-----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, Lsrlb3m7OAMXGF6649AOYQ64bPbg7lhig3KNCZSe6S47WinMB0cO9ndlC9TZ6PHK TDytc+ecurVpyM6y7830Qw== 0001047469-99-033682.txt : 19990826 0001047469-99-033682.hdr.sgml : 19990826 ACCESSION NUMBER: 0001047469-99-033682 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19990530 FILED AS OF DATE: 19990825 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONAGRA 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: 10-K405 SEC ACT: SEC FILE NUMBER: 001-07275 FILM NUMBER: 99699543 BUSINESS ADDRESS: STREET 1: ONE CONAGRA DR CITY: OMAHA STATE: NE ZIP: 68102 BUSINESS PHONE: 4025954000 FORMER COMPANY: FORMER CONFORMED NAME: NEBRASKA CONSOLIDATED MILLS CO DATE OF NAME CHANGE: 19721201 10-K405 1 10-K405 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended May 30, 1999 ------------ 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 No. 1-7275 ------- CONAGRA, INC. ----------------------------------------------------- (Exact name of registrant, as specified in charter) A Delaware Corporation 47-0248710 - ---------------------- -------------------------- (State of Incorporation) (I.R.S. Employer's Number) One ConAgra Drive Omaha, Nebraska 68102-5001 - --------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (402) 595-4000 -------------- Securities Registered Pursuant to Section 12 (b) of the Act: - ------------------------------------------------------------ Name of Exchange Title of Each Class on Which Registered - ----------------------------- ----------------------- Common Stock, $5.00 par value New York Stock Exchange 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- At July 30, 1999, 492,366,644 common shares were outstanding. The aggregate market value of the voting common stock of ConAgra, Inc. held by non-affiliates on July 30, 1999, was approximately $12.6 billion. Documents incorporated by reference are listed on page 2. Documents Incorporated by Reference 1. Portions of Registrant's Annual Report to Stockholders for the fiscal year ended May 30, 1999 are incorporated into Part I, Item 1; Part II, Items 5, 6, 7, 7A and 8; and Part IV, Item 14. 2. Portions of the Registrant's definitive Proxy Statement filed for Registrant's 1999 Annual Meeting of Stockholders are incorporated into Part III. 2 PART I This 10-K report contains certain forward-looking statements, including such statements in the documents incorporated herein by reference. 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. ITEM 1. BUSINESS a) General Development of Business Nebraska Consolidated Mills Company, which was originally incorporated in Nebraska on September 29, 1919, changed its name to ConAgra, Inc. ("ConAgra" or the "Company") on February 25, 1971, and since December 5, 1975, has been incorporated in Delaware. b) Financial Information About Industry Segments The Company's businesses are classified into three industry segments: Packaged Foods, Refrigerated Foods and Agricultural Products. The contributions of each industry segment to net sales and operating profit, and the identifiable assets attributable to each industry segment are set forth in Note 19 "Business Segments" on pages 57 and 58 of the Company's 1999 Annual Report to Stockholders. c) Narrative Description of Business The information set forth in the "Business Review" on pages 12 through 31 of the Company's 1999 Annual Report to Stockholders is incorporated herein by reference. The following comments pertain to the Company as a whole. ConAgra is a diversified food company that operates across the food chain, from basic agricultural inputs to production and sale of branded consumer products. As a result, ConAgra uses many different raw materials, the bulk of which are commodities. Raw materials are generally available from several different sources and ConAgra presently believes that it can obtain these as needed. Each business is highly competitive. Many companies compete in one or more of the markets served by ConAgra, some of which have greater sales and assets than ConAgra. Quality control processes at principal manufacturing locations emphasize applied research and technical services directed at product improvement and quality control. In addition, the Refrigerated Foods and the Packaged Foods segments conduct research activities related to the development of new products. Many of ConAgra's facilities and products are subject to various laws and regulations administered by the United States Department of Agriculture, the Federal Food and Drug Administration, and other federal, state, local and foreign governmental agencies relating to the quality of products, sanitation, safety and environmental control. The Company believes that it complies with such laws and regulations in all material respects, and that continued compliance with such regulations will not have a material effect upon capital expenditures, earnings or the competitive position of the Company. ConAgra and its subsidiaries have more than 80,000 employees, primarily in the United States. 3 ITEM 1. BUSINESS (CONTINUED) d) Foreign Operations The information set forth in the "Business Review" on pages 12 through 31 of the Company's Annual Report to Stockholders is incorporated herein by reference. The Company is not engaged in material operations in foreign countries, nor are material portions of sales or revenues derived from customers in foreign countries. ITEM 2. PROPERTIES The Company's corporate headquarters are located in Omaha, Nebraska. The headquarters and principal operating locations of each business are set forth on the following list of "ConAgra Locations." The Company maintains a number of distribution facilities, in addition to distribution facilities and warehouse space available at substantially all of its manufacturing facilities. Utilization of manufacturing capacity varies by type of product manufactured, plant and week. In general, ConAgra operates most of its manufacturing facilities in excess of 80% of standard industry capacity. Standards vary by industry from 40 hours per week to 144 hours per week. Most principal manufacturing facilities are held in fee. However, certain parcels of land, machinery and buildings, and substantially all of ConAgra's transportation equipment used in its processing and merchandising operations, including covered rail hopper cars and river barges, are leased. 4 ITEM 2. PROPERTIES (CONTINUED) CONAGRA LOCATIONS PACKAGED FOODS CONAGRA FROZEN PREPARED FOODS Headquarters in Omaha, Nebraska. CONAGRA FROZEN FOODS Headquarters and Corporate sales office in Omaha, Nebraska. Seven plants in Arkansas, Iowa, Missouri and Virginia. Two broiler growing and processing complexes in Arkansas. Product development facility in Omaha, Nebraska. GILARDI FOODS Headquarters and sales office in Sidney, Ohio. Three processing plants in Ohio and Oklahoma. PIERCE FOODS Headquarters and sales office in Winchester, Virginia. Main processing plant in Moorefield, West Virginia. CONAGRA SEAFOOD COMPANIES CONAGRA SHRIMP COMPANIES Headquarters in Tampa, Florida. One seafood processing facility in Tampa, Florida. MERIDIAN PRODUCTS Headquarters in Santa Fe Springs, California. Seafood trading company with facilities in New Jersey, Texas and Washington. O'DONNELL-USEN U.S.A. Headquarters and sales office in Tampa, Florida. CONAGRA GROCERY PRODUCTS COMPANIES Headquarters in Fullerton, California. CONAGRA GROCERY PRODUCTS COMPANY Headquarters in Fullerton, California. Product development facility in Fullerton. 21 manufacturing plants, 12 distribution and customer service centers and over 40 grocery and foodservice sales offices serving the U.S. and Canada: CONAGRA GROCERY PRODUCTS COMPANIES INTERNATIONAL CONAGRA GROCERY PRODUCTS COMPANY GROCERY BRANDS HUNT-WESSON FOODSERVICE COMPANY HUNT-WESSON GROCERY PRODUCTS SALES COMPANY 5 ITEM 2. PROPERTIES (CONTINUED) CONAGRA LOCATIONS GOLDEN VALLEY MICROWAVE FOODS Headquarters in Edina, Minnesota. Five plants in Iowa, Minnesota and Ohio. Popcorn storage warehouse in Nebraska, product development facility in Eden Prairie, Minnesota and microwave packaging production facility in Maple Grove, Minnesota. CONAGRA FOODS LTD. Headquarters in Manchester, England. Manufacturer of microwave meals and snacks, supplying UK and other European countries. GOODMARK FOODS, INC. Headquarters in Raleigh, South Carolina Manufacturer of branded meat snacks, specialty snacks and other convenient food products, supplying mass-merchandisers, vending machines and grocery, drug, club, convenience and video stores. Plants in North Carolina, Pennsylvania and California. ARROW INDUSTRIES, INC. Headquarters in Carrollton, Texas Food plastics and paper products plants in Texas and Tennessee. A lighter fluid facility in Texas. A plastic bags and wrap plant in Georgia. Charcoal plants in Texas and Arkansas. An aluminum foil products plant in Georgia. CONAGRA FOODSERVICE COMPANY Headquarters in Boise, Idaho LAMB WESTON, INC. Headquarters in Tri-Cities, Washington. 12 plants in Idaho, Oregon, Washington, Minnesota (50-percent owned), the Netherlands (50-percent owned) and Turkey (50-percent owned). Product development facility in Richland, Washington. International business development center in Boise, Idaho. FERNANDO'S FOODS CORPORATION Headquarters in Los Angeles, California One Mexican food processing facility in California CASA DE ORO Headquarters in Omaha, Nebraska Flour tortilla processing facilities in Nebraska and Kentucky. DAIRY CASE Headquarters in Waukesha, Wisconsin BEATRICE CHEESE COMPANY Headquarters in Waukesha, Wisconsin. Eight facilities located in six states include natural and processed cheese manufacturing, direct and indirect retail sales, foodservice sales, cheese importing and aerosol. BEATRICE FOODS Headquarters in Indianapolis, Indiana Three facilities in three states include margarine and egg product manufacturing, direct and indirect retail sales and foodservice sales. 6 ITEM 2. PROPERTIES (CONTINUED) CONAGRA LOCATIONS REFRIGERATED FOODS PROCESSED MEATS COMPANIES Headquarters in Downers Grove, Illinois. ARMOUR SWIFT-ECKRICH Product development in Downers Grove and 26 plants in 17 states, processed meat plant in Panama, and a food distribution center in Puerto Rico, serving: ASE CONSUMER PRODUCTS COMPANY ASE DELI/FOODSERVICE COMPANY BUTTERBALL TURKEY COMPANY DECKER FOOD COMPANY NATIONAL FOODS, INC. TEXAS SIGNATURE FOODS Headquarters in Lufkin, Texas. Processing, sales and distribution facilities in Texas. COOK FAMILY FOODS, LTD. Headquarters in Lincoln, Nebraska. Three plants in Nebraska, Kentucky and Missouri. CONAGRA BEEF COMPANIES Headquarters in Greeley, Colorado AUSTRALIA MEAT HOLDINGS PTY LTD. Headquarters in Dinmore, Australia. Eight plants and feedlots in Australia. CONAGRA CATTLE FEEDING COMPANY Headquarters in Greeley, Colorado. Three feedlots in Colorado. CONAGRA REFRIGERATED FOODS INTERNATIONAL SALES CORPORATION Headquarters in Greeley, Colorado. E. A. MILLER, INC. Headquarters in Hyrum, Utah. Processing facilities in Utah and a feedlot in Idaho. MONFORT BEEF AND LAMB COMPANY Headquarters in Greeley, Colorado. Ten plants in Colorado, Kansas, Nebraska, Texas and Indiana. MONFORT FOOD DISTRIBUTION CO. Headquarters in Greeley, Colorado. Eight sales and distribution branches in seven states. MONFORT FRESH MEATS COMPANY Headquarters in Greeley, Colorado. Four plants in Idaho, Nebraska, and Alabama. 7 ITEM 2. PROPERTIES (CONTINUED) CONAGRA LOCATIONS CONAGRA POULTRY COMPANY Headquarters in Duluth, Georgia. CONAGRA BROILER COMPANY Headquarters in Duluth, Georgia. Eight broiler growing and processing divisions in Alabama, Arkansas, Georgia, Louisiana and Puerto Rico. Two further processing cookplants in West Virginia and Louisiana. PROFESSIONAL FOOD SYSTEMS Headquarters in El Dorado, Arkansas. 16 sales and distribution units in 12 states. SWIFT & COMPANY Headquarters in Greeley, Colorado. Three pork processing plants in Iowa, Minnesota and Kentucky. Three further processing plants in Illinois, Florida and California. AGRICULTURAL PRODUCTS CONAGRA AGRI-PRODUCTS COMPANIES Headquarters in Greeley, Colorado. UNITED AGRI PRODUCTS Headquarters in Greeley, Colorado. Over 500 field sales, administration, warehouse, rail, formulation and joint venture locations in the United States, Canada, United Kingdom, Mexico, South Africa, Chile, Bolivia, Ecuador, Argentina, France, Peru, Hong Kong, Taiwan and Zimbabwe. Businesses are involved with crop protection products, seed, liquid and dry fertilizer operations and one terminal facility. AGRICULTURAL TRADING & PROCESSING COMPANIES Headquarters in Omaha, Nebraska. CONAGRA TRADE GROUP Headquarters in Omaha, Nebraska. AGRICULTURAL DIVISION Headquarters in Omaha, Nebraska. The Agricultural Division consists of a North American network of grain merchandising offices and over 90 elevators, river loading facilities, export elevators and barges. One joint venture operating an export facility in the United States. D.R. Johnston, an international trading company, operates in Australia, Singapore and New Zealand. COMMODITY SERVICES Headquarters in Omaha, Nebraska. Soft Commodities Division and ConAgra Energy Services in Omaha, Nebraska and a protein trading operation in Bremen, Germany. KBC TRADING AND PROCESSING COMPANY Headquarters in Stockton, California. Operates over 40 facilities processing edible beans in nine states and South America and one walnut processing facility in California. 8 ITEM 2. PROPERTIES (CONTINUED) CONAGRA LOCATIONS CONAGRA FLOUR MILLING COMPANY Headquarters in Omaha, Nebraska. 25 flour mills in 14 states. Eight country elevators in South Dakota. One joint venture flour mill and one joint venture elevator in the U.S. INTERNATIONAL Headquarters in Omaha, Nebraska. Trading operations in four countries doing business as BDR Agriculture Ltd. and J.F. Braun. Wool processing plant in Australia. Poultry, animal feed and processed meat facilities in Portugal and feed plants in Spain. Four malt joint ventures with barley malting facilities in the United States, Canada, Australia, the United Kingdom and China. A food products distribution joint venture in Mexico doing business as Verde Valle. A flour mill, dry corn mill and grain trading in Puerto Rico, doing business as Molinos de Puerto Rico. ITC Agro-Tech is an edible oil processing and grain trading joint venture in India. International fertilizer trading operations headquartered in Savannah, Georgia. Joint venture oilseed processing plant in Argentina, doing business as Pecom Agra. OATS/CORN Headquarters in Omaha, Nebraska. Corn merchandising and processing facilities in Kansas and Bremen, Germany. Two oat processing facilities in Nebraska and Canada. Two grain elevators in Minnesota and Wisconsin. Two joint ventures, one specialty processing facility in Minnesota and one oat processing facility in the United Kingdom. SERGEANT'S PET PRODUCTS COMPANY Headquarters in Omaha, Nebraska. Distribution centers in Tennessee, Colorado and Canada. UNITED SPECIALTY FOOD INGREDIENTS COMPANIES Headquarters in Glendale Heights, Illinois. Two food processing plants and a research and development facility in Kentucky. A dehydrated food ingredients plant and animal feed ingredients plant in Minnesota. A dehydrated food ingredients plant in Wisconsin. A spice plant and research and development facility in Illinois and seasoning plants in Michigan and New Jersey, with supporting research and development facilities. Flavorings plants in New Jersey and Utah. Food ingredients distribution business headquartered in Iowa with distribution centers in Texas, Illinois and Colorado. A distributor of supplies and equipment for the food processing industry in Texas. Chili products plants located in California (two), New Mexico, and Santiago, Chile, with a research and development facility in California. A specialty marketing business with processed eggs, Mexican food products, and food oils business headquartered in Texas. Two garlic and onion dehydration and processing facilities with a supporting research and development facility in California and plants in Nevada and Oregon. 9 ITEM 3. LEGAL PROCEEDINGS 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. Beatrice also is engaged in 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 44 Superfund, proposed Superfund or state-equivalent sites. Beatrice has paid or is in the process of paying its liability share at 41 of these sites. Substantial reserves for these matters have been established based on the Company's best estimate of its undiscounted remediation liabilities, which estimates include evaluation of investigatory studies, extent of required cleanup, the known volumetric contribution of Beatrice and other potentially responsible parties, and its experience in remediating sites. ConAgra is party to a number of other lawsuits and claims arising out of the operation of its businesses. After taking into account liabilities recorded for all of the foregoing matters, management believes the ultimate resolution of such matters should not have a material adverse effect on ConAgra's financial condition, results of operations or liquidity. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 10 EXECUTIVE OFFICERS OF THE REGISTRANT AS OF AUGUST 25, 1999
Year Assumed Name Title & Capacity Age Present Office - ---- ---------------- --- -------------- Bruce C. Rohde President and Chief Executive Officer 50 1997 Jay D. Bolding Vice President and Controller 39 1999 Kenneth W. DiFonzo Senior Vice President, Profit Improvement 47 1999 Kenneth W. Gerhardt Senior Vice President and Chief Information Officer 49 1998 Dwight J. Goslee Senior Vice President, Mergers and Acquisitions 49 1997 Owen C. Johnson Senior Vice President, Human Resources and Administration 53 1998 Thomas L. Manuel President and Chief Operating Officer, ConAgra Trading and Processing Companies 52 1994 Timothy P. McMahon Senior Vice President, Sales and Marketing Development 45 1998 James P. O'Donnell Executive Vice President, Chief Financial Officer and Corporate Secretary 51 1997 James T. Smith President and Chief Operating Officer, ConAgra Frozen Prepared Foods 51 1998
The foregoing have held executive officer positions with ConAgra for the past five years, except as follows: Bruce C. Rohde became Vice Chairman of the Board and President in August 1996 and was named President and Chief Executive Officer in September 1997. He previously had been ConAgra's general counsel since 1984. He was president of the Omaha-based law firm McGrath, North, Mullin & Kratz, P.C. from 1984 to 1996. Jay D. Bolding joined ConAgra in 1997 as Vice President, Business Processes and Financial Analysis. He was Vice President, Chief Financial Officer and Treasurer of Allen & O'Hara, Inc., a construction and property management company from 1995 to 1997. Prior to that, he spent 14 years with KPMG Peat Marwick, in various positions including senior manager. He was named to his current position in May 1999. Kenneth W. Gerhardt was Senior Vice President and Chief Information Officer of Ameriserve Distribution, Inc. from 1997 to 1998. Prior to 1997, he worked for Pepsico, Inc. in various capacities, including Vice President and Chief Information Officer for Pepsico Food Services from 1996 to 1997; Senior Director, Information Technology for Pepsi Cola North American from 1994 to 1996; and Senior Director, Corporate Systems for Pizza Hut, Inc. from 1991 to 1994. He joined ConAgra in March 1998. Owen C. Johnson was Senior Vice President, Human Resources, Corporate Communications and Administration of Northern Indiana Power Corporation from 1990 to 1998. He joined ConAgra in his current position in June 1998. Timothy P. McMahon was Vice President, Marketing for ConAgra Trading and Processing Companies from June 1997 to October 1997. Prior to that, he was President of McMahon Marketing Communications Company for ten years. He became Senior Vice President, Corporate Marketing Development in October 1997 and was named to his current position in 1998. James T. Smith joined ConAgra as President of ConAgra Frozen Foods in 1993 and was named to his current position in 1998. 11 OTHER SIGNIFICANT EMPLOYEES OF THE REGISTRANT AS OF AUGUST 25, 1999
Year Assumed Name Title & Capacity Age Present Office - ----- ---------------- ---- --------------- J. Charles Blue President and Chief Operating Officer, ConAgra Agri-Products Companies 60 1998 Raymond J. De Riggi President and Chief Operating Officer, ConAgra Grocery Products Companies 51 1998 Timothy M. Harris President and Chief Operating Officer, ConAgra Refrigerated Prepared Foods 43 1997 Richard A. Porter Chairman, Lamb Weston and President and Chief Operating Officer, ConAgra Foodservice Company 50 1998 John S. Simons President and Chief Operating Officer, ConAgra Beef Companies 38 1999 Kevin W. Tourangeau Senior Vice President, Operational Effectiveness 47 1999 Michael D. Walter Senior Vice President, Commodity Procurement and Customer Risk Management 50 1996
J. Charles Blue was President of United Agri Products Companies since 1991 and was named to his current position in June 1998. Raymond J. De Riggi was President of United Specialty Food Ingredients Cos. since 1995. He was Executive Vice President of Sales for Pet, Inc. from 1992 to 1995. He was named to his current position in June 1998. Timothy M. Harris was President of ConAgra Refrigerated Prepared Foods from 1995 to 1997. He was President of Butterball Turkey Company from 1994 to 1995; Executive Vice President of Business Management for Butterball and Healthy Choice during 1994; and Vice President and General Manager, Prepared Foods Company from 1990 to 1994. He was named to his current position in September 1997. Richard A. Porter was President of Lamb Weston, Inc. from 1990 to 1998. He was named to his current position in June 1998. John S. Simons was Vice President, Red Meat Business Development with Excel, Inc. (owned by Cargill, Inc.) from 1996 to 1999. He was Vice President and General Manager, Canada for Excel from 1993 to 1996. Prior to that, he held the position of Business Analyst with Cargill, Inc. He was named to his current position in May 1999. Kevin W. Tourangeau founded Randol Management Consultants in 1988, working with major corporations, including ConAgra, to improve operations and profitability. He joined ConAgra in his current position in March 1999. Michael D. Walter joined ConAgra in 1989 as President of ConAgra Specialty Grain Products Company. He was named to his current position in October 1996. 12 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ConAgra's common stock is listed on the New York Stock Exchange. Ticker symbol: CAG. At the end of fiscal 1999, 488.2 million shares of common stock were outstanding, including 17.2 million shares held in the company's Employee Equity Fund. There were 36,000 shareholders of record, 30,000 holders via ConAgra's 401(k) plan for employees and more than 140,000 "street-name" beneficial holders whose shares are held in names other than their own. During fiscal 1999, 320 million shares were traded, a daily average of about 1.3 million shares. Quarterly information is incorporated herein by reference to Note 20 "Quarterly Results (Unaudited)" on page 59 of the Company's 1999 Annual Report to Stockholders. ITEM 6. SELECTED FINANCIAL DATA The following table presents selected consolidated financial data for the company for each of the five fiscal years 1995 through 1999. All amounts are in millions except per share data. Fiscal years 1995 through 1998 have been restated to give effect to acquisitions accounted for as poolings of interest. Prior years per share amounts have been adjusted to reflect the two-for-one stock split which was effective October 1, 1997.
