<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 27, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 1-7275
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CONAGRA, INC.
--------------------------------------------------------------
(Exact name of registrant, as specified in charter)
Delaware 47-0248710
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One ConAgra Drive, Omaha, Nebraska 68102-5001
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(Address of Principal Executive Offices) (Zip Code)
(402) 595-4000
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(Registrant's telephone number, including area code)
NA
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /x/ No / /
Number of shares outstanding of issuer's common stock, as of March 26, 2000 was
492,238,619.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions except per share amounts)
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 5,797.8 $ 5,693.3 $ 18,994.3 $ 18,581.1
Costs and expenses
Cost of goods sold * 4,780.2 4,686.2 15,859.0 15,550.6
Selling, administrative and general expenses * 678.3 640.4 2,142.4 1,962.6
Interest expense 80.3 88.0 233.9 255.4
Restructuring/Impairment charges 27.7 - 61.4 -
----------- ----------- ----------- -----------
5,566.5 5,414.6 18,296.7 17,768.6
----------- ----------- ----------- -----------
Income before income taxes 231.3 278.7 697.6 812.5
Income taxes 87.9 107.3 265.1 312.8
----------- ----------- ----------- -----------
Net income $ 143.4 $ 171.4 $ 432.5 $ 499.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income per share - basic $ .30 $ .36 $ .91 $ 1.06
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income per share - diluted $ .30 $ .36 $ .90 $ 1.05
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
- --------------------------------------------------------------------------------
</TABLE>
* Other restructuring-related items for the thirteen weeks and thirty-nine
weeks ended February 27, 2000 include: accelerated depreciation of $19.6
million and $84.4 million, respectively, included in cost of goods sold;
$18.8 million and $30.3 million, respectively, of accelerated depreciation
included in selling, administrative and general expenses; inventory
markdowns of $7.7 million and $41.4 million, respectively, included in cost
of goods sold, and restructuring plan implementation costs of $10.8 million
and $18.6 million, respectively, included in selling, administrative and
general expenses. For the thirteen weeks and thirty-nine weeks ended
February 27, 2000, total restructuring and restructuring-related charges
were $84.6 million and $236.1 million, respectively.
See notes to the condensed consolidated financial statements.
2
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
FEBRUARY 27, FEBRUARY 28, FEBRUARY 27, FEBRUARY 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income $ 143.4 $ 171.4 $ 432.5 $ 499.7
Other comprehensive income/(loss):
Currency translation adjustment (9.2) (4.2) (13.6) 1.0
----------- ----------- ----------- -----------
Comprehensive income $ 134.2 $ 167.2 $ 418.9 $ 500.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
See notes to the condensed consolidated financial statements.
3
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amount)
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS FEBRUARY 27, MAY 30, FEBRUARY 28,
2000 1999 1999
---------- ----------- ----------
<S> <C> <C> <C>
Current assets
Cash and cash equivalents $ 17.4 $ 62.8 $ 22.9
Receivables, less allowance for doubtful accounts
of $82.2, $60.0 and $85.1 1,973.9 1,637.5 2,447.8
Inventories 4,236.7 3,639.9 4,008.5
Prepaid expenses 307.3 315.9 320.7
---------- ----------- ----------
Total current assets 6,535.3 5,656.1 6,799.9
---------- ----------- ----------
Property, plant and equipment 6,766.1 6,213.8 6,227.6
Less accumulated depreciation (3,013.3) (2,599.6) (2,579.9)
---------- ----------- ----------
Property, plant and equipment, net 3,752.8 3,614.2 3,647.7
---------- ----------- ----------
Brands, trademarks and goodwill, net 2,404.2 2,408.7 2,627.3
Other assets 423.0 467.1 462.0
---------- ----------- ----------
$ 13,115.3 $ 12,146.1 $ 13,536.9
---------- ----------- ----------
---------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 2,406.3 $ 837.9 $ 2,653.7
Current installments of long-term debt 19.0 21.1 19.2
Accounts payable 2,130.3 2,036.5 2,225.4
Advances on sales 156.2 1,191.7 180.7
Other accrued liabilities 1,354.9 1,299.2 1,376.9
