EX-99.2 3 qa_q406.htm


 

Q4 FY06 Question & Answer

June 28, 2006

 

 

1.

What were some examples of major brands in the Consumer Foods segment posting sales growth for the quarter?

 

Blue Bonnet

Chef Boyardee

DAVID

Egg Beaters

Hebrew National

Hunt’s

Kid Cuisine

Manwich

Marie Callender’s

Orville Redenbacher’s

PAM

Parkay

Reddi-wip

Rosarita

Swiss Miss

Wesson

 

 

2.

What were some examples of major brands in the Consumer Foods segment posting sales declines for the quarter?

 

ACT II

Banquet

Healthy Choice

Peter Pan

Slim Jim

Snack Pack

Van Camp’s

 

 

3.

What were unit volume changes for the quarter in the Consumer Foods and Food and Ingredients segments?

 

Consumer Foods volume declined 2% in the current quarter.

 

Food and Ingredients volume increased 1% in the current quarter.

 

 

4.

How much was total Depreciation and Amortization for the quarter?

 

Approximately $85 million, of which all applied to continuing operations (versus approximately $91 million in Q4 2005, of which approximately $77 million applied to continuing operations).

 

 

Page 1 of 8

 


 

 

 

5.

How much was total Depreciation and Amortization for the fiscal 2006?

 

Approximately $353 million, of which approximately $313 million applied to continuing operations (versus $355 million through Q4 2005, of which approximately $285 million applied to continuing operations).

 

 

6.

How much were Capital Expenditures for the quarter?

 

Approximately $92 million (versus approximately $102 million in Q4 2005), including both continuing operations and discontinued operations.

 

 

7.

How much were Capital Expenditures for the fiscal 2006?

 

Approximately $288 million (versus $455 million through Q4 2005), including both continuing operations and discontinued operations.

 

 

8.

What was the net interest expense for the quarter?

 

Approximately $54 million.

 

 

9.

What was the net interest expense for the fiscal 2006?

 

Approximately $247 million.

 

 

10.

What was Corporate Expense for the quarter?

 

Approximately $213 million, which includes $30 million of expense related to restructuring charges, $26 million of expense related to early retirement of debt, and $41 million for a charge related to an impairment of a note receivable.

 

 

11.

How much did the company pay in dividends during the quarter?

 

$ 142 million

 

 

12.

How much did the company pay in dividends fiscal 2006?

 

$ 565 million

 

 

13.

What was the weighted average number of diluted shares outstanding for the quarter?

 

519 million shares

 

 

14.

What was the company’s number of shares outstanding (not weighted average) at quarter end?

 

511 million shares

 

 

15.

What was the approximate effective tax rate for the quarter (rounded) for continuing operations?

 

The effective tax rate for continuing operations for the quarter was 11%, reflecting the benefit of changes in estimates related to certain state and foreign tax matters, partially offset by the impact of non-deductible impairment charges.

 

 

Page 2 of 8

 


 

 

 

16.

What were the gross margins and operating margins for the quarter ($ amounts in millions, rounded)?

 

Gross Margin = Gross Profit* divided by Net Sales

Gross Margin = $700/$2,975 = 23.5%

 

Operating Margin = Segment Operating Profit** divided by Net Sales

Operating Margin = $340/$2,975 = 11.4%

 

* Gross Profit = Net Sales – Costs of Goods Sold ($2,975 – $2,275 = $700)

 

**See fourth-quarter segment operating results for a reconciliation of Operating Profit to Income from continuing operations before income taxes and equity method investment earnings (loss). Income from continuing operations before income taxes and equity method investment earnings (loss), divided by Net Sales = $72/$2,975 = 2.4%.

 

 

17.

What was the trade working capital position at quarter end, excluding amounts for discontinued operations?

 

Trade working capital is defined as the net position of Accounts Receivable plus Inventory less Current Operating Liabilities (Accounts Payable, Accrued Expenses, and Advances on Sales).

