commodity at each month end during the fiscal year. The market risk exposure
analysis excludes the anticipated energy requirements or physical delivery
commitments that are being hedged by these instruments.
Effect of 10% Change in Fair Value
<TABLE>
<CAPTION>
--------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999
========================================================
<S> <C> <C>
Energy
High $ 5.6 $ 8.7
Low 0.2 0.7
Average 2.0 4.3
--------------------------------------------------------
</TABLE>
INTEREST RATES - ConAgra has used interest rate swaps to hedge adverse interest
rate changes on a portion of its short-term debt. During 2000 and 1999 these
swaps effectively changed the interest rate on a portion of short-term debt from
a variable rate to a fixed rate, thus reducing ConAgra's exposure to interest
rate risk. The average short-term debt covered by swaps was $380 million for
2000 and $870 million for 1999. A one hundred basis-point change in interest
rates on average short-term borrowings would have impacted net interest expense
by $24.7 million and $27.9 million for 2000 and 1999, respectively.
FOREIGN OPERATIONS - Transactions denominated in a currency other than an
entity's functional currency are generally hedged to reduce market risk. ConAgra
principally uses non-exchange-traded contracts to effect this coverage. Market
risk on such transactions is not material to ConAgra's results of operations or
financial position. ConAgra's market risk from translation of foreign-based
entities' annual profit and loss, and from amounts permanently invested in
foreign subsidiaries, is not material.
ACCOUNTING CHANGES - In June 1998, Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, was
issued. This standard will become effective for the company in fiscal 2002. The
company has not quantified the impact, if any, resulting from adoption of this
standard.
In December 1999, SEC Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements, was issued. This SAB will become effective
for the company in fiscal 2001. The company has not quantified the impact, if
any, resulting from the adoption of this SAB.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements in the Letter to Shareholders,
business description and review sections, and Management's Discussion &
Analysis. 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.
The brand names in this annual report are owned or licensed by ConAgra Brands,
Inc., or its affiliates.
39 ConAgra, Inc. 2000 Annual Report
56
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
ConAgra, Inc., and Subsidiaries
<TABLE>
<CAPTION>
For the fiscal years ended May
-----------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS EXCEPT PER-SHARE AMOUNTS 2000 1999 1998
=======================================================================================================================
<S> <C> <C> <C>
Net sales $ 25,385.8 $ 24,594.3 $ 24,219.5
Costs and expenses
Cost of goods sold* 21,205.9 20,556.2 20,409.0
Selling, general and administrative expenses* 2,888.2 2,598.4 2,468.8
Interest expense 303.4 316.6 300.7
Restructuring/Impairment charges (Note 3) 322.2 440.8 -
-----------------------------------------------------------------------------------------------------------------------
24,719.7 23,912.0 23,178.5
-----------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of change in accounting 666.1 682.3 1,041.0
Income taxes 253.1 323.9 399.2
-----------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in accounting 413.0 358.4 641.8
Cumulative effect of change in accounting - - (14.8)
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 413.0 $ 358.4 $ 627.0
-----------------------------------------------------------------------------------------------------------------------
INCOME PER SHARE - BASIC
Income before cumulative effect of change in accounting $ .87 $ .76 $ 1.38
Cumulative effect of change in accounting - - (.03)
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ .87 $ .76 $ 1.35
-----------------------------------------------------------------------------------------------------------------------
INCOME PER SHARE - DILUTED
Income before cumulative effect of change in accounting $ .86 $ .75 $ 1.35
Cumulative effect of change in accounting - - (.03)
-----------------------------------------------------------------------------------------------------------------------
NET INCOME $ .86 $ .75 $ 1.32
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Other restructuring-related items in fiscal 2000 include accelerated
depreciation of $108.3 million and inventory markdowns of $114.5 million
included in cost of goods sold and $30.8 million of accelerated
depreciation and $45.6 million of restructuring plan implementation costs
included in selling, general and administrative expenses.
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
ConAgra, Inc., and Subsidiaries
<TABLE>
<CAPTION>
For the fiscal years ended May
---------------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999 1998
============================================================================================================================
<S> <C> <C> <C>
NET INCOME $ 413.0 $ 358.4 $ 627.0
----------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)
Currency translation adjustment (37.2) 1.7 (35.9)
----------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME $ 375.8 $ 360.1 $ 591.1
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
40 ConAgra, Inc. 2000 Annual Report
57
<PAGE>
CONSOLIDATED BALANCE SHEETS
ConAgra, Inc., and Subsidiaries
<TABLE>
<CAPTION>
MAY 28 May 30
---------------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS EXCEPT PER-SHARE AMOUNTS 2000 1999
===========================================================================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 157.6 $ 62.8
Receivables, less allowance for doubtful accounts of $62.8 and $60.0 1,606.8 1,637.5
Inventories 3,787.3 3,639.9
Prepaid expenses 414.8 315.9
---------------------------------------------------------------------------------------------------------------------------
Total current assets 5,966.5 5,656.1
---------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
Land 147.1 161.2
Buildings, machinery and equipment 5,430.3 5,205.8
Other fixed assets 537.0 426.9
Construction in progress 327.4 419.9
---------------------------------------------------------------------------------------------------------------------------
6,441.8 6,213.8
Less accumulated depreciation (2,857.8) (2,599.6)
---------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 3,584.0 3,614.2
---------------------------------------------------------------------------------------------------------------------------
Brands, trademarks and goodwill, at cost less accumulated amortization of $748.3 and $668.2 2,366.0 2,408.7
Other assets 379.3 467.1
---------------------------------------------------------------------------------------------------------------------------
$ 12,295.8 $ 12,146.1
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 1,255.5 $ 837.9
Current installments of long-term debt 20.6 21.1
Accounts payable 2,044.6 2,036.5
Advances on sales 888.7 1,191.7
Accrued payroll 258.9 269.4
Other accrued liabilities 1,020.9 1,029.8
---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 5,489.2 5,386.4
---------------------------------------------------------------------------------------------------------------------------
Senior long-term debt, excluding current installments 1,816.8 1,793.1
Other noncurrent liabilities 750.7 782.8
Subordinated debt 750.0 750.0
Preferred securities of subsidiary company 525.0 525.0
Commitments and contingencies - -
Common stockholders' equity
Common stock of $5 par value, authorized 1,200,000,000 shares;
issued 524,137,617 and 519,648,673 2,620.7 2,598.2
Additional paid-in capital 147.5 219.4
Retained earnings 1,420.7 1,369.8
Foreign currency translation adjustment (103.1) (65.9)
Less treasury stock, at cost, common shares of 31,925,505 and 31,475,678 (760.2) (749.9)
---------------------------------------------------------------------------------------------------------------------------
3,325.6 3,371.6
Less unearned restricted stock and value of 15,246,068 and 17,184,831
common shares held in Employee Equity Fund (361.5) (462.8)
---------------------------------------------------------------------------------------------------------------------------
Total common stockholders' equity 2,964.1 2,908.8
---------------------------------------------------------------------------------------------------------------------------
$ 12,295.8 $ 12,146.1
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
41 ConAgra, Inc. 2000 Annual Report
58
<PAGE>
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
ConAgra, Inc., and Subsidiaries
<TABLE>
<CAPTION>
For the fiscal years ended May
