<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 26, 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
--------------------------------------------------------------------------------
CONAGRA FOODS, 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
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(402) 595-4000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Number of shares outstanding of issuer's common stock, as of December 24, 2000
was 536,801,372.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
CONAGRA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
NOVEMBER 26, NOVEMBER 28, NOVEMBER 26, NOVEMBER 28,
2000 1999 2000 1999
------------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 7,206.2 $ 6,697.7 $ 14,081.5 $ 13,402.9
Costs and expenses
Cost of goods sold 5,970.9 5,689.1 11,925.0 11,536.6
Selling, general and administrative expenses 627.5 599.1 1,238.0 1,212.7
Interest expense 117.3 77.2 192.3 153.6
Restructuring/Impairment charges - 30.2 - 33.7
----------- ----------- ----------- -----------
6,715.7 6,395.6 13,355.3 12,936.6
----------- ----------- ----------- -----------
Income before income taxes 490.5 302.1 726.2 466.3
Income taxes 188.8 114.8 278.4 177.2
----------- ----------- ----------- -----------
Net income $ 301.7 $ 187.3 $ 447.8 $ 289.1
=========== =========== =========== ===========
Income per share - basic $ .58 $ .39 $ .90 $ .61
=========== =========== =========== ===========
Income per share - diluted $ .58 $ .39 $ .89 $ .60
=========== =========== =========== ===========
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
For the thirteen weeks and twenty-six weeks ended November 28, 1999, other
restructuring-related items included accelerated depreciation of $33.8
million and $64.8 million, respectively, included in cost of goods sold; $7.5
million and $11.5 million, respectively, of accelerated depreciation included
in selling, general and administrative expenses; and inventory markdowns of
$25.1 million and $33.7 million, respectively, included in cost of goods
sold. For both the thirteen weeks and twenty-six weeks ended November 28,
1999, restructuring plan implementation costs included in selling, general
and administrative expenses were $7.8 million.
See notes to the condensed consolidated financial statements.
2
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
NOVEMBER 26, NOVEMBER 28, NOVEMBER 26, NOVEMBER 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 301.7 $ 187.3 $ 447.8 $ 289.1
Other comprehensive income/(loss):
Currency translation adjustment (32.9) 2.1 (24.3) (4.4)
--------- -------- --------- ---------
Comprehensive income $ 268.8 $ 189.4 $ 423.5 $ 284.7
========= ======== ========= =========
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
3
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
NOVEMBER 26, MAY 28, NOVEMBER 28,
2000 2000 1999
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 82.7 $ 157.6 $ 9.5
Receivables, less allowance for doubtful accounts
of $86.6, $62.8 and $85.9 2,594.8 1,605.5 2,525.0
Inventories 5,153.2 3,788.4 4,386.3
Prepaid expenses 481.5 404.8 294.7
---------- ----------- ----------
Total current assets 8,312.2 5,956.3 7,215.5
---------- ----------- ----------
Property, plant and equipment 7,050.2 6,441.8 6,447.1
Less accumulated depreciation (3,083.5) (2,857.8) (2,887.4)
----------- ------------ ----------
Property, plant and equipment, net 3,966.7 3,584.0 3,559.7
---------- ----------- ----------
Brands, trademarks and goodwill, net 4,388.7 2,366.0 2,384.1
Other assets 650.2 386.7 412.6
---------- ----------- ----------
$ 17,317.8 $ 12,293.0 $ 13,571.9
========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,783.1 $ 1,255.5 $ 2,761.0
Current installments of long-term debt 65.1 20.6 20.5
Accounts payable 2,031.0 2,040.8 2,123.3
Advances on sales 263.2 888.7 229.4
Other accrued liabilities 1,606.9 1,280.9 1,467.2
---------- ----------- ----------
Total current liabilities 7,749.3 5,486.5 6,601.4
---------- ----------- ----------
Senior long-term debt, excluding current installments 3,418.6 1,816.8 1,851.1
Other noncurrent liabilities 806.4 750.7 799.9
Subordinated debt 750.0 750.0 750.0