FOR THE FISCAL YEARS ENDED MAY 1999 1998 1997 1996 1995 For the Year Net sales $ 24,594.3 $ 24,219.5 $ 24,445.2 $ 24,321.3 $ 23,829.8 After-tax income from continuing operations and before cumulative effect of changes in accounting 358.4* 641.8 637.9 211.8** 512.2 Net income 358.4* 627.0 637.9 211.8** 512.2 Basic income per share Continuing operations and before cumulative effect of changes in accounting $ .76* $ 1.38 $1.36 $ .43** $1.04 Net income $ .76* $ 1.35 $1.36 $ .43** $1.04 Diluted income per share Continuing operations and before cumulative effect of changes in accounting $ .75* $ 1.35 $1.34 $ .43** $1.02 Net income $ .75* $ 1.32 $1.34 $ .43** $1.02 Cash dividends declared per share of common stock $ .6918 $ .6050 $ .5275 $ .4600 $.4013 At Year End Total assets $ 12,146.1 $ 11,808.5 $ 11,451.8 $ 11,364.2 $ 10,969.2 Senior long-term debt (noncurrent) 1,793.1 1,753.5 1,628.5 1,536.3 1,801.5 Subordinated long-term debt (noncurrent) 750.0 750.0 750.0 750.0 750.0 Preferred securities of subsidiary company 525.0 525.0 525.0 525.0 525.0 Redeemable preferred stock -- -- -- -- 354.9
* 1999 amounts include non-recurring charges: before tax, $440.8 million; after tax, $337.9 million. Excluding the charges, basic income per share was $1.48 and diluted income per share was $1.46. ** 1996 amounts include non-recurring charges: before tax, $507.8 million; after tax, $356.3 million. Excluding the charges, basic income per share was $1.19 and diluted income per share was $1.17. 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated herein by reference to "Management's Discussion & Analysis" on pages 36 through 42 of the Company's 1999 Annual Report to Stockholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Incorporated herein by reference to the subsection "Market Risk" in "Management's Discussion & Analysis" on pages 38 through 40 of the Company's 1999 Annual Report to Stockholders. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following consolidated financial statements of ConAgra, Inc. and Subsidiaries and Independent Auditors' Report set forth on pages 43 through 60 of the Company's 1999 Annual Report to Stockholders are incorporated herein by reference: Consolidated Statements of Earnings - Years ended May 30, 1999, May 31, 1998 and May 25, 1997 Consolidated Statements of Comprehensive Income - Years ended May 30, 1999, May 31, 1998 and May 25, 1997 Consolidated Balance Sheets - May 30, 1999 and May 31, 1998 Consolidated Statements of Common Stockholders' Equity - Years ended May 30, 1999, May 31, 1998 and May 25, 1997 Consolidated Statements of Cash Flows - Years ended May 30, 1999, May 31, 1998 and May 25, 1997 Notes to Consolidated Financial Statements The supplementary data regarding quarterly results of operations set forth in Note 20 "Quarterly Results (Unaudited)" on page 59 of the Company's 1999 Annual Report to Stockholders is incorporated herein by reference. Independent Auditors' Report ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated herein by reference to "Board of Directors and Election" on pages 3 through 4 of the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on September 23, 1999. Information concerning all Executive Officers of the Company is included in Part I above. ITEM 11. EXECUTIVE COMPENSATION Incorporated herein by reference to (i) "Executive Compensation" through "Benefit Plans Retirement Programs" on pages 6 through 10 of the Company's Proxy Statement, and (ii) information on director compensation on pages 4 and 5 of the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on September 23, 1999. 14 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated herein by reference to "Voting Securities and Ownership by Certain Beneficial Owners" and "Voting Securities Owned by Executive Officers and Directors" on page 2 of the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on September 23, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Incorporated herein by reference to (i) the last three paragraphs of "Directors' Meetings and Compensation" on page 5 of the Company's Proxy Statement, and (ii) the last paragraph of "Benefit Plans Retirement Programs" on page 10 of the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on September 23, 1999. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a) List of documents filed as part of this report: 1. Financial Statements All financial statements of the company as set forth under Item 8 of this report on Form 10-K. 2. Financial Statement Schedules
Schedule Page Number Description Number ------ ----------- ------- II Valuation and Qualifying Accounts 16
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the consolidated financial statements, notes thereto, or the Management's Discussion & Analysis section of the Company's 1999 Annual Report to Stockholders. Separate financial statements of the registrant have been omitted because the registrant meets the requirements permitting omission. 3. Exhibits All exhibits as set forth on the Exhibit Index, which is incorporated herein by reference. b) Reports on Form 8-K The Company filed a report on Form 8-K dated May 13, 1999 reporting a major restructuring and other initiatives (described in the documents incorporated by reference in this 10-K report). 15 Schedule II CONAGRA, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts For the Fiscal Years ended May 30, 1999, May 31, 1998 and May 25, 1997 (in millions)
Additions Balance at ------------------------ Deductions Balance at Beginning Charged from Close of Description of Period to Income Other Reserves Period - ----------- --------- ---------- ----- --------- ---------- Year ended May 30, 1999: Allowance for doubtful receivables $68.2 29.9 .2(2) 38.3(1) $60.0 Year ended May 31, 1998: Allowance for doubtful receivables $67.9 29.1 .4(2) 29.2(1) $68.2 Year ended May 25, 1997: Allowance for doubtful receivables $52.6 39.4 .1(2) 24.2(1) $67.9 Valuation reserve related to restructuring $235.8 - - 235.8(3) -
(1) Bad debts charged off, less recoveries. (2) Primarily reserve accounts of acquired businesses less reserve accounts of divested businesses and foreign currency translation adjustments. (3) Assets written-off to valuation reserve. 16 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors ConAgra, Inc. Omaha, Nebraska We have audited the consolidated financial statements of ConAgra, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998, and for each of the three years in the period ended May 30, 1999, and have issued our report thereon dated July 9, 1999; such financial statements and report are included in your 1999 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of ConAgra, Inc. and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Omaha, Nebraska July 9, 1999 17 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, ConAgra, Inc. has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 25th day of August, 1999. CONAGRA, INC. /s/ Bruce C. Rohde ------------------------------------------------------ Bruce C. Rohde President and Chief Executive Officer /s/ James P. O'Donnell ------------------------------------------------------ James P. O'Donnell Executive Vice President, Chief Financial Officer and Corporate Secretary (Principal Financial Officer) /s/ Jay D. Bolding ------------------------------------------------------ Jay D. Bolding Vice President and Controller (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 25th day of August, 1999. /s/ Bruce C. Rohde - ------------------------------------ Director Bruce C. Rohde Mogens C. Bay* Director Philip B. Fletcher* Director Charles M. Harper* Director Robert A. Krane* Director Carl E. Reichardt* Director Ronald W. Roskens* Director Marjorie M. Scardino* Director Walter Scott, Jr.* Director Kenneth E. Stinson* Director Thomas R. Williams* Director Clayton K. Yeutter* Director * Bruce C. Rohde, by signing his name hereto, signs this Annual Report on behalf of each person indicated. A Power-of-Attorney authorizing Bruce C. Rohde to sign this Annual Report on Form 10-K on behalf of each of the indicated Directors of ConAgra, Inc. has been filed herein as Exhibit 24. By: /s/ Bruce C. Rohde -------------------------------------- Bruce C. Rohde Attorney-In-Fact 18 EXHIBIT INDEX
Number Description Page No. - ------ ----------- -------- 3.1 ConAgra's Certificate of Incorporation, as amended, incorporated herein by reference to ConAgra's annual report on Form 10-K for the fiscal year ended May 26, 1996. 3.2 ConAgra's Bylaws, as amended, incorporated herein by reference to ConAgra's quarterly report on Form 10-Q for the quarter ended February 28, 1999. 4.1 Rights Agreement dated as of July 12, 1996, incorporated herein by reference to ConAgra's current report on Form 8-K dated July 12, 1996. 4.2 Certificate of Adjustment dated October 1, 1997 to Rights Agreement, incorporated herein by reference to ConAgra's quarterly report on Form 10-Q for the quarter ended August 24, 1997. 4.3 Amendment to Rights Agreement dated as of July 10, 1998, incorporated herein by reference to Exhibit 4.3 of ConAgra's annual report on Form 10-K for the fiscal year ended May 31, 1998. 4.4 Form of documents establishing Series A, Series B and Series C Preferred Securities of Conagra Capital, L.L.C., incorporated herein by reference to Exhibit 4.8 and Exhibit 4.14 of ConAgra's registration on Form S-3 (033-56973). 10.1 ConAgra's Amended and Restated Long-Term Senior Management Incentive Plan, Amendment thereto, and Operational Document, and Amendment thereto, incorporated herein by reference to Exhibit 10.1 of ConAgra's annual report on Form 10-K for the fiscal year ended May 25, 1997. 10.2 Second Amendment to ConAgra's Long-Term Senior Management Incentive Plan Operational Document, incorporated herein by reference to Exhibit 10.2 of ConAgra's annual report on Form 10-K for the fiscal year ended May 28, 1995. 10.3 Form of Employment Agreement between ConAgra and its executive officers, incorporated herein by reference to Exhibit 10.3 of ConAgra's annual report on Form 10-K for the fiscal year ended May 31, 1998. 10.4 ConAgra's Employee Flexible Bonus Payment Plan, incorporated herein by reference to Exhibit 10.4 of ConAgra's annual report on Form 10-K for the fiscal year ended May 25, 1997.
19 EXHIBIT INDEX - (Continued)
Number Description Page No. - ------ ----------- -------- 10.5 ConAgra's 1985 Stock Option Plan, with amendments thereto incorporated herein by reference to Exhibit 10.5 of ConAgra's annual report on Form 10-K for the fiscal year ended May 25, 1997. 10.6 ConAgra Non-Qualified CRISP Plan. 23 10.7 ConAgra Non-Qualified Pension Plan, and First Amendment thereto. 27 10.8 ConAgra Supplemental Pension and CRISP Plan for Change of Control. 35 10.9 ConAgra Incentives and Deferred Compensation Change of Control Plan. 40 10.10 ConAgra 1990 Stock Plan, and amendments thereto, incorporated herein by reference to Exhibit 10.11 of ConAgra's annual report on Form 10-K for the fiscal year ended May 28, 1995. 10.11 ConAgra 1995 Stock Plan, incorporated herein by reference to Exhibit 10.1 of ConAgra's quarterly report on Form 10-Q for the quarter ended August 27, 1995. 10.12 ConAgra Directors' Unfunded Deferred Compensation Plan, and First Amendment thereto, incorporated herein by reference to Exhibit 10.12 of ConAgra's annual report on Form 10-K for the fiscal year ended May 28, 1995. 10.13 Second Amendment to the ConAgra Directors' Unfunded Deferred Compensation Plan, incorporated herein by reference to Exhibit 10.2 of ConAgra's quarterly report on Form 10-Q for the quarter ended February 23, 1997. 10.14 Third Amendment to the ConAgra Directors' Unfunded Deferred Compensation Plan, incorporated herein by reference to Exhibit 10.14 of ConAgra's annual report on Form 10-K for the fiscal year ended May 31, 1998. 10.15 ConAgra Employee Equity Fund Trust Agreement, with Stock Purchase Agreement and Revolving Promissory Note executed in connection therewith, incorporated herein by reference to Exhibit 10.14 of ConAgra's annual report on Form 10-K for the fiscal year ended May 25, 1997.
20 EXHIBIT INDEX - (Continued)
Number Description Page No. - ------- ----------- -------- 10.16 P. B. Fletcher Incentive Agreement dated July 15, 1993, as amended and restated, incorporated herein by reference to Exhibit 10.15 of ConAgra's annual report on Form 10-K for the fiscal year ended May 26, 1996. 10.17 Amendment to the P.B. Fletcher Incentive Agreement dated July 11, 1997, incorporated herein by reference to Exhibit 10.16 of ConAgra's annual report on Form 10-K for the fiscal year ended May 25, 1997. 10.18 Employment Contract between ConAgra and Bruce C. Rohde, incorporated herein by reference to Exhibit 10.1 of ConAgra's quarterly report on Form 10-Q for the quarter ended February 23, 1997. 10.19 Amendment dated February 16, 1998 to Bruce C. Rohde Employment Contract, incorporated herein by reference to Exhibit 10.19 of ConAgra's annual report on Form 10-K for the fiscal year ended May 31, 1998 10.20 C. M. Harper Deferred Compensation Agreement dated March 15, 1976, incorporated herein by reference to Exhibit 10.20 of ConAgra's annual report on Form 10-K for the fiscal year ended May 31, 1998 10.21 ConAgra Executive Incentive Plan. 44 12 Statement regarding computation of ratio of earnings to fixed charges and ratio of earnings to combined fixed charges and preferred stock dividends 46 13 Pages 12 through 33 and pages 36 through 60 of ConAgra, Inc.'s Annual Report to Stockholders for the fiscal year ended May 30, 1999, portions of which are incorporated herein by reference. Those portions of ConAgra, Inc.'s Annual Report to Stockholders that are not incorporated herein by reference shall not be deemed to be filed as a part of this Report. 47 21 Subsidiaries of ConAgra 113 23 Consent of Deloitte & Touche LLP 117 24 Powers of Attorney 118
21 EXHIBIT INDEX - (Continued) Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to ConAgra's long-term debt are not filed with this Form 10-K. ConAgra will furnish a copy of any such long-term debt agreement to the Securities and Exchange Commission upon request. Except for those portions of ConAgra, Inc.'s Annual Report to Stockholders for its fiscal year ended May 30, 1999 (such portions filed hereto as Exhibit 13) specifically incorporated by reference in the report on Form 10-K, such annual report is furnished solely for the information of the Securities and Exchange Commission and is not to be deemed "filed" as part of this filing. Items 10.1 through 10.21 are management contracts or compensatory plans filed as exhibits pursuant to Item 14(c) of Form 10-K. 22 EX-10.6 2 EXHIBIT 10.6 EXHIBIT 10.6 CONAGRA NONQUALIFIED CRISP PLAN 1. Purpose. ConAgra has previously adopted the ConAgra Retirement Income Savings Plan ("Qualified CRISP"). The Qualified CRISP is qualified under Code Section 401(a). Regardless of a qualified plan's benefit formula, the Code imposes restrictions upon the benefits that may be provided under plans qualified under Code Section 401(a), such as limitations under Code Sections 401(a)(17), 401(k), 402(g) and 415 ("Code Restrictions"). These Code Restrictions limit the amount of retirement benefits that may be provided certain ConAgra executives under the Qualified CRISP. This Plan is intended to make up the employer-provided benefits (on an after-tax basis) not available under the Qualified CRISP benefit formula because of the Code Restrictions. Since the contributions and earnings under this Plan are not tax-deferred as are the contributions under the Qualified CRISP, the benefits under this Plan will be tax-effected to reflect this difference, so that the after-tax benefits under this Plan make up on an after-tax basis the benefits not available under the Qualified CRISP because of the Code Restrictions. However, ConAgra recognizes that the tax effect to each Participant is unique, and therefore, the benefits cannot be tax-effected to certainty, but must be approximated. 2. Definitions. The following definitions shall apply to the Plan: 2.1 "Code" means the Internal Revenue Code of 1986, as amended. 2.2 "Committee" means the ConAgra Employee Benefits Committee or any successor thereto. The Committee shall be the "named fiduciary" as described in ERISA Section 402(a)(2). 2.3 "Compensation Committee" means the Compensation Committee of the Board of Directors of ConAgra. 2.4 "ConAgra" means ConAgra, Inc., a Delaware corporation. 2.5 "ConAgra Controlled Group" means the controlled group of corporations as described in Code Section 414(b), which includes ConAgra. 2.6 "Effective Date" of this Plan means January 1, 1988. 2.7 "Employee" shall have the same meaning as set forth in the Qualified CRISP. 2.8 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.9 "Participant" means an Employee who has satisfied the eligibility requirements set forth in Section 3 of the Plan and who has not received his total benefits under the Plan. 23 2.10 "Plan" means this plan which shall be called the ConAgra Nonqualified CRISP Plan. 2.11 "Plan Year" means the calendar year. 2.12 "Total and Permanent Disability" shall have the same meaning as set forth in the Qualified CRISP. 2.13 "Trustee" means the entity or individual selected by the Committee to be trustee of the trust. The Committee shall select the Trustee and ConAgra shall enter into a Trust Agreement with the Trustee. 2.14 "Year of Service" shall have the same meaning as set forth in the Qualified CRISP. 3. Eligibility and Participation. Each Employee who meets the following requirements shall participate in this Plan: (a) The Employee participates in the Qualified CRISP; (b) The Employee has completed One Year of Service; (c) The Employee's benefits under the Qualified CRISP are limited by the Code Restrictions; and (d) The Compensation Committee has selected the Employee to participate in the Plan. The Employee shall become a Participant in this Plan as of the first day that he has met each of the above four requirements, or such other date as selected by the Compensation Committee. Each Participant shall continue to participate in this Plan until all the benefits payable to the Participant under this Plan have been paid. 4. Benefits. 4.1 General Benefit and Funding. Provided the Participant had made the maximum employee contribution allowed him under the Qualified CRISP, each Plan Year ConAgra shall make a contribution to each Participant's Account equal to the excess of (a) over (b) where, (a) equals the employer contribution that would have been made to the Qualified CRISP for the Participant had there not been any Code Restrictions and assuming the Participant had made the maximum employee contribution allowed under the Qualified CRISP (ignoring the Code Restrictions), and (b) equals the employer contribution actually made to the Qualified CRISP for the Participant. The maximum employee contributions assumed in (a) above is computed ignoring the Code Restrictions, but not the percentage limits on employee contributions set forth in the Qualified CRISP 24 and not the percentages imposed because of the mathematical test under Code Section 401(k)(3)(A). The Plan is also intended to provide a tax gross-up to reflect that this is an after-tax plan, whereas the Qualified CRISP is a before-tax plan. The intent is to provide the Participant with a combined after-tax benefit from this Plan and the Qualified CRISP that approximates the benefit the Participant would receive had there not been any Code Restrictions. 4.2 Tax Gross-Up. In addition to other contributions hereunder, ConAgra shall make a tax gross-up payment to each Participant each Plan Year to approximate his additional Federal and state income tax on account of the Plan. The Committee shall determine the amount of the payment and the Committee's determination shall be final, conclusive and binding on, the Participant, the Trustee and ConAgra. In making the determination, the Committee may make any assumptions it deems appropriate, including, but not limited to, the Participant's Federal and state income tax rates and the earnings of the Participant's Account. The Committee may, but is not required to, assume that the same Federal and/or state income tax rate applies to all Participants. Also, at the Committee's discretion, all Participants may be treated differently or the same, as long as the Committee has a reasonable basis for such different treatment. It is expressly understood that the payment contemplated by this Paragraph 4.2 is an approximation and will not necessarily be the taxes that result from the Plan to an individual Participant. The Committee, in its discretion, may make a portion or all of this payment to the Participant's Account, rather than the Participant. 5. Participants' Accounts. A separate account shall be established for each Participant in the Plan ("Participant's Account"). Each Participant Account shall share in the earnings and losses of the trust in proportion to the value of the account on the first day of the valuation period. Each Participant's Account shall be valued as often as determined appropriate by the Committee, but at least once per Plan Year. A Participant's Account shall not be forfeitable for any reason. 6. Payment of Benefits. The benefits payable under this Plan shall be payable upon the same event that causes the payment of benefits under the Qualified CRISP. The form of benefits hereunder shall be the same form as the form of benefit payments provided under the Qualified CRISP with the same elections to the Participant (and his spouse) as provided under the Qualified CRISP. The amount of benefits shall be based upon the balance in the Participant's Account with payment of benefits from the Participant's Account payable until the Participant's Account has a zero balance. 7. Administration. This Plan shall be administered by the Committee. The Committee shall make all determinations with regard to the Plan, subject to the provisions of the Plan and any determinations that are designated to be made by the Compensation Committee. The 25 Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt or revise rules and regulations as it deems necessary or advisable for the administration of the Plan. Claims procedures and claims review procedures required by ERISA shall be developed by the Committee. To the extent not inconsistent with the provisions of the Plan, all determinations of the Committee shall be final, conclusive and binding upon all the parties. Any determination or decision that only affects a member of the Committee who is a Participant shall be made by the Compensation Committee. 8. Beneficiary Designation. Designation of a beneficiary under the Plan shall be in the same form and with the same restrictions as under the Qualified CRISP. 9. Nonalienation of Benefits. No benefit payable under this Plan shall be subject, at any time and in any manner, to alienation, sale, transfer, assignment, pledge or encumbrance of any kind. 10. Amendment and Termination. ConAgra, by action of its Board of Directors, may amend or terminate this Plan at any time, provided, however, this Plan shall not be amended or terminated to eliminate or reduce any Participant's Account balance of the Participants therein at the time of the amendment or termination or to reduce the vesting of a Participant. 11. Applicable Law. This Plan and all rights hereunder shall be governed by and construed according to the laws of the State of Nebraska. This Plan has been adopted effective January 1, 1988. 