-----------------------------------------------------------------------------------------------------------------------------------
Foreign EEF*
Additional Currency Stock
Common Common Paid-in Retained Translation Treasury and
COLUMNAR AMOUNTS IN MILLIONS Shares Stock Capital Earnings Adjustment Stock Other Total
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MAY 25, 1997 522.7 $ 1,306.8 $ 636.9 $ 2,125.7 $ (31.7) $ (655.1) $ (811.6) $2,571.0
Shares issued
Stock option and incentive plans .6 2.8 4.0 .5 7.3
EEF*: stock option, incentive and
other employee benefit plans 34.7 70.5 105.2
Fair market valuation of EEF shares (97.1) 97.1 -
Acquisitions 1.3 6.7 .4 3.3 2.2 12.6
Shares acquired for incentive plans (172.7) 1.0 (171.7)
Shares retired (5.2) (26.2) (93.7) 119.9 -
Two-for-one stock split 1,307.0 (258.9) (1,048.1) -
Foreign currency translation adjustment (35.9) (35.9)
Dividends declared
Common stock, $.605 per share (273.6) (273.6)
Pooled companies (2.9) (2.9)
Net income 627.0 627.0
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 31, 1998 519.4 2,597.1 320.0 1,337.7 (67.6) (705.2) (643.0) 2,839.0
Shares issued
Stock option and incentive plans .2 1.1 1.8 .5 3.4
EEF*: stock option, incentive and
other employee benefit plans 13.6 62.3 75.9
Fair market valuation of EEF shares (116.4) 116.4 -
Acquisitions .4 2.2 2.6
Shares acquired for incentive plans (47.6) 1.5 (46.1)
Shares retired (.2) .2 -
Foreign currency translation adjustment 1.7 1.7
Dividends declared
Common stock, $.69175 per share (324.9) (324.9)
Pooled companies (1.2) (1.2)
Net income 358.4 358.4
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 30, 1999 519.6 2,598.2 219.4 1,369.8 (65.9) (749.9) (462.8) 2,908.8
Shares issued
Stock option and incentive plans .5 2.4 2.5 .4 5.3
EEF*: stock option, incentive and
other employee benefit plans 9.4 26.1 35.5
Fair market valuation of EEF shares (70.0) 70.0 -
Acquisitions 4.0 20.1 (13.7) 13.4 19.8
Shares acquired for incentive plans (.1) (10.7) 5.2 (5.6)
Foreign currency translation adjustment (37.2) (37.2)
Dividends declared
Common stock, $.789 per share (375.5) (375.5)
Net income 413.0 413.0
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE AT MAY 28, 2000 524.1 $ 2,620.7 $ 147.5 $1,420.7 $ (103.1) $ (760.2) $ (361.5) $2,964.1
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
* Employee Equity Fund (Note 12)
42 ConAgra, Inc. 2000 Annual Report
59
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
ConAgra, Inc., and Subsidiaries
<TABLE>
<CAPTION>
For the fiscal years ended May
-----------------------------------------------------------------------------------------------------------------------
DOLLARS IN MILLIONS 2000 1999 1998
=======================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 413.0 $ 358.4 $ 627.0
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and other amortization 473.1 430.4 389.0
Goodwill amortization 63.4 69.4 67.8
Restructuring and other restructuring-related charges (including
accelerated depreciation) 621.4 440.8 -
Cumulative effect of change in accounting - - 24.0
Other noncash items (includes nonpension postretirement benefits) 49.9 87.8 86.5
Change in assets and liabilities before effects from business acquisitions
Receivables (106.0) (296.0) (191.4)
Inventories and prepaid expenses (181.2) (68.0) (270.5)
Accounts payable and accrued liabilities (642.6) 156.7 (109.2)
-----------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 691.0 1,179.5 623.2
-----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Additions to property, plant and equipment (539.3) (662.3) (583.7)
Payment for business acquisitions (390.1) (421.9) (33.7)
Sale of businesses and property, plant and equipment 154.6 48.5 225.9
Notes receivable and other items (36.6) 25.5 (3.9)
-----------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES (811.4) (1,010.2) (395.4)
-----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Net short-term borrowings 402.7 (22.7) 317.7
Proceeds from issuance of long-term debt 33.1 595.2 311.8
Repayment of long-term debt (32.6) (602.5) (490.8)
Accounts receivable sold 165.0 125.5 (10.0)
Cash dividends paid (375.0) (312.4) (263.2)
Cash distributions of pooled companies - (1.2) (3.8)
Other items 22.0 3.2 (88.0)
-----------------------------------------------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES 215.2 (214.9) (226.3)
-----------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 94.8 (45.6) 1.5
Cash and cash equivalents at beginning of year 62.8 108.4 106.9
-----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 157.6 $ 62.8 $ 108.4
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
43 ConAgra, Inc. 2000 Annual Report
60
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ConAgra, Inc., and Subsidiaries
Years ended May 28, 2000, May 30, 1999, and May 31, 1998
COLUMNAR AMOUNTS IN MILLIONS EXCEPT PER-SHARE AMOUNTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR - The fiscal year of ConAgra, Inc., ("ConAgra" or the "company")
ends the last Sunday in May. The fiscal years for the consolidated financial
statements presented consist of 52-week periods (fiscal 2000 and 1999) or
53-week periods (fiscal 1998).
The accounts of two wholly-owned subsidiaries, ConAgra Fertilizer company and
United Agri Products, Inc., have been consolidated on the basis of a year ending
in February. Such fiscal period corresponds with those companies' natural
business year.
BASIS OF CONSOLIDATION - The consolidated financial statements include the
accounts of ConAgra, Inc., and all majority-owned subsidiaries. The investments
in and the operating results of 50%-or-less-owned entities are included in the
financial statements on the basis of the equity method of accounting. All
significant intercompany investments, accounts, and transactions have been
eliminated.
INVENTORIES - Grain, flour, and major feed ingredient inventories are hedged to
the extent practicable and are generally stated at market, including adjustment
to market of open contracts for purchases and sales. Short-term interest expense
incurred to finance hedged inventories is included in cost of goods sold in
order to properly reflect gross profits on hedged transactions. Inventories not
hedged are priced at the lower of average cost (first-in, first-out) or market.
PROPERTY AND DEPRECIATION - Property, plant and equipment are carried at cost.
Depreciation has been calculated using primarily the straight-line method over
the estimated useful lives of the respective classes of assets as follows:
Buildings 15 - 40 years
Machinery and equipment 5 - 20 years
Other fixed assets 5 - 15 years
BRANDS, TRADEMARKS, GOODWILL AND LONG-LIVED ASSETS - Brands, goodwill arising
from the excess of cost of investment over fair value of net assets at date of
acquisition, and trademarks are amortized using the straight-line method,
principally over a period of 40 years. An impairment is recognized when future
undiscounted cash flows of assets are estimated to be insufficient to recover
their related carrying value. The company considers continued operating losses,
or significant and long-term changes in business conditions, to be its primary
indicators of potential impairment. In measuring impairment, the company looks
to quoted market prices, if available, or the best information available in the
circumstance.
Recoverability of goodwill not identified with impaired assets is evaluated on
the basis of management's estimates of future undiscounted operating income
associated with the acquired business.
DERIVATIVE INSTRUMENTS - The company uses derivatives for the purpose of hedging
commodity price and, to a lesser extent, interest rate exposure, that exist as a
part of its ongoing business operations.
INTEREST RATE SWAP AGREEMENTS - The company utilizes interest rate swap
agreements to reduce the risk of changes in interest rates. Interest
differentials to be paid or received on such swaps are recognized in the
statement of earnings as incurred, as a component of interest expense.
COMMODITY CONTRACTS - The company uses commodity futures and option contracts,
swaps, and forward contracts to reduce the risk of price fluctuations in various
commodities traded or used in its businesses. In the trading businesses,
commodity contracts are marked-to-market and the related gains or losses
recorded in the statement of earnings. The company's processing businesses
reflect commodity contract gains and losses as adjustments to the basis of
underlying hedged commodities purchased; gains or losses are recognized in the
statement of earnings as a component of cost of goods sold upon sale of the
hedged commodity.
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. 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.
Cash flows related to derivative financial instruments are classified in the
statements of cash flows in a manner consistent with those of transactions being
hedged.
