-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K9kozFiFZG16j6bMXpSDEkyrrCNct2xzhXNa9+qAGwOPhFAdit6FLRb6pLo2PMJx 2MM5VZDvNUVpInqf5DwPAA== 0000900440-01-500009.txt : 20010627 0000900440-01-500009.hdr.sgml : 20010627 ACCESSION NUMBER: 0000900440-01-500009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010523 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20010524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONAGRA FOODS INC /DE/ CENTRAL INDEX KEY: 0000023217 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 470248710 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07275 FILM NUMBER: 1646962 BUSINESS ADDRESS: STREET 1: ONE CONAGRA DR CITY: OMAHA STATE: NE ZIP: 68102 BUSINESS PHONE: 4025954000 MAIL ADDRESS: STREET 1: ONE CONAGRA DRIVE CITY: OMAHA STATE: NE ZIP: 68102 FORMER COMPANY: FORMER CONFORMED NAME: CONAGRA INC /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: NEBRASKA CONSOLIDATED MILLS CO DATE OF NAME CHANGE: 19721201 8-K 1 cag8kmay01.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 May 23, 2001 Date of Report (Date of earliest event reported) ConAgra Foods, Inc. (Exact name of registrant as specified in its charter) Delaware 1-7275 47-0248710 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) One ConAgra Drive, Omaha, Nebraska 68102-5001 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (402) 595-4000 Item 5. Other Events. On May 23, 2001, ConAgra Foods, Inc., issued a press release relating to an expected restatement of financial statements. A copy of the press release and a Question and Answer document posted on the company's website are attached hereto as exhibits. Item 7. Financial Statements and Exhibits. 99.1 Press Release issued May 23, 2001. 99.2 Question and Answer SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CONAGRA FOODS, INC. May 23, 2001 By: /s/ James P. O'Donnell ----------------------------- Name: James P. O'Donnell Title: Executive Vice President, Chief Financial Officer and Corporate Secretary EX-99.1 2 cagpressrelease.txt PRESS RELEASE CONAGRA FOODS WILL RESTATE FINANCIALS BASED ON AUDIT COMMITTEE INVESTIGATION OF ITS UAP SUBSIDIARY Omaha, Neb. May 23 - ConAgra Foods, Inc. (NYSE:CAG) today announced that accounting and conduct matters at its United Agri Products Companies (UAP) subsidiary during fiscal years 1999 and 2000 will result in the restatement of the Company's financial results for those years. Certain accounting adjustments will also result in a restatement for fiscal 1998. The restatement will reduce revenues and earnings in fiscal years 1998, 1999 and 2000, and will increase revenues and earnings in fiscal 2001. UAP, which distributes seed, fertilizer and agricultural chemicals to agricultural growers, is one of three businesses in ConAgra Foods' agricultural products reporting segment and represented approximately 9% of ConAgra Foods' operating profit for the fiscal years 1998, 1999 and 2000. The restatement is based upon the preliminary results of an investigation undertaken by ConAgra Foods and the Audit Committee of its Board of Directors. That investigation, and an informal inquiry by the staff of the Securities and Exchange Commission, are continuing. ConAgra Foods presently estimates the following financial statement effect of the restatement, excluding restructuring and other non-recurring items in fiscal 1998, 1999 and 2000: * for fiscal 1998, revenues will be reduced from $24,271 million to $24,192 million, profit before tax will be reduced from $1,041 million to $1,014 million and fully-diluted earnings will be reduced from $1.35 per share to $1.32 per share; * for fiscal 1999, revenues will be reduced from $25,020 million to $24,924 million, profit before tax will be reduced from $1,123 million to $1,086 million and fully-diluted earnings will be reduced from $1.46 per share to $1.41 per share; * for fiscal 2000, revenues will be reduced from $25,805 million to $25,631 million, profit before tax will be reduced from $1,288 million to $1,229 million and fully-diluted earnings will be reduced from $1.67 per share to $1.60 per share; and * for fiscal 2001, revenues will be increased by $350 million, profit before tax will be increased by $127 million and fully-diluted earnings will be increased by $.15 per share . These are the Company's estimates and final audited numbers will be available when the Company announces total company results for fiscal year ended May 27, 2001, expected at the end of June 2001. Following June 2001, revised financial statements for fiscal 1998, 1999 and 2000 and related auditors reports will be issued. Bruce Rohde, ConAgra Foods' Chairman and CEO, stated: "Certain matters were discovered that warranted an investigation into several accounting practices at UAP. Our preliminary findings indicate that certain conduct at UAP circumvented generally accepted accounting practices and violated ConAgra Foods' corporate policy. Those actions will not be tolerated. I have directed that the control systems at UAP be strengthened and that we take additional actions, as appropriate, including personnel changes to deal with circumstances requiring corrective measures. These actions have the full support of our Board of Directors." Background. In November 2000, the Audit Committee of the Board of Directors of ConAgra