Preferred securities of subsidiary company 525.0 525.0 525.0
Commitments and contingencies -- -- --
Common stockholders' equity
Common stock of $5 par value, authorized 1,200,000,000
shares; issued 565,260,906, 524,137,617 and 524,071,467 2,826.3 2,620.7 2,620.4
Additional paid-in capital 761.5 147.5 161.9
Retained earnings 1,650.9 1,420.7 1,486.1
Foreign currency translation adjustment (127.4) (103.1) (70.3)
Less treasury stock, at cost, common
shares 29,102,872, 31,925,505 and 31,789,174 (692.7) (760.3) (757.3)
---------- ----------- ----------
4,418.6 3,325.5 3,440.8
Less unearned restricted stock and value of 13,590,191,
15,246,068 and 15,948,951 common shares held
in Employee Equity Fund (350.1) (361.5) (396.3)
---------- ----------- ----------
Total common stockholders' equity 4,068.5 2,964.0 3,044.5
---------- ----------- ----------
$ 17,317.8 $ 12,293.0 $ 13,571.9
========== =========== ==========
--------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
4
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
TWENTY-SIX WEEKS ENDED
NOVEMBER 26, NOVEMBER 28,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 447.8 $ 289.1
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and other amortization 248.1 224.0
Goodwill amortization 32.3 31.9
Restructuring/impairment charges and other restructuring-related
charges (includes accelerated depreciation) - 151.5
Other noncash items (includes nonpension postretirement benefits) 32.7 51.8
Change in assets and liabilities before effects
from business acquisitions (2,598.7) (2,376.1)
---------- ---------
Net cash flows from operating activities (1,837.8) (1,627.8)
---------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (251.5) (223.4)
Payment for business acquisitions (1,049.6) (14.3)
Sale of businesses and property, plant and equipment 54.2 27.0
Notes receivable and other items (11.5) (20.8)
---------- ---------
Net cash flows from investing activities (1,258.4) (231.5)
---------- ---------
Cash flows from financing activities:
Net short-term borrowings 1,340.6 1,905.4
Proceeds from issuance of long-term debt 2,841.4 64.7
Repayment of long-term debt (394.5) (12.4)
Cash dividends paid (220.8) (171.8)
Repayment of acquired company's debt (729.3) -
Other items 183.9 20.1
--------- ---------
Net cash flows from financing activities 3,021.3 1,806.0
--------- ---------
Net change in cash and cash equivalents (74.9) (53.3)
Cash and cash equivalents at beginning of period 157.6 62.8
--------- ---------
Cash and cash equivalents at end of period $ 82.7 $ 9.5
========= =========
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to the condensed consolidated financial statements.
5
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 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
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related
notes included in the ConAgra Foods, Inc. (the "Company") fiscal 2000
annual report on Form 10-K.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for other interim periods or
the full year.
Certain prior year amounts have been reclassified in order to conform
with current year classifications.
In December 1999, SEC Staff Accounting Bulletin (SAB) No. 101, REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, was issued. In fiscal 2001,
Emerging Issues Task Force (EITF) Issue No. 00-14, ACCOUNTING FOR
COUPONS, REBATES, AND DISCOUNTS, EITF Issue No. 99-19, REPORTING
REVENUE GROSS AS A PRINCIPAL VERSUS NET AS AN AGENT, and EITF Issue No.
00-10, ACCOUNTING FOR SHIPPING AND HANDLING FEES AND COSTS, were
issued. These pronouncements will become effective for the Company in
fiscal 2001. In conjunction with the adoption of these pronouncements
the Company is assessing accounting policies potentially impacted by
the new pronouncements. The Company has not quantified the impact, if
any, resulting from adoption of these new pronouncements.
In addition, Statement of Financial Accounting Standards No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, will
become effective for the Company in fiscal 2002. The Company has not
quantified the impact, if any, resulting from adoption of this
standard.