FAIR VALUES OF FINANCIAL INSTRUMENTS - Unless otherwise specified, the company
believes the book value of financial instruments approximates their fair value.
44 ConAgra, Inc. 2000 Annual Report
61
<PAGE>
REVENUE RECOGNITION - Revenue is recognized when title to finished product
passes to the customer. Revenue is recognized as the net amount to be received
after deducting estimated amounts for discounts, trade allowances, and product
returns.
NET SALES - Gross profits earned from commodity trading activities, which are
included in net sales, total $148.0 million, $147.3 million, and $214.3 million
for fiscal 2000, 1999, and 1998, respectively.
Sales and cost of sales, if reported on a gross basis for these activities,
would be increased by $7.7 billion, $4.9 billion, and $6.0 billion for fiscal
2000, 1999, and 1998, respectively.
COMPREHENSIVE INCOME - Comprehensive income for all periods presented consists
of net income and foreign currency translation adjustments. 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.
ACCOUNTING CHANGES - In June 1998, Statement of Financial Accounting Standards
No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was
issued. This standard will become effective for the company in fiscal 2002. The
company has not quantified the impact, if any, resulting from adoption of this
standard.
In December 1999, SEC Staff Accounting Bulletin (SAB) No. 101, REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, was issued. This SAB will become effective
for the company in fiscal 2001. The company has not quantified the impact, if
any, resulting from the adoption of this SAB.
In fiscal 1998, the company recorded an after-tax charge of $14.8 million to
comply with Emerging Issues Task Force (EITF) Issue No. 97-13. This EITF
requires business process re-engineering costs associated with computer systems
development to be expensed as incurred. Previously, the company capitalized such
costs.
USE OF ESTIMATES - Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions. These estimates or assumptions affect reported amounts of
assets, liabilities, revenue, and expenses as reflected in the financial
statements. Actual results could differ from estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to prior year
amounts to conform to current year classifications.
2. BUSINESS COMBINATIONS
In the third quarter of fiscal 2000, ConAgra acquired the assets of Seaboard
Farms, the poultry division of Seaboard Corporation, for approximately $360
million. Seaboard Farms produces and markets value-added poultry products
primarily to foodservice customers and has annual sales of approximately $480
million. The acquisition was accounted for as a purchase, with the business
acquired being included in the financial statements subsequent to the date of
acquisition.
In the first quarter of fiscal 1999, ConAgra acquired the table-spreads and Egg
Beaters business 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. The
results of operations of the businesses acquired are included in the financial
statements subsequent to the date of acquisition.
During fiscal 1998, ConAgra completed mergers with GoodMark Foods, Inc.,
Fernando's Foods Corporation, Hester Industries, Inc., and A.M. Gilardi & Sons,
Inc. In each of the these transactions, ConAgra issued common stock for all of
the outstanding shares of the merged companies with each transaction being
accounted for as a pooling-of-interests. The historical financial statements of
the company were restated to give effect to all of the fiscal 1998 acquisitions
as though the companies had operated together from the beginning of the earliest
period presented.
Net sales and net income for the fiscal 1998 acquired businesses were $379.0
million and $13.8 million, respectively, for the 1998 period prior to
acquisition date.
3. OPERATION OVERDRIVE
During the fourth quarter of fiscal 1999, the company approved a restructuring
plan expected to span three fiscal years in connection with its previously
announced initiative, "Operation Overdrive." However, the restructuring plan was
completed within two fiscal years as the plan's final charges were incurred in
the fourth quarter of fiscal 2000. The restructuring plan was aimed at improving
future profitability by eliminating overcapacity and streamlining operations.
The pre-tax charge of the plan totaled $1,062.2 million with $621.4 million and
$440.8 million recognized in fiscal 2000 and 1999, respectively.
45 ConAgra, Inc. 2000 Annual Report
62
<PAGE>
Fiscal 2000 charges are as follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
=========================================================================
<S> <C> <C> <C> <C>
Accelerated depreciation $ 128.2 $ 10.9 $ - $ 139.1
Inventory markdowns 46.2 11.2 57.1 114.5
Restructuring plan
implementation costs 25.2 14.6 5.8 45.6
Restructuring/Impairment
charges 109.9 131.3 81.0 322.2
-------------------------------------------------------------------------
Total $ 309.5 $ 168.0 $ 143.9 $ 621.4
Fiscal 1999 charges are
as follows:
Restructuring/Impairment
charges $ 39.0 $ 358.6 $ 43.2 $ 440.8
=========================================================================
</TABLE>
The fiscal 2000 charges are reflected in the company's consolidated statements
of earnings as follows: accelerated depreciation of $108.3 million and $30.8
million is included in cost of goods sold and selling, general and
administrative expenses, respectively; inventory markdowns are included in cost
of goods sold; plan implementation costs (primarily third-party consulting
costs) are also included in selling, general and administrative expenses. For
fiscal 2000 and fiscal 1999, restructuring/impairment charges are reflected as
such and result from asset impairments, employee-related costs and contractual
termination costs.
Included in fiscal 2000 and 1999 consolidated statements of earnings are asset
impairment charges of approximately $213.5 million and $388.4 million,
respectively. Fiscal 2000 asset impairment charges include $171.4 million in
write-downs of property, plant and equipment and $42.1 million in reductions of
intangible and other assets. The fiscal 2000 property, plant and equipment
write-downs occurred primarily in the Refrigerated Foods segment as a result of
management's decision to reorganize certain protein businesses. Fiscal 1999
asset impairment charges include $183.5 million in write-downs of property,
plant and equipment and $204.9 million in reductions of intangible and other
assets. The fiscal 1999 intangible and other asset write-downs occurred
primarily in the Refrigerated Foods segment as a result of management's decision
to consolidate and reorganize its turkey businesses.
Accelerated depreciation results from revisions in the estimated useful lives of
assets to be disposed of that the company does not have the current ability to
remove from operations. Inventory markdowns represent losses on the carrying
value of non-strategic inventory resulting from the closure of facilities and
discontinuation of certain products.
In association with the restructuring plan, the company closed a total of 31
production facilities, 106 non-production locations (e.g., storage,
distribution, administrative, etc.) and sold 18 non-core businesses. The
historical operating results and gains/losses associated with sold businesses or
facilities were not material.
Approximately 8,450 employees received notification of their termination as a
result of the restructuring plan, primarily in manufacturing and operating
facilities. This total represents an increase of approximately 1,750 individuals
from the original estimate, and resulted primarily from updated estimates
associated with existing restructuring initiatives. In addition, other exit
costs (consisting of lease termination and other contractual termination costs)
occurred as a result of the restructuring plan. Such activity is as follows:
<TABLE>
<CAPTION>
Severance Other Exit
(IN MILLIONS, EXCEPT HEADCOUNT) Amount Headcount Costs
================================================================
<S> <C> <C> <C>
Fiscal 1999 activity:
Charges to income $ 45.1 3,160 $ 7.3
Utilized (6.1) (260) -
----------------------------------------------------------------
Balance, May 30, 1999 39.0 2,900 7.3
Fiscal 2000 activity:
Charges to income 57.8 5,290 50.9
Utilized (44.3) (4,990) (21.5)
----------------------------------------------------------------
Balance, May 28, 2000 $ 52.5 3,200 $ 36.7
================================================================
</TABLE>
4. INCOME PER SHARE
Basic income per share is calculated on the basis of weighted average
outstanding common shares. Diluted income per share is computed on the basis of
weighted average outstanding common shares plus equivalent shares assuming
exercise of stock options and conversion of outstanding convertible securities,
where dilutive.