Foods commissioned an investigation of accounting matters at UAP. The Audit Committee engaged an outside law firm, and they in turn obtained the assistance of forensic accountants, to perform the investigation. Prior to this, the Company had commenced a review of UAP revenue recognition practices and subsequent to that, received an informal inquiry from the staff of the SEC regarding UAP accounting matters. The investigation has identified improper accounting practices that have financial statement impact in three areas: 1. Revenue recognition for deferred delivery sales and associated vendor rebates 2. Recognition of advance rebate income 3. Accruals for bad debt reserves In addition, an error was identified relating to consolidation of intercompany sales during fiscal 1998. The investigation is continuing, but the Company believes that all matters having a material financial statement impact have been identified. Item 1. Revenue Recognition for Deferred Delivery Sales. After reviewing the results of the investigation, the Company has determined that UAP improperly recorded revenues on deferred delivery sales transactions. The investigation identified sales contracts for fiscal 1999 and 2000 that were not considered binding on the customer as well as instances of fictitious sales contracts at various UAP locations. Further, the investigation identified noncompliance for fiscal 1998, 1999 and 2000 with certain accounting requirements for deferred delivery transactions in other sales contracts. Accordingly, ConAgra Foods will revise its reporting of deferred delivery sales transactions for fiscal 1998, 1999 and 2000 so that such revenue is reported upon transfer of title and shipment of the products. As a result of these circumstances, associated vendor rebate income was also incorrectly accrued. ConAgra Foods also reviewed the estimating process used by UAP in the recognition of vendor rebates on a quarterly basis. The review indicated that UAP used inconsistent estimating processes on a quarterly and annual basis. As part of the restatement, ConAgra Foods will adopt a consistent quarterly estimating process for the recognition of UAP vendor rebates. The impact of the new process will result in a larger portion of vendor rebates being recognized later in the UAP fiscal year. These revenue recognition matters are expected to have the following financial statement impact: * for fiscal 1998, revenue will be reduced by $79 million and profit before tax will be reduced by $22 million; * for fiscal 1999, revenue will be reduced by $84 million and profit before tax will be reduced by $7 million; * for fiscal 2000, revenue will be reduced by $162 million and profit before tax will be reduced by $30 million; and * for fiscal 2001, revenue will be increased by $326 million, and profit before tax will be increased by $63 million. In light of the preliminary results of the investigation, and in order to avoid future compliance issues with deferred delivery accounting requirements, ConAgra Foods is adopting a change in its accounting practices. Effective with fiscal year 2001, UAP will book revenue for all sales transactions upon transfer of title and shipment of the product. Item 2. Recognition of Advance Rebate Income. The investigation identified instances in which UAP prematurely recognized certain rebate payments as income in the fiscal year in which they were received, rather than the fiscal year in which they were earned. As a result, the Company is making an adjustment for recognition of advance rebate income which is expected to have the following financial statement impact: * for fiscal 1999, revenue and profit before tax will be reduced by $12 million; * for fiscal 2000, revenue and profit before tax will be reduced by $12 million; and * for fiscal 2001, revenue and profit before tax will be increased by $24 million. Item 3. Accruals for Bad Debt Reserves. The investigation indicated that UAP accrued insufficient bad debt reserves in fiscal 1998, 1999 and 2000. UAP substantially increased the write-off of its accounts receivable and increased its bad debt reserves during fiscal 2001. The investigation indicated that certain of the increased write-offs in fiscal 2001 should have been taken in prior fiscal years and, accordingly, adjustments will be made as part of the restatement. ConAgra Foods believes the UAP reserves recorded are now adequate. The Company's preliminary estimate of the financial statement impact of changes in the bad debt accruals is: * for fiscal 1998, expenses will be increased and profit before tax will be reduced by $5 million; * for fiscal 1999, expenses will be increased and profit before tax will be reduced by $18 million; * for fiscal 2000, expenses will be increased and profit before tax will be reduced by $17 million; and * for fiscal 2001, expenses will be reduced and profit before tax will be increased by $40 million. Mr. Rohde commented: "We have shared the preliminary results of the Audit Committee's investigation with the SEC staff and we are fully cooperating with them. We cannot predict how long the SEC inquiry will continue or its outcome, but appropriate corrective actions are under way and more will be taken. We have addressed the major financial issues at our UAP subsidiary and look forward to