2. ACQUISITIONS
On August 24, 2000, the Company acquired all of the outstanding shares
of common stock and stock options of International Home Foods ("IHF")
in a transaction accounted for as a purchase business combination. As
part of the acquisition, the Company issued approximately 41 million
shares of Company common stock and assumed options to acquire
approximately 5 million post-acquisition shares of Company common
stock, having an aggregate fair value of approximately $850 million. In
addition, the Company paid approximately $875 million in cash to the
IHF shareholders and assumed approximately $1.1 billion of debt. IHF's
results of operations did not impact the Company's results during the
first quarter of fiscal 2001 as the acquisition was completed at the
conclusion of the first quarter.
The Company has preliminarily allocated the excess of the purchase
price over the net assets acquired to brands, trademarks and goodwill.
The purchase price allocation will be completed upon finalization of
asset and liability valuations. In connection with this acquisition,
the Company expects to consolidate certain plants and will include the
associated costs as part of the purchase price allocation. The costs
assigned to intangible assets arising from the transaction are being
amortized on a straight-line basis over a period of 40 years.
6
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
On September 15, 2000, the Company issued $1.65 billion of senior
notes, comprised of $600 million of 7.5% senior notes, due September
15, 2005, $750 million of 7.875% senior notes, due September 15,
2010 and $300 million of 8.25% senior notes, due September 15, 2030.
The net proceeds were used to reduce outstanding borrowings under
short-term credit facilities with maturities less than six months
and bearing interest at a rate between 6.7% and 6.8% per annum. In
addition, the Company assumed $385 million of IHF 10.375% senior
secured notes due in 2006 and redeemed the notes on October 6, 2000.
The Company's unaudited pro forma results of operations for the
twenty-six weeks ended November 26, 2000 and November 28, 1999,
assuming the acquisition of IHF occurred as of the beginning of the
periods presented are as follows:
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
NOVEMBER 26, NOVEMBER 28,
2000 1999
------------ ------------
<S> <C> <C>
Net sales $ 14,519.6 $ 14,292.9
Net income 458.6 309.5
Income per share - diluted .88 .59
</TABLE>
3. OPERATION OVERDRIVE
During the fourth quarter of fiscal 2000, the Company completed a
restructuring plan in connection with its previously announced
initiative, "Operation Overdrive." The restructuring plan was aimed at
eliminating overcapacity, streamlining operations and improving future
profitability through margin expansion and expense reductions. 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.
Included in the Company's results of operations for the thirteen weeks
ended November 28, 1999 are restructuring plan charges of $104.4
million ($64.7 million net of tax) as follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
-------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Accelerated depreciation $ 40.0 $ 1.3 $ - $ 41.3
Inventory markdowns 14.5 - 10.6 25.1
Restructuring plan implementation costs 2.6 4.4 .8 7.8
Restructuring/Impairment charges 11.4 12.2 6.6 30.2
-------- -------- -------- --------
Total $ 68.5 $ 17.9 $ 18.0 $ 104.4
======== ======== ======== ========
</TABLE>
7
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
Included in the Company's results of operations for the twenty-six
weeks ended November 28, 1999 are restructuring plan charges of $151.5
million ($93.9 million net of tax) as follows:
<TABLE>
<CAPTION>
Packaged Refrigerated Agricultural
Foods Foods Products Total
-------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Accelerated depreciation $ 67.4 $ 8.9 $ - $ 76.3
Inventory markdowns 14.5 .1 19.1 33.7
Restructuring plan implementation costs 2.6 4.4 .8 7.8
Restructuring/Impairment charges 12.8 12.6 8.3 33.7
-------- -------- -------- --------
Total $ 97.3 $ 26.0 $ 28.2 $ 151.5
======== ======== ======== ========
</TABLE>
Restructuring plan charges reflected in the Company's Consolidated
Statements of Earnings for the thirteen weeks and twenty-six weeks
ended November 28, 1999 are as follows: accelerated depreciation of
$33.8 million and $64.8 million, respectively, are included in cost of
goods sold; accelerated depreciation of $7.5 million and $11.5 million,
respectively, are included in selling, general and administrative
expenses; inventory markdowns are included in cost of goods sold; plan
implementation costs (primarily third-party consulting costs) are
included in selling, general and administrative expenses; and
restructuring/impairment charges are reflected as such and result from
asset impairments, employee related costs and contractual termination
costs. Asset impairment charges were primarily reflected in the
Company's Refrigerated Foods and Agricultural Products segments.