The following table reconciles the income and average share amounts used to
compute both basic and diluted income per share:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
2000 1999 1998
=======================================================================
<S> <C> <C> <C>
NET INCOME
Income before cumulative effect
of change in accounting $ 413.0 $ 358.4 $ 641.8
Cumulative effect of change in
accounting - - (14.8)
-----------------------------------------------------------------------
Net income $ 413.0 $ 358.4 $ 627.0
=======================================================================
INCOME PER SHARE - BASIC
Weighted average shares
outstanding 475.7 470.0 465.5
=======================================================================
INCOME PER SHARE - DILUTED
Weighted average shares
outstanding - basic 475.7 470.0 465.5
Add shares contingently issuable
upon exercise of stock options 2.9 6.7 9.8
-----------------------------------------------------------------------
Weighted average shares
outstanding 478.6 476.7 475.3
=======================================================================
</TABLE>
46 ConAgra, Inc. 2000 Annual Report
63
<PAGE>
At the end of fiscal years 2000, 1999, and 1998, there were 16.2 million, 8.9
million, and 4.9 million options outstanding, respectively, with exercise prices
exceeding the market value of common stock that were therefore excluded from the
computation of shares contingently issuable upon exercise of the options.
5. RECEIVABLES
The company has agreements to sell interests in pools of receivables, in an
amount not to exceed $950 million at any one time. Participation interests in
new receivables may be sold as collections reduce previously sold participation
interests. The participation interests are sold at a discount that is included
in selling, general and administrative expenses in the consolidated statements
of earnings. Gross proceeds from the sales were $814 million and $649 million at
fiscal year-end 2000 and 1999, respectively.
6. INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
2000 1999
======================================================================
<S> <C> <C>
Hedged commodities $ 1,305.7 $ 1,306.2
Food products and livestock 1,350.7 1,144.7
Agricultural chemicals, fertilizer, and feed 671.9 597.4
Other, principally ingredients and supplies 459.0 591.6
----------------------------------------------------------------------
$ 3,787.3 $ 3,639.9
======================================================================
</TABLE>
7. CREDIT FACILITIES AND BORROWINGS
At May 28, 2000, the company had credit lines from banks which totaled
approximately $5.5 billion, including: $1.8 billion of long-term revolving
credit facilities maturing in September 2003; $1.8 billion short-term revolving
credit facilities maturing in September 2000; and uncompensated bankers'
acceptance and money market loan facilities approximating $1.9 billion.
Borrowings under the revolver agreements are at or below prime rate and may be
prepaid without penalty. The company pays fees for its revolving credit
facilities.
The company finances its short-term needs with bank borrowings, commercial paper
borrowings, and bankers' acceptances. The average consolidated short-term
borrowings outstanding under these facilities for the 2000 fiscal year were
$2,739 million. This excludes an average of $186 million of short-term
borrowings that were classified as long-term throughout the fiscal year (see
Note 8). The highest period-end short-term indebtedness during fiscal 2000 was
$3,159.2 million. Short-term borrowings were at rates below prime. The weighted
average interest rate was 5.85% and 5.58%, respectively, for fiscal 2000 and
1999.
At May 28, 2000, the company had no interest rate swap agreements in effect. At
May 30, 1999, the company had outstanding interest rate swap agreements
effectively changing the interest rate exposure on $650 million of short-term
borrowings from variable to a 5.8% fixed rate. The swap agreements matured in
fiscal 2000. At May 31, 1998, the company had outstanding interest rate swap
agreements effectively changing the interest rate exposure on $600 million of
short-term borrowings from variable to a 6% fixed rate. The swap agreements
matured in fiscal 1999. The net cost in fiscal 2000, 1999, and 1998, and the
estimated fair value of these agreements as of May 30, 1999, were not material.
8. SENIOR LONG-TERM DEBT, SUBORDINATED DEBT
AND LOAN AGREEMENTS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
2000 1999
============================================================================
<S> <C> <C>
Senior Debt
Commercial paper backed by long-term
revolving credit agreement $ 164.5 $ 153.2
7.00% senior debt due in 2028 396.5 396.4
6.70% senior debt due in 2027
(redeemable at option of holders in 2009) 300.0 300.0
7.125% senior debt due in 2026
(redeemable at option of holders in 2006) 397.8 397.7
9.875% senior debt due in 2006 100.0 100.0
5.50% senior debt due in 2002 199.3 199.0
9.87% to 9.95% unsecured senior notes
due in various amounts through 2009 39.4 53.7
8.1% to 9.0% publicly issued unsecured
medium-term notes due in various
amounts through 2004 117.0 117.0
5.75% to 9.28% Industrial Development
Revenue Bonds (collateralized by plant
and equipment) due on various dates
through 2017 46.2 29.0
Miscellaneous unsecured 56.1 47.1
----------------------------------------------------------------------------
Total senior debt $ 1,816.8 $ 1,793.1
----------------------------------------------------------------------------
Subordinated Debt
9.75% subordinated debt due in 2021 400.0 400.0
7.375% to 7.4% subordinated debt due
through 2005 350.0 350.0
----------------------------------------------------------------------------
Total subordinated debt $ 750.0 $ 750.0
----------------------------------------------------------------------------
Total long-term debt, excluding
current installments $ 2,566.8 $ 2,543.1
============================================================================
</TABLE>
The aggregate minimum principal maturities of the long-term debt for each of the
five fiscal years following May 28, 2000, are as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------
<S> <C>
2001 $ 20.6
2002 124.2
2003 373.6
2004 12.6
2005 370.0
=========================================================
</TABLE>
Under the long-term credit facility referenced in Note 7, the company has
agreements that allow it to borrow up to $1.8 billion through September 2003.
47 ConAgra, Inc. 2000 Annual Report
64
<PAGE>
The most restrictive note agreements (the revolving credit facilities and
certain privately placed long-term debt) require the company to repay the debt
if consolidated funded debt exceeds 60% of consolidated capital base or if fixed
charges coverage is less than 1.75 to 1.0 as such terms are defined in
applicable agreements.
Net interest expense consists of:
<TABLE>
<CAPTION>
----------------------------------------------------------------
2000 1999 1998
================================================================
<S> <C> <C> <C>
Long-term debt $ 198.4 $ 194.6 $ 206.9
Short-term debt 139.1 166.5 143.2
Interest income (28.6) (37.6) (38.0)
Interest capitalized (5.5) (6.9) (11.4)
----------------------------------------------------------------
$ 303.4 $ 316.6 $ 300.7
================================================================
</TABLE>
Net interest paid was $299.9 million, $308.5 million, and $300.6 million in
fiscal 2000, 1999, and 1998, respectively.
Short-term debt interest expense of $31.4 million, $20.0 million, and $19.1
million in fiscal 2000, 1999, and 1998, respectively, incurred to finance hedged
inventories, has been charged to cost of goods sold.
The carrying amount of long-term debt (including current installments) was
$2,587.4 million and $2,564.2 million as of May 28, 2000, and May 30, 1999,
respectively. Based on current market rates primarily provided by outside
investment bankers, the fair value of this debt at May 28, 2000, and May_30,
1999, was estimated at $2,417.0 million and $2,665.1 million, respectively. The
company's long-term debt is generally not callable until maturity.
9. OTHER NONCURRENT LIABILITIES
Other noncurrent liabilities consist of:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
2000 1999
=====================================================================
<S> <C> <C>
Legal and environmental liabilities primarily
associated with the company's acquisition
of Beatrice Company (acquired in
fiscal 1991) $ 165.2 $ 169.2
Estimated postretirement health care
and pensions 596.7 589.2
Deferred taxes and other 52.7 100.4
---------------------------------------------------------------------
814.6 858.8
Less estimated current portion 63.9 76.0
---------------------------------------------------------------------
$ 750.7 $ 782.8
=====================================================================
</TABLE>
10. PREFERRED SECURITIES OF SUBSIDIARY COMPANY
ConAgra Capital, L.C., an indirectly controlled subsidiary of the company, has
the following Preferred Securities outstanding:
4 MILLION SHARES OF 9% SERIES A CUMULATIVE PREFERRED
("SERIES A SECURITIES")
Distributions are payable monthly.