 

 

Q4 FY06

Q4 FY05

Accounts Receivable

$1,181

$1,261

Inventory

$2,133

$2,154

Less: Accounts Payable

$ 869

$ 782

Less: Accrued Expenses

$1,559

$1,517

Less: Advances on Sales

$ 103

$ 150

Net Position

$ 783

$ 966

 

 

18.

What is included in the company’s net debt at the end of the quarter (in millions)?

 

 

Q4 FY06

Q4 FY05

Total Debt*

$3,586

$4,475

Less: Cash On Hand

$ 332

$ 208

Total

$3,254

$4,267

 

* Total debt = notes payable, short-term debt, long-term debt, and subordinated debt.

 

 

19.

What were the significant changes to debt during the quarter?

 

At the end of the fourth quarter, interest-bearing debt was approximately $3.6 billion, reflecting the redemption of $250 million of the company’s 7.875% senior debt due September 2010; $500 million of that senior debt is still outstanding. The current portion of long-term debt reflects $400 million of 7.125% senior debt due October 2026 that has been reclassified because of a put option that is exercisable by the holders of the debt from Aug. 1, 2006 to Sept. 1, 2006. Based on current market conditions, the company does not anticipate the holders to exercise the put option, and therefore expects to reclassify the $400 million debt back into senior long-term debt after Sept. 1, 2006 when the put option expires.

 

 

20.

Can the company comment on any proceeds related to the sale of its ham and seafood businesses?

 

 

Page 3 of 8

 


 

 

The company received pretax proceeds of approximately $440 million. The gain was approximately $111 million pretax and approximately $35 million after tax.

 

 

21.

What is the projected effective tax rate for continuing operations fiscal 2007 (rounded), excluding any items impacting comparability?

 

Approximately 36%.

 

 

22.

What are the projected Capital Expenditures for fiscal 2007?

 

Approximately $450 million.

 

 

23.

What is the expected net interest expense for fiscal 2007?

 

Approximately $225-$250 million.

 

Questions 24-26 deal with EPS comparability and historical segments.

 

 

24.

What are the main items from continuing and discontinuing operations in fiscal 2006 EPS that were called out during the quarters?

 

Reported within Continuing Operations

First  

Quarter

Second Quarter

Third Quarter

Fourth Quarter

Gain on sale of Pilgrim’s Pride Corporation common stock

$0.40

 

 

 

Impairment charges related to two joint ventures

-$0.03

-$0.05

-$0.02

-$0.05

Expense related to plant closure

-$0.01

 

 

 

Expense related to accelerated recognition of benefits in connection with departure of key executives

 

-$0.02

 

 

Expense related to restructuring charges

 

 

-$0.06

-$0.09

Expense related to a note receivable

 

 

-$0.06

-$0.05

Expense reflecting the adjustment of a litigation reserve

 

 

-$0.02

 

Benefit from lower than normal tax rate

 

 

$0.02

$0.04

Expense related to early retirement of debt

 

 

 

-$0.03

 

Reported within Discontinued Operations

First  

Quarter

Second Quarter

Third Quarter

Fourth Quarter

Income from discontinued operations

$0.01

 

 

 

Expense related to a goodwill impairment charge

 

 

-$0.30

 

Gain on divestitures

 

 

 

$0.07

 

 

25.

What are the revised historical segment results as a result of the classification change that took place this quarter?

 

Please see the attached tables—one shows segment information and the other shows the entire P/L information. (Pages 5-6)

 

 

26.

How do the previous items impacting comparability fit into the new segments?

 

Please see the attached tables. (Pages 7-8)

 

Page 4 of 8

 


 

 

 

ConAgra Foods, Inc.