Certain assets to be disposed of that were not immediately removed from
operations were depreciated on an accelerated basis over their
remaining useful lives. Inventory markdowns represented losses to write
down the carrying value of non-strategic inventory resulting from the
closure of facilities and discontinuation of certain products.
Approximately 8,450 employees received notification of their
termination as a result of the restructuring plan, primarily in
manufacturing and operating facilities. 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
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
Fiscal 2001 activity:
Utilized (24.3) (2,510) (17.7)
--------- ----- ---------
Balance, November 26, 2000 $ 28.2 690 $ 19.0
======== ====== ========
</TABLE>
8
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
Included in the November 26, 2000 severance reserve balance are amounts
owed to individuals who have been severed but have elected to receive
their severance payments over a period of time rather than in the form
of a lump-sum.
4. INCOME PER SHARE
The following table reconciles the income and average share amounts
used to compute both basic and diluted income per share:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
-------------------------- --------------------------
NOV. 26, NOV. 28, NOV. 26, NOV. 28,
2000 1999 2000 1999
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET INCOME $ 301.7 $ 187.3 $ 447.8 $ 289.1
=========== =========== =========== ===========
INCOME PER SHARE - BASIC
Weighted average shares outstanding - basic 520.4 476.2 499.5 474.7
=========== =========== =========== ===========
INCOME PER SHARE - DILUTED
Weighted average shares outstanding - basic 520.4 476.2 499.5 474.7
Add shares contingently issuable upon
exercise of stock options 3.5 3.4 2.8 3.9
----------- ----------- ----------- -----------
Weighted average shares outstanding - diluted 523.9 479.6 502.3 478.6
=========== =========== =========== ===========
</TABLE>
The sum of the income per share reported for fiscal 2001 first and
second quarters does not equal the income per share reported for the
first half of fiscal 2001 due to rounding.
5. INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
NOV. 26, MAY 28, NOV. 28,
2000 2000 1999
------------ ----------- ------------
<S> <C> <C> <C>
Hedged commodities $ 1,575.8 $ 1,301.6 $ 1,415.4
Food products and livestock 1,837.0 1,393.6 1,435.3
Agricultural chemicals, fertilizer and feed 942.6 671.1 822.6
Other, principally ingredients and supplies 797.8 422.1 713.0
------------ ------------ ------------
$ 5,153.2 $ 3,788.4 $ 4,386.3
============ ============ ============
</TABLE>
6. CONTINGENCIES
In fiscal 1991, the Company 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 the Company
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 the Company. The environmental
proceedings include
9
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
litigation and administrative proceedings involving Beatrice's status
as a potentially responsible party at 41 Superfund, proposed Superfund
or state-equivalent sites. Beatrice has paid or is in the process of
paying its liability share at 33 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.
The Company 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 the Company's financial condition,
results of operations or liquidity.
7. BUSINESS SEGMENTS
The Company's business segments are aggregated into three reportable
segments based upon similar economic characteristics, nature of
products and services offered, 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 food 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 expense, goodwill amortization, interest
expense and income taxes have been excluded from segment operations.