focusing and improving the fundamentals of this business unit." The company has posted question and answer information relating to this release at http://www.conagrafoods.com/investors. ConAgra Foods is North America's largest foodservice manufacturer and second largest retail food supplier, with annualized sales of approximately $27 billion. This news release contains certain "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements in this release include without limitation statements addressing the following subjects: projected changes in financial results and results of the investigation by the Audit Committee and the inquiry by the Securities and Exchange Commission. Future economic circumstances, industry conditions, company performance and financial results and/or regulatory factors affecting the Company's businesses are examples of factors, among others, that could cause actual results to differ materially from those described in the forward-looking statements. The statements are based on many assumptions and factors described in the Company's reports filed with the Securities and Exchange Commission. The Company is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. EX-99.2 3 cagqanda.txt QUESTIONS AND ANSWERS QUESTIONS AND ANSWERS 1. What does UAP do? UAP, which stands for United Agri Products Companies, operates with 433 locations in the U.S. and 97 locations outside of the U.S. and distributes seed, fertilizer, and agricultural chemicals to the agricultural production community. 2. Where are UAP's financial results located in your financial statements? UAP is one of three businesses which are reported in our Agricultural Products reporting segment. Our Agricultural Products segment reflects results for: * UAP * ConAgra Trade Group * Food Ingredients. 3. In fiscal 1998 through 2000, what percentage of ConAgra Foods' sales and operating profit did UAP represent? In each of those years, UAP represented approximately 13% of total company sales and approximately 9% of total company operating profit. 4. What is the estimated impact of the restatement on previously reported financial highlights for 1998, 1999 and 2000 (dollars in millions except per-share amounts): - --------------------- ------------------------------------------------------------------------------------------------ Before Restatement Excluding Restructuring and Restructuring-Related Charges - --------------------- ------------------------------------------------------------------------------------------------ Reporting Period Net Operating Income Income Before Net Income per Sales (1) Income Taxes Income Share-diluted - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1998 24,271.1 1,572.9 1,041.0 627.0 1.35 (2) - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1999 25,020.2 1,706.3 1,123.1 696.3 1.46 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 2000 25,805.4 1,909.7 1,287.5 798.3 1.67 - --------------------- ------------------------------------------------------------------------------------------------
- --------------------- ------------------------------------------------------------------------------------------------ After Restatement Excluding Restructuring and Restructuring-Related Charges - --------------------- ------------------------------------------------------------------------------------------------ Reporting Period Net Operating Income Income Before Net Income per Sales (1) Income Taxes Income Share-diluted - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1998 24,192.1 1,546.2 1,014.3 610.5 1.32 (2) - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1999 24,923.9 1,669.3 1,086.1 673.6 1.41 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 2000 25,631.0 1,851.2 1,229.0 762.2 1.60 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
- --------------------- ------------------------------------------------------------------------------------------------ Before Restatement Including Restructuring and Restructuring-Related Charges - --------------------- ------------------------------------------------------------------------------------------------ Reporting Period Net Operating Income Income Before Net Income per Sales (1) Income Taxes Income Share-diluted - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1998 24,271.1 1,572.9 1,041.0 627.0 1.35 (2) - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1999 25,020.2 1,265.5 682.3 358.4 0.75 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 2000 25,805.4 1,288.3 666.1 413.0 0.86 - --------------------- ------------------------------------------------------------------------------------------------
- --------------------- ------------------------------------------------------------------------------------------------ After Restatement Including Restructuring and Restructuring-Related Charges - --------------------- ------------------------------------------------------------------------------------------------ Reporting Period Net Operating Income Income Before Net Income per Sales (1) Income Taxes Income Share-diluted - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1998 24,192.1 1,546.2 1,014.3 610.5 1.32 (2) - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 1999 24,923.9 1,228.5 645.3 355.7 0.70 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------ 2000 25,631.0 1,229.8 607.6 376.9 0.79 - --------------------- ------------------ ------------------- ------------------ ------------------- ------------------