26 EX-10.7 3 EXHIBIT 10.7 EXHIBIT 10.7 CONAGRA NONQUALIFIED PENSION PLAN 1. Purpose. ConAgra has previously adopted the Restatement of the ConAgra Pension Plan for Salaried Employees ("Qualified Pension Plan"). The Qualified Pension Plan is qualified under Code Section 401(a). Regardless of a qualified plan's benefit formula, the Code imposes restrictions upon the benefits that may be provided under plans qualified under Code Section 401(a), such as limitations under Code Sections 401(a)(17), 402(g) and 415 ("Code Restrictions"). These Code Restrictions limit the amount of retirement benefits that may be provided certain ConAgra executives under the Qualified Pension Plan. This Plan is intended to make up the benefits (on an after-tax basis) not available under the Qualified Pension Plan benefit formula because of the Code Restrictions. Since the contributions and earnings under this Plan are not tax-deferred as are the contributions under the Qualified Pension Plan, the benefits under this Plan will be tax-effected to reflect this difference, so that the benefits under this Plan make up on an after-tax basis the benefits not available under the Qualified Pension Plan formula because of the Code Restrictions. However, ConAgra recognizes that the tax effect to each Participant is unique, and therefore, the benefits cannot be tax-effected to certainty, but must be approximated. 2. Definitions. The following definitions shall apply to the Plan: 2.1 "Business Combination or Acquisition" means (i) any merger or consolidation of ConAgra with or into any other corporation, (ii) the sale or lease of all or any substantial part of the assets of ConAgra to any Other Entity, and (iii) a tender offer or other series of stock purchases which result in any Other Entity becoming the beneficial owner of more than 50% of ConAgra's outstanding voting securities. 2.2 "Code" means the Internal Revenue Code of 1986, as amended. 2.3 "Committee" means the ConAgra Employee Benefits Committee or any successor thereto. The Committee shall be the "named fiduciary" as described in ERISA Section 402(a)(2). 2.4 "Compensation Committee" means the Compensation Committee of the Board of Directors of ConAgra. 2.5 "ConAgra" means ConAgra, Inc., a Delaware corporation. 2.6 "ConAgra Controlled Group" means the controlled group of corporations as described in Code Section 414(b), which includes ConAgra. 2.7 "Effective Date" of this Plan means January 1, 1988. 27 2.8 "Employee" shall have the same meaning as set forth in the Qualified Pension Plan. 2.9 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 2.10 "Other Entity" means any corporation, person or other entity and any other entity with which it or its affiliates or associates has any agreement, arrangement or understanding, directly or indirectly, for the purpose of acquiring, holding, voting or disposing of the stock of ConAgra or which is an affiliate or associate of such entity, together with the successors and assigns of such persons. 2.11 "Participant" means an Employee who has satisfied the eligibility requirements set forth in Section 3 of the Plan and who has not received his total benefits under the Plan. 2.12 "Past Service Cost" means the aggregate cost of providing the benefits which relate to service of the Participant prior to establishment of the Plan and prior to the Employee becoming a Participant hereunder. 2.13 "Plan" means this plan which shall be called the ConAgra Nonqualified Pension Plan. 2.14 "Plan Year" means the calendar year. 2.15 "Total and Permanent Disability" shall have the same meaning as set forth in the Qualified Pension Plan. 2.16 "Trustee" means the entity or individual selected by the Committee to be trustee of the trust. The Committee shall select the Trustee and ConAgra shall enter into a Trust Agreement with the Trustee. 2.17 "Year of Service" shall have the same meaning as set forth in the Qualified Pension Plan. 3. Eligibility and Participation. Each Employee who meets the following requirements shall participate in this Plan: (a) The Employee participates in the Qualified Pension Plan; (b) The Employee has completed One Year of Service; and (c) The Employee's benefits under the Qualified Pension Plan are limited by the Code Restrictions; and (d) The Compensation Committee has selected the Employee to participate in the Plan. The Employee shall become a Participant in this Plan as of the first day that he has met each of the above four requirements, or such other date as selected by the Compensation Committee. Each Participant shall continue to participate in this Plan until all the benefits payable to the Participant under this Plan have been paid. 28 4. Benefits. 4.1 Benefit Objectives. The objective of the Plan is to provide each Participant with a benefit, assuming the Participant's vesting schedule as described in Paragraph 4.5, which equals the excess of (a) over (b) where, (a) equals the value of the after-tax Qualified Pension Plan benefits the Participant would have received had there not been any Code Restrictions, and (b) equals the value of the after-tax Qualified Pension Plan benefits the Participant is expected to receive. No benefit shall be earned under this Plan for periods of employment after the Participant has attained age 65. The Plan is also intended to provide a tax gross-up to reflect that this is an after-tax plan, whereas the Qualified Pension Plan is a before-tax plan. The intent is to provide the Participant with a combined after-tax benefit from this Plan and the Qualified Pension Plan that approximates the benefit the Participant would receive had there not been any Code Restrictions. 4.2 General Funding. ConAgra shall fund each Participant's Account sufficiently to meet the benefit objectives set forth in Paragraph 4.1. At a minimum, each Plan Year, ConAgra shall contribute to each Participant's Account an amount equal to the sum of (a) and (b) below, where (a) equals the actuarially determined lump sum value of benefits that were not earned by the Participant under the Qualified Pension Plan because of Code Restrictions, and (b) equals an amortization (over the Participant's remaining years until age 65) of the Participant's Past Service Cost. Subject to the preceding, the Committee, in its sole and absolute discretion, shall determine the amount of funding for each Participant each Plan Year with the assistance of an actuarial firm selected by the Committee. The Committee shall select reasonable actuarial assumptions (in the aggregate) to use to make the calculations. 4.3 Tax Gross-Up. In addition to other contributions hereunder, ConAgra shall make a tax gross-up payment to each Participant each Plan Year to approximate his additional Federal and state income tax on account of the Plan. The Committee shall determine the amount of the payment and the Committee's determination shall be final, conclusive and binding on, the Participant, the Trustee and ConAgra. In making the determination, the Committee may make any assumptions it deems appropriate, including, but not limited to, the Participant's Federal and state income tax rates and the earnings of the Participant's Account. The Committee may, but is not required to, assume that the same Federal and/or state income tax rate applies to all Participants. Also, at the Committee's discretion, all Participants 29 may be treated differently or the same, as long as the Committee has a reasonable basis for such different treatment. It is expressly understood that the payment contemplated by this Paragraph 4.3 is an approximation and will not necessarily be the taxes that result from the Plan to an individual Participant. The Committee, in its discretion, may make a portion or all of this payment to the Participant's Account, rather than the Participant. 4.4 Business Combination or Acquisition. Notwithstanding any other provisions of the Plan, upon a Business Combination or Acquisition, any amounts necessary to immediately fund the benefits vested hereunder pursuant to the Participant's vesting schedule under Paragraph 4.5 shall be immediately funded, unless 75% or more of the living ConAgra Directors (who were Directors of ConAgra on the date 1 year prior to the vote) vote not to have this Paragraph 4.4 apply. Such amounts include all amounts for past service of the Participant, all amounts for future service of the Participant that are vested under the applicable schedule described in Paragraph 4.5 assuming the Participant will be employed by ConAgra until age 65 and a tax gross-up payment to the Participant (or the Participant's Account) to reflect the Federal and state income tax effects to the Participant of the funding under this Paragraph 4.4. Notwithstanding Section 12 of the Plan, this Paragraph 4.4 may not be amended after the date of a Business Combination or Acquisition unless such Business Combination or Acquisition has received prior approval of 75% or more of the ConAgra Directors who were Directors of ConAgra on the date 1 year prior to such approval. 4.5 Vesting. There shall be three vesting schedules for the Plan. The Compensation Committee shall determine which vesting schedule applies to a Participant at the time the Employee is selected to participate in the Plan. The Compensation Committee may change the vesting schedule that applies to a Participant, but in no event may a Participant whose vesting schedule is Schedule C be changed to Schedule B or A, nor may a Participant whose vesting schedule is Schedule B be changed to Schedule A. Under Schedule A, a Participant is always 100% vested in his interest in the Plan that is earned for his past service, but the Participant benefits related to future service are forfeited upon his termination of employment with ConAgra. Under Schedule B, a Participant is 100% vested in his interest in the Plan that is earned for his past service and that would be earned for the 5 Plan Years following his entry into the Plan even if the Participant terminates his employment prior to the end of such 5 years. Under Schedule C, a Participant is 100% vested in his interest in the Plan that is earned for his past service and that would be earned for all future years of service up to age 65. In all events, a Participant shall be 100% vested in his interest in the Plan earned in the year he terminates employment. 30 4.6 Funding Upon Death or Disability of Participant. If a Participant dies, or becomes Totally and Permanently Disabled, prior to age 65 while employed by ConAgra, no additional funding shall be made with regard to potential future service of the Participant. However, upon such death, or Total and Permanent Disability, funding and related tax gross-up shall be made as soon as possible to adequately fund the Participant's death or disability benefit. The Participant's benefit upon such death or Total and Permanent Disability shall be the benefit that can be provided based upon the assets in his Participant's Account. 4.7 Funding Upon Early Retirement. A Participant may elect early retirement under this Plan in the same manner and to the same extent as provided in the Qualified Pension Plan. If a Participant properly elects such early retirement, immediate funding and related tax gross-up will be made to adequately fund the Participant's early retirement benefit. 4.8 Funding Upon Termination of Employment. Upon termination of employment prior to age 65 (other than early retirement under Paragraph 4.7 or death or disability under Paragraph 4.6) funding and related tax gross-up shall be made as soon as possible to adequately fund the Participant's termination benefit. If the Participant's vesting schedule is Schedule B or Schedule C any future years funding shall be made in the applicable year (with appropriate loss adjustments), subject to acceleration of funding under Paragraph 4.4. 5. Participants' Accounts. A separate account shall be established for each Participant in the Plan ("Participant's Account"). Each Participant Account shall share in the earnings and losses of the trust in proportion to the value of the account on the first day of the valuation period. Each Participant's Account shall be valued as often as determined appropriate by the Committee, but at least once per Plan Year. 6. Participant Reports. Within 30 days after execution of this document, each Participant will be provided a calculation which sets forth the Participant's vested benefit under the Plan as of that date including any vested benefit for future years of service by the Participant. Thereafter, within 90 days after each Plan Year end, each Participant shall receive a calculation which sets forth the Participant's vested benefits under the Plan as of the preceding December 31, including any vested benefits for future years of service by the Participant. 7. Payment of Benefits. The benefits payable under this Plan shall be payable upon the same event that causes the payment of benefits under the Qualified Pension Plan. The form of benefits hereunder shall be the same form as the form of benefit payments provided under the Qualified Pension Plan with the same elections to the Participant (and his spouse) as provided under the Qualified Pension Plan. The amount of benefits shall be based upon the balance in the Participant's Account with payment of benefits from the Participant's Account payable until the Participant's Account has a zero balance. 31 The Trust shall purchase an annuity to fund any payment of benefits that are to be paid in an annuity form. 8. Loss Adjustment. If the earnings and losses of a Participant's Account do not equal or exceed the earnings rate assumption used to compute funding under Paragraph 4.2, ConAgra shall contribute a sufficient additional amount so that such earnings and losses equal such earnings rate assumption. This additional funding shall be made at such date or dates as determined in the sole and absolute discretion of the Committee, but no later than the earlier of the date necessary to make the benefit payments contemplated by Paragraph 4.2 or the date of funding pursuant to Paragraph 4.4. The intent of this Paragraph 8 is for ConAgra to incur the investment risk inherent in this defined contribution plan, rather than the Participant. To the extent any other provision of this Plan is inconsistent or contrary to this Paragraph 8, this Paragraph 8 shall control. 9. Administration. This Plan shall be administered by the Committee. The Committee shall make all determinations with regard to the Plan, subject to the provisions of the Plan and any determinations that are designated to be made by the Compensation Committee. The Committee shall have the authority, subject to the provisions of the Plan, to establish, adopt or revise rules and regulations as it deems necessary or advisable for the administration of the Plan. Claims procedures and claims review procedures required by ERISA shall be developed by the Committee. To the extent not inconsistent with the provisions of the Plan, all determinations of the Committee shall be final, conclusive and binding upon all the parties. Any determination or decision that only affects a member of the Committee who is a Participant shall be made by the Compensation Committee. 10. Beneficiary Designation. Designation of a beneficiary under the Plan shall be in the same form and with the same restrictions as under the Qualified Pension Plan. 11. Nonalienation of Benefits. No benefit payable under this Plan shall be subject, at any time and in any manner, to alienation, sale, transfer, assignment, pledge or encumbrance of any kind. 12. Amendment and Termination. ConAgra, by action of its Board of Directors, may amend or terminate this Plan at any time, provided, however, no such action shall eliminate ConAgra's obligation to provide the benefits intended to be provided by this Plan for both past and future service of Employees who are Participants in the Plan at the time of such action and this Plan shall not be amended or terminated to eliminate or reduce any benefits that a Participant shall receive. The Plan may only be amended to reduce benefits of Employees who are not Participants at the time of amendment and the Plan may only be terminated with regard to Employees who are not Participants at the time of such termination. 13. Applicable Law. This Plan and all rights hereunder shall be governed by and construed according to the laws of the State of Nebraska. This Plan has been adopted effective January 1, 1988. 32 FIRST AMENDMENT TO THE CONAGRA NONQUALIFIED PENSION PLAN (Effective May 11, 1989) Effective upon ConAgra Board of Director approval of this amendment, the ConAgra Nonqualified Pension Plan shall be amended as follows: ARTICLE I Paragraph 2.1 of the Plan shall be amended to read, as follows: "2.1 "Change of Control" shall mean: (i) The acquisition (other than from ConAgra) by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, ConAgra or its subsidiaries, or any employee benefit plan of ConAgra or its subsidiaries which acquires beneficial ownership of voting securities of ConAgra) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of ConAgra's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by ConAgra's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Agreement, considered as through such person were a member of the Incumbent Board; or (iii) Approval by the stockholders of ConAgra of a reorganization, merger, consolidation, in each case, with respect to which persons who were the stockholders of ConAgra immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of ConAgra or of the sale of all or substantially all of the assets of ConAgra." 33 ARTICLE II Paragraph 2.10 of the Plan is hereby deleted and the paragraphs thereafter shall be appropriately renumbered. ARTICLE III Paragraph 4.4 shall be amended to read, as follows: "4.4 Change of Control. Notwithstanding any other provisions of the Plan, upon a Change of Control, any amounts necessary to immediately fund the benefits vested hereunder pursuant to the Participants' vesting schedule under Paragraph 4.5 shall be immediately funded. Such amounts include all amounts for past service of the Participant, all amounts for future service of the Participant that are vested under the applicable schedule described in Paragraph 4.5 assuming the Participant will be employed by ConAgra until age 65 and a tax gross-up payment to the Participant (or the Participant's account) to reflect the Federal and state income tax effects to the Participant of the funding under this Paragraph 4.4. Notwithstanding Paragraph 12 of the Plan, this Paragraph 4.4 may not be amended after the date of a Change of Control." ARTICLE IV In all other respects the Plan is hereby confirmed. 34 EX-10.8 4 EXHIBIT 10.8 EXHIBIT 10.8 CONAGRA SUPPLEMENTAL PENSION AND CRISP PLAN FOR CHANGE OF CONTROL 1. Name and Purpose. Name. The name of the plan shall be the ConAgra Supplemental Pension and CRISP Plan for Change of Control ("Plan"). 1.2 Purpose. The Board of Directors of ConAgra has determined that the interests of ConAgra stockholders will best be served by assuring certain employees of adequate retirement benefits in the event of termination of employment or sale of an IOC after a Change of Control of ConAgra. This Plan is intended to promote stability among employees in order to serve the best interests of ConAgra stockholders. Under this Plan, supplemental pension and CRISP benefits will be provided to certain, eligible employees in the event of the employee's termination or sale of an IOC, prior to age 65, after a Change of Control. 2. Definitions. The terms used herein shall have the following meanings unless a different meaning is clearly required by the context: 2.1 "Additional Years of Service" means the additional Years of Service the Eligible Employee would receive if his employment with ConAgra was not terminated (or if the IOC sale described in Paragraph 4 did not occur) prior to his attaining age 65. 2.2 "Board" means the Board of Directors of ConAgra. 2.3 "Change of Control" means: (i) The acquisition (other than from ConAgra) by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, ConAgra or its subsidiaries, or any employee benefit plan of ConAgra or its subsidiaries which acquires beneficial ownership of voting securities of ConAgra) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of ConAgra's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by ConAgra's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Agreement, considered as through such person were a member of the Incumbent Board; or 35 (iii) Approval by the stockholders of ConAgra of a reorganization, merger, consolidation, in each case, with respect to which persons who were the stockholders of ConAgra immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of ConAgra or of the sale of all or substantially all of the assets of ConAgra. 2.4 "Committee" means the Compensation Committee of the Board. 2.5 "Code" means the Internal Revenue Code of 1986, as amended. 2.6 "ConAgra" means ConAgra, Inc., a Delaware Corporation, or any successor thereto. 2.7 "ConAgra Controlled Group" shall mean the controlled group of corporations as defined in Code section 414, which includes ConAgra. 2.8 "CRISP" means the ConAgra Retirement Income Savings Plan, or any successor thereto. 2.9 "Effective Date" of this Plan means January 1, 1989. 2.10 "Eligible Employee" means any of the following employees who have attained age 50 with at least 10 Years of Service at the time of a Change of Control: A. A ConAgra salaried, corporate employee. A corporate employee is an employee who is employed in a corporate administration department. B. A salaried, non-plant IOC Employee. Notwithstanding the preceding, Eligible Employee shall exclude the following: 1. Any ConAgra employee who is a party to a conditional employment agreement with ConAgra. "Conditional employment agreement" refers to those agreements between ConAgra and certain of its executives, previously or hereafter executed, providing certain benefits if another entity acquires control of ConAgra, generally in the form of those agreements incorporated at Exhibit 10.5 to ConAgra's Form 10-K for the fiscal year ended May 29, 1988. 2. Any employee who is not eligible to participate in the Qualified Pension Plan and CRISP. 2.11 "IOC" means an Independent Operating Company of ConAgra. "IOC Employee" means an employee of an IOC. However, ConAgra recognizes that not all IOCs are separate corporations and an IOC Employee may legally be employed by ConAgra or a member of the ConAgra Controlled Group. 2.12 "Qualified Pension Plan" means the ConAgra, Inc. Pension Plan for Salaried Employees or the ConAgra, Inc. Pension Plan for Hourly Rate Production Employees, or any defined benefit retirement plan of ConAgra or a member of the ConAgra Controlled Group, that qualifies under section 401(a) of the Internal Revenue Code of 1986, as amended, whichever applies to the Eligible Employee. If the Eligible Employee participates in more than one such plan, benefits under each plan shall be combined for purposes of this Plan. 36 2.13 "Years of Service" shall have the same meaning as set forth in CRISP. 3. Effect of a Change of Control. In the event of involuntary termination of an Eligible Employee's employment by a member of the ConAgra Controlled Group after a Change of Control, the Eligible Employee shall receive the supplemental pension and CRISP benefit and the supplemental CRISP benefit described herein. An Eligible Employee shall also receive a supplemental pension and CRISP benefit hereunder if the Employee voluntarily terminates his employment with the ConAgra Controlled Group after a Change of Control following a reduction in the Eligible Employee's compensation (including fringe benefits) or a substantial change in the location of the Eligible Employee's job without the Eligible Employee's written consent. Substantial change in location means any location change in excess of 35 miles from the location of the Eligible Employee's job at the time of the Change of Control. Regardless of any other provisions of the Plan, no supplemental pension or CRISP benefit shall be paid if the Eligible Employee's employment with ConAgra terminates after the Eligible Employee attains age 65. 