7 MILLION SHARES OF SERIES B ADJUSTABLE RATE CUMULATIVE PREFERRED ("SERIES B
SECURITIES")
Distributions are payable monthly at a rate per annum, which is adjusted
quarterly to 95% of the highest of three U.S. Treasury security indices,
subject to a floor of 5.0% and a ceiling of 10.5% per annum. The
distribution rate in fiscal 2000 ranged from 5.6% to 6.3%.
10 MILLION SHARES OF 9.35% SERIES C CUMULATIVE PREFERRED
("SERIES C SECURITIES")
Distributions are payable monthly.
For financial statement purposes, distributions on these Securities are included
in selling, general and administrative expenses in the company's consolidated
statements of earnings as such amounts represent minority interests.
The above Securities were issued at a price of $25 per share. All such
Securities are non-voting (except in certain limited circumstances), and are
guaranteed on a limited basis by ConAgra and, in certain limited circumstances,
are exchangeable for debt securities of ConAgra. The Securities are redeemable
at the option of ConAgra Capital, L.C., (with ConAgra's consent) in whole or in
part, at $25 per security plus accumulated and unpaid distributions to the date
fixed for redemption.
11. CAPITAL STOCK
The company has authorized shares of preferred stock as follows:
Class B- $50 par value; 150,000 shares
Class C- $100 par value; 250,000 shares
Class D- without par value; 1,100,000 shares
Class E- without par value; 16,550,000 shares
There were no preferred shares issued or outstanding as of May 28, 2000.
12. EMPLOYEE EQUITY FUND
In fiscal 1993, the company established a $700 million Employee Equity Fund
("EEF"), a grantor trust, to pre-fund future stock-related obligations of the
company's compensation and benefit plans. The EEF supports existing, previously
approved employee plans that use ConAgra common stock.
48 ConAgra, Inc. 2000 Annual Report
65
<PAGE>
For financial reporting purposes, the EEF is consolidated with ConAgra. The fair
market value of the shares held by the EEF is shown as a reduction to common
stockholders' equity in the company's consolidated balance sheets. All dividends
and interest transactions between the EEF and ConAgra are eliminated.
Differences between cost and fair value of shares held and/or released are
included in consolidated additional paid-in capital. Following is a summary of
shares held by the EEF:
<TABLE>
<CAPTION>
------------------------------------------------------------------
2000 1999
==================================================================
<S> <C> <C>
Shares held (in millions) 15.2 17.2
Cost - per share $ 14.552 $ 14.552
Cost - total 221.9 250.1
Fair market value - per share $ 22.9375 $ 26.0625
Fair market value - total 349.7 447.9
------------------------------------------------------------------
</TABLE>
13. STOCK OPTIONS AND RIGHTS
Stock option plans approved by the stockholders provide for granting of options
to employees for purchase of common stock generally at prices equal to fair
market value at the time of grant, and for issuance of restricted or bonus stock
without direct cost to the employee. During fiscal 2000, 1999, and 1998,
respectively, 126,000 shares, 195,825 shares, and 274,926 shares of restricted
stock (including stock issued under incentive plans) were issued. The value of
the restricted stock, equal to fair market value at the time of grant, is being
amortized as compensation expense over the vesting period. This compensation
expense was not significant for fiscal 2000, 1999, and 1998. Options become
exercisable under various vesting schedules and generally expire 10 years after
the date of grant. Option shares and prices are adjusted for common stock splits
and changes in capitalization.
The changes in the outstanding stock options during the three years ended May
28, 2000, are summarized below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
2000 1999 1998
===================================================================================
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning of year 23.5 $ 22.86 23.6 $ 20.91 23.1 $ 17.01
Granted 6.0 23.35 4.8 28.15 5.2 33.57
Exercised (1.8) 13.41 (3.3) 14.70 (3.4) 13.80
Canceled (2.1) 27.20 (1.6) 26.76 (1.3) 20.52
End of year 25.6 $ 23.30 23.5 $ 22.86 23.6 $ 20.91
Exercisable
at end of year 16.2 $ 21.56 14.4 $ 19.58 13.8 $ 16.99
-----------------------------------------------------------------------------------
</TABLE>
The following summarizes information about stock options outstanding as of May
28, 2000:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Options Outstanding Options Exercisable
================================================================================
Weighted Weighted Weighted
Average Average Average
Remaining Exercise Exercise
Range of Exercise Price Shares Life Price Shares Price
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.97 - $ 6.42 0.1 1.0 $ 5.09 0.1 $ 5.09
7.63 - 11.33 0.6 0.4 10.63 0.6 10.63
11.54 - 16.88 5.1 3.2 14.83 5.1 14.83
19.06 - 29.00 16.0 7.7 24.11 8.2 23.39
29.50 - 36.81 3.8 7.4 33.71 2.2 33.72
$ 4.97 - $ 36.81 25.6 6.6 $ 23.30 16.2 $ 21.56
--------------------------------------------------------------------------------
</TABLE>
The company has elected to account for its employee stock option plans using the
intrinsic value method of accounting. Accordingly, no compensation expense is
recognized for stock options because the exercise price of the stock options
equals the market price of the underlying stock on the date of the grant.
Pro forma information regarding net income and income per share is required by
SFAS No. 123, assuming the company accounted for its employee stock options
using the fair value method. The fair value of options was estimated at the date
of the grant using the Black-Scholes option pricing model with the following
weighted average assumptions for 2000, 1999, and 1998, respectively: risk-free
interest rate of 6.33%, 4.29%, and 6.03%; a dividend yield of 2.2%, 2.2%, and
2.1%; expected volatility of 20.6%, 20.0%, and 19.1%; and an expected option
life of six years. The weighted average fair value of options granted in fiscal
2000, 1999, and 1998 was $6.21, $6.12, and $8.53, respectively. Pro forma net
income and income per share are as follows (because SFAS No. 123 is applicable
only to options granted subsequent to fiscal 1995, its pro forma effect was not
fully reflected until fiscal 2000):
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
2000 1999 1998
=================================================================================
<S> <C> <C> <C>
Pro forma net income $ 393.3 $ 344.3 $ 615.9
Pro forma basic income per share .83 .73 1.32
Basic income per share - as reported .87 .76 1.35
Pro forma diluted income per share .82 .72 1.30
Diluted income per share - as reported .86 .75 1.32
---------------------------------------------------------------------------------
</TABLE>
At May 28, 2000, approximately 2.8 million shares were reserved for granting
additional options and restricted or bonus stock awards.
Each share of common stock carries with it one-half preferred stock purchase
right ("Right"). The Rights become exercisable 10 days after a person (an
"Acquiring Person") acquires or commences a tender offer for 15% or more of the
company's common stock.
49 ConAgra, Inc. 2000 Annual Report
66
<PAGE>
Each Right entitles the holder to purchase one one-thousandth of a share of a
new series of Class E Preferred Stock at an exercise price of $200, subject to
adjustment. The Rights expire on July 12, 2006, and may be redeemed at the
option of the company at $.01 per Right, subject to adjustment. Under certain
circumstances, if (i) any person becomes an Acquiring Person or (ii) the company
is acquired in a merger or other business combination after a person becomes an
Acquiring Person, each holder of a Right (other than the Acquiring Person) will
have the right to receive, upon exercise of the Right, shares of common stock
(of the company under (i) and of the acquiring company under (ii)) having a
value of twice the exercise price of the Right. The Rights were issued pursuant
to a dividend declared by the company's Board of Directors on July 12, 1996,
payable to stockholders of record on July 24, 1996. The one Right for each
outstanding share was adjusted to one-half Right for each share effective
October 1, 1997, as a result of the two-for-one stock split. At May 28, 2000,
the company had reserved one million Class E preferred shares for exercise of
the Rights.