---------- ----------- ----------
Total current liabilities 6,066.7 5,386.4 6,455.9
---------- ----------- ----------
Senior long-term debt, excluding current installments 1,871.7 1,793.1 1,888.0
Other noncurrent liabilities 809.5 782.8 787.8
Subordinated debt 750.0 750.0 750.0
Preferred securities of subsidiary company 525.0 525.0 525.0
Common stockholders' equity
Common stock of $5 par value, authorized 1,200,000,000
shares; issued 524,129,789, 519,648,673 and 519,621,865 2,620.6 2,598.2 2,598.1
Additional paid-in capital 38.3 219.4 298.9
Retained earnings 1,537.2 1,369.8 1,595.2
Foreign currency translation adjustment (79.5) (65.9) (66.6)
Less treasury stock, at cost, common
shares 31,883,927, 31,475,678 and 30,991,229 (759.3) (749.9) (735.5)
---------- ----------- ----------
3,357.3 3,371.6 3,690.1
Less unearned restricted stock and value of 15,602,138,
17,184,831 and 18,089,367 common shares held
in Employee Equity Fund (264.9) (462.8) (559.9)
---------- ----------- ----------
Total common stockholders' equity 3,092.4 2,908.8 3,130.2
---------- ----------- ----------
$ 13,115.3 $ 12,146.1 $ 13,536.9
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
- --------------------------------------------------------------------------------
See notes to the condensed consolidated financial statements.
4
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FEBRUARY 27, FEBRUARY 28,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 432.5 $ 499.7
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and other amortization 339.7 321.1
Goodwill amortization 47.8 51.7
Restructuring/impairment charges and other restructuring-related
charges (includes accelerated depreciation) 236.1 -
Other noncash items (includes nonpension postretirement benefits) 60.6 66.1
Change in assets and liabilities before effects
from business acquisitions (2,052.9) (1,804.1)
--------- ---------
Net cash flows from operating activities (936.2) (865.5)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (333.8) (439.9)
Payment for business acquisitions (374.8) (401.4)
Sale of businesses and property, plant and equipment 46.0 13.3
Notes receivable and other items (31.6) 4.4
--------- ---------
Net cash flows from investing activities (694.2) (823.6)
--------- ---------
Cash flows from financing activities:
Net short-term borrowings 1,553.5 1,793.1
Proceeds from issuance of long-term debt 71.4 595.2
Repayment of long-term debt (16.8) (495.9)
Cash dividends paid (278.6) (240.8)
Cash distributions of pooled companies - (1.2)
Employee Equity Fund stock transactions - 7.0
Other items 255.5 (53.8)
--------- ---------
Net cash flows from financing activities 1,585.0 1,603.6
--------- ---------
Net change in cash and cash equivalents (45.4) (85.5)
Cash and cash equivalents at beginning of period 62.8 108.4
--------- ---------
Cash and cash equivalents at end of period $ 17.4 $ 22.9
--------- ---------
--------- ---------
</TABLE>
- -------------------------------------------------------------------------------
See notes to the condensed consolidated financial statements.
5
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED FEBRUARY 27, 2000
(COLUMNAR DOLLARS IN MILLIONS)
1. ACCOUNTING POLICIES
The unaudited interim financial information included herein reflects normal
recurring adjustments which are, in the opinion of management, necessary
for a fair presentation of the results of operations, financial position,
and cash flows for the periods presented. These consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's fiscal
1999 annual report on Form 10-K.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for other interim periods or the
full year.
Certain prior year amounts have been reclassified in order to conform to
current year classifications.
2. OPERATION OVERDRIVE
During the fourth quarter of fiscal 1999, the Company approved a 36-month
restructuring plan in connection with its previously announced initiative,
"Operation Overdrive." The restructuring plan is aimed at eliminating
overcapacity, streamlining operations and improving profitability through
margin improvement and expense reductions. The total pre-tax charge of the
plan is presently estimated at $880 million, with a pre-tax charge recorded
to date of $676.9 million. In accordance with generally accepted accounting
principles, the remaining cost will be recognized when employees are
notified of separation or when appropriate restructuring plan costs result
in accruable expenses.