10
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
NOVEMBER 26, NOVEMBER 28,
2000 1999
------------- ------------
<S> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 2,413.7 $ 2,080.7
Refrigerated Foods 3,366.9 3,203.1
Agricultural Products 1,425.6 1,413.9
------------ ------------
Total $ 7,206.2 $ 6,697.7
------------ ------------
Intersegment sales
Packaged Foods $ 13.3 $ 12.6
Refrigerated Foods 83.8 57.3
Agricultural Products 93.5 96.7
------------ ------------
190.6 166.6
Intersegment elimination (190.6) (166.6)
------------ ------------
Total $ - $ -
============ ============
Net sales
Packaged Foods $ 2,427.0 $ 2,093.3
Refrigerated Foods 3,450.7 3,260.4
Agricultural Products 1,519.1 1,510.6
Intersegment elimination (190.6) (166.6)
------------ ------------
Total $ 7,206.2 $ 6,697.7
============ ============
Operating profit
Packaged Foods $ 397.9 $ 239.1
Refrigerated Foods 154.2 123.8
Agricultural Products 139.8 87.4
------------ ------------
Total operating profit 691.9 450.3
Interest expense 117.3 77.2
General corporate expenses 53.8 55.2
Goodwill amortization 30.3 15.8
------------ ------------
Income before tax $ 490.5 $ 302.1
============ ============
</TABLE>
Included in the thirteen weeks ended November 28, 1999 are before-tax
restructuring/impairment charges and other restructuring-related
charges of $104.4 million. The charges are included in operating profit
as follows: $68.5 million in Packaged Foods; $17.9 million in
Refrigerated Foods; and $18.0 million in Agricultural Products.
11
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWENTY-SIX WEEKS ENDED NOVEMBER 26, 2000
(COLUMNAR DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
NOVEMBER 26, NOVEMBER 28,
2000 1999
------------- ------------
<S> <C> <C>
Sales to unaffiliated customers
Packaged Foods $ 4,123.8 $ 3,813.3
Refrigerated Foods 6,799.5 6,419.0
Agricultural Products 3,158.2 3,170.6
------------ ------------
Total $ 14,081.5 $ 13,402.9
------------ ------------
Intersegment sales
Packaged Foods $ 24.4 $ 24.4
Refrigerated Foods 168.1 107.8
Agricultural Products 194.9 165.3
------------ ------------
387.4 297.5
Intersegment elimination (387.4) (297.5)
------------ ------------
Total $ - $ -
=========== ===========
Net sales
Packaged Foods $ 4,148.2 $ 3,837.7
Refrigerated Foods 6,967.6 6,526.8
Agricultural Products 3,353.1 3,335.9
Intersegment elimination (387.4) (297.5)
------------ ------------
Total $ 14,081.5 $ 13,402.9
------------ ------------
Operating profit
Packaged Foods $ 600.9 $ 409.4
Refrigerated Foods 263.8 233.5
Agricultural Products 237.0 146.6
------------ ------------
Total operating profit 1,101.7 789.5
Interest expense 192.3 153.6
General corporate expenses 136.6 137.7
Goodwill amortization 46.6 31.9
------------ ------------
Income before tax $ 726.2 $ 466.3
============ ============
</TABLE>
Included in the twenty-six weeks ended November 28, 1999 are before-tax
restructuring/impairment charges and other restructuring-related
charges of $151.5 million. The charges are included in operating profit
as follows: $97.3 million in Packaged Foods; $26.0 million in
Refrigerated Foods; and $28.2 million in Agricultural Products.
12
<PAGE>
CONAGRA FOODS, 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 affected the Company's financial condition and operating results for the
periods included in the accompanying condensed consolidated financial
statements. Results for the thirteen weeks and twenty-six weeks ended November
26, 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.
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.
On August 24, 2000, the Company acquired all of the outstanding International
Home Foods ("IHF") common stock and assumed options exercisable post-acquisition
for shares of Company common stock for total consideration of approximately $1.7
billion plus the assumption of approximately $1.1 billion in debt. Primarily as
a result of this acquisition, capital investment increased approximately $2.8
billion as compared to May 28, 2000, consisting of a $93.1 million working
capital increase and a $2.7 billion increase in noncurrent assets. In addition,
senior long-term debt increased approximately $1.6 billion as compared to May
28, 2000, primarily as a result of the IHF acquisition.
During the second quarter of fiscal 2001, the Company issued $1.65 billion of
senior notes, comprised of $600 million of 7.5% senior notes, due September 15,
2005, $750 million of 7.875% senior notes, due September 15, 2010 and $300
million of 8.25% senior notes, due September 15, 2030. The net proceeds were
used to reduce outstanding borrowings under short-term credit facilities with
maturities less than six months and bearing interest at a rate between 6.7% and
6.8% per annum. In addition, the Company assumed $385 million of IHF 10.375%
senior secured notes due in 2006 and redeemed the notes on October 6, 2000.