14. PRETAX INCOME AND INCOME TAXES
Income before taxes and cumulative effect of change in accounting consisted of
the following:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
2000 1999 1998
-------------------------------------------------------------------
<S> <C> <C> <C>
United States $ 590.0 $ 570.8 $ 968.9
Foreign 76.1 111.5 72.1
-------------------------------------------------------------------
$ 666.1 $ 682.3 $ 1,041.0
===================================================================
</TABLE>
The provision for income taxes includes the following:
<TABLE>
<CAPTION>
---------------------------------------------------------
2000 1999 1998
---------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 272.6 $ 280.7 $ 287.0
State 23.3 52.1 56.6
Foreign 33.3 24.5 12.3
---------------------------------------------------------
$ 329.2 $ 357.3 $ 355.9
---------------------------------------------------------
Deferred
Federal (70.1) (30.0) 38.8
State (6.0) (3.4) 4.5
Foreign - - -
---------------------------------------------------------
(76.1) (33.4) 43.3
---------------------------------------------------------
$ 253.1 $ 323.9 $ 399.2
=========================================================
</TABLE>
Income taxes computed by applying statutory rates to income before income taxes
are reconciled to the provision for income taxes set forth in the consolidated
statements of earnings as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
2000 1999 1998
========================================================================
<S> <C> <C> <C>
Computed U.S. federal
income taxes $ 233.1 $ 238.8 $ 364.3
State income taxes, net of
U.S. federal tax benefit 11.9 31.6 39.7
Nondeductible amortization of
goodwill and other intangibles 18.1 21.5 20.1
Export and jobs tax credits (19.2) (12.2) (7.5)
Permanent differences due to
restructuring/impairment charges - 57.3 -
Other 9.2 (13.1) (17.4)
------------------------------------------------------------------------
$ 253.1 $ 323.9 $ 399.2
========================================================================
</TABLE>
Income taxes paid were $441.5 million, $344.5 million, and $282.3 million in
fiscal 2000, 1999, and 1998, respectively. The Internal Revenue Service has
closed examinations of the company's tax returns through fiscal 1995. The IRS
has proposed certain adjustments for later years, some of which are being
contested by the company. The company believes that it has made adequate
provisions for income taxes payable.
The tax effect of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------------
Assets Liabilities Assets Liabilities
=================================================================================
<S> <C> <C> <C> <C>
Depreciation and
amortization $ - $ 462.3 $ - $ 361.2
Nonpension
postretirement benefits 157.9 - 171.1 -
Other noncurrent liabilities
which will give rise to
future tax deductions 185.7 - 194.2 -
Accrued expenses 141.4 - 76.5 -
Restructuring/Impairment
and restructuring-related
charges 304.7 - 150.6 -
Other 83.1 136.2 68.3 128.5
---------------------------------------------------------------------------------
$ 872.8 $ 598.5 $ 660.7 $ 489.7
=================================================================================
</TABLE>
15. COMMITMENTS
The company leases certain facilities and transportation equipment under
agreements that expire at various dates. Management expects that in the normal
course of business, leases that expire will be renewed or replaced by other
leases. Substantially all leases require payment of property taxes, insurance,
and maintenance costs in addition to rental payments.
50 ConAgra, Inc. 2000 Annual Report
67
<PAGE>
A summary of rent expense charged to operations follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------
2000 1999 1998
==============================================================
<S> <C> <C> <C>
Cancelable $ 189.4 $ 154.8 $ 153.2
Noncancelable 97.5 117.9 115.1
--------------------------------------------------------------
$ 286.9 $ 272.7 $ 268.3
==============================================================
</TABLE>
A summary of noncancelable operating lease commitments for fiscal years
following May 28, 2000, is as follows:
<TABLE>
<CAPTION>
Type of property
---------------------------------------------------------------------
Real and Other Transportation
Property Equipment
=====================================================================
<S> <C> <C>
2001 $ 79.9 $ 14.7
2002 72.9 9.7
2003 57.4 4.4
2004 47.7 1.6
2005 36.6 1.5
Later years 84.4 1.8
---------------------------------------------------------------------
$ 378.9 $ 33.7
=====================================================================
</TABLE>
The company had letters of credit, performance bonds, and other commitments and
guarantees outstanding at May 28, 2000, aggregating approximately $207.8
million.
16. 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 40 Superfund, proposed Superfund or
state-equivalent sites. Beatrice has paid or is in the process of paying its
liability share at 34 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 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.
17. DERIVATIVE FINANCIAL INSTRUMENTS
The company uses interest rate swaps to manage its interest rate risk, as
outlined in Note 7. In addition, the company's energy subsidiary uses derivative
financial instruments in its trading activities in energy markets. At May 28,
2000, the company's energy subsidiary was party to natural gas price swaps with
a notional value of $230.2 million. The swap agreements are settled in cash
based on the difference between a fixed and floating (index-based) price for the
underlying commodity. All swaps expire within 12 months, while most have a
duration of no more than six months. At May 30, 1999, the notional value of
these financial instruments was $265.9 million. All contracts are
marked-to-market, with gains and losses recorded in the consolidated statements
of earnings consistent with all trading business activity within the company.
The company performs credit assessments on all counterparties and obtains
additional guarantees of financial performance, if deemed necessary. The
predominance of these trades are swaps, where the company pays or receives only
the difference between the contract value and the market value. The amount at
risk is therefore limited to the gain on the swap. The company does not
anticipate any material loss because of nonperformance by a counterparty.
Certain of the company's operations use foreign exchange forwards to hedge fixed
purchase and sales commitments denominated in a foreign currency. The fair value
of these foreign exchange positions was not material.
18. PENSION AND POSTRETIREMENT BENEFITS
RETIREMENT PENSION PLANS
The company and its subsidiaries have defined benefit retirement plans ("Plan")
for eligible salaried and hourly employees. Benefits are based on years of
credited service and average compensation or stated amounts for each year of
service. The company funds these plans in accordance with the minimum and
maximum limits established by law.