Of the $676.9 million recognized to date, $440.8 million ($337.9 million
net of tax) was recognized in fiscal 1999, $47.1 million ($29.2 million net
of tax) was recognized in the first quarter of fiscal 2000, $104.4 million
($64.7 million net of tax) was recognized in the second quarter of fiscal
2000, and the remaining $84.6 million ($52.5 million net of tax) was
recognized in the third quarter of fiscal 2000. Fiscal 2000 third quarter
charges were as follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
------- ------- ------ -------
<S> <C> <C> <C> <C>
Accelerated depreciation $ 37.1 $ 1.3 $ - $ 38.4
Inventory markdowns .4 3.2 4.1 7.7
Restructuring plan implementation costs 4.0 5.1 1.7 10.8
Restructuring/Impairment charges 10.5 2.1 15.1 27.7
------- ------- ------ -------
Total $ 52.0 $ 11.7 $ 20.9 $ 84.6
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
6
<PAGE>
For the thirty-nine weeks ended February 27, 2000, the Company has
recognized $236.1 million ($146.4 million net of tax) for
restructuring/impairment charges and other restructuring-related charges as
follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
------- ------- ------ -------
<S> <C> <C> <C> <C>
Accelerated depreciation $ 104.5 $ 10.2 $ - $ 114.7
Inventory markdowns 15.0 3.2 23.2 41.4
Restructuring plan implementation costs 6.7 9.5 2.4 18.6
Restructuring/Impairment charges 23.1 14.8 23.5 61.4
------- ------- ------ -------
Total $ 149.3 $ 37.7 $ 49.1 $ 236.1
------- ------- ------ -------
------- ------- ------ -------
</TABLE>
The third quarter and year-to date charges are reflected in the Company's
Consolidated Statements of Earnings as follows: accelerated depreciation of
$19.6 million and $84.4 million, respectively, is included in cost of goods
sold; accelerated depreciation of $18.8 million and $30.3 million,
respectively, is included in selling, administrative and general expenses;
inventory markdowns are included in cost of goods sold; plan implementation
costs (primarily third-party consulting costs) are included in selling,
administrative and general expenses; and restructuring/impairment charges
are reflected as such and result from asset impairments, employee related
costs and contractual termination costs.
Certain assets to be disposed of that are not immediately removed from
operations are depreciated on an accelerated basis over their remaining
useful lives. Inventory markdowns represent losses 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 has, to date,
closed a total of 13 production facilities, 70 non-production locations
(e.g., storage, distribution, administrative, etc.) and sold nine non-core
businesses. The historical operating results and gains/losses associated
with sold businesses or facilities were not material.
Approximately 7,000 employee separations will occur as a result of the
restructuring plan, primarily in manufacturing and operating facilities.
This total represents an increase of approximately 300 individuals from the
original estimate, and results from updated estimates associated with
existing restructuring initiatives. In addition, other exit costs
(consisting of lease termination and other contractual termination costs)
will occur as a result of the restructuring plan. Such activity recognized
to date is as follows:
<TABLE>
<CAPTION>
Severance Other Exit
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, to date:
Charges to income 23.4 2,340 15.2
Utilized (33.7) (4,130) (12.4)
-------- --------- ----------
Balance, February 27, 2000 $ 28.7 1,110 $ 10.1
-------- --------- ----------
-------- --------- ----------
</TABLE>
7
<PAGE>
3. INCOME PER SHARE
The following table reconciles the income and average share amounts used to
compute both basic and diluted income per share (amounts in millions):
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------- -------------------------
FEB. 27, FEB. 28, FEB. 27, FEB. 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET INCOME $ 143.4 $ 171.4 $ 432.5 $ 499.7
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
INCOME PER SHARE - BASIC
Weighted average shares outstanding - basic 476.5 470.8 475.3 469.8
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
INCOME PER SHARE - DILUTED
Weighted average shares outstanding - basic 476.5 470.8 475.3 469.8
Add shares contingently issuable upon
exercise of stock options 2.3 7.8 3.4 7.2
----------- ----------- ----------- -----------
Weighted average shares outstanding - diluted 478.8 478.6 478.7 477.0
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
4. INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
FEB. 27, MAY 30, FEB. 28,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Hedged commodities $ 1,290.7 $ 1,306.2 $ 1,308.5
Food products and livestock 1,382.4 1,144.7 1,321.5
Agricultural chemicals, fertilizer and feed 788.5 597.4 682.1
Other, principally ingredients and supplies 775.1 591.6 696.4
------------ ------------ ------------
$ 4,236.7 $ 3,639.9 $ 4,008.5
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
5. CONTINGENCIES
In fiscal 1991, ConAgra acquired Beatrice Company ("Beatrice"). As a result
of the acquisition and the significant pre-acquisition contingencies of the
Beatrice businesses and its former subsidiaries, the consolidated
post-acquisition financial statements of ConAgra reflect significant
liabilities associated with the estimated resolution of these
contingencies. These include various litigation and environmental
proceedings related to businesses divested by Beatrice prior to its
acquisition by ConAgra. The environmental proceedings include litigation
and administrative proceedings involving Beatrice's status as a potentially
responsible party at 42 Superfund, proposed Superfund or state-equivalent
sites. Beatrice has paid or is in the process of paying its liability share
at 37 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.
8
<PAGE>
ConAgra is a party to a number of other lawsuits and claims arising out of
the operation of its businesses. After taking into account liabilities
recorded for all of the foregoing matters, management believes the ultimate
resolution of such matters should not have a material adverse effect on
ConAgra's financial condition, results of operations or liquidity.
6. ACQUISITIONS
On January 3, 2000, ConAgra acquired 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.
7. BUSINESS SEGMENTS
The Company has three segments, which are organized based upon similar
economic characteristics and the similarity 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. Refrigerated Foods includes companies that
produce and market branded processed meats, beef, pork, chicken and turkey.
Both the Packaged Foods and Refrigerated Foods segments market products in
retail and foodservice channels. Agricultural Products includes companies
involved in distribution of agricultural inputs and procurement,
processing, trading and distribution of commodity food ingredients and
agricultural commodities.
Intersegment sales have been recorded at amounts approximating market.
Operating profit for each segment is based on net sales less all
identifiable operating expenses and includes the related equity in earnings
of companies included on the basis of the equity method of accounting.
General corporate expenses, goodwill amortization, interest expense and
income taxes have been excluded from segment operations. The Company
operates principally in the United States.
9
<PAGE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FEBRUARY 27, FEBRUARY 28,
2000 1999
------------ ------------
<S> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 1,920.0 $ 1,894.6
Refrigerated Foods 3,046.0 2,808.9
Agricultural Products 831.8 989.8
------------ ------------
Total $ 5,797.8 $ 5,693.3
------------ ------------
------------ ------------
Intersegment sales
Packaged Foods $ 9.9 $ 4.1
Refrigerated Foods 97.5 55.1
Agricultural Products 47.6 43.0
------------ ------------
155.0 102.2
Intersegment elimination (155.0) (102.2)
------------ ------------
Total $ - $ -
------------ ------------
------------ ------------
Net sales
Packaged Foods $ 1,929.9 $ 1,898.7
Refrigerated Foods 3,143.5 2,864.0
Agricultural Products 879.4 1,032.8
Intersegment elimination (155.0) (102.2)
------------ ------------
Total $ 5,797.8 $ 5,693.3
------------ ------------
------------ ------------
Operating profit*
Packaged Foods $ 238.3 $ 267.4
Refrigerated Foods 98.7 83.7
Agricultural Products 47.0 76.9
------------ ------------
Total operating profit 384.0 428.0
Interest expense 80.3 88.0
General corporate expenses 56.5 43.8
Goodwill amortization 15.9 17.5
------------ ------------
Income before tax $ 231.3 $ 278.7
------------ ------------
------------ ------------
</TABLE>
* Thirteen weeks ended February 27, 2000 includes before-tax restructuring/
impairment charges and other restructuring-related charges of $84.6
million. The charges were included in operating profit as follows: $52.0
million in Packaged Foods; $11.7 million in Refrigerated Foods; and $20.9
million in Agricultural Products.