4. Disposition of an IOC Following a Change of Control. An Eligible Employee who is an IOC Employee shall receive a supplemental pension and CRISP benefit hereunder if (i) all of the stock or substantially all of the assets of the IOC of such Eligible Employee, prior to such Eligible Employee attaining age 65 or terminating employment as described in Paragraph 3, are sold or otherwise disposed of following a Change of Control and (ii) the Eligible Employee's employment is subsequently terminated as described in Paragraph 3. For purposes of this paragraph, termination of employment shall not include termination upon the sale or disposition unless the purchaser does not offer employment to the Eligible Employee under similar terms and conditions applicable to the Eligible Employee immediately preceding the sale or disposition. Such a disposition includes the sale of one or more members of the ConAgra Controlled Group which consist of all or a substantial portion of the IOC. Substantial or substantially all means greater than 50%. 5. Amount of Supplemental Pension Benefit. The supplemental pension benefit shall be equal to the result of subtracting the benefit the Eligible Employee will receive under the Qualified Pension Plan from the pension benefit the Eligible Employee would obtain under the Qualified Pension Plan if the Eligible Employee remained in the employ of ConAgra until the Eligible Employee attained age 65. The Eligible Employee's compensation for purposes of computing the supplemental pension benefit (and for purposes of Paragraph 6, below) shall be the greater of the Eligible Employee's compensation for the calendar year preceding his termination or the Eligible Employee's compensation for the calendar year preceding the Change of Control. The supplemental pension benefit is to be computed assuming the Eligible Employee is to receive an unreduced normal retirement pension benefit payable beginning at the later of the date the Eligible Employee attains age 60 or the date of the Eligible Employee's termination of employment, or disposition of the IOC, as described in Paragraphs 3 and 4. If the Eligible Employee begins to receive his supplemental pension benefit at a time other than as described in the preceding sentence, an actuarial adjustment shall be made to reflect such. 6. Amount of Supplemental CRISP Benefit. The supplemental CRISP benefit shall be equal to the amount computed, as follows: A. The Additional Years of Service of the Eligible Employee is multiplied by the Eligible Employee's compensation (as described in Paragraph 5). B. The result in A, immediately above, is multiplied by 2%. 37 C. The result in B, immediately above, is present valued to the date of the Eligible Employee's termination of employment, or disposition of the IOC, by the ConAgra Controlled Group (as described in Paragraphs 3 and 4). The discount factor for such present value shall be the discount factor used by the Qualified Pension Plan at the time of such termination of employment. The present value shall be computed based on the assumption that the result in B, immediately above, is paid ratably (and monthly) over the Additional Years of Service of the Eligible Employee. D. The present value amount determined pursuant to C, immediately above, shall be funded pursuant to Paragraph 8, below. 7. Actuarial Assumptions and Form of Benefit. The actuarial assumptions and methods used by this Plan shall be the same as those used by the Qualified Pension Plan, for the preceding fiscal year. The timing of payment and the form of benefit under this Plan shall be the same as elected by the Eligible Employee under the Qualified Pension Plan for the supplemental pension benefit and the same as elected by the Eligible Employee under CRISP for the supplemental CRISP benefit; provided, however, the Committee must approve the Eligible Employee's form of benefit elected with respect to this Plan. 8. Funding. The supplemental pension and CRISP benefits payable under this Plan shall be unfunded until a voluntary or involuntary termination or a disposition of an IOC (as described in Paragraphs 3 and 4, above) following a Change of Control. Within 60 days following such a termination or disposition, the supplemental pension and CRISP benefits shall be funded, in one lump sum payment, through a trust in the form attached hereto and incorporated by reference. The transferred amount for the supplemental CRISP benefit shall be held in a separate account and separately invested by the trustee. The amount accumulated in such account shall be the sole source of payment of the supplemental CRISP benefit, and shall be the amount of the supplemental CRISP benefit hereunder. ConAgra shall make up any supplemental pension benefit payments the Eligible Employee does not receive under the trust, e.g., if the funds in the trust are insufficient to make the payments due to insufficient earnings in the trust. A separate trust shall be established for each Eligible Employee who is entitled to a supplemental pension or CRISP benefit. The trustee of such trust shall be a national or state chartered bank. If funding of the trust is not made within the sixty day period described in this Paragraph 8, the Eligible Employee's supplemental pension and CRISP benefits shall then be equal to 150% multiplied by the amount of supplemental pension and CRISP benefits described in Paragraphs 5 and 6, above; provided, however, this increase in benefits is not intended to remove ConAgra's obligation to fund the trust. The supplemental pension and CRISP benefits shall not be paid from the assets of the Qualified Pension Plan or CRISP. 9. Notice to Employees. The Vice President of Human Resources of ConAgra shall notify the Eligible Employees of the provisions of this Plan. Any employee receiving written notice of the Plan from such Vice President shall automatically be an Eligible Employee. 10. Administration. This Plan shall be administered by the Committee. A majority vote of the Committee at a meeting at which a quorum is present, or acts reduced to, or approved in writing by, a majority of the members of the Committee, shall be the valid acts of the Committee for purposes of this Plan. 11. Attorneys' Fees, Etc. If an Eligible Employee successfully brings a lawsuit to enforce his rights hereunder, ConAgra shall reimburse the Eligible Employee for any attorneys' fees and expenses incurred by the Eligible Employee with respect to such lawsuit. 38 12. Amendment. This Plan may be amended from time to time by the Board; provided, however, no amendment shall be effective subsequent to the announcement of an event that could result in a Change of Control with respect to a person who is an Eligible Employee on the date of such announcement. 13. Termination. This Plan may be terminated by the Board; provided, however, the Plan may not be terminated after an announcement of an event that could result in a Change of Control with respect to a person who is an Eligible Employee on the date of such announcement. 39 EX-10.9 5 EXHIBIT 10.9 EXHIBIT 10.9 CONAGRA INCENTIVES AND DEFERRED COMPENSATION CHANGE OF CONTROL PLAN 1. Name and Purpose. 1.1 Name. The name of the plan shall be the ConAgra Incentives and Deferred Compensation Change of Control Plan ("Plan"). 1.2 Purpose. ConAgra has adopted, established and/or entered into various long term and short-term incentive, bonus and deferred compensation agreements, programs and plans. Additionally, certain of such arrangements provide that all or a portion of the payments and benefits under such arrangements shall be deferred, vested over future periods and/or paid in ConAgra stock (restricted or unrestricted). The Board of Directors of ConAgra has determined that the interests of ConAgra stockholders will best be served by assuring employees that their incentive, bonus and deferred compensation payments will remain intact during any event that could result in a change of control of ConAgra. This Plan is intended to promote stability among employees in order to serve the best interests of ConAgra stockholders. Under this Plan, payments, benefits and deferred compensation under the incentive, bonus, deferred compensation and similar type arrangements shall be protected in the event of change of control of ConAgra. 2. Definitions. The terms used herein shall have the following meanings unless a different meaning is clearly required by the context: 2.1 "Board" means the Board of Directors of ConAgra. 2.2 "Change of Control" means: (i) The acquisition (other than from ConAgra) by any person, entity or "group," within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act"), (excluding, for this purpose, ConAgra or its subsidiaries, or any employee benefit plan of ConAgra or its subsidiaries which acquires beneficial ownership of voting securities of ConAgra) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of ConAgra's then outstanding voting securities entitled to vote generally in the election of directors; or (ii) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by ConAgra's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of this Agreement, considered as through such person were a member of the Incumbent Board; or (iii) Approval by the stockholders of ConAgra of a reorganization, merger, consolidation, in each case, with respect to which persons who were the stockholders of ConAgra immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote 40 generally in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities, or a liquidation or dissolution of ConAgra or of the sale of all or substantially all of the assets of ConAgra. 2.3 "Committee" means the Compensation Committee of the Board. 2.4 "ConAgra" means ConAgra, Inc., a Delaware Corporation, or any successor thereto. 2.5 "ConAgra Controlled Group" means the controlled group of corporations as described in I.R.C. Section 414(b), which includes ConAgra. 2.6 "Covered Plans" means all incentive, bonus, deferred compensation and similar type arrangements currently or subsequently approved by the Committee or pursuant to authority delegated by the Committee. 2.7 "Effective Date" of this Plan means January 1, 1989. 2.8 "Fiscal Year" means ConAgra's fiscal year. If a Fiscal Year is referred to with respect to a Covered Plan that has a year different than ConAgra's fiscal year, in this instance Fiscal Year shall mean that applicable year. 2.9 "Nondiscretionary Plan" means a Covered Plan under which the award, the incentive, or the payment for a particular year is not subject to the discretion of a member of the ConAgra Controlled Group, i.e., the award or payment is computed by a formula. A "Discretionary Plan" means any Covered Plan that is not a Nondiscretionary Plan. 2.10 "Participant" means a person participating in a Covered Plan. 3. Effect of a Change of Control. In the event of a Change of Control, the following shall apply, regardless of any provision of the Covered Plans: A. All payments, awards and benefits under the Covered Plans shall be immediately nonforfeitable by the Participants. This shall include, but not be limited to, any payment, award or benefit that is deferred and any payment, award or benefit that is payable in ConAgra stock. B. Any Participant terminated after a Change of Control, but prior to the date the Participant would otherwise be eligible (if the provisions of this Plan did not apply) to receive an award, payment or benefit under a Covered Plan shall receive a pro rata award. The pro rata award shall be based upon the number of days the Participant was employed by a member of the ConAgra Controlled Group during the applicable Fiscal Year. C. The method of, and the factors used in, computing the awards, benefits and payments under each Covered Plan may not be changed prior to the Fiscal Year after the Change of Control. Also, any interest cost or overhead charges that relate directly or indirectly to the Change of Control shall be ignored for computing the awards, benefits and payments under each Covered Plan. The following is a list of example items that may not be changed with respect to the Covered Plans. The list is not intended to be all inclusive, but is merely set forth for exemplary purposes. 41 (1) Accounting methods and procedures. (2) Performance objectives, guidelines and formulae (individual or group). (3) Capital charges. (4) Allocation and formulae methods. (5) Participants and eligibility. (6) Payment provisions, e.g., timing of payment and form of payment, except for the funding provisions of Paragraph 4, below. (7) Methods, procedures and formulae for computing bonus pools. (8) Sale, disposition or transfer of all, or a significant portion, of the assets utilized in achieving the original objectives of a Covered Plan. If any changes are made to a Covered Plan before the Fiscal Year following the Change of Control, each Participant in a (1) Nondiscretionary Plan shall receive an award, benefit or payment equal to the maximum award, benefit or payment available under the applicable Covered Plan; and (2) Discretionary Plan shall receive an award, benefit or payment for the Fiscal Year of the Change of Control which is no less than the dollar amount of the highest annual award, benefit or payment the Participant received for any of the preceding three Fiscal Years. D. No Covered Plan may be terminated prior to the Fiscal Year following the Change of Control. 4. Funding. The awards, benefits and payments contemplated under the Covered Plans shall be funded only in accordance with the provisions of the applicable Covered Plan until a Change of Control. Upon a Change of Control, the awards, benefits and payments that are deferred according to the applicable Covered Plan shall be funded, in one lump sum payment, through a trust. The transfer shall be made within 60 days following the later of the date of the Change of Control or the date the award, benefit or payment is computed under the normal administration of the applicable Covered Plan. If the deferral under the applicable Covered Plan is to be made in ConAgra stock, the appropriate number of shares of ConAgra stock shall be transferred to the trust. ConAgra shall make up any award, benefit or payment the Participant does not receive under the trust, e.g., if the funds in the trust are insufficient to make the payments due to insufficient earnings in the trust. A separate trust shall be established for each Participant who is entitled to a deferred award, benefit or payment. The trustee of such trust shall be a national or state chartered bank. If funding of the trust is not made within the sixty day period described in this Paragraph 4, the Participant's deferred award, benefit or payment shall then be equal to 150% multiplied by the amount of the deferred award, benefit or payment the Participant would otherwise receive; provided, however, this increase is not intended to remove ConAgra's obligation to fund the trust. 5. Notice of Employees. The Vice President of Human Resources of ConAgra shall notify the Participants of the provisions of this Plan. 6. Administration. This Plan shall be administered by the Committee. A majority vote of the Committee at a meeting at which a quorum is present, or acts reduced to, or approved in writing by, a majority of the members of the Committee, shall be the valid acts of the Committee for purposes of this Plan. 7. Qualified Plans. The Plan shall neither apply to, nor have any effect on, a ConAgra plan intended to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended. 8. Amendment. This Plan may be amended from time to time by the Board; provided, however, no amendment shall be effective prior to the beginning of the Fiscal Year following 42 the date the action is taken to amend this Plan. 9. Termination. This Plan may be terminated by the Board; provided, however, the Plan may not be terminated prior to the beginning of the Fiscal Year following the date the action is taken to terminate this Plan. 43 EX-10.21 6 EXHIBIT 10.21 EXHIBIT 10.21 CONAGRA, INC EXECUTIVE INCENTIVE PLAN 1. Purpose. The principal purpose of the ConAgra Executive Incentive Plan (the "Plan") is to provide incentives to executive officers and other senior management officers of ConAgra ("ConAgra") who have significant responsibility for the success and growth of ConAgra and to assist ConAgra in attracting, motivating and retaining executive officers on a competitive basis. 2. Administration of the Plan. The Plan shall be administered by the Human Resources Committee of the Board of Directors (the "Committee"). The Committee shall have the sole discretion to interpret the Plan; approve a pre-established objective performance measure or measures annually; certify the level to which each performance measure was attained prior to any payment under the Plan; approve the amount of awards made under the Plan; and determine who shall receive any payment under the Plan. The Committee shall have full power and authority to administer and interpret the Plan and to adopt such rules, regulations and guidelines for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable. The Committee's interpretations of the Plan, and all actions taken and determinations made by the Committee pursuant to the powers vested in it hereunder, shall be conclusive and binding on all parties concerned, including ConAgra, its stockholders and any person receiving an award under the Plan. 3. Eligibility. Executive officers and other senior management officers of ConAgra shall be eligible to receive awards under the Plan. Such participants include the Chief Executive Officer, the members of the Office of the President, other executive and senior management officers and any persons performing similar duties in the future. The Committee shall designate the executive officers and other senior management officers who will participate in the Plan each year. 4. Awards. The Committee shall establish annual and/or long-term incentive award targets for participants. If an individual becomes an executive officer or senior management officer during the year, such individual may be granted eligibility for an incentive award for that year upon such individual assuming such position; provided, if such person is a covered employee under Section 162(m) of the Internal Revenue Code, the eligibility of such person shall be conditioned on compliance with Section 162(m) for tax deductibility of the award. The Committee shall also establish annual and/or long-term performance targets which must be achieved in order for an award to be earned under the Plan. Such targets shall be based on earnings, earnings per share, growth in earnings per share, achievement of annual operating profit plans, return on equity performance, or similar financial performance measures as may be determined by the Committee. The specific performance targets for each participant shall be established in writing by the Committee within ninety days after the commencement of the fiscal year (or within such other time period as may be required by Section 162(m) of the Internal Revenue Code) to which the performance target relates. The performance target shall be established in such a manner than a third party having knowledge of the relevant facts could determine whether the performance goal has been met. 44 Awards shall be payable following the completion of each fiscal year upon certification by the Committee that ConAgra achieved the specified performance target established for the participant. Awards may be paid in cash or securities. Notwithstanding the attainment by ConAgra of the specified performance targets, the Committee has the discretion, for each participant, to reduce some or all of an award that would otherwise be paid. However, in no event may a participant receive an award under the Plan in any fiscal year of more than .1% of ConAgra's market capitalization (stock price multiplied by number of shares outstanding) as of the first day of the fiscal year. 5. Miscellaneous Provisions. ConAgra shall have the right to deduct from all awards hereunder paid in cash any federal, state, local or foreign taxes required by law to be withheld with respect to such awards. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of ConAgra. The costs and expenses of administering the Plan shall be borne by ConAgra and shall not be charged to any award or to any executive officer receiving an award. 6. Effective Date, Amendments and Termination. The Plan shall become effective on July 9, 1999, subject to approval by the stockholders of ConAgra at the 1999 Annual Meeting of Stockholders. The Committee may at any time terminate or from time to time amend the Plan in whole or in part, but no such action shall adversely affect any rights or obligations with respect to any awards theretofore made under the Plan. However, unless the stockholders of ConAgra shall have first approved thereof, no amendment of the Plan shall be effective which would increase the maximum amount which can be paid to any one participant under the Plan in any fiscal year, which would change the performance goals permissible under this Plan for payment of awards, or which would modify the requirement as to eligibility for participation in the Plan. 45 EX-12 7 EXHIBIT 12 EXHIBIT 12 CONAGRA, INC. AND SUBSIDIARIES Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Stock Dividends (Dollars in millions)
Fiscal Year Ended ------------------------------------------------------------------------- 1995 1996 1997 1998 1999 ---------- ---------- ---------- ---------- ---------- Fixed charges: Interest expense $ 326.3 $ 365.5 $ 353.1 $ 368.9 $ 368.3 Capitalized interest 4.9 5.8 11.2 11.4 6.9 Interest in cost of goods sold 17.5 27.5 21.8 19.1 20.0 One third of non-cancelable lease rent 39.1 40.6 37.7 38.8 39.8 ---------- ---------- ---------- ---------- ---------- Total fixed charges (A) 387.8 439.4 423.8 438.2 435.0 Add preferred stock dividends of the Company 39.3 14.6 - - - ---------- ---------- ---------- ---------- ---------- Total fixed charges and preferred stock dividends (B) $ 427.1 $ 454.0 $ 423.8 $ 438.2 $ 435.0 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings: Pretax income $ 848.3 $ 435.5 $ 1,044.0 $ 1,041.0 $ 682.3 Adjusted for unconsolidated subsidiaries 10.6 2.3 (.4) 1.9 (0.8) ---------- ---------- ---------- ---------- ---------- Pretax income of the Company as a whole 858.9 437.8 1,043.6 1,042.9 681.5 Add fixed charges 387.8 439.4 423.8 438.2 435.0 Less capitalized interest (4.9) (5.8) (11.2) (11.4) (6.9) ---------- ---------- ---------- ---------- ---------- Earnings and fixed charges (C) $ 1,241.8 $ 871.4 $ 1,456.2 $ 1,469.7 $ 1,109.6 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Ratio of earnings to fixed charges (C/A) 3.2 2.0* 3.4 3.4 2.6** Ratio of earnings to combined fixed charges and preferred stock dividends (C/B) 2.9 1.9* 3.4 3.4 2.6**