The Company'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. The
Company's policy has been that it would 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 IHF
represented such an opportunity.
13
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
A summary of the period to period increases (decreases) in the principal
components of operations, both before and after restructuring and other
restructuring-related charges ("restructuring charges") recognized in fiscal
2000, is shown below (dollars in millions, except per share amounts).
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
NOV. 26, 2000 AND NOV. 28, 1999 NOV. 26, 2000 AND NOV. 28, 1999
------------------------------- -------------------------------
EXCLUDING EXCLUDING
AS RESTRUCTURING AS RESTRUCTURING
REPORTED CHARGES REPORTED CHARGES
----------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Net sales $ 508.5 $ 508.5 $ 678.6 $ 678.6
Costs and expenses
Cost of goods sold 281.8 340.7 388.4 486.9
Selling, general and administrative expenses 28.4 43.7 25.3 44.6
Interest expense 40.1 40.1 38.7 38.7
Restructuring/Impairment charges (30.2) - (33.7) -
------------ ----------- ------------ -----------
320.1 424.5 418.7 570.2
----------- ----------- ----------- -----------
Income before income taxes 188.4 84.0 259.9 108.4
Income taxes 74.0 34.3 101.2 43.6
----------- ----------- ----------- -----------
Net income $ 114.4 $ 49.7 $ 158.7 $ 64.8
=========== =========== ========== ===========
Income per share - basic $ .19 $ .05 $ .29 $ .09
=========== =========== =========== ===========
Income per share - diluted $ .19 $ .05 $ .29 $ .09
=========== =========== =========== ===========
</TABLE>
In comparison to fiscal 2000 second quarter, the Company's fiscal 2001 second
quarter diluted income per share was $.58, an increase of $.19, or 48.7 percent;
operating profit was $691.9 million, an increase of $241.6 million, or 53.7
percent; and net income was $301.7 million, an increase of $114.4 million, or
61.1 percent. Excluding restructuring charges recognized in the second quarter
of fiscal 2000, the Company's fiscal 2001 second quarter diluted income per
share increased $.05, or 9.4 percent; operating profit increased $137.2 million,
or 24.7 percent; and net income increased $49.7 million, or 19.7 percent.
For the first half of fiscal 2001, diluted income per share was $.89, an
increase of $.29, or 48.0 percent; operating profit was $1,101.7 million, an
increase of $312.2 million, or 39.5 percent; and net income was $447.8 million,
an increase of $158.7 million, or 54.9 percent. The sum of the income per share
for fiscal 2001 first and second quarters does not equal the income per share
reported for the first half of fiscal 2001 due to rounding. Excluding
restructuring charges recognized in the first half of fiscal 2000, the Company's
fiscal 2001 first half diluted income per share increased $.09, or 11.2 percent;
operating profit increased $160.7 million, or 17.1 percent; and net income
increased $64.8 million, or 16.9 percent.
In the Company's Packaged Foods segment, second quarter sales increased $333.0
million, or 16.0 percent, as compared to second quarter fiscal 2000. Operating
profit for the second quarter increased $158.8 million, or 66.4 percent, as
compared to the same period in fiscal 2000. For the first half of fiscal 2001,
sales increased $310.5 million, or 8.1 percent, while operating profit increased
$191.5 million, or 46.8 percent as compared to the first half of fiscal 2000.
The second quarter and first half increases in sales
14
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
and operating profit resulted primarily from the broader portfolio of shelf
stable products associated with the International Home Foods acquisition, which
occurred at the end of the first quarter of fiscal 2001. The second quarter and
first half increases in fiscal 2001 operating profit were also a result of
stronger results in the segment's french fry, seafood, and specialty meats
operations, as well as restructuring plan charges included in fiscal 2000's
operating results. Excluding restructuring plan charges recognized in fiscal
2000, second quarter operating profit increased $90.3 million, or 29.4 percent,
over the second quarter of fiscal 2000, while operating profit for the first
half of fiscal 2001 increased $94.2 million, or 18.6 percent, as compared to the
comparable period in fiscal 2000.