10
<PAGE>
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FEBRUARY 27, FEBRUARY 28,
2000 1999
------------ ------------
<S> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 5,743.9 $ 5,580.8
Refrigerated Foods 9,276.9 8,589.2
Agricultural Products 3,973.5 4,411.1
------------ ------------
Total $ 18,994.3 $ 18,581.1
------------ ------------
------------ ------------
Intersegment sales
Packaged Foods $ 34.5 $ 29.2
Refrigerated Foods 221.7 166.5
Agricultural Products 140.3 193.5
------------ ------------
396.5 389.2
Intersegment elimination (396.5) (389.2)
------------ ------------
Total $ - $ -
------------ ------------
------------ ------------
Net sales
Packaged Foods $ 5,778.4 $ 5,610.0
Refrigerated Foods 9,498.6 8,755.7
Agricultural Products 4,113.8 4,604.6
Intersegment elimination (396.5) (389.2)
------------ ------------
Total $ 18,994.3 $ 18,581.1
------------ ------------
------------ ------------
Operating profit*
Packaged Foods $ 645.0 $ 730.7
Refrigerated Foods 332.1 261.9
Agricultural Products 195.4 274.4
------------ ------------
Total operating profit 1,172.5 1,267.0
Interest expense 233.9 255.4
General corporate expenses 193.2 147.4
Goodwill amortization 47.8 51.7
------------ ------------
Income before tax $ 697.6 $ 812.5
------------ ------------
------------ ------------
</TABLE>
* Thirty-nine weeks ended February 27, 2000 includes before-tax
restructuring/impairment charges and other restructuring-related charges
of $236.1 million. The charges were included in operating profit as
follows: $149.3 million in Packaged Foods; $37.7 million in Refrigerated
Foods; and $49.1 million in Agricultural Products.
11
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Following is management's discussion and analysis of certain significant factors
which have affected the Company's financial condition and operating results for
the periods included in the accompanying condensed consolidated financial
statements. Results for the thirteen and thirty-nine week periods ended February
27, 2000 are not necessarily indicative of results that may be attained in the
future.
This report contains forward-looking statements. The statements reflect
management's current views and estimates of future economic circumstances,
industry conditions, Company performance and financial results. The statements
are based on many assumptions and factors including availability and prices of
raw materials, product pricing, competitive environment and related market
conditions, operating efficiencies, access to capital and actions of
governments. Any changes in such assumptions or factors could produce
significantly different results.
OPERATION OVERDRIVE
During fiscal 1999, ConAgra commenced an initiative ("Operation Overdrive") to
improve financial results by aligning the Company's resources by customer
channel, eliminate duplicative costs and capital, and increase investment in
market position. A major focus of Operation Overdrive is to ensure that each of
ConAgra's operating companies works together to increase the level of sales
captured internally. Year-to-date, total sales between ConAgra operating
companies (both intersegment and intrasegment sales) have increased by
approximately $150 million, or 21.3 percent, over the same period in the prior
fiscal year.
In the fourth quarter of fiscal 1999, as part of Operation Overdrive, the
Company announced a restructuring plan covering a 36-month period aimed at
consolidating capacity, streamlining operations and improving profitability
through margin improvement and expense reductions. The total pre-tax charge of
the plan is presently estimated at $880 million. Pretax savings associated with
the Company's restructuring plan are currently projected to be approximately
$460 million during the plan's first three years ($95 million in fiscal 2000,
$155 million in fiscal 2001, and $210 million in fiscal 2002). These planned
savings are primarily a result of reducing duplicative efforts, lowering
employee-related expense, and reducing future depreciation and amortization
costs. Accordingly, the Company anticipates these savings will positively impact
the Company's "cost of goods sold" and "selling, administrative and general"
line items within its Consolidated Statements of Earnings.