 

 

 

 

 

 

 

 

 

 

 

 

Segment Operating Results

 

 

 

 

 

 

 

 

 

 

 

 

($USD, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2005

 

FY 2006

 

 

 

 

 

 

 

Q1 FY05

Q2 FY05

Q3 FY05

Q4 FY05

Total

 

Q1 FY06

Q2 FY06

Q3 FY06

Q4 FY06

Total

Segment Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Foods

 

 

 

$1,549.3

$1,898.0

$1,625.7

$1,642.4

$6,715.4

 

$1,525.5

$1,776.6

$1,661.3

$1,637.2

$6,600.6

 

International Foods

 

 

 

130.3

154.9

137.9

155.1

578.2

 

144.2

155.2

149.5

155.5

604.4

 

Food and Ingredients

 

 

 

728.1

750.3

733.4

774.0

2,985.8

 

770.5

805.3

789.8

823.0

3,188.6

 

Trading and Merchandising

 

 

 

222.9

315.0

259.3

427.1

1,224.3

 

260.0

288.6

278.3

358.9

1,185.8

 

 

Total

 

 

 

 

2,630.6

3,118.2

2,756.3

2,998.6

11,503.7

 

2,700.2

3,025.7

2,878.9

2,974.6

11,579.4

Segment Operating Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer Foods

 

 

 

174.0

321.7

265.3

183.4

944.4

 

176.5

263.0

211.1

187.9

838.5

 

International Foods

 

 

 

12.2

17.2

13.6

19.7

62.7

 

9.4

15.3

15.1

22.5

62.3

 

Food and Ingredients

 

 

 

88.8

88.6

51.9

76.6

305.9

 

95.6

90.7

78.7

93.4

358.4

 

Trading and Merchandising

 

 

 

34.6

49.6

57.6

55.0

196.8

 

50.0

27.6

55.1

36.0

168.7

 

 

Total

 

 

 

 

309.6

477.1

388.4

334.7

1,509.8

 

331.5

396.6

360.0

339.8

1,427.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of total operating profit to income

 

 

 

 

 

 

 

 

 

 

 

 

from continuing operations before income taxes

 

 

 

 

 

 

 

 

 

 

 

 

and equity method investment earnings (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Items excluded from segment operating profit:

 

 

 

 

 

 

 

 

 

 

 

 

General corporate expense

 

 

(63.6)

(77.0)

(137.8)

(123.8)

(402.2)

 

(72.9)

(103.1)

(170.6)

(213.3)

(559.9)

 

Gain on sale of Pilgrim's Pride

 

 

-

-

185.7

-

185.7

 

329.4

-

-

-

329.4

Corporation common stock

 

Interest expense, net

 

 

 

(73.4)

(85.8)

(68.1)

(67.7)

(295.0)

 

(68.1)

(62.3)

(61.8)

(54.4)

(246.6)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations before income

 

 

 

 

 

 

 

 

 

 

 

 

taxes and equity method investment earnings (loss)

 

$172.6

$314.3

$368.2

$143.2

$998.3

 

$519.9

$231.2

$127.6

$72.1

$950.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating profit excludes general corporate expense, gain on sale of Pilgrim's Pride Corporation common stock, equity method investment earnings (loss)

 

and net interest expense. Management believes such amounts are not directly associated with segment performance results for the period. Management believes

 

the presentation of total operating profit for segments facilitates period-to-period comparison of results of segment operations.

 

 

 

 

 

 

Page 5 of 8

 


 

 

 

ConAgra Foods, Inc.

 

 

 

 

Income Statement for FY06, FY05

 

 

 

 

($USD, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2005

 

FY 2006

 

 

 

Q1

FY05

Q2

FY05

Q3

FY05

Q4

FY05

Total

 

Q1 FY06

Q2 FY06

Q3 FY06

Q4 FY06

Total

Net sales

 

 

$2,630.6

$3,118.2

$2,756.3

$2,998.6

$11,503.7

 

$2,700.2

$3,025.7

$2,878.9

$2,974.6

$11,579.4

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

2,004.1

2,311.3

2,046.1

2,313.8

8,675.3

 

2,031.5

2,298.6

2,164.1

2,275.0

8,769.2

SG&A expenses

 

 

380.5

406.8

459.6

473.9

1,720.8

 

410.1

433.6

525.4

573.1

1,942.2

Interest expenses, net

 

 

73.4

85.8

68.1

67.7

295.0

 