51 ConAgra, Inc. 2000 Annual Report
68
<PAGE>
Components of pension benefit costs and weighted average actuarial assumptions
are:
<TABLE>
<CAPTION>
---------------------------------------------------------------
2000 1999 1998
===============================================================
<S> <C> <C> <C>
PENSION BENEFIT COST
Service cost $ 55.7 $ 48.5 $ 44.4
Interest cost 103.2 97.7 92.5
Expected return on plan assets (114.6) (101.4) (92.4)
Amortization of prior
service costs 4.3 3.8 4.4
Amortization of transition
obligation (2.7) (2.7) (2.7)
Recognized net actuarial loss 3.4 1.9 2.3
Curtailment (gain) loss and
special benefits 3.3 - (.1)
---------------------------------------------------------------
Pension benefit cost -
Company plans 52.6 47.8 48.4
Pension benefit cost -
Multiemployer plans 9.4 9.1 9.5
---------------------------------------------------------------
Total pension benefit cost $ 62.0 $ 56.9 $ 57.9
---------------------------------------------------------------
ACTUARIAL ASSUMPTIONS
Discount rate 6.75% 7.25% 7.50
Long-term rate of return on
plan assets 9.25 8.75 9.25
Long-term rate of compensation
increase 5.50 5.50 5.50
---------------------------------------------------------------
</TABLE>
The change in projected benefit obligation, change in plan assets, and funded
status of the plans at February 29, 2000, and February 28, 1999, were:
<TABLE>
<CAPTION>
---------------------------------------------------------------
2000 1999
===============================================================
<S> <C> <C>
CHANGE IN PROJECTED BENEFIT OBLIGATION
Projected benefit obligation at
beginning of year $ 1,561.2 $ 1,376.3
Service cost 55.7 48.5
Interest cost 103.2 97.7
Plan participants' contributions 0.1 0.1
Amendments 3.2 4.3
Actuarial loss (gain) (156.4) 110.6
Curtailment/Settlement loss 2.4 -
Other 0.5 1.4
Benefits paid (80.7) (77.7)
---------------------------------------------------------------
Projected benefit obligation at
end of year 1,489.2 1,561.2
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------
2000 1999
=================================================================
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year 1,535.8 1,504.6
Actual return on plan assets 189.2 103.8
Employer contributions 16.9 13.9
Plan participants' contributions 0.1 0.1
Investment and administrative expenses (9.4) (10.7)
Other 0.2 1.8
Benefits paid (80.7) (77.7)
-----------------------------------------------------------------
Fair value of plan assets at end of year 1,652.1 1,535.8
-----------------------------------------------------------------
FUNDED STATUS 162.9 (25.4)
Unrecognized actuarial gain (355.3) (135.3)
Unrecognized prior service cost 22.9 27.4
Unrecognized transition amount (6.6) (9.3)
-----------------------------------------------------------------
Accrued benefit cost $ (176.1) $ (142.6)
=================================================================
ACTUARIAL ASSUMPTIONS
Discount rate 7.50% 6.75%
Long-term rate of compensation increase 5.50 5.50
-----------------------------------------------------------------
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for pension plans with accumulated benefit obligations in excess
of plan assets at February 29, 2000, and February 28, 1999, were:
<TABLE>
<CAPTION>
---------------------------------------------------------------
2000 1999
===============================================================
<S> <C> <C>
Projected benefit obligation $ 192.9 $ 229.6
Accumulated benefit obligation 182.7 215.7
Fair value of plan assets 116.8 143.2
---------------------------------------------------------------
</TABLE>
Plan assets are primarily invested in equity securities, corporate and
government debt securities, and common trust funds. Included in plan assets are
5.1 million shares of the company's common stock at a fair market value of $83.2
million and $152.7 million at February 29, 2000, and February 28, 1999,
respectively.
Certain employees of the company are covered under defined contribution plans.
The expense related to these plans was $31.1 million, $29.7 million, and $29.0
million in fiscal 2000, 1999, and 1998, respectively.
52 ConAgra, Inc. 2000 Annual Report
69
<PAGE>
POSTRETIREMENT BENEFITS
The company's postretirement plans provide certain medical and dental benefits
to qualifying U.S. employees.
Components of postretirement benefit costs and weighted average actuarial
assumptions are:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
2000 1999 1998
=================================================================
<S> <C> <C> <C>
POSTRETIREMENT BENEFIT COST
Service cost $ 2.8 $ 2.8 $ 2.7
Interest cost 22.1 24.7 25.1
Expected return on plan assets (0.5) (0.6) (0.7)
Amortization of prior service cost (2.1) (0.1) (0.1)
Amortization of transition obligation 0.1 0.1 0.1
Recognized net actuarial (gain) loss (3.8) (3.0) (3.7)
Curtailment (gain) loss (9.3) - 0.1
-----------------------------------------------------------------
$ 9.3 $ 23.9 $ 23.5
=================================================================
ACTUARIAL ASSUMPTIONS
Discount rate 6.75% 7.25% 7.50%
Long-term rate of return on
plan assets 13.70 13.70 13.70
-----------------------------------------------------------------
</TABLE>
The change in accumulated benefit obligation, change in plan assets, and funded
status of the plans at February 29, 2000, and February 28, 1999, were:
<TABLE>
<CAPTION>
-----------------------------------------------------------------
2000 1999
=================================================================
<S> <C> <C>
CHANGE IN ACCUMULATED BENEFIT OBLIGATION
Accumulated benefit obligation at
beginning of year $ 350.7 $ 351.5
Service cost 2.8 2.8
Interest cost 22.1 24.7
Plan participants' contributions 2.1 2.6
Actuarial (gain) loss (15.7) (5.5)
Acquisition - 5.6
Benefits paid (35.5) (31.0)
Plan amendments (11.2) -
-----------------------------------------------------------------
Accumulated benefit obligation at end
of year 315.3 350.7
-----------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year 5.3 5.5
Actual return on plan assets 0.7 0.7
Employer contributions 32.5 27.5
Plan participants' contributions 2.1 2.6
Benefits paid (35.5) (31.0)
-----------------------------------------------------------------
Fair value of plan assets at end of year 5.1 5.3
-----------------------------------------------------------------
FUNDED STATUS (310.2) (345.4)
Unrecognized net gain (104.6) (92.5)
Unrecognized transition amount 0.6 0.7
Unrecognized prior service cost (1.2) (1.4)
-----------------------------------------------------------------
Accrued benefit cost $ (415.4) $ (438.6)
=================================================================
ACTUARIAL ASSUMPTIONS
Discount rate 7.50% 6.75%
-----------------------------------------------------------------
</TABLE>
Benefit costs were generally estimated assuming retiree health care costs would
increase at a 5.5% annual rate.
A one percentage point change in assumed health care cost rates would have the
following effect:
<TABLE>
<CAPTION>
--------------------------------------------------------------
One Percent One Percent
Increase Decrease
==============================================================
<S> <C> <C>
Total service and interest
cost components $ 2.7 $ (2.3)
Postretirement benefit obligation 26.2 (22.7)
--------------------------------------------------------------
</TABLE>
The company generally intends to fund claims as reported.
19. BUSINESS SEGMENTS AND RELATED INFORMATION
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 expense,
goodwill amortization, interest expense, and income taxes have been excluded
from segment operations. All assets other than cash and those assets related to
the corporate office have been identified with the segments to which they
relate.