In connection with its 36-month restructuring plan, the Company anticipates
incurring cash expenses of $195 million, offset partially by approximately $70
million in cash proceeds from business and facility dispositions. The Company
expects to fund this $125 million pre-tax net cash outlay through cash generated
by its ongoing operations. The approximate pre-tax net cash outlay, by year of
associated expense, is as follows (dollars in millions):
<TABLE>
<S> <C>
1999 $ 36
2000 42
2001 38
2002 9
--------
Total $ 125
--------
--------
</TABLE>
Net cash outlays associated with the restructuring plan were previously
estimated to be $90 million over the 36-month restructuring plan. The increase
is primarily due to a decrease in the estimated proceeds from asset
dispositions, coupled with additional costs associated with existing
restructuring initiatives.
12
<PAGE>
During the third quarter of fiscal 2000, the Company recognized
restructuring/impairment charges and other restructuring-related costs
("restructuring charges") of $84.6 million ($52.5 million net of tax), bringing
total restructuring charges recorded from fiscal 1999 to date to $676.9 million
($484.3 million net of tax). Of the $84.6 million charge recognized in the third
quarter, $26.3 million will require cash expenditures resulting from contractual
terminations, employee-related costs and third-party consulting costs. The
remaining $58.3 million are non-cash charges resulting from asset impairments,
accelerated depreciation and inventory markdowns associated with the Company's
restructuring plan.
For fiscal 2000 year-to date, the Company recognized restructuring charges of
$236.1 million ($146.4 million net of tax). Of the $236.1 million charge, $57.2
million will require cash expenditures resulting from contractual terminations,
employee-related costs and third-party consulting costs. The remaining $178.9
million are non-cash charges resulting from asset impairments, accelerated
depreciation and inventory markdowns associated with the Company's restructuring
plan.
In association with the restructuring plan, the Company has, to date, closed a
total of 13 production facilities, 70 non-production locations (e.g., storage,
distribution, administrative, etc.) and sold nine non-core businesses. The
historical operating results and gains/losses associated with sold businesses or
facilities were not material.
The Company recorded net income of $143.4 million or $.30 diluted income per
share for the third quarter of fiscal 2000. Excluding restructuring charges, the
Company's net income was $195.9 million or $.41 diluted income per share.
Accordingly, the after-tax effect of restructuring charges on the Company's
third quarter of fiscal 2000 was $52.5 million or $.11 diluted income per share.
Fiscal 2000 year-to date, the Company recorded net income of $432.5 million or
$.90 diluted income per share. Excluding restructuring charges, the Company's
net income was $578.9 million or $1.21 diluted income per share. Accordingly,
the after-tax effect of restructuring charges for fiscal 2000 year-to date was
$146.4 million or $.31 diluted income per share.
FINANCIAL CONDITION
ConAgra's earnings are generated principally from its capital investment, which
consists of working capital (current assets less current liabilities) plus all
noncurrent assets. Capital investment is financed with stockholders' equity,
long-term debt and other noncurrent liabilities.
Capital investment increased $288.9 million, or 4.3 percent, compared to May 30,
1999. Working capital increased $198.9 million, and noncurrent assets increased
$90.0 million. The increase in working capital was primarily caused by normal
seasonal increases in accounts receivable and inventory which were partially
funded by short-term debt, as well as current year acquisitions.
Year-to-date, ConAgra has invested $333.8 million in property, plant and
equipment compared to $439.9 million for the same period in fiscal 1999. The
decrease of $106.1 million, or 24.1 percent, is reflective of the Company's
ongoing efforts to critically analyze its capital expenditure process.
Year-to-date, investments in business acquisitions were $374.8 million as
compared to $401.4 million for the same period in fiscal 1999.
The Company's objective is that senior long-term debt normally will not exceed
30 percent of total long-term debt plus equity. For purposes of computing the
ratio, preferred securities of subsidiary company are treated as equity due to
their preferred stock characteristics. This objective was met for all periods
presented.
13
<PAGE>
OPERATING RESULTS
A summary of the period to period increases (decreases) in the principal
components of operations, both before and after restructuring charges, is shown
below (dollars in millions, except per share amounts).