* In 1996, pretax income includes non-recurring charges of $507.8 million. Excluding the charges, the "ratio of earnings to fixed charges" and the "ratio of earnings to combined fixed charges and preferred stock dividends" was 3.1 and 3.0, respectively. See Note 2 "Non-Recurring Charges" on page 41 of the Company's 1996 Annual Report to Stockholders. ** In 1999, pretax income includes non-recurring charges of $440.8 million. Excluding the charges, the "ratio of earnings to fixed charges" and the "ratio of earnings to combined fixed charges and preferred stock dividends" were 3.6. See Note 3 "Non-Recurring Charges" on pages 49 and 50 of the Company's 1999 Annual Report to Stockholders. For purposes 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 non-cancelable 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. For purposes of calculating the above ratio of earnings to combined fixed charges and preferred dividends, preferred stock dividend requirements (computed by increasing preferred stock dividends to an amount representing the pre-tax earnings which would be required to cover such dividend requirements) are combined with fixed charges as described above, and the total is divided into earnings as described above. 46 EX-13 8 EXHIBIT 13 EXHIBIT 13 The following Business Review section (pages 12-31) describes the businesses in which ConAgra operates, provides a fiscal-year-in-review report on these businesses and gives a brief look forward into fiscal 2000. Packaged Foods [PIE CHART] [PIE CHART]
Segment Sales Operating Profit (In millions) (In millions) 1999 $7,465.5 1999* $992.1 1998 $7,192.2 1998 $978.1 % Change +3.8% % Change +1.4%
* Fiscal 1999 segment operating profit excludes certain non-recurring charges. Segment operating profit after the charges was $951.4 million. See Note 3 on page 49. Packaged Foods operating profit increased 1.4 percent. Operating profit increased in the microwave popcorn, meat snacks, chicken foodservice, pizza products, potato products and tortilla businesses, and declined in the shelf-stable foods, frozen foods, cheese products and seafood businesses. Acquisitions contributed to operating profit and to the 3.8-percent segment sales increase. The discussion of results in the Business Review (pages 12-31) excludes the effect of non-recurring charges in fiscal 1999. See page 33 for segment sales and operating profit both before and after non-recurring charges. 12 ConAgra, Inc. 1999 Annual Report 47 FROZEN FOODS PRINCIPAL ACTIVITIES: Production and marketing of frozen foods for grocery, foodservice and special market customers such as club stores and supercenters. MAJOR BRANDS: Healthy Choice, Banquet, Marie Callender's, Kid Cuisine, Butterball, Singleton, Taste O'Sea, Pierce, MaMa Rosa's, Papa G's, Gilardi's, Morton, Patio, Chun King and La Choy. The ConAgra Frozen Prepared Foods group of companies includes ConAgra Frozen Foods, Pierce Foods, Gilardi Foods and ConAgra Seafood Companies. ConAgra Frozen Prepared Foods' sales were about $2.2 billion in fiscal 1999. Operating income for the group increased moderately over the prior year. Competition in the frozen food industry was intense in fiscal 1999. Significant price-cutting overshadowed product innovation industrywide. ConAgra Frozen Foods had a difficult year, but volume was up modestly from fiscal 1998 levels. Operating earnings decreased as marketing spending more than offset lower ingredient and administration costs. Fiscal 1999's best volume performers were the Marie Callender's and Kid Cuisine brands, Banquet bone-in chicken products, products sold internationally, and the ConAgra Frozen Foods products created for and sold through special channels like delis, convenience stores and mass merchandisers. A line of Marie Callender's Skillet Meals and Side Dishes was introduced late in the year. Consumers' early reviews are positive for these innovative and convenient meal solutions that deliver Marie Callender's traditional high quality and "made-from-scratch" taste in less than 20 minutes. Volume for Healthy Choice frozen products was about even with fiscal 1998 volume, and there was good news for this leadership brand. Healthy Choice Bowl Creations were introduced in early fiscal 1999 and were a resounding hit with consumers. Bowl Creations are one-dish, Healthy Choice convenience offerings that taste homemade -- in sturdy, microwaveable bowls. Most consumers who purchased Bowl Creations were new Healthy Choice users, very good news in an industry that depends upon innovation for growth. Healthy Choice Ice Cream performed well, spurred by new Peanut Butter Cup and Old-Fashioned Strawberry flavors. The Banquet poultry line had a good year, highlighted by the successful introduction of Banquet Honey BBQ Style Wings. Banquet Pot Pies rose to record share levels, an extraordinary achievement for Banquet's oldest product but one that has clearly kept up with consumers' changing preferences. Other good performers included Banquet dinners and Banquet's The Hearty One line (a larger-portion-size meal formerly called Extra Helpings, restaged in early fiscal 1999 as The Hearty One). The Banquet dessert pie line was sold in fiscal 1999. 13 ConAgra, Inc. 1999 Annual Report 48 Pierce Foods is a producer of high-quality poultry products for foodservice customers. Fiscal 1999 was Pierce's first full year as part of ConAgra. The "ConAgra connection" enabled Pierce to significantly reduce its operating costs by sharing some production with other ConAgra plants and purchasing poultry supplies internally. The result was an excellent year, with operating income well over plan and the prior year. Pierce also took advantage of ConAgra's product development and distribution strengths to introduce a Pierce Pot Pie for foodservice customers, and to gain important new foodservice customers. Pierce's future on the ConAgra team is a bright one. Gilardi Foods produces and markets quality pizzas and other dough-based products, sold primarily in the refrigerated and frozen cases and at the deli counters of retail outlets. Gilardi's brands include MaMa Rosa's, Papa G's and Gilardi's. Fiscal 1999 was Gilardi's first full year as part of the ConAgra team. Gilardi had an outstanding year, with operating profit well over plan and the year-ago level. The year was highlighted by Gilardi's successful entry into the school lunch business, innovative new products, a general upgrade of most product offerings, the addition of frozen pizzas to Gilardi's refrigerated line, and the introduction of frozen pizza products in Canada. New products included Max Stix, a successful line of cheese-stuffed soft bread sticks introduced in special markets like club stores and mass merchandisers, and the Quick-n-Savory line of pocket sandwiches introduced in retail channels. An Operation Overdrive cost-savings initiative in fiscal 2000 will combine Gilardi's back-office support functions with ConAgra Frozen Foods' in Omaha. ConAgra Seafood Companies include ConAgra Shrimp Companies, O'Donnell-Usen and Meridian Products. Total external seafood sales were about $410 million in fiscal 1999. The seafood industry and our seafood businesses were hit hard in fiscal 1999 by La Nina-related water temperature changes and by Hurricane Georges, which pushed the western Mexico shrimp beds out to sea, resulting in the lowest Mexican shrimp harvest in more than 20 years. Our commodity shrimp volume was down substantially, and seafood operating earnings in total declined from fiscal 1998 results. U.S. seafood consumption was flat. ConAgra Shrimp Companies, our largest seafood business, had a reasonably good year in its base foodservice and deli businesses but was hurt by higher raw material prices and exiting an unprofitable business line. ConAgra Shrimp's earnings declined. Meridian Products, a worldwide seafood trader, sources much of its shrimp in Mexico. The poor harvest there caused a sizeable decline in Meridian's sales volume. Operation Overdrive initiatives under way should reduce ConAgra Shrimp's manufacturing costs, increase collaboration in developing key customers and increase seafood sales to other ConAgra companies. A superb example of cross-company teamwork is already in place: the No. 1 frozen fish dinner in the U.S. is our Banquet Fish Stick Meal; ConAgra Seafood sells the fish to 14 ConAgra, Inc. 1999 Annual Report 49 Banquet, its largest customer. We expect improved seafood results in fiscal 2000. For fiscal 2000, the ConAgra Frozen Prepared Foods companies plan increased operating efficiencies, smart marketing and innovative new products to drive sales growth. SHELF-STABLE FOODS PRINCIPAL ACTIVITIES: Production and marketing of primarily shelf-stable foods for grocery, foodservice and special market customers. MAJOR BRANDS: Hunt's, Healthy Choice, Wesson, Orville Redenbacher's, Slim Jim, Act II, Peter Pan, Van Camp's, Beanee Weenee, Manwich, Hunt's Snack Pack, Swiss Miss, Knott's Berry Farm, Chun King, La Choy, Rosarita, Gebhardt, Wolf Brand, Pemmican, Rough Cut, Penrose, Andy Capp's, Advantage\10 and Culturelle. ConAgra Grocery Products Companies include ConAgra Grocery Products Company (formerly Hunt-Wesson), Golden Valley Foods, GoodMark Foods and Arrow Industries. Fiscal 1999 was a year of significant change for ConAgra Grocery Products Company. Early in the fiscal year, a new management team from within ConAgra was tapped to lead the company's growth. Following the successful fiscal 1998 reorganization of ConAgra Grocery's sales organization around its customers, the company in fiscal 1999 reorganized its business units around consumers, creating four groups: Ingredients, Snacks, Meals and Functional Foods. That reorganization led to a streamlining of ConAgra Grocery's headquarters staff. Late in the year, the company announced three plant closings and one partial plant closing to make its manufacturing system more efficient, and the closing of four distribution centers to improve product movement to customers. In the second half of the year, a new $50 million Hunt's Snack Pack pudding plant began start-up operations in the Midwest, adding needed, state-of-the-art capacity for the successful Snack Pack line. The marketplace for ConAgra Grocery's branded shelf-stable products was a challenging one in fiscal 1999 -- intense competition in most categories, low or no category growth, and continuing consolidation of the company's retail customers. ConAgra Grocery Products Company's unit volumes were modestly lower than the year-ago level, largely as a result of a planned effort to better match product shipments to consumption patterns. A one-week-shorter fiscal year also impacted volumes. For ConAgra Grocery Products Company in total, earnings declined from fiscal 1998 results. Sales were about $2.1 billion in fiscal 1999. Results for the products in the Ingredients group were mixed. Fiscal 1999 was a very good year for branded oil products. Wesson products were promoted aggressively, but a commodity oil price increase hurt overall oil products earnings. A tomato shortage and low inventories caused Hunt's to curtail the promotion of tomato products in the second half of fiscal 1999. Unit volumes and earnings decreased as a result, although a price increase reflecting demand offset much of the negative earnings impact. Hunt's Ketchup performed well, with unit volumes up moderately in a relatively flat category. 15 ConAgra, Inc. 1999 Annual Report 50 Results for products in the Snacks group also were mixed. Unit volumes for puddings and cocoa products increased. Hunt's Snack Pack Puddin' Pies, new in fiscal 1998, were a major success with consumers. This innovative product line brought significant numbers of new buyers to the snack pudding category. Swiss Miss cocoa products had an excellent year, helped by a cold-weather-triggered advertising program. Unit volumes were down for Orville Redenbacher's popcorn products, but Orville Redenbacher's new Double Feature Popcorn was a hit with consumers -- and the winner of an American Marketing Association Edison Award as one of the year's best new products. Many of the purchasers of Double Feature Popcorn -- jumbo-size popcorn with a real butter pour-over sauce -- are new users of microwave popcorn products. Peter Pan Peanut Butter results were affected somewhat by higher peanut prices and costs to introduce the new Peter Pan Honey Roasted Peanut Butter. New product introduction costs also impacted results in the Knott's Berry Farm jam, jelly and preserve business. The Meals business unit includes Healthy Choice Soups, Manwich, Hunt's and Healthy Choice pasta sauces, Wolf Brand Chili and Chun King and La Choy Oriental products. Healthy Choice Soups strengthened its category leadership position in fiscal 1999 although volumes for the year declined across the healthy soups category, including Healthy Choice Soups unit volumes. Unit volumes also declined for pasta sauces. Most offerings in the Healthy Choice Soups line were reformulated during the year, and the new, more flavorful products will be introduced for the fiscal 2000 soup season. ConAgra Grocery worked with flavor experts from its sister company USFI and, through new technologies, achieved significantly improved taste. Another ConAgra Grocery Products Company group is Functional Foods. Two product lines have been introduced so far: Advantage\10 and Culturelle. Advantage\10 is a breakthrough line of low-fat vegetarian products with less than 10 percent of calories from fat, endorsed by physician Dr. Dean Ornish, well-known for his pioneering work in reducing heart disease through diet. Introduced in fiscal 1998, Advantage\10 was honored by the American Marketing Association with an Edison Award as one of the year's best new products. Advantage\10 products continue to expand distribution across the U.S., and early results are promising. Culturelle is a dietary supplement that aids digestion by helping restore and maintain the balance of bacteria in the digestive system. Distribution of Culturelle has been expanding since its introduction in the first half of fiscal 1999. Golden Valley Foods is a leading marketer of microwave popcorn, specialty snacks and other convenient food products sold internationally in mass-merchandising outlets, vending machines and grocery, drug, club, convenience and video stores. Its principal brand is Act II. Golden Valley had an excellent year, significantly increasing grocery store distribution for Act II popcorn products and growing unit volumes. Golden Valley worked with Verde Valle, S.A. to significantly grow Act II microwave popcorn's presence in Mexico. Verde Valle, 50-percent owned by ConAgra, is a leading packager and distributor of grocery products in Mexico. 16 ConAgra, Inc. 1999 Annual Report 51 Act II promotional tie-ins with Warner Brothers and National Basketball Association teams reinforced Act II's leadership as an "entertainment brand" of popcorn. Golden Valley grew its seasonal popcorn novelty business and its ready-to-eat popcorn business in fiscal 1999. And Golden Valley launched the Act II Big Softy into selected markets during the year. The Big Softy is the only shelf-stable soft pretzel available in retail markets. Convenient to reheat, it delivers "fresh-baked" taste. Act II Big Softy distribution will expand in fiscal 2000. Early in fiscal 1999, GoodMark Foods merged with ConAgra and became a unit of ConAgra Grocery Products, working with Golden Valley to take advantage of opportunities for synergies in snack foods marketing and distribution. GoodMark is a leading marketer of branded meat snacks and grain-based snacks. Brands include Slim Jim, Penrose, Pemmican, Rough Cut and Andy Capp's. GoodMark's performance in fiscal 1999 was outstanding, far better than anticipated. Slim Jim meat snacks made major gains in distribution and in-store placement, and operating profit and volumes were up strongly. Unit volumes for Pemmican jerky products grew substantially, spurred by the introduction of a resealable bag. Golden Valley as a whole achieved a good earnings increase, helped by GoodMark's performance and in spite of low corn prices that hurt the results of Golden Valley's Vogel Popcorn unit, a foodservice and commodity popcorn supplier. Arrow Industries is a manufacturer and distributor of private label consumer products for the grocery trade. Arrow's operating profit declined from the previous year. We expect fiscal 2000 to be a good year for ConAgra Grocery Products Companies. These companies are aggressive and innovative, and they are unwaveringly focused on helping their customers succeed by meeting consumers' needs. FOODSERVICE PRODUCTS PRINCIPAL ACTIVITIES: Production and marketing of potato products, Mexican food products, hand-held dough-based products and other products primarily for foodservice markets. MAJOR BRANDS: Lamb Weston, Fernando's, Casa de Oro and Holly Ridge. Fiscal 1999 marked the beginning of a stronger, more effective ConAgra-wide focus on meeting the many special needs of foodservice customers. During the year, ConAgra Foodservice Company was established to capitalize on our many foodservice assets and resources. ConAgra Foodservice Company is working with all ConAgra companies to help focus and direct foodservice assets and resources for optimum customer service and success. 17 ConAgra, Inc. 1999 Annual Report 52 ConAgra Foodservice Company included Lamb Weston, Fernando's Foods and Casa de Oro in fiscal 1999. Holly Ridge Foods, Zoll Foods and our seafood businesses have already joined the group in fiscal 2000. While some other foodservice businesses may remain in existing operating groups to leverage operating synergies, we will organize their customer services as part of the overall ConAgra foodservice team for maximum effectiveness. Lamb Weston supplies potato products to most of the leading restaurant chains and foodservice distributors in the U.S., Europe and Asia. Lamb Weston products are sold in more than 70 countries on six continents. Annual sales exceed $1 billion. Lamb Weston's retail brand is Inland Valley. U.S. and world demand for frozen potato products was strong in fiscal 1999; North American demand was up slightly, and global demand was mixed, strong in Europe but soft in Asia. As Lamb Weston's foodservice customers open new restaurants around the world, Lamb Weston is well-positioned to provide the potato products they need, when they need them and where they need them. In fiscal 1999, Lamb Weston had another good year. The company's good performance was driven by growth in international markets, a product mix with more value-added offerings, and operating efficiencies. Lamb Weston was able to overcome the effects of a poor potato crop in the northwestern U.S. through good manufacturing practices and a strong sales performance in the U.S., Mexico and Europe, including a good increase in value-added products sold in Europe. Exports to Asia, especially China and Korea, grew, as did U.S. retail sales. A poor potato crop in Europe enabled Lamb Weston's domestic operations to capture incremental business from South American customers who could not get the products they needed from European suppliers. A new Lamb Weston potato processing plant in Alberta, Canada, began its start-up at the end of fiscal 1999. The plant is in one of North America's best potato-growing regions and will significantly enhance Lamb Weston's ability to serve its foodservice customers. In fiscal 2000, Lamb Weston plans continued emphasis on providing foodservice customers with innovative and convenient menu solutions, and providing consumers with delicious and easy-to-prepare potato products. We expect another good year for Lamb Weston. Fernando's Foods joined ConAgra in the first quarter of fiscal 1999. Fernando's produces a wide range of frozen prepared Mexican entrees, snacks and appetizers sold to food distributors, convenience stores and in-store delis. Fernando's is the second largest supplier of frozen Mexican food products to the foodservice industry. Sales of Mexican foods are growing rapidly in the U.S. Fernando's achieved its profit plan in fiscal 1999. Casa de Oro Foods processes grain-based food products -- including tortillas, corn chips and taco shells -- for large-volume foodservice and contract-packing customers. Casa de Oro's earnings were up for the year. 18 ConAgra, Inc. 1999 Annual Report 53 At the beginning of fiscal 2000, ConAgra acquired Holly Ridge Foods, which will operate as part of Lamb Weston. Holly Ridge Foods is a producer of a wide variety of fruit turnovers made for grocery in-store bakeries and foodservice operations including national quick-service restaurants. Holly Ridge is known in the industry for its ability to develop custom and proprietary formulations to meet specific customer needs. We expect good foodservice growth in fiscal 2000 as the ConAgra foodservice team collaborates across operating companies to deliver a broad mix of menu solutions to our customers. DAIRY CASE PRODUCTS PRINCIPAL ACTIVITIES: Production and marketing of branded processed cheeses, tablespreads, cholesterol-free egg products and dessert toppings for retail, foodservice and industrial markets. MAJOR BRANDS: Parkay, Blue Bonnet, Fleischmann's, Egg Beaters, Healthy Choice, County Line, Reddi-wip, Treasure Cave, Touch of Butter, Chiffon and Move Over Butter. ConAgra products sold in the dairy case are part of the Beatrice Group, which includes Beatrice Cheese Company, tablespreads, Egg Beaters and Reddi-wip. Annual sales for the Beatrice Group are about $1.3 billion. The tablespreads and Egg Beaters business was acquired in the first quarter of fiscal 1999. Egg Beaters, the first fat-free, cholesterol-free egg product, is a "healthy foods" pioneer and the longtime market leader. The tablespreads business manufactures and markets margarine under the well-known names of Parkay, Blue Bonnet, Fleischmann's, Touch of Butter, Chiffon and Move Over Butter. During fiscal 1999, Beatrice Foods, the branded retail products group, focused on managing business combination issues, improvements in product quality and mix, and controlling costs. Beatrice Foods performed well in fiscal 1999, with unit volumes and earnings better than projected at the time of the acquisition. The Reddi-wip dessert toppings business had a good year with unit volumes and earnings up nicely. Earnings and volumes declined for Beatrice's branded retail cheese business. In fiscal 2000, Beatrice Foods plans continued improvements in product quality and product mix, enhanced sales and marketing programs, and continued growth in volumes and earnings. The Swissrose International retail deli cheese business markets both specialty imported and domestic cheeses to supermarket delis and other specialty cheese outlets. Both unit volumes and earnings grew strongly in fiscal 1999, the third consecutive year of good growth for this business. Beatrice Cheese produces and markets cheese products and dessert toppings to foodservice distributors and industrial customers. Fiscal 1999 was a difficult year for Beatrice Cheese. Volumes declined as a result of closing a plant in Washington. Record-high butterfat prices forced high raw material costs for processed cheese, and volatile milk prices didn't help. Earnings for Beatrice Cheese were down for the year. Beatrice Cheese consolidated production at more efficient plants during fiscal 1999, and manufacturing costs are improving. Ingredient costs also should moderate in fiscal 2000, and we expect improved results. 19 ConAgra, Inc. 1999 Annual Report 54 Refrigerated Foods
[PIE CHART] [PIE CHART] Segment Sales Operating Profit (In millions) (In millions) 1999 $11,549.3 1999* $360.9 1998 $11,416.2 1998 $204.6 % Change +1.2% % Change +76.4%