In the Company's Refrigerated Foods segment, second quarter sales increased
$163.8 million, or 5.1 percent, as compared to second quarter fiscal 2000.
Operating profit for the second quarter increased $30.4 million, or 24.6
percent, as compared to the same period in fiscal 2000. Increased operating
profits for the segment's branded meat business and poultry operations
contributed to the growth in operating profit for the quarter. For the first
half of fiscal 2001, sales increased $380.5 million, or 5.9 percent, while
operating profit increased $30.3 million, or 13.0 percent as compared to the
first half of fiscal 2000. The first half increases in operating profit were
primarily due to increased operating profits in the segment's branded prepared
meat business, which more than offset decreases in operating profit for the
segment's pork and poultry operations. The second quarter and first half
increases in fiscal 2001 operating profit were also impacted by restructuring
plan charges included in fiscal 2000's operating results. Excluding
restructuring plan charges recognized in fiscal 2000, second quarter operating
profit increased $12.5 million, or 8.8 percent, over the second quarter of
fiscal 2000, while operating profit for the first half of fiscal 2001 increased
$4.3 million, or 1.7 percent, as compared to the comparable period in fiscal
2000.
In the Company's Agricultural Products segment, second quarter sales increased
$11.7 million, or .8 percent, as compared to second quarter fiscal 2000.
Operating profit for the second quarter increased $52.4 million, or 60.0
percent, as compared to the same period in fiscal 2000. For the first half of
fiscal 2001, sales decreased $12.4 million, or .4 percent, while operating
profit increased $90.4 million, or 61.7 percent as compared to the first half of
fiscal 2000. The second quarter and first half increases in operating profit
were primarily due to increased operating profits in the segment's trading
business. The second quarter and first half increases in fiscal 2001 operating
profit were also impacted by restructuring plan charges included in fiscal
2000's operating results. Excluding restructuring plan charges recognized in
fiscal 2000, second quarter operating profit increased $34.4 million, or 32.6
percent, over the second quarter of fiscal 2000, while operating profit for the
first half of fiscal 2001 increased $62.2 million, or 35.6 percent, as compared
to the comparable period in fiscal 2000.
On December 25, 2000, one of the Company's beef processing facilities located in
Garden City, Kansas, suffered damage due to a fire. As a result, the facility
will be shut down for an indeterminate period of time. The Company does not
believe the shut down of the facility will have a material impact on its results
of operations.
15
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the Company's market risk during the
twenty-six weeks ended November 26, 2000. For additional information, refer to
pages 38 and 39 of the Company's 2000 Annual Report to Stockholders,
incorporated by reference into the Company's annual report on Form 10-K for the
fiscal year ended May 28, 2000.
16
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The unaudited pro forma combined condensed financial statements, which give
effect to the acquisition of International Home Foods by the Company under the
purchase method of accounting for the twenty-six weeks ended November 26, 2000
and the fiscal year ended May 28, 2000, are attached hereto as Exhibit 99.1.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
12 - Statement regarding computation of ratio of earnings to fixed
charges
99.1 - The unaudited pro forma combined condensed financial
statements, which give effect to the acquisition of
International Home Foods by ConAgra Foods under the purchase
method of accounting.
(B) The Company filed a report on Form 8-K dated September 5, 2000 with
additional unaudited pro forma information giving effect to the merger
of International Home Foods, Inc. based upon the period presented by
the Company's Form 10-K for the fiscal year ended May 28, 2000.
CONAGRA FOODS, 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
Senior Vice President, Controller
Dated this 10th day of January, 2001.
17
<PAGE>
CONAGRA FOODS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
12 Statement regarding computation of ratio of 19
earnings to fixed charges
99.1 The unaudited pro forma combined condensed 20
financial statements, which give effect to the
acquisition of International Home Foods by ConAgra
Foods under the purchase method of accounting.
</TABLE>
18