68.1

62.3

61.8

54.4

246.6

Gain on sale of Pilgrim's Pride Corporation

-

-

185.7

-

185.7

 

329.4

-

-

-

329.4

common stock

Income from continuing operations before

 

172.6

314.3

368.2

143.2

998.3

 

519.9

231.2

127.6

72.1

950.8

income taxes and equity method

investment earnings (loss)

Income tax expense

 

70.9

126.1

144.8

66.2

408.0

 

181.1

86.7

34.3

5.9

308.0

Equity method investment earnings (loss)

 

14.1

15.1

(64.0)

10.0

(24.8)

 

(13.9)

(16.7)

(0.6)

(18.4)

(49.6)

Income from continuing operations

 

115.8

203.3

159.4

87.0

565.5

 

324.9

127.8

92.7

47.8

593.2

Income (loss) from discontinued operations

 

19.0

36.3

5.9

14.8

76.0

 

27.2

35.3

(124.4)

60.7

(1.2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$134.8

$239.6

$165.3

$101.8

$641.5

 

$352.1

$163.1

$(31.7)

$108.5

$592.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share—diluted

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$0.22

$0.39

$0.31

$0.17

$1.09

 

$0.62

$0.25

$0.18

$0.09

$1.14

Income (loss) from discontinued operations

 

0.04

0.07

0.01

0.03

0.14

 

0.05

0.07

(0.24)

0.12

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$0.26

$0.46

$0.32

$0.20

$1.23

 

$0.68

$0.31

$(0.06)

$0.21

$1.14

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average shares outstanding

 

521.4

517.5

520.3

521.0

520.2

 

520.5

521.0

520.9

518.8

520.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 6 of 8

 


 

 

Items Impacting Comparability: Current Classifications

 

 

 

 

 

 

In millions, except per share amounts

 

 

 

 

 

 

(Due to rounding, quarterly per share amounts may not total to year-to-date amounts)

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2005

Item Impacting Comparability

---------------------- Originally Reported As -------------------

-------------------------- Now Reported As --------------------------

Segment /

Pretax

EPS

 

Segment /

Pretax

EPS

Line Item

$ Amount

(rounded)

 

Line Item

$ Amount

(rounded)

 

 

 

 

 

 

 

 

Q1: Costs to implement efficiency initiatives

Retail Products - COGS

(7)

(0.01)

 

Consumer Foods - COGS

(7)

(0.01)

Q1: Costs to implement efficiency initiatives

Retail Products - SG&A

(1)

0.00

 

Consumer Foods - SG&A

(1)

0.00

Q1: Costs to implement efficiency initiatives

Foodservice Products - COGS

(2)

0.00

 

Consumer Foods - COGS

(2)

0.00

Q1: Costs to implement efficiency initiatives

Foodservice Products - SG&A

(3)

(0.01)

 

Consumer Foods - SG&A

(3)

(0.01)

 

 

 

 

 

 

 

 

Q2: Loss from discontinued operations

Discontinued

(6)

(0.01)

 

Discontinued

(6)

(0.01)

 

 

 

 

 

 

 

 

Q3: Litigation charge - SEC accrual

Corporate

(22)

(0.04)

 

Corporate

(22)

(0.04)

Q3: Benefit from favorable litigation settlement

Retail Products - SG&A

17

0.02

 

Consumer Foods - SG&A

17

0.02

Q3: Gain on Pilgrim's Pride stock

Corporate

186

0.22

 

Corporate

186

0.22

Q3: Impairment charge related to joint ventures

Equity Method Investment

(71)

(0.13)

 

Equity Method Investment

(71)

(0.13)

Q3: Fire damage

Foodservice Products - SG&A

(10)

(0.01)

 

Food and Ingredients - SG&A

(10)

(0.01)

Q3: Impairment charge

Retail Products - SG&A

(10)

(0.01)

 

Consumer Foods - SG&A

(10)

(0.01)

Q3: Plant impairment charge

Food Ingredients - SG&A

(15)

(0.02)

 

Food and Ingredients - SG&A

(15)