* Fiscal 1999 segment operating profit excludes certain non-recurring charges. Segment operating profit after the charges was $4.0 million. See Note 3 on page 49. Refrigerated Foods operating profit increased 76.4 percent, rebounding strongly from fiscal 1998's industrywide depressed results. Operating profit increased for the pork, beef, chicken and turkey businesses. The branded processed meats business, the segment's largest profit contributor, increased operating profit at a double-digit rate. Segment sales increased 1.2 percent. 20 ConAgra, Inc. 1999 Annual Report 55 PRINCIPAL ACTIVITIES: Production and marketing of branded processed meats, beef and pork products, and chicken and turkey products. MAJOR BRANDS: Butterball, Healthy Choice, Armour, Eckrich, Swift Premium, Decker, Ready Crisp, Cook's, Hebrew National, Monfort, Country Pride, To-Ricos, Texas BBQ, Brown 'N Serve, Golden Star and National Deli. ConAgra's processed meats businesses had a good year, with growth in almost all sectors. These companies achieved an earnings increase in fiscal 1999, beating last year's excellent results. Key drivers of the increase were top-line growth in branded products and deli/foodservice products, and lower ingredient costs, which more than offset a drop in exports to Russia. Processed meats industry conditions were difficult in fiscal 1999, with moderately reduced consumption and increased competitiveness. Our processed meats businesses improved their market positions in most key categories. Innovative new products gave consumers new reasons to buy processed meats. Healthy Choice Savory Selections are tasty new varieties of luncheon meats with zesty spices, seasonings and herbs, and they're 97-percent fat free. Flavors such as Honey Mustard Ham and Mesquite Flavored Smoked Turkey Breast meet consumers' desires for more flavorful healthy foods. Healthy Choice Savory Selections did well in their introductory year. Eckrich Smoked Grillers were introduced during the year to a strong positive consumer response. Eckrich Smoked Grillers are ready-to-grill skinless smoked sausage links in five popular flavors. Another of the year's consumer favorites was not a "new" product, but expanded distribution brought the product line new fans. Eckrich Lunch Makers, meals and snacks packaged so young consumers can build their own creations, entered new markets and achieved a dramatic increase in volume year-to-year. And Swift Premium Brown 'N Serve Sausage, an old favorite in an established category, increased volume, share and earnings for the third year in a row. Similarly, the Armour meatball business continued its good growth and profitability. Through an acquisition in late fiscal 1998, we augmented our precooked bacon business. The combination of the acquisition and our existing precooked bacon business made ConAgra a leading supplier of precooked bacon products to foodservice customers. Fiscal 1999 sales and profits were better than anticipated. Ready Crisp and Armour brand precooked bacon expanded distribution in retail markets during the year. 21 ConAgra, Inc. 1999 Annual Report 56 Fiscal 1999 was a banner year for the processed meats deli and foodservice business. With a solid volume increase, this business led the processed meats group in earnings growth. The deli business grew by expanding distribution and introducing new products, including Butterball and Healthy Choice Golden Brown Turkey Breast products and Eckrich Black Angus Beef. Foodservice strength came from new large-volume customers and new business with existing customers. Our processed meats companies also turned in good performances in food and workplace safety. ConAgra Refrigerated Prepared Foods' food safety leadership was recognized by the U.S. Department of Agriculture, and the company sponsored a food safety workshop for smaller companies. The company's Brown 'N Serve plant in Illinois earned special status (achieved by less than 1 percent of U.S. workplaces) from the Occupational Safety and Health Administration as part of the Voluntary Protection Plan for work sites that far exceed safety compliance criteria. The Cook Family Foods ham business had another excellent year, achieving its profit plan and beating fiscal 1998 results. Volumes increased solidly, driven by sales of Cook's popular spiral-sliced ham and a good increase in Cook's base business. Cook's also grew its corned beef business. Good volumes and a focus on becoming more cost-efficient combined to produce an earnings increase for Cook's. National Foods also had a good year. Its Hebrew National products did very well in the marketplace during the year and, in the fourth quarter, began expanding to nationwide distribution. A major advertising campaign (with Hebrew National's longtime "We Answer to a Higher Authority" theme) raised awareness with consumers, and early results are positive. We expect another increase in processed meats earnings in fiscal 2000. ConAgra's fresh beef and pork businesses produce and market fresh meat products for customers in domestic and international markets. Annual sales of ConAgra's U.S.-based fresh meat companies are about $6.7 billion. ConAgra's Australia Meat Holdings Pty Ltd. (AMH), a major Australian beef processor and exporter, has annual sales of more than $950 million. Fiscal 1999 was a rebuilding year for our U.S. beef business. The primary focus was on significant enhancement of product quality and customer service, and results of this effort are encouraging. Customer feedback and our own testing show superior product quality that delivers greater value to our customers. Major initiatives also were undertaken to improve risk management programs and manufacturing efficiencies. On the risk management side, our beef companies work closely with the ConAgra Trade Group team to procure grain, hedge commodity risks and sell byproducts. In late fiscal 1999, 22 ConAgra, Inc. 1999 Annual Report 57 restructuring initiatives to improve manufacturing efficiencies and overall costs -- one plant closing, one partial plant closing and a companywide administrative workforce reduction -- were announced. A new leader of ConAgra Beef Companies joined ConAgra in May 1999, further strengthening the management team we have been building over the past 18 months. We now have in place an aggressive, talented and focused management team that is making substantial improvement in our beef businesses. U.S. beef results were much better in fiscal 1999 than in fiscal 1998, but still did not meet the business' long-term potential. An oversupply of U.S. red meat and poultry continued in fiscal 1999, but began to moderate somewhat as the year progressed. Sluggish export markets compounded the oversupply problem, and beef processing margins were squeezed industrywide as beef struggled to compete for consumer purchases with cheaper and plentiful pork and poultry products. Better risk management programs coupled with somewhat better economics resulted in a major positive swing in cattle feeding earnings. Despite weak Asian demand for hides, markets for byproducts were more favorable in fiscal 1999. Our Australian beef business had an outstanding year in fiscal 1999. AMH benefited from an exceptionally good management team, good industry conditions and the relative weakness of the Australian dollar in export markets. AMH earnings were well over plan and the previous year. AMH substantially improved its manufacturing efficiency in fiscal 1999. A new beef processing plant -- with state-of-the-art production capability, cost structure and food safety systems -- opened near Brisbane. An old and much smaller facility was closed. We expect AMH to have another good year in fiscal 2000, and we expect improved earnings for the U.S. beef business. Operation Overdrive initiatives to increase internal purchasing across ConAgra will significantly benefit our beef businesses. Beef sales to other ConAgra companies began to increase in fiscal 1999, and will increase more in fiscal 2000. In fiscal 1999, our U.S. beef processing business became the first multi-plant meat processor in the U.S. to have its entire processing operation under a uniform food-safety intervention program. The ConAgra Beef Carcass Pasteurization System is state-of-the-art and, in the view of university experts with whom ConAgra Beef worked in designing the process, probably the best in the beef industry. 23 ConAgra, Inc. 1999 Annual Report 58 Swift & Company, our fresh pork business, had a good year, with results well above plan and fiscal 1998's performance. Volumes increased significantly, thanks in part to retailers featuring more pork products at attractive prices. Raw material costs declined in the face of a continuing oversupply of U.S. pork and weak export demand. Swift also benefited from increasing the percentage of its product sold as value-added and from companywide cost reductions and productivity improvements. A meaningful percentage of Swift's raw material costs is determined by procurement contracts. Earnings were held down significantly in fiscal 1999 by hog contracts at higher-than-market prices, but over time contracts are a valuable risk management tool for both producers and processors. Zoll Foods, which became part of Swift & Company in the second half of fiscal 1998, is a leading processor and marketer of custom-cut pork ribs and other pork products for foodservice customers. Zoll had a good year, with solid increases in volumes and profitability. Zoll implemented an aggressive new product innovation program and gained a number of new customers during the year. Fiscal 2000 should be another good year for Swift, although we expect raw material costs to rise as the number of available hogs declines. Our poultry businesses are ConAgra Poultry Company (chicken products) and Butterball Turkey Company (turkey products). ConAgra Poultry had fiscal 1999 sales of about $1.4 billion. Butterball Turkey had sales of more than $350 million, excluding significant intercompany sales for further-processed turkey products. U.S. per capita consumption of chicken products continued on its robust long-term growth trend in fiscal 1999. Industry conditions were difficult in fiscal 1999, however, with too much protein in the market and a severe drop in dark meat exports to Russia. Lower feed ingredient costs were a positive. ConAgra Poultry made considerable progress in fiscal 1999, with results still not up to potential, but much better than in fiscal 1998. 24 ConAgra, Inc. 1999 Annual Report 59 ConAgra Poultry dramatically strengthened senior management during the year. The new president is a well-respected business and industry leader, and new executives leading manufacturing and sales are at the top of their fields. We now have in place an excellent poultry management team poised for growth. ConAgra Poultry benefited in fiscal 1999 from good fast-food demand, cost improvements and an increasing percentage of value-added products. Professional Food Systems, ConAgra Poultry's distribution business, had a good year, as did the Puerto Rican chicken products business. Texas Signature Foods, which was part of ConAgra Poultry, became part of ConAgra's processed meats business in the middle of fiscal 1999. Early in fiscal 2000, ConAgra Poultry introduced the unique "Fresh Trace" symbol on Butterball Fresh Chicken products. Fresh Trace, which enables Butterball to trace every chicken product from the farm to the store, illustrates Butterball's commitment to freshness, quality and safety. We expect continued improvement in ConAgra Poultry's results in fiscal 2000 as the new management team aggressively moves this business forward. The turkey industry as a whole was unprofitable for the third straight year as supply continued to outpace demand. While Butterball Turkey Company reduced its operating loss during the year, results are still not up to the business' potential. Butterball is America's favorite brand of turkey, and Butterball branded products continue to do well in the marketplace. Highlights of Butterball's performance include volume increases in both branded further-processed turkey products and branded whole birds. Value-added products grew significantly as a percent of all Butterball sales, including cooked turkey products, Butterball Fresh Cuts and fully prepared holiday turkey dinners. Lower feed ingredient costs helped results in fiscal 1999. Manufacturing efficiency in fiscal 2000 will be improved by the consolidation and reorganization of Butterball's commodity turkey operations, including the sale of a California turkey processing plant early in fiscal 2000. Turkey supplies are expected to decline, and Butterball -- with its strong consumer franchise -- is well-positioned for earnings improvement in a better industry environment. 25 ConAgra, Inc. 1999 Annual Report 60 Agricultural Products
[PIE CHART] [PIE CHART] Segment Sales Operating Profit (In millions) (In millions) 1999 $5,579.5 1999* $354.8 1998 $5,611.1 1998 $390.2 % Change -.6% % Change -9.1%
* Fiscal 1999 segment operating profit excludes certain non-recurring charges. Segment operating profit after the charges was $311.6 million. See Note 3 on page 49. Operating profit increased in our crop inputs, specialty food ingredients, oat processing and international businesses. Results declined for the grain merchandising, commodity services, edible bean, flour milling and dry corn processing businesses. As a result, segment sales decreased .6 percent and Agricultural Products operating profit decreased 9.1 percent, due in part to historically low commodity prices that slowed volume movements. Divestitures contributed to the decreases in sales and operating profit. 26 ConAgra, Inc. 1999 Annual Report 61 AGRICULTURAL INPUTS PRINCIPAL ACTIVITIES: Distribution of crop inputs (seeds, fertilizer products, crop protection chemicals and information systems) in the United States, Argentina, Bolivia, Canada, Chile, Ecuador, France, Mexico, Peru, South Africa, the United Kingdom and Zimbabwe. MAJOR BRANDS: Clean Crop, ACA, mPOWER3, Savage, Shotgun, Starane and Signature. United Agri Products (UAP) is a leading global distributor of crop inputs. Annual sales are about $3.2 billion. Crop protection chemical sales declined industrywide in UAP's fiscal 1999 for several reasons: depressed global commodity prices and struggling farm economies worldwide, the rapid introduction of biotech seeds, and unfavorable weather conditions in some regions. UAP again managed well in a challenging environment, however, growing internationally, developing new products, improving product mix, increasing joint opportunities with other ConAgra companies and reorganizing to lower costs and increase efficiencies. UAP added significantly to its international base in fiscal 1999, acquiring a majority interest in Phyto-Service, S.A., a crop input business in France, and forming a joint venture in the U.K. with SCATS, a large farmer-owned seeds, crop input and grain business. UAP also started businesses in Argentina, Bolivia, Ecuador and Peru during the year. A number of small acquisitions in the U.S. added to UAP's domestic base. New UAP products introduced during fiscal 1999 include Starane, a more effective herbicide for wheat, developed jointly by UAP and Dow AgroSciences; Signature, a new fertilizer developed exclusively for the growing golf course market; and mPOWER3, an information systems program designed to help growers use technology to increase yields. UAP also distributes new products developed by its suppliers and continues as a leader in the distribution of new biotechnology products designed to improve foods and farming. In the U.S., UAP's most significant geographic region, planted acres of corn and soybeans were up slightly in total. A wet spring in the Midwest and dry conditions in the Southwest combined with low commodity prices and increased usage of biotech seeds to reduce demand for crop inputs. UAP responded by taking costs out of its system, introducing new products and services for growers and marketing biotech products, resulting in increased margins. Fiscal 1999 was UAP's 16th consecutive year of record sales and earnings. 27 ConAgra, Inc. 1999 Annual Report 62 In the middle of fiscal 1999, UAP restructured its U.S. organization -- from 22 operating companies to 13. The streamlined organization is designed to make UAP even more responsive to customers and suppliers, and to increase efficiencies and lower costs across the company. Operation Overdrive initiatives to team up with other ConAgra companies hold significant promise for UAP. The company is working with Lamb Weston to supply products to potato growers and with ConAgra Grocery Products Company to serve tomato growers. UAP is working with ConAgra Trade Group and Monsanto Company to help U.S. growers find markets for biotech corn. UAP continues to be a leader in responsible environmental stewardship. The company is a longtime national leader in the recycling and reuse of empty crop protection chemical containers, and runs an extensive program to educate customers and businesses about the environmentally sensitive use of agricultural chemicals. In the U.K., the Willmot Pertwee Conservation Trust works with schools to promote knowledge and appreciation of conservation. In the U.S., UAP has worked for three years with the U.S. Department of Agriculture on an innovative initiative to encourage farmers to create buffer strips -- land maintained in permanent vegetation -- to intercept potential pollutants. More than 575,000 miles of buffer strips have been created since the program began in 1997. In UAP's fiscal 2000, the number of U.S. acres planted in corn and soybeans is expected to be about the same as in fiscal 1999. UAP's success depends on continuing to find new ways to help farmers succeed, continuing its domestic and international growth, continuing to manage well in a rapidly changing environment, increasing teamwork with other ConAgra companies and improving efficiencies across its system. Although the difficult farm economy presents major challenges for UAP, we expect another year of earnings growth. The international fertilizer business had a reasonably good year in spite of continued weak demand in Asian markets. Improved results in North and South America more than made up for softness in Asia. AGRICULTURAL TRADING AND PROCESSING PRINCIPAL ACTIVITIES: Sourcing, trading, processing and distribution of grain-based products and food ingredients around the world. MAJOR BUSINESSES: Grain procurement and merchandising; food-related commodity trading; commodity services; barley malting; dry edible bean processing and merchandising; flour, oat and corn milling; specialty food ingredients manufacturing. 28 ConAgra, Inc. 1999 Annual Report 63 ConAgra Trade Group was formed early in fiscal 1999. The Trade Group includes ConAgra's grain, edible bean and commodity services businesses. ConAgra Trade Group offers both external and internal customers responsive and sophisticated purchasing, selling and risk management services. ConAgra Trade Group's Agricultural Division (formerly ConAgra Grain Companies) is the largest business in ConAgra Trade Group and is a leading global grain merchandiser. A number of factors combined in fiscal 1999 to keep the U.S. grain industry in a slump. Export demand was soft due to a global oversupply of grain and the economic woes in Asia, ConAgra's leading grain export market in more normal years. Grain prices were at historic or near-historic lows. The low prices and U.S. government payments made it more economical for some farmers to store grain rather than sell it. Grain movement in the U.S. slowed dramatically as a result, and ConAgra's grain business suffered along with the rest of the industry. Earnings declined substantially from the fiscal 1998 level. The grain industry is not expected to strengthen quickly, since large crops in most major global grain-producing areas and weak demand have created an oversupply. We expect ConAgra Trade Group's Agricultural Division to manage well in the tough environment and achieve some earnings improvement in fiscal 2000. In late fiscal 1999, the headquarters of ConAgra's grain business consolidated from multiple locations to the new Global Trading Center on ConAgra's headquarters campus in Omaha. The Global Trading Center is a high-tech, high-energy, high-synergy nerve center for ConAgra's commodity and financial trading activities. It is a marketplace where ConAgra companies can source raw materials and more effectively manage their risk in an increasingly complex market. The combination of so much of ConAgra's trading brainpower and commodity buying power in one place creates a dynamic environment for teamwork. In late fiscal 1999, ConAgra Trade Group's Agricultural Division and Monsanto Company announced a joint marketing agreement for ConAgra to source from U.S. producers corn that has been developed using biotechnology. ConAgra will separate, or "identity preserve," biotech corn varieties not yet approved for export to all markets. As part of the restructuring plan, ConAgra Trade Group's Agricultural Division also closed nine grain elevators to improve efficiencies across its system. ConAgra Trade Group's feed ingredient merchandising and energy services businesses were hurt by low commodity prices and low volatility in commodity markets. Results were well below fiscal 1998's excellent performance. KBC Trading and Processing Company's core business is the processing and trading of dry edible beans. The bean business also was caught in the global 29 ConAgra, Inc. 1999 Annual Report 64 commodity price crash. Overall world bean demand was down and exports fell as a result. KBC's results were not good, and were below the fiscal 1998 level. As part of ConAgra's companywide restructuring, KBC will exit certain unprofitable trading businesses in fiscal 2000. ConAgra Flour Milling Company, a longtime leader in the U.S. flour milling industry, has 25 mills in 14 states. ConAgra also jointly owns one flour mill with another company. Annual flour volume, excluding the jointly owned mill, is about 6.4 billion pounds. The per capita consumption of flour and of grain-based foods in general remains strong, but the healthy demand is resulting in new capacity and increased competitiveness. The customer-focused ConAgra Flour Milling team is responding aggressively, especially in fast-growing population areas of the U.S. In late fiscal 1999, ConAgra acquired certain assets of Capitol Milling Co. LLC, including a new, state-of-the-art flour mill in Southern California. A major modernization and expansion project at a Colorado flour mill, expected to be completed in late fiscal 2000, will create one of the most technologically advanced flour mills in the U.S. ConAgra Flour Milling had a good year, with operating profit over expectations but down somewhat from fiscal 1998's outstanding results. Much of the year-to-year difference was due to the superior-quality wheat crop in fiscal 1998, which increased manufacturing yields significantly. The wheat crop in fiscal 1999 was closer to average, and yields moderated accordingly. We expect flour demand to remain strong in fiscal 2000, and wheat supplies and quality looked favorable as fiscal 1999 ended. A full year of Capitol Milling contributions should boost results, and we expect increased earnings for ConAgra Flour Milling in fiscal 2000. Fiscal 1999 was the first full year for ConAgra's new flour mill in Puerto Rico. The feed business in Puerto Rico was sold during the year. Puerto Rico results improved substantially. Results in other U.S. milling businesses were mixed. Earnings increased in oat processing and declined in corn processing. An Operation Overdrive initiative in fiscal 2000 will combine the administrative functions supporting the flour, corn and oat processing businesses. The most profitable of ConAgra's trading and processing businesses in fiscal 1999 was United Specialty Food Ingredients Companies (USFI). USFI manufactures and markets internationally a broad line of food ingredients -- flavorings, seasonings, blends and other specialty ingredients. The largest USFI business is Gilroy Foods, a leading supplier of onion, garlic, capsicum (pepper) and other food ingredients. Gilroy performed well in fiscal 1999 despite the loss of more than half the U.S. garlic crop to disease. Resulting volume shortfalls challenged Gilroy, but the Gilroy team scrambled and found ways to meet supply commitments. Overall, operations improved 