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
FEB. 27, 2000 AND FEB. 28, 1999 FEB. 27, 2000 AND FEB. 28, 1999
------------------------------- -------------------------------
POST- PRE- POST- PRE-
RESTRUCTURING RESTRUCTURING RESTRUCTURING RESTRUCTURING
DOLLAR CHANGE DOLLAR CHANGE DOLLAR CHANGE DOLLAR CHANGE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 104.5 $ 104.5 $ 413.2 $ 413.2
Costs and expenses
Cost of goods sold 94.0 66.7 308.4 182.6
Selling, administrative and general expenses 37.9 8.3 179.8 130.9
Interest expense (7.7) (7.7) (21.5) (21.5)
Restructuring/Impairment charges 27.7 - 61.4 -
------------- ------------- ------------- -------------
151.9 67.3 528.1 292.0
------------- ------------- ------------- -------------
Income before income taxes (47.4) 37.2 (114.9) 121.2
Income taxes (19.4) 12.7 (47.7) 42.0
------------- ------------- ------------- -------------
Net income $ (28.0) $ 24.5 $ (67.2) $ 79.2
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Income per share - basic $ (.06) $ .05 $ (.15) $ .16
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Income per share - diluted $ (.06) $ .05 $ (.15) $ .16
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
In ConAgra's Packaged Foods segment, third quarter sales increased 1.3 percent
to $1,920.0 million. Operating profit decreased 10.9 percent to $238.3 million,
down from last year's third quarter operating profit of $267.4 million.
Excluding restructuring charges, operating profit increased 8.6 percent, or
$22.9 million. For the first nine months, sales increased 2.9 percent to
$5,743.9 million. Operating profit decreased 11.7 percent to $645.0 million from
last year's first nine months operating profit of $730.7 million. Excluding
restructuring charges, the segment's operating profit increased 8.7 percent, or
$63.6 million. The segment's third quarter and first nine months operating
profit improvement, excluding restructuring charges, were primarily driven by
strong year-to-year performance improvement in ConAgra's foodservice and grocery
products units.
In the Company's Refrigerated Foods segment, third quarter sales increased 8.4
percent to $3,046.0 million. Operating profit for the quarter increased 17.9
percent to $98.7 million from $83.7 million in fiscal 1999's third quarter.
Excluding restructuring charges, operating profit increased 31.9 percent, or
$26.7 million. For the first nine months sales increased 8.0 percent, and
operating profit increased 26.8 percent to $332.1 million from $261.9 million.
Excluding restructuring charges, operating profit for the segment's first nine
months increased 41.2 percent, or $107.9 million. The segment's beef, pork and
prepared meats units achieved sales and operating profit increases for both the
third quarter and first nine months of fiscal 2000, and were the primary drivers
of the segment's improved performance over the same period in fiscal 1999.
14
<PAGE>
In ConAgra's Agricultural Products segment, third quarter sales decreased 16.0
percent to $831.8 million. Operating profit decreased 38.9 percent from $76.9
million to $47.0 million for the quarter. Excluding restructuring charges,
operating profit decreased 11.7 percent, or $9.0 million. For the first nine
months sales in this segment decreased 9.9 percent, and operating profit
decreased 28.8 percent from $274.4 million to $195.4 million. Excluding
restructuring charges, the segment's first nine months operating profit
decreased 10.9 percent, or $29.9 million. The segment's results were negatively
impacted by low grain prices and volumes.
For the Company in total, net income was $143.4 million for the third quarter,
while diluted earnings per share was $.30, a decrease of $.06 from the third
quarter of fiscal 1999. Excluding restructuring charges, net income was $195.9
million, while diluted earnings per share was $.41, an increase of $.05, as
compared to prior year's third quarter. Interest expense for the third quarter
decreased by $7.7 million, or 8.8 percent, as compared to the third quarter of
fiscal 1999 due to the Company carrying lower short-term debt balances.
For the first nine months of fiscal 2000, ConAgra's net income was $432.5
million, while diluted earnings per share was $.90, a decrease of $.15 as
compared to the first nine months of fiscal 1999. Excluding restructuring
charges, net income was $578.9 million, while diluted earnings per share was
$1.21, an increase of $.16 as compared to the first nine months of fiscal 1999.