53 ConAgra, Inc. 2000 Annual Report
70
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
2000 1999 1998
================================================================================================================================
<S> <C> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 7,713.5 $ 7,426.6 $ 7,192.2
Refrigerated Foods 12,522.2 11,591.4 11,416.2
Agricultural Products 5,150.1 5,576.3 5,611.1
--------------------------------------------------------------------------------------------------------------------------------
Total $ 25,385.8 $ 24,594.3 $ 24,219.5
================================================================================================================================
Intersegment sales
Packaged Foods $ 48.6 $ 38.2 $ 34.1
Refrigerated Foods 341.4 213.1 193.4
Agricultural Products 188.7 288.0 220.0
--------------------------------------------------------------------------------------------------------------------------------
578.7 539.3 447.5
Intersegment elimination (578.7) (539.3) (447.5)
--------------------------------------------------------------------------------------------------------------------------------
Total $ - $ - $ -
================================================================================================================================
Net sales
Packaged Foods $ 7,762.1 $ 7,464.8 $ 7,226.3
Refrigerated Foods 12,863.6 11,804.5 11,609.6
Agricultural Products 5,338.8 5,864.3 5,831.1
Intersegment elimination (578.7) (539.3) (447.5)
--------------------------------------------------------------------------------------------------------------------------------
Total $ 25,385.8 $ 24,594.3 $ 24,219.5
================================================================================================================================
Operating profit (Note a)
Packaged Foods $ 778.4 $ 941.3 $ 978.1
Refrigerated Foods 322.7 9.4 204.6
Agricultural Products 187.2 314.8 390.2
--------------------------------------------------------------------------------------------------------------------------------
Total operating profit 1,288.3 1,265.5 1,572.9
Interest expense 303.4 316.6 300.7
General corporate expenses 255.4 197.2 163.4
Goodwill amortization 63.4 69.4 67.8
--------------------------------------------------------------------------------------------------------------------------------
Income before tax and cumulative effect of change in accounting $ 666.1 $ 682.3 $ 1,041.0
================================================================================================================================
Identifiable assets
Packaged Foods $ 4,621.2 $ 4,758.9 $ 4,327.5
Refrigerated Foods 3,665.7 3,407.3 3,830.3
Agricultural Products 3,251.5 3,580.3 3,249.1
Corporate 757.4 399.6 401.6
--------------------------------------------------------------------------------------------------------------------------------
Total $ 12,295.8 $ 12,146.1 $ 11,808.5
================================================================================================================================
Additions to property, plant and equipment - including businesses acquired
Packaged Foods $ 227.2 $ 375.4 $ 263.2
Refrigerated Foods 459.6 226.0 206.9
Agricultural Products 81.8 136.1 124.1
Corporate 59.9 25.7 8.6
--------------------------------------------------------------------------------------------------------------------------------
Total $ 828.5 $ 763.2 $ 602.8
================================================================================================================================
Depreciation and amortization
Packaged Foods $ 263.0 $ 241.1 $ 221.6
Refrigerated Foods 184.7 193.7 175.9
Agricultural Products 73.3 63.2 56.8
Corporate 15.5 1.8 2.5
--------------------------------------------------------------------------------------------------------------------------------
Total $ 536.5 $ 499.8 $ 456.8
================================================================================================================================
</TABLE>
Note a: Fiscal 2000 includes before-tax restructuring and restructuring-related
charges of $621.4 million (Note 3). These charges were included in operating
profit as follows: $309.5 million in Packaged Foods, $168.0 million in
Refrigerated Foods, and $143.9 million in Agricultural Products. Fiscal 1999
includes before-tax restructuring charges of $440.8 million (Note 3). The fiscal
1999 charges were included in operating profit as follows: $39.0 million in
Packaged Foods, $358.6 million in Refrigerated Foods, and $43.2 million in
Agricultural Products.
54 ConAgra, Inc. 2000 Annual Report
71
<PAGE>
The operations of the company are principally in the United States. Operations
outside the United States are worldwide with no single foreign country or
geographic region being significant to the consolidated operations. Foreign net
sales were $3.6 billion in each of the following fiscal years: 2000, 1999, and
1998. Net sales are attributed to countries based on location of customer. The
company's long-lived assets located outside of the United States are not
significant.
20. SUBSEQUENT EVENT
On June 22, 2000, the company signed a definitive agreement to acquire
International Home Foods. The definitive agreement provides that International
Home Foods' shareholders will receive a targeted value of $22 per share, $11 of
which will be paid in cash and the balance will be paid in ConAgra stock. The
stock portion of the consideration is subject to adjustment based on the trading
price of ConAgra stock prior to the closing of the transaction. The transaction
is valued at approximately $2.9 billion, consisting of the consideration above
and the assumption of $1.3 billion of debt. The acquisition is subject to
customary closing conditions, including approval by International Home Foods'
shareholders and regulatory authorities.
21. QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Net Income(Loss) Dividends
Net Gross Income Per Share Stock Market Price Declared
Sales Profit (Loss) Basic Diluted High Low Per Share
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
2000
First $ 6,593.6 $ 976.2 $ 101.8 (1) $ .22 (1) $ .21 (1) $ 28.13 $ 24.06 $ .17850
Second 6,602.9 1,141.5 187.3 (2) .39 (2) .39 (2) 26.50 21.50 .20350
Third 5,797.8 1,017.6 143.4 (3) .30 (3) .30 (3) 24.63 15.88 .20350
Fourth 6,391.5 1,044.6 (19.5)(4) (.04)(4) (.04)(4) 23.25 15.06 .20350
-----------------------------------------------------------------------------------------------------------------------------
YEAR $25,385.8 $4,179.9 $ 413.0 (5) $ .87 (5) $ .86 (5) $ 28.13 $ 15.06 $ .7890
=============================================================================================================================
1999
First $ 6,483.4 $ 917.5 $ 109.3 $ .23 $ .23 $ 33.25 $ 22.56 $ .15625
Second 6,404.4 1,105.9 219.0 .47 .46 32.44 24.63 .17850
Third 5,693.3 1,007.1 171.4 .36 .36 34.38 29.25 .17850
Fourth 6,013.2 1,007.6 (141.3)(6) (.30)(6) (.30)(6) 31.25 23.13 .17850
-----------------------------------------------------------------------------------------------------------------------------
YEAR $24,594.3 $4,038.1 $ 358.4 (6) $ .76 (6) $ .75 (6) $ 34.38 $ 22.56 $ .69175
=============================================================================================================================
</TABLE>
(1) Includes after-tax restructuring and related charges of $29.2 million, or
$.06 for both basic and diluted earnings per share (Note 3).
(2) Includes after-tax restructuring and related charges of $64.7 million, or
$.14 for both basic and diluted earnings per share (Note 3).
(3) Includes after-tax restructuring and related charges of $52.5 million, or
$.11 for both basic and diluted earnings per share (Note 3).
(4) Includes after-tax restructuring and related charges of $238.9 million, or
$.50 for both basic and diluted earnings per share (Note 3).
(5) Includes after-tax restructuring and related charges of $385.3 million, or
$.81 for both basic and diluted earnings per share (Note 3).
(6) Includes after-tax restructuring charges of $337.9 million, or $.72 and $.71
for basic and diluted earnings per share, respectively (Note 3).
55 ConAgra, Inc. 2000 Annual Report
72
<PAGE>
RESPNSIBILITIES
INDEPENDENT AUDITORS' REPORT
THE STOCKHOLDERS AND BOARD OF DIRECTORS
CONAGRA, INC.
We have audited the accompanying consolidated balance sheets of ConAgra, Inc.
and subsidiaries as of May 28, 2000, and May 30, 1999, and the related
consolidated statements of earnings, comprehensive income, common stockholders'
equity and cash flows for each of the three years in the period ended May 28,
2000. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of ConAgra, Inc. and subsidiaries as
of May 28, 2000, and May 30, 1999, and the results of their operations and their
cash flows for each of the three years in the period ended May 28, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
July 14, 2000
Omaha, Nebraska
THE CONDUCT OF OUR AFFAIRS
The major objectives of the company are expressed in terms of return on
stockholders' equity and growth in trend line earning power. As we conduct
ourselves in the pursuit of our existing businesses and in the growth of our
businesses in an ethical and moral way, we must also fulfill our commitments to
our government, to our society, and to ourselves as individuals. In one sense,
ethics involves the point of view that suggests we live in a glass bowl, and we
should feel comfortable with any actions we take, if they were shared publicly.
Further, we will conduct our affairs within the law.
Should there be evidence of possible malfeasance on the part of any officer or
member of management, each employee must feel the responsibility to communicate
that to the appropriate party. This is a commitment that each of us must
undertake and not feel that it is a high-risk communication, but that it is
expected and, indeed, an obligation.
PRINCIPAL OFFICERS
The principal officers of the company include, among others, those listed on
pages 58 and 59 of this report. The principal officers are responsible for
maintaining throughout the company a system of internal controls, which protect
the assets of the company on a reasonable and economic basis. They also are
responsible for maintaining records, which permit the preparation of financial
statements that fairly present the financial condition and results of operations
of the company in accordance with generally accepted accounting principles.
AUDIT COMMITTEE OF THE BOARD
The Audit Committee of ConAgra's Board of Directors is composed entirely of
outside directors and recommends the appointment of the company's independent
public accountants. The Audit Committee meets regularly, and when appropriate
separately, with the independent public accountants, the internal auditors, and
financial management. Both the independent public accountants and the internal
auditors have unrestricted access to the Audit Committee.
56 ConAgra, Inc. 2000 Annual Report
73