30 ConAgra, Inc. 1999 Annual Report 65 from fiscal 1998's results. Results in other major USFI businesses were mixed, but earnings for the USFI group as a whole increased significantly from the strong fiscal 1998 level. USFI expects a good year in fiscal 2000. Results were mixed for our international trading and processing businesses; these businesses as a group achieved a strong earnings increase for the year. ConAgra Iberia, our feed and food business in Spain and Portugal, had a good year and beat both its plan and prior-year results. Iberia's poultry and feed businesses performed well, and management organizations in Spain and Portugal were combined to increase focus and reduce costs. ConAgra Malt, a joint venture with South Africa-based Tiger Oats Limited, had a difficult year. ConAgra Malt's domestic malt business in each of its major regions did relatively well, but the export business was weak. European malt subsidies had a major negative impact on malt margins worldwide and kept ConAgra Malt at a significant disadvantage on the global market. Results in soybean processing and the Australian wool business were better than in fiscal 1998. Camerican International, a food importing business, was sold at the end of fiscal 1999. ConAgra owns 50 percent of Verde Valle, S.A., a leading packager and distributor of grocery products in Mexico. Verde Valle has become a valued partner in the sales and distribution of Act II popcorn products in Mexico and, in fiscal 1999, the introduction in Mexico of a full line of Hunt's tomato products. Sales of Verde Valle packaged rice and bean products in U.S. Hispanic markets grew during the year. Verde Valle continued to make good progress in spite of tough economic conditions in Mexico. ConAgra and Tiger Oats Limited jointly own a majority interest in ITC Agro-Tech Limited, a branded and commodity oil business in India. ITC Agro-Tech's Sundrop branded oil is the market leader in India. ITC Agro-Tech did very well in local markets, expanding distribution and improving margins, and the company began introducing other basic foods in India. A collapse in global oil prices hurt overall ITC Agro-Tech results, but this business gives ConAgra an important base in the fast-growing India market. ITC Agro-Tech also has a 50-percent interest in a hybrid seed business in India. Earnings for ConAgra's trading and processing businesses as a group declined substantially from fiscal 1998's strong showing, with an earnings increase by the processing businesses in total more than offset by a substantial decline in the trading businesses. We expect meaningfully better results in the new year. 31 ConAgra, Inc. 1999 Annual Report 66 Corporate Citizenship ConAgra has long been committed to being a good corporate citizen in the communities where ConAgra employees work and live. We aim to have a lasting, positive impact on our communities, our industries and the countries in which we do business. In fiscal 1999, the ConAgra Foundation, the philanthropic arm of ConAgra, made 230 grants in more than 70 ConAgra communities in 29 states. In addition, ConAgra, Inc. and ConAgra operating companies made direct contributions to hundreds more worthy causes in communities across the U.S. and in other nations. Just as important, thousands of ConAgra employees gave generously of their time, talents and resources to make their communities better places. We salute the many ConAgrans who are community leaders, volunteers and contributors in cities and towns around the world. The power of Team ConAgra is at work in our communities. HOME FOOD SAFETY EDUCATION We launched in 1999 a major three-year home food safety education program in cooperation with the American Dietetic Association (ADA). Results in survey after survey show that improved food handling by consumers in their homes would dramatically decrease the incidences of food-borne illness in the United States. ConAgra has invested millions of dollars in state-of-the-art food safety systems in our processing plants, and we continue to invest to ensure that the foods we provide to consumers are as wholesome and safe as possible. After products leave the store or the restaurant, however, how they are handled by consumers impacts safety. Through our partnership with the ADA, we seek to make a measurable impact on food safety further along the food chain and encourage consumers to take control of food safety in their homes. The ADA is one of the nation's most credible sources of science-based information on nutrition, food safety and health. Working with the ADA, we will aggressively promote a comprehensive education program built around four simple messages: - - Wash hands often. - - Keep raw meats and ready-to-eat foods separate. - - Cook to proper temperatures. - - Refrigerate promptly below 40 DEG. #F. Together, the ADA and ConAgra are working to make these common-sense practices second nature for consumers. 32 ConAgra, Inc. 1999 Annual Report 67 Sales & Operating Profit by Segment
1999 1998* 1997* 1996* 1995* ------------------------------------------------------------------------------------------------- Including Excluding Including Excluding Non-recurring Non-recurring Non-recurring Non-recurring Dollars in millions Charges Charges Charges Charges ------------------------------------------------------------------------------------------------- Packaged Foods Sales $ 7,465.5 $ 7,465.5 $ 7,192.2 $ 7,054.2 $ 6,627.6 $ 6,627.6 $ 6,133.5 Percent of total 30.3% 30.3% 29.7% 28.9% 27.2% 27.2% 25.8% Operating profit 951.4 992.1 978.1 884.4 718.2 790.1 679.4 Percent of total 75.1% 58.1% 62.2% 56.3% 69.6% 53.2% 50.8% Refrigerated Foods Sales $ 11,549.3 $ 11,549.3 $ 11,416.2 $ 11,769.4 $ 12,028.0 $ 12,028.0 $ 12,565.7 Percent of total 47.0% 47.0% 47.1% 48.1% 49.5% 49.5% 52.7% Operating profit 4.0 360.9 204.6 358.2 108.6 366.1 412.6 Percent of total .3% 21.1% 13.0% 22.8% 10.5% 24.7% 30.8% Agricultural Products Sales $ 5,579.5 $ 5,579.5 $ 5,611.1 $ 5,621.6 $ 5,665.7 $ 5,665.7 $ 5,130.6 Percent of total 22.7% 22.7% 23.2% 23.0% 23.3% 23.3% 21.5% Operating profit 311.6 354.8 390.2 328.2 205.1 328.5 245.7 Percent of total 24.6% 20.8% 24.8% 20.9% 19.9% 22.1% 18.4% Total Sales $ 24,594.3 $ 24,594.3 $ 24,219.5 $ 24,445.2 $ 24,321.3 $ 24,321.3 $ 23,829.8 Operating profit** 1,267.0 1,707.8 1,572.9 1,570.8 1,031.9 1,484.7 1,337.7 Interest expense 316.6 316.6 300.7 279.2 307.5 307.5 280.0 General corporate expense 198.7 198.7 163.4 178.6 219.0 164.0 137.6 Goodwill amortization 69.4 69.4 67.8 69.0 69.9 69.9 71.8 Income before income taxes*** $ 682.3 $ 1,123.1 $ 1,041.0 1,044.0 $ 435.5 $ 943.3 $ 848.3
* Fiscal years 1995 through 1998 have been restated to reflect acquisitions accounted for as poolings of interest. See Note 2 on page 49. ** Operating profit is profit before interest expense, goodwill amortization, general corporate expense and income taxes. *** Excludes impact of change in accounting in 1998. 33 ConAgra, Inc. 1999 Annual Report 68 Management's Discussion & Analysis INTRODUCTION Our objective here is to help stockholders understand management's views on ConAgra's financial condition and results of operations. This discussion should be read in conjunction with the financial statements and the notes to the financial statements. Years (1999, 1998, etc.) in this discussion refer to ConAgra's May-ending fiscal years. Non-recurring charges (see Note 3 to the financial statements) in the fourth quarter of 1999 significantly affected ConAgra's results of operations in 1999. The charges totaled $440.8 million before income tax and $337.9 million after income tax, or $.71 per diluted share. The non-recurring charges, on a pretax basis, include restructuring reserves of $121.8 million and $319.0 million for write-downs of impaired assets under Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. The restructuring plan is part of Operation Overdrive, an initiative commenced during fiscal 1999 to improve margins and sales, streamline operations and to combine and utilize ConAgra's strengths. The restructuring plan will cover approximately a 36-month period, and is aimed at consolidating capacity, streamlining operations and improving profitability through margin improvement and expense reductions. Approximately 6,700 jobs will be eliminated through the closure of numerous manufacturing, processing, storage and distribution facilities. The cost of the plan is expected to total $880 million over the 36-month period. Of the total charges, about $130 million is expected to be a cash expense. In accordance with generally accepted accounting principles, the remaining cost of the restructuring plan will be recognized when plans become finalized, assets become available for sale or employees are notified of termination. The 1999 restructuring reserves include $69.4 million for assets to be disposed of at 36 facilities, $45.1 million for employee-related cash outlays and $7.3 million for other cash charges. The company expects to dispose of the assets within 12 months and will continue to depreciate the assets during the period facilities are operational. The asset impairment charge of $319.0 million includes $114.1 million for write-downs of property, plant and equipment and $204.9 million in write-downs of intangible and other assets. Most of this impairment relates to the Refrigerated Foods segment, and is the result of management's decision to consolidate and reorganize its turkey businesses. ConAgra expects that the restructuring plan, in conjunction with other sales-enhancing and efficiency initiatives of Operation Overdrive, will generate substantial annual savings and margin 69 improvements. ConAgra also expects that the company's revenues and liquidity will not be materially affected by the restructuring plan. In 1999, GoodMark Foods, Inc. and Fernando's Foods Corporation merged with ConAgra through exchanges of shares. In 1998, mergers with Hester Industries, Inc. and A.M. Gilardi & Sons, Inc. were completed. These business combinations were accounted for as poolings of interest and the historical financial statements were restated to give effect to the mergers as though the companies had operated together from the beginning of the earliest period presented. The following discussion and analysis is based on restated financial information. FINANCIAL CONDITION AND CASH FLOW CAPITAL RESOURCES - ConAgra's earnings are generated principally from its capital investment, which consists of working capital (current assets less current liabilities) plus all noncurrent assets. Capital investment is financed with stockholders' equity, long-term debt and other noncurrent liabilities. CAPITAL INVESTMENT
- ------------------------------------------------------------------------------------ Dollars in millions 1999 1998 % Change - ------------------------------------------------------------------------------------ Working capital $ 269.7 $ 444.0 (39)% Property, plant & equipment, net 3,614.2 3,449.7 5 Intangible assets, net 2,408.7 2,391.7 1 Other noncurrent assets 467.1 429.4 9 - ------------------------------------------------------------------------------------ Total noncurrent assets 6,490.0 6,270.8 3 - ------------------------------------------------------------------------------------ Capital investment $ 6,759.7 $ 6,714.8 1 - ------------------------------------------------------------------------------------
During 1999, capital investment increased $45 million, or 1%. The $165 million increase in property, plant and equipment and $38 million increase in other noncurrent assets was offset by a $174 million decrease in working capital. Investments in property, plant and equipment, including acquisitions, totaled $763 million. The investments were offset by $412 million of depreciation expense and $183 million in asset write-downs in connection with the 1999 non-recurring charges. Intangible assets are mainly goodwill related to acquisitions, principally associated with ConAgra's acquisition of Beatrice Company in 1991. This goodwill represents valuable assets such as respected brands with significant marketplace acceptance. In 1999, increases in intangible assets as a result of the tablespreads and Egg Beaters acquisition were largely offset by amortization and write-downs of impaired intangible assets under SFAS No. 121. Goodwill amortization was 36 ConAgra, Inc. 1999 Annual Report 70 $69 million in 1999 and $68 million in 1998, while depreciation expense was $412 million in 1999 and $375 million in 1998. ConAgra financed its capital investment as shown in the following table: CAPITALIZATION
- ------------------------------------------------------------------------------------ Dollars in millions 1999 1998 % Change - ------------------------------------------------------------------------------------ Senior long-term debt $ 1,793.1 $ 1,753.5 2% Other noncurrent liabilities 782.8 847.3 (8) Subordinated long-term debt 750.0 750.0 - Subsidiary's preferred securities 525.0 525.0 - Common stockholders' equity 2,908.8 2,839.0 2 - ------------------------------------------------------------------------------------ Total capitalization $ 6,759.7 $ 6,714.8 1 - ------------------------------------------------------------------------------------
In 1999, senior long-term debt, excluding the current portion of long-term debt, increased $40 million. Short-term borrowings backed by long-term credit agreements and classified as long-term decreased $532 million, while other senior debt issues increased $572 million. Other noncurrent liabilities consist of estimated postretirement health care and pension benefits, deferred income taxes and reserves for estimated legal and environmental liabilities Beatrice Company incurred before its acquisition by ConAgra. It will require a number of years to resolve remaining issues related to the Beatrice liabilities. Resolution over time will use cash, but is not expected to affect earnings adversely because ConAgra believes reserves are adequate. ConAgra's long-standing policy is to purchase on the open market shares of the company's common stock to replace shares issued for conversion of preferred stock, employee incentive and benefit programs, and smaller acquisitions accounted for as purchases so that such issuance will not dilute earnings per share. In 1999, ConAgra purchased on the open market 1 million shares of the company's common stock at a cost of $31 million. During the seven years through 1999, ConAgra invested $1.68 billion to purchase the company's common stock on the open market. Common stockholders' equity increased $70 million in 1999 mainly because net income and the value of shares issued exceeded $325 million in cash dividends declared and the cost of shares purchased on the open market. CASH FLOW - Cash provided by operating activities was $1,180 million in 1999, compared to $623 million in 1998. The increase in 1999 versus 1998 was primarily the result of higher sales advances 71 in Agricultural Products and Refrigerated Foods and a lower level of inventory increases, mainly in Refrigerated Foods. The non-recurring charges had minimal impact on cash flow in 1999, since the majority of the charges related to write-downs of assets. Depreciation and other amortization increased $41 million in 1999 as compared to 1998. In 1998, cash provided by operating activities was $623 million compared to $967 million in 1997. The decrease in 1998 versus 1997 was primarily the result of higher inventories in Agricultural Products and a higher level of receivables across all businesses. Depreciation and amortization increased in 1998 as compared to 1997. Cash used for investing activities was $1,010 million in 1999. ConAgra invested $662 million in property, plant and equipment and its investment in businesses acquired, net of disposals, totaled $373 million in 1999. This was mainly due to the $400 million acquisition of the tablespreads and Egg Beaters business. Cash used for investing activities was $395 million in 1998. ConAgra invested $584 million in property, plant and equipment, down from the prior year. Proceeds from businesses sold in 1998 exceeded cash acquisition expenditures by $192 million as ConAgra issued common stock for certain acquisitions. In 1997, cash used for investing activities totaled $890 million; investment in property, plant and equipment totaled $683 million and ConAgra's investment in businesses acquired, net of disposals, was $166 million. In 2000, ConAgra expects to invest $430 million to $450 million in additions to property, plant and equipment of present businesses. In addition, capital required in connection with restructuring activities is estimated at $100 million for 2000. Capital projects in 1999 and planned for 2000 are broadly based investments in modernization, efficiency and capacity expansion. Cash used for financing activities in 1999 was $215 million. ConAgra issued $595 million of senior notes, with $396 million issued at 7% and $199 million issued at 5.5%. Long-term debt repayments totaled $70 million in 1999 and ConAgra reduced the amount of short-term borrowings backed by long-term credit agreements and classified as long-term by $532 million. Accounts receivable sold increased by $125 million during 1999. Cash dividends paid totaled $312 million, up 19%. The dividend rate was up 14% in 1999 over the prior year and the remaining increase was caused by a larger number of shares outstanding, mainly issued for acquisitions. The cost of stock repurchased in 1999 totaled $31 million. Short-term debt decreased slightly during 1999. 37 ConAgra, Inc. 1999 Annual Report 72 In 1998, cash used for financing activities was $226 million. ConAgra repaid $368 million of senior long-term debt and reduced the amount of short-term borrowings backed by long-term credit agreements and classified as long-term by $123 million. ConAgra issued $312 million of senior long-term notes, with $300 million issued at 6.7%. The cost of stock repurchased by ConAgra was $153 million in 1998 versus $267 million in 1997. Cash dividends paid totaled $263 million, up 14% from the $230 million paid in 1997. Short-term borrowings, used primarily to fund working capital needs, increased $318 million in 1998 compared to a $104 million increase in 1997. In 1997, cash used for financing activities was $84 million. ConAgra made long-term debt repayments totaling $184 million. In 1997, ConAgra issued $435 million of senior long-term notes, with $400 million issued at 7.125%, and increased short-term borrowings backed by long-term credit agreements and classified as long-term by $51 million. FINANCING OBJECTIVES - ConAgra's primary financing objective is to maintain a conservative balance sheet. We define this as using appropriate levels of equity and long-term debt to finance noncurrent assets and permanent working capital needs. Short-term debt is used to finance liquid and seasonal asset requirements. ConAgra's long-term debt objective is that senior long-term debt normally will not exceed 30% of total long-term debt plus equity. Long-term subordinated debt is treated as equity due to its preferred stock characteristics. ConAgra's short-term debt objective is that at the end of their natural fiscal year, most ConAgra businesses will eliminate short-term debt used to finance assets other than hedged commodity inventories. ConAgra met its long-term debt objective every year from 1976 through 1999, except 1991 and 1992 when it temporarily exceeded its self-imposed long-term debt limitation to acquire Beatrice. ConAgra has met its short-term debt objective for the past 24 years. ConAgra has access to a wide variety of financing markets. Public debt offerings and private debt placements provide long-term financing. At the end of 1999, ConAgra's senior debt ratings were BBB+ (Duff & Phelps), Baa1 (Moody's) and BBB+ (Standard & Poor's), all investment grade ratings. Short-term credit is provided by the sale of commercial paper and bank financing. Commercial paper borrowings are backed by multiyear bank credit facilities. During 1999, short-term borrowing continued at interest rates below the prime rate. Short-term debt averaged $3.05 billion in 1999 compared to $2.52 billion in 1998, excluding short-term borrowings classified as long-term. Acquisition financing and increased working capital requirements caused the increase in short-term debt. ConAgra uses cancelable and noncancelable leases in its financing activities, particularly for 73 transportation equipment. In 1999, cancelable lease expense was $155 million versus $153 million in 1998, and noncancelable lease expense was $118 million versus $115 million in 1998. To maintain a conservative financial position, ConAgra focuses on cash flow as well as its balance sheet. ConAgra's plans incorporate cash flow sufficient to meet financing obligations, maintain capital investment and pay stockholder dividends even if a severe and unexpected decline in earnings occurs. This measure of cash-flow adequacy provides an effective tool for managing the company's leverage. ASSET LIQUIDITY - Many of ConAgra's businesses are current asset intensive. Inventory and accounts receivables were 1.5 times property, plant and equipment at the end of 1999 and 1998. The seasonal nature and liquidity of ConAgra's current asset investments explain the company's significant use of short-term debt and emphasis on repaying short-term debt at year end. From time to time, ConAgra also obtains product financing for certain commodity inventories, classified as advances on sales in the Consolidated Balance Sheets. ConAgra's reported net sales understate the degree to which current assets turn over during the year. For 1999, total sales invoiced to customers were approximately $29.5 billion versus $24.6 billion reported net sales. This is because grain, feed ingredient merchandising and international fertilizer merchandising transactions include only gross margins in reported sales. ConAgra's current ratio (current assets divided by current liabilities) was 1.05 to 1 at the end of 1999 and 1.09 to 1 at the end of 1998. ConAgra's consolidated current ratio is a composite of various current ratios appropriate for its individual businesses. The company focuses more on appropriate use of short-term debt and trade credit financing than on the absolute level of its current ratio. Some ConAgra businesses are able to generate substantial trade credit that does not result in financing costs. MARKET RISK - The principal market risks affecting ConAgra are exposure to changes in commodity or energy prices and interest rates on debt. While the company does have international operations, and operates in international markets, it considers its market risk in such activities to be immaterial. COMMODITIES - ConAgra operates across the food chain, from basic agricultural inputs to production and sale of branded consumer products. As a result, ConAgra uses various raw materials, many of which are commodities. Raw materials are generally available from several different sources, and ConAgra presently believes that it can obtain them as needed. 38 ConAgra, Inc. 1999 Annual Report 74 Commodities are subject to price fluctuations that may create price risk. Generally, it is ConAgra's intent to hedge commodities in order to mitigate this price risk. While this may tend to limit the company's ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity prices. ConAgra has established policies that limit the amount of unhedged inventory positions permissible for ConAgra's independent operating companies. Processing business limits are expressed in terms of weeks of commodity usage. Trading businesses are generally limited to a dollar risk exposure stated in relation to equity capital. ConAgra typically purchases certain commodities such as wheat, corn, oats, soybeans, soybean meal, soybean oil, cattle and hogs for use in its processing businesses. In addition, ConAgra purchases and sells certain commodities such as wheat, corn, soybeans, soybean meal, soybean oil and oats in its trading businesses. The commodity price risk associated with these activities can be hedged by selling (or buying) the underlying commodity, or by using an appropriate derivative commodity instrument. The particular hedging instrument used by ConAgra depends on a number of factors, including availability of appropriate derivative instruments. ConAgra utilizes exchange-traded futures and options as well as non-exchange-traded derivatives, in which case the company monitors the amount of associated credit risk. The following table presents one measure of market risk exposure using sensitivity analysis. Market risk exposure is defined as the change in the fair value of the derivative commodity instruments assuming a hypothetical change of 10% in market prices. Actual changes in market prices may differ from hypothetical changes. Fair value was determined using quoted market prices and was based on the company's net derivative position by commodity at each month end during the fiscal year. The market risk exposure analysis excludes the underlying commodity positions that are being hedged. The underlying commodities hedged have a high inverse correlation to price changes of the derivative commodity instrument. Increased hedging activities, mainly in the cattle feeding and domestic beef businesses, resulted in larger derivative positions in 1999 compared to 1998. 75 EFFECT OF 10% CHANGE IN FAIR VALUE