(0.02)

Q3: Expense due to early retirement of debt

Corporate

(22)

(0.03)

 

Corporate

(22)

(0.03)

Q3: Impairment charge (operations no longer owned)

Foodservice Products - SG&A

(23)

(0.03)

 

Discontinued

(23)

(0.03)

 

 

 

 

 

 

 

 

Q4: Severance expense

Retail Products - SG&A

(24)

(0.03)

 

Consumer Foods - SG&A

(24)

(0.03)

Q4: Severance expense

Foodservice Products - SG&A

(4)

(0.01)

 

Consumer Foods - SG&A

(4)

(0.01)

Q4: Severance expense

Food Ingredients - SG&A

(4)

0.00

 

Food and Ingredients - SG&A

(3)

0.00

 

 

 

 

 

Trading and Merchandising - SG&A

(1)

0.00

Q4: Severance expense

Corporate

(11)

(0.01)

 

Corporate

(11)

(0.01)

Q4: Higher than estimated effective state income tax

Income Tax

N/A

(0.01)

 

Income Tax

N/A

(0.01)

 

 

Page 7 of 8

 


 

 

 

Items Impacting Comparability: Current Classifications

 

 

 

 

 

 

In millions, except per share amounts

 

 

 

 

 

 

(Due to rounding, quarterly per share amounts may not total to year-to-date amounts)

 

 

 

 

 

 

 

 

 

 

Fiscal Year 2006

Item Impacting Comparability

---------------------- Originally Reported As -------------------

-------------------------- Now Reported As --------------------------

Segment /

Pretax

EPS

 

Segment /

Pretax

EPS

Line Item

$ Amount

(rounded)

 

Line Item

$ Amount

(rounded)

 

 

 

 

 

 

 

 

Q1: Gain on Pilgrim's Pride stock

Corporate

329

0.40

 

Corporate

329

0.40

Q1: Impairment charge related to joint ventures

Equity Method Investment

(19)

(0.03)

 

Equity Method Investment

(19)

(0.03)

Q1: Plant closure expense

Retail Products - SG&A

(7)

(0.01)

 

International Foods - SG&A

(7)

(0.01)

 

 

 

 

 

 

 

 

Q1: Income from discontinued operations

Discontinued

5

0.01

 

Discontinued

5

0.01

 

 

 

 

 

 

 

 

Q2: Impairment charge related to joint venture

Equity Method Investment

(24)

(0.05)

 

Equity Method Investment

(24)

(0.05)

Q2: Executive transition expense

Corporate

(19)

(0.02)

 

Corporate

(19)

(0.02)

 

 

 

 

 

 

 

 

Q3: Patent-related litigation expense

Corporate

(17)

(0.02)

 

Corporate

(17)

(0.02)

Q3: Impairment charge related to joint venture

Equity Method Investment

(9)

(0.02)

 

Equity Method Investment

(9)

(0.02)

Q3: Restructuring plan charge

Retail Products - COGS

(4)

0.00

 

Consumer Foods - COGS

(4)

0.00

Q3: Restructuring plan charge

Retail Products - SG&A

(19)

(0.03)

 

Consumer Foods - SG&A

(19)

(0.03)

Q3: Restructuring plan charge

Foodservice Products - COGS

(1)

0.00

 

Consumer Foods - COGS

(1)

0.00

Q3: Restructuring plan charge

Foodservice Products - SG&A

(17)

(0.02)

 

Consumer Foods - SG&A

(17)

(0.02)

Q3: Restructuring plan charge

Corporate

(9)

(0.01)

 

Corporate

(9)

(0.01)

Q3: Swift note impairment charge

Corporate

(47)

(0.06)

 

Corporate

(47)

(0.06)

Q3: Lower than normal tax rate

Income Tax

N/A

0.02

 

Income Tax

N/A

0.02

 

 

 

 

 

 

 

 

Q3: Goodwill impairment-related charges

Discontinued

(171)

(0.30)

 

Discontinued

(171)

(0.30)

 

 

 

 

Page 8 of 8