(1) Certain reclassifications have been made to prior year amounts to conform with current year classifications. (2) Income per share is before a $.03 cumulative effect of change in accounting. 5. What is the estimated impact of the restatement on fiscal 2001? For fiscal 2001, the restatement is estimated to increase net sales by $350 million, increase income before income taxes by $127 million and increase income per fully-diluted share by $.15. 6. How much of your estimated adjustment of $.15 of fully-diluted earnings per share for fiscal 2001 will increase your fully-diluted earnings per share previously reported for the first three quarters of fiscal 2001? Approximately $.03 7. Does the restatement of earnings for fiscal 1998 through 2000, and the first nine months of fiscal 2001 change the cash flow throughout the restatement period? No. The restatement does not change the cumulative cash generated across the restatement period. This is due to the fact that while net income for some of the quarters may change due to the restatement, working capital accounts are also being restated. This results in no effect to the cash generated throughout the period. 8. What are the revised quarterly results? The numbers in the press release are very recent and we have not yet computed the restated quarterly numbers. We will have the restated quarterly numbers by the time we announce our fourth quarter earnings at the end of June. 9. The press release mentioned deferred delivery sales. What does that mean? Deferred delivery sales are sales that are recognized before a product is shipped. At UAP, deferred delivery sales occurred when customers contracted for crop inputs that they would receive at a later date. This is consistent with generally accepted accounting principles, provided that certain revenue recognition criteria are met. Generally, a company recognizes sales revenue when title passes and the product is delivered to a customer. In most cases, a customer buys a product and walks out of the store with it, and there's no issue about the timing of revenue recognition. However, sometimes a customer may not be ready to take delivery of the product. The customer may not have sufficient space for inventory, or may not want to receive the product until ready to use it. In those situations, the selling company may "bill and hold" the product sale and recognize revenue prior to delivery of the product if certain accounting requirements are met, such as passing risk of ownership to the buyer, segregating the sold product from the seller's other inventory and having a fixed delivery schedule. 10. How will 2001 financial results be affected by the expected adjustments? Reported sales and profits in fiscal 2001 will increase in 2001 as a result of the expected adjustments. The increases are due to the changes in timing of revenue and profit recognition and the timing of bad debt expense recognition. Certain revenue and profit previously reported in fiscal 2000 will now be reported in fiscal 2001; and certain bad debt write-offs previously taken and reported in fiscal 2001 will be reflected in fiscal 1998, 1999 and 2000. For clarity, the change in accounting practice effective in fiscal 2001 means that UAP will book revenue and/or deferred delivery sales transactions upon transfer of title and shipment of product. This is consistent with our review of SAB 101 and will avoid future compliance issues with deferred delivery accounting requirements. Accordingly, any deferred delivery business conducted in the fourth quarter of fiscal 2001 will not be recognized until delivery in fiscal 2002. 11. When will the adjusted financial results for fiscal year ended May 27, 2001 be available? We expect to announce total company results for fiscal year ended May 27, 2001 during the last week of June. Following June 2001, revised financial statements for fiscal 1998 through 2000 and related auditors reports will be issued. 12. Have you taken any personnel actions regarding responsible persons at UAP? The Company's investigation of this matter is ongoing and we cannot give you any specific information today concerning the responsibility of, or actions taken or to be taken with respect to any individual; however, appropriate corrective actions will be taken and those who are responsible will be disciplined or dismissed. A new UAP chief operating officer was appointed in August 2000 and a new UAP senior financial officer was appointed in October 2000. 13. Are the accounting changes for the EITF's that you reported you were reviewing in your third quarter 10-Q reflected in the expected adjustments set forth in the press release? No, the expected restatements described in the press release do not reflect the adoption of these pronouncements. As previously reported, in conjunction with the adoption of the EITF pronouncements, the Company is assessing accounting policies potentially impacted by the new pronouncements as well as several other pending EITF issues. 14. What law firm was retained by the Audit Committee as outside counsel? Gibson, Dunn & Crutcher LLP. -----END PRIVACY-ENHANCED MESSAGE-----