As compared to the first nine months of fiscal 1999, selling, administrative and
general expenses, excluding restructuring charges, increased $130.9 million, or
6.7 percent, due in part to an increase in advertising and promotion costs and
information systems' integration costs. Interest expense for the first nine
months of fiscal 2000 decreased by $21.5 million, or 8.4 percent, as compared to
the first nine months of fiscal 1999 due to the Company carrying lower
short-term debt balances.
15
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the Company's market risk during the
thirty-nine weeks ended February 27, 2000. For additional information, refer to
pages 38 through 40 of the Company's 1999 Annual Report to Stockholders,
incorporated by reference into the Company's annual report on Form 10-K for the
fiscal year ended May 30, 1999.
16
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
12 - Statement regarding computation of ratio of earnings to fixed
charges
27 - Financial Data Schedule
(B) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter covered by
this report.
CONAGRA, INC.
By:
/s/ James P. O'Donnell
-----------------------------
James P. O'Donnell
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
By:
/s/ Jay D. Bolding
-----------------------------
Jay D. Bolding
Vice President and Controller
Dated this 11th day of April, 2000.
17
<PAGE>
CONAGRA, INC. AND SUBSIDIARIES
EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
12 Statement regarding computation of ratio of 19
earnings to fixed charges
27 Financial Data Schedule 20
18
<PAGE>
EXHIBIT 12
CONAGRA, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions)
<TABLE>
<CAPTION>
THIRTY-NINE
WEEKS ENDED
FEBRUARY 27,
2000
------------
<S> <C>
Fixed Charges
Interest expense $ 258.4
Capitalized interest 3.9
Interest in cost of goods sold 22.3
One-third of noncancelable lease rent 29.7
------------
Total fixed charges (A) $ 314.3
------------
------------
Earnings
Pretax income* $ 697.6
Adjustment for unconsolidated subsidiaries (1.0)
Add fixed charges 314.3
Less capitalized interest (3.9)
------------
Earnings and fixed charges (B) $ 1,007.0
------------
------------
Ratio of earnings to fixed charges (B/A) 3.2
</TABLE>
*Pretax income includes $236.1 million of restructuring/impairment charges
and other restructuring-related charges. Excluding these charges, the
"ratio of earnings to fixed charges" was 4.0. See note 2 to the condensed
consolidated financial statements.
For the purpose of computing the above ratio of earnings to fixed charges,
earnings consist of income before taxes and fixed charges. Fixed charges,
for the purpose of computing earnings, are adjusted to exclude interest
capitalized. Fixed charges include interest on both long and short-term
debt (whether said interest is expensed or capitalized and including
interest charged to cost of goods sold), and a portion of noncancelable
rental expense representative of the interest factor. The ratio is computed
using the amounts for ConAgra as a whole, including its majority-owned
subsidiaries, whether or not consolidated, and its proportionate share of
any 50% owned subsidiaries, whether or not ConAgra guarantees obligations
of these subsidiaries.
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-28-2000
<PERIOD-START> MAY-31-1999
<PERIOD-END> FEB-27-2000
<CASH> 17,400
<SECURITIES> 0
<RECEIVABLES> 2,056,100
<ALLOWANCES> 82,200
<INVENTORY> 4,236,700
<CURRENT-ASSETS> 6,535,300
<PP&E> 6,766,100
<DEPRECIATION> 3,013,300
<TOTAL-ASSETS> 13,115,300
<CURRENT-LIABILITIES> 6,066,700
<BONDS> 2,621,700
0
0
<COMMON> 2,620,600
<OTHER-SE> 471,800
<TOTAL-LIABILITY-AND-EQUITY> 13,115,300
<SALES> 18,994,300
<TOTAL-REVENUES> 18,994,300
<CGS> 15,859,000
<TOTAL-COSTS> 15,859,000
<OTHER-EXPENSES> 2,203,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 233,900
<INCOME-PRETAX> 697,600
<INCOME-TAX> 265,100
<INCOME-CONTINUING> 432,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,500
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.90
</TABLE>