- --------------------------------------------------------------------------- In millions 1999 1998 - --------------------------------------------------------------------------- PROCESSING BUSINESSES Grains/Food High $ 24.4 $ 30.0 Low 12.8 9.0 Average 17.1 23.6 Meats High 48.8 22.5 Low 13.4 2.6 Average 32.3 11.1 TRADING BUSINESSES Grains High 21.9 16.4 Low 12.6 5.8 Average 16.4 11.5 Meats High 5.9 - Low - - Average 1.4 -
ENERGY - ConAgra's operating companies incur substantial energy costs in their manufacturing facilities and incur higher operating expenses as a result of increases in energy costs. ConAgra has formed an energy subsidiary to hedge the company's operations against adverse price movements in energy costs, primarily natural gas and electricity. In addition, the energy subsidiary trades derivative commodity and financial instruments as a profit-making activity. Trading is limited in terms of maximum dollar exposure and monitored to ensure compliance with these limits. The subsidiary uses both exchange-traded derivative commodity instruments and non-exchange-traded swaps and options. The company monitors the amount of associated counterparty credit risk for non-exchange-traded transactions. The following presents one measure of market risk exposure using sensitivity analysis. Market risk exposure is defined as the change in the fair value of the derivative commodity and financial instruments assuming a hypothetical change of 10% in market prices. Actual changes in market prices may differ from hypothetical changes. Fair value was determined using quoted market prices, if available, and was based on the subsidiary's net derivative position by commodity at each month end during the fiscal year. The market risk exposure analysis excludes the anticipated energy requirements or physical delivery commitments that are being hedged by these instruments. 39 ConAgra, Inc. 1999 Annual Report 76 EFFECT OF 10% CHANGE IN FAIR VALUE
- --------------------------------------------------------- In millions 1999 1998 - --------------------------------------------------------- ENERGY High $8.7 $11.5 Low .7 2.1 Average 4.3 5.9
INTEREST RATES - ConAgra uses interest rate swaps to hedge adverse interest rate changes on a portion of its short-term debt. At May 30, 1999, the company had $650 million notional value of interest rate swaps outstanding. These swaps effectively change the interest rate on $650 million in short-term debt to a 5.8% fixed rate through the period ending December 31, 1999. Assuming year-end fiscal 1999 variable rates and average short-term borrowings for fiscal 1999, a one-hundred-basis-point change in interest rates would impact net interest expense by $27.9 million, net of the effect of swaps. At May 31, 1998, the company had $600 million notional value of interest rate swaps outstanding, changing the interest rate on short-term debt to a 6% fixed rate through December 22, 1998. Based on fiscal 1998 average balances and variable rates, a one-hundred-basis-point change in interest rates would have impacted net interest expenses by $25.6 million. FOREIGN OPERATIONS - Transactions denominated in a currency other than an entity's functional currency are generally hedged to reduce this market risk. The company uses principally non-exchange-traded contracts to effect this coverage. Market risk on such transactions is not material to the company's results of operations or financial position. The company's market risk from translation of foreign-based entities' annual profit and loss, and from amounts permanently invested in foreign subsidiaries, is not material. YEAR 2000 - The Year 2000 ("Y2K") computer software compliance issues affect ConAgra and most companies in the world. Historically, certain computer programs were written using two digits rather than four to define the applicable year. As a result, software may recognize a date using the two digits "00" as 1900 rather than the year 2000. Computer programs that do not recognize the proper date could generate erroneous data or cause systems to fail. ConAgra has established a Y2K project office and contracted with an independent consulting group to provide assistance with regard to ConAgra's Y2K compliance. ConAgra's Y2K project covers both traditional computer systems and infrastructure ("IT systems") and computer-based manufacturing, logistical and related systems ("non-IT systems"). The Y2K project has six phases: systems inventory, assessment, renovation, validation, implementation and contingency planning. 77 ConAgra operates on a decentralized independent operating company ("IOC") structure. Consequently, the Y2K project efforts may vary by IOC. For both IT and non-IT systems, the status of the project generally ranges from renovation to contingency planning. Based on its assessment of its major information technology systems, ConAgra expects that necessary modifications and/or replacements will be completed in a timely manner. ConAgra's Y2K project also considers the readiness of significant customers and suppliers. ConAgra does not have any suppliers or customers that are material to its operations as a whole. Each IOC is verifying the readiness of suppliers and customers that may be significant for such IOC. Due to the decentralized IOC structure, there are few IT systems and non-IT systems, the failure of which would have a material effect on ConAgra as a whole. Such material systems include general ledger, payroll, fixed assets and cash management systems. ConAgra's Y2K project includes contingency plans for these systems that involve, among other things, manual workarounds and extra staffing. ConAgra's Y2K project includes the development of a full contingency plan for each IOC, and ConAgra presently expects to have such contingency arrangements completed by September 1999. ConAgra has incurred approximately $43 million of Y2K project expenses to date. Future expenses are expected to include $7 million to $12 million of additional costs. Such cost estimates are based upon presently available information and may change as ConAgra continues with its Y2K project. OPERATING RESULTS This section addresses ConAgra's consolidated operating results shown in the Consolidated Statements of Earnings and should be read together with Note 3 to the financial statements covering non-recurring charges and the business segments information shown in Note 19 to the financial statements. 1999 COMPARED WITH 1998 - 1999 had 52 weeks versus 53 weeks in 1998. The effect on earnings was not material. NET SALES
- ---------------------------------------------------------------------------------- Dollars in millions 1999 1998 % Change - ---------------------------------------------------------------------------------- Packaged Foods $ 7,465.5 $ 7,192.2 3.8% Refrigerated Foods 11,549.3 11,416.2 1.2% Agricultural Products 5,579.5 5,611.1 -.6% - ---------------------------------------------------------------------------------- Total $24,594.3 $24,219.5 1.5% - ----------------------------------------------------------------------------------
40 ConAgra, Inc. 1999 Annual Report 78 Cheese, frozen foods, chicken foodservice and pizza products contributed to sales growth in Packaged Foods, although the main driver of the increase was the tablespreads and Egg Beaters acquisition. Shelf-stable products experienced a downturn in sales, mainly as a result of lower volumes due to the intense competitive environment. In Refrigerated Foods, volume-related sales gains in domestic beef, pork and poultry, coupled with the expansion of the meat trading business, more than offset the impact of continued low commodity prices in protein markets. The Australian beef business and branded processed meats contributed significantly to the sales improvement. In Agricultural Products, solid sales growth in crop inputs offset the adverse impact of low commodity prices and reduced volume in the grain merchandising and trading businesses. Excluding the impact of dispositions, Agricultural Products' sales were up slightly in 1999 compared to 1998. For ConAgra in total, lower commodity selling prices reduced 1999 sales by $275 million (1%). This was more than offset by the impact of acquisitions, net of dispositions. In 1999, gross margin (net sales minus cost of goods sold) increased $227.6 million, up 6%, while gross margin as a percent of sales increased to 16.4% in 1999 from 15.7% in 1998. Gross margin dollar and percent gains in Refrigerated Foods were the major factor in the improvement. Packaged Foods gross margin dollars were up, largely due to the tablespreads and Egg Beaters acquisition, while margins as a percent of sales were relatively unchanged from 1998. Excluding the impact of dispositions, Agricultural Products experienced gross margin dollar and percent gains over 1998. Selling, general and administrative (SG&A) expenses increased $129.6 million, or 5.2%, in 1999, while SG&A as a percent of sales was 10.6% in 1999 and 10.2% in 1998. Increases occurred in all segments, as well as in the general corporate component. Business expansion, mainly in crop inputs, and the tablespreads and Egg Beaters acquisition, accounted for most of the increase. Corporate expenses were impacted by Y2K spending, increased staffing for new systems initiatives and higher expenses associated with Operation Overdrive initiatives. OPERATING PROFIT
- ---------------------------------------------------------------------------------- Dollars in millions 1999 1998 % Change - ---------------------------------------------------------------------------------- Packaged Foods $ 951.4 $ 978.1 -2.7% Refrigerated Foods 4.0 204.6 -98.0% Agricultural Products 311.6 390.2 -20.1% - ---------------------------------------------------------------------------------- Total $1,267.0 $1,572.9 -19.4% - ----------------------------------------------------------------------------------
79 Operating profit represents earnings before interest, goodwill amortization, general corporate expense and income taxes. Comparisons of 1999 versus 1998 operating profit are affected substantially by non-recurring charges of $440.8 million before tax in 1999 for restructuring and SFAS No. 121 asset write-downs. For purposes of segment reporting, these charges are included in operating profit of the individual segment (see Notes 3 and 19). In 1999, Packaged Foods operating profit was $951.4 million, down 2.7%, including the non-recurring charges, or $992.1 million, up 1.4%, excluding the charges. Excluding non-recurring charges, meat snacks, microwave popcorn, potato products, chicken foodservice and pizza products all improved operating profits in 1999, while frozen foods, shelf-stable products, cheese and seafood operating profits declined. The tablespreads and Egg Beaters acquisition was a key contributor of operating profit to the segment. Refrigerated Foods 1999 operating profit was $4 million, down 98%, including the non-recurring charges, or $360.9 million, up 76.4%, excluding the charges. Excluding the charges, operating profit increased in all businesses -- branded processed meats, beef, pork and poultry. Volume growth and stabilization of commodity prices drove the improvement. Agricultural Products 1999 operating profit was $311.6 million, down 20.1%, including the non-recurring charges, or $354.8 million, down 9.1%, excluding the charges. Operating profit, excluding the charges, increased in specialty food ingredients, crop inputs and international agricultural operations. This was more than offset by operating profit decreases in grain merchandising and trading operations. Low commodity prices and low volume caused most of the decrease. Dispositions accounted for 5.6% of the segment's decrease. ConAgra's total operating profit was $1.27 billion in 1999, down 19.4%, including the charges, or $1.71 billion, up 8.6%, excluding the charges. In 1999, net interest expense increased 5.3% to $316.6 million. Higher borrowings were somewhat offset by lower short-term interest rates and the impact of one-week's reduction in interest due to the 52- versus 53-week year. Income before income tax in 1999 was $682.3 million, down 34.5%, including the non-recurring charges, or $1,123.1 million, up 7.9%, excluding the charges. The effective tax rate was 38% in 1999 versus 38.3% in 1998, excluding the impact of non-recurring charges. The non-deductibility of intangible asset write-downs under SFAS No. 121 resulted in a 47.5% effective tax rate, including non-recurring charges. Net income in 1999 was $358.4 million, down 42.8%, including the charges, or $696.3 million, up 11.1%, excluding the charges. Net income in 1998 included a $14.8 million charge for the cumulative effect of a change in accounting for systems re-engineering costs. 41 ConAgra, Inc. 1999 Annual Report 80 Diluted earnings per share in 1999 were $.75, down 43.2% from $1.32 in 1998, including the charges, and up 10.6%, excluding the charges. The impact of non-recurring charges was $.71 per diluted share. The cumulative effect of the change in accounting for systems re-engineering costs in 1998 was $.03 per diluted share. Excluding both the 1999 non-recurring charges and the 1998 cumulative effect of change in accounting, diluted earnings per share were up 8.1%. 1998 COMPARED WITH 1997 - 1998 had 53 weeks versus 52 weeks in 1997. The effect on earnings was not material. NET SALES
- ----------------------------------------------------------------------------------- Dollars in millions 1998 1997 % Change - ----------------------------------------------------------------------------------- Packaged Foods $ 7,192.2 $ 7,054.2 2.0% Refrigerated Foods 11,416.2 11,769.4 -3.0% Agricultural Products 5,611.1 5,621.6 -.2% - ----------------------------------------------------------------------------------- Total $24,219.5 $24,445.2 -.9% - -----------------------------------------------------------------------------------
Seafood, potato products and frozen foods contributed to sales growth in Packaged Foods. Shelf-stable foods sales increased slightly. The main cause of the Refrigerated Foods sales decrease was lower commodity costs passed through as lower selling prices in fresh beef, pork and poultry. In Agricultural Products, a large sales increase in crop inputs was offset mainly by the sale of a specialty retailing business in 1998's first quarter and lower commodity costs passed through as lower selling prices in grain processing. For ConAgra in total, lower commodity selling prices and business divestitures, net of sales added by acquisitions, reduced 1998 sales by approximately $725 million, nearly three percentage points. In 1998, gross margin increased $106 million, up 2.9%, while gross margin as a percent of sales increased to 15.7% in 1998 from 15.2% in 1997. Gross margin dollar and percent gains in Packaged Foods and Agricultural Products more than offset declines in Refrigerated Foods. SG&A expenses increased $88 million, or 3.7%, in 1998 due to business expansion, increased marketing spending and the extra week in the year. SG&A expenses as a percent of sales increased to 10.2% in 1998 versus 9.7% in 1997. SG&A expenses increased in all three business segments, excluding the specialty retailing divestiture in Agricultural Products. The general corporate expense component of SG&A expenses decreased $15.2 million, or 8.5%, to $163.4 million in 1998 mainly due to lower incentive compensation and pension expense. 81 OPERATING PROFIT
- ---------------------------------------------------------------------------------- Dollars in millions 1998 1997 % Change - ---------------------------------------------------------------------------------- Packaged Foods $ 978.1 $ 884.4 10.6% Refrigerated Foods 204.6 358.2 -42.9% Agricultural Products 390.2 328.2 18.9% - ---------------------------------------------------------------------------------- Total $ 1,572.9 $ 1,570.8 .1% - ----------------------------------------------------------------------------------
Most Packaged Foods businesses - frozen foods, potato products, shelf-stable foods and seafood - contributed to that segment's gain in operating income. In Refrigerated Foods, operating profit growth in branded processed meats and Australian beef was more than offset by a major decline in U.S. fresh meat and poultry - the beef, pork, chicken and turkey products businesses. Excess supplies of animal protein, lower realizations from byproducts and reduced Asian export demand combined to depress industry selling prices and margins. As a result, U.S. fresh meat and poultry was unprofitable in 1998. Crop inputs, specialty food ingredients, commodity services and grain processing drove Agricultural Products operating profit increases. Decreases in grain merchandising and offshore operations partially offset these gains. In 1998, net interest expense increased 7.7% to $300.7 million due to slightly higher average borrowing balances and interest rates, lower interest income and the extra week in the year. Income before income taxes and change in accounting decreased .3% to $1.04 billion in 1998. In 1998, ConAgra implemented a new Financial Accounting Standards Board Emerging Issues Task Force directive requiring expensing rather than capitalizing certain business systems re-engineering costs. This required accounting change resulted in a cumulative one-time, non-cash provision of $14.8 million after tax, or $.03 per diluted share. Before the accounting change, net income increased .6% to $641.8 million in 1998, and diluted earnings per share increased .7% to $1.35 from $1.34 in 1997. The effective tax rate was 38.3% in 1998 versus 38.9% in 1997. Including the accounting change, net income decreased 1.7% to $627.0 million, and diluted earnings per share decreased 1.5% to $1.32. 42 ConAgra, Inc. 1999 Annual Report 82 CONSOLIDATED STATEMENTS OF EARNINGS CONAGRA, INC. AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED MAY IN MILLIONS EXCEPT PER SHARE AMOUNTS
- ---------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Net sales $ 24,594.3 $ 24,219.5 $ 24,445.2 Costs and expenses Cost of goods sold 20,556.2 20,409.0 20,741.0 Selling, administrative and general expenses 2,598.4 2,468.8 2,381.0 Interest expense (Note 8) 316.6 300.7 279.2 Non-recurring charges (Note 3) 440.8 - - ------------ ------------ ------------ 23,912.0 23,178.5 23,401.2 ------------ ------------ ------------ Income before income taxes and cumulative effect of change in accounting 682.3 1,041.0 1,044.0 Income taxes (Note 14) 323.9 399.2 406.1 ------------ ------------ ------------ Income before cumulative effect of change in accounting 358.4 641.8 637.9 Cumulative effect of change in accounting for systems re-engineering costs - (14.8) - ------------ ------------ ------------ Net income $ 358.4 $ 627.0 $ 637.9 ------------ ------------ ------------ ------------ ------------ ------------ Income per share - basic (Note 4) Income before cumulative effect of change in accounting $ .76 $ 1.38 $ 1.36 Cumulative effect of change in accounting - (.03) - ------------ ------------ ------------ Net income $ .76 $ 1.35 $ 1.36 ------------ ------------ ------------ ------------ ------------ ------------ Income per share - diluted (Note 4) Income before cumulative effect of change in accounting $ .75 $ 1.35 $ 1.34 Cumulative effect of change in accounting - (.03) - ------------ ------------ ------------ Net income $ .75 $ 1.32 $ 1.34 ------------ ------------ ------------ ------------ ------------ ------------
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME CONAGRA, INC. AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED MAY DOLLARS IN MILLIONS
- ---------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ------------ ------------ ------------ Net income $ 358.4 $ 627.0 $ 637.9 Other comprehensive income Currency translation adjustment 1.7 (35.9) 7.6 ------------ ------------ ------------ Comprehensive income $ 360.1 $ 591.1 $ 645.5 ------------ ------------ ------------ ------------ ------------ ------------
The accompanying notes are an integral part of the consolidated financial statements. 43 ConAgra, Inc. 1999 Annual Report 83 CONSOLIDATED BALANCE SHEETS CONAGRA, INC. AND SUBSIDIARIES DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNT
- --------------------------------------------------------------------------------------------- MAY 30 MAY 31 1999 1998 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 62.8 $ 108.4 Receivables, less allowance for doubtful accounts of $60.0 and $68.2 (Note 5) 1,637.5 1,546.9 Inventories (Note 6) 3,639.9 3,540.8 Prepaid expenses 315.9 341.6 ----------- ----------- Total current assets 5,656.1 5,537.7 ----------- ----------- Property, plant and equipment Land 161.2 155.1 Buildings, machinery and equipment 5,205.8 4,827.0 Other fixed assets 426.9 379.8 Construction in progress 419.9 399.2 ----------- ----------- 6,213.8 5,761.1 Less accumulated depreciation (2,599.6) (2,311.4) ----------- ----------- Property, plant and equipment, net 3,614.2 3,449.7 ----------- ----------- Brands, trademarks and goodwill, at cost less accumulated amortization of $668.2 and $641.9 2,408.7 2,391.7 Other assets 467.1 429.4 ----------- ----------- $ 12,146.1 $ 11,808.5 ----------- ----------- ----------- -----------
44 ConAgra, Inc. 1999 Annual Report 84
MAY 30 MAY 31 1999 1998 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 837.9 $ 858.1 Current installments of long-term debt 21.1 52.7 Accounts payable 2,036.5 1,971.0 Advances on sales 1,191.7 829.7 Accrued payroll 269.4 293.6 Other accrued liabilities 1,029.8 1,088.6 ----------- ----------- Total current liabilities 5,386.4 5,093.7 ----------- ----------- Senior long-term debt, excluding current installments (Note 8) 1,793.1 1,753.5 Other noncurrent liabilities (Note 9) 782.8 847.3 Subordinated debt (Note 8) 750.0 750.0 Preferred securities of subsidiary company (Note 10) 525.0 525.0 Common stockholders' equity (Notes 11, 12 and 13) Common stock of $5 par value, authorized 1,200,000,000 shares; issued 519,648,673 and 519,424,034 2,598.2 2,597.1 Additional paid-in capital 219.4 320.0 Retained earnings 1,369.8 1,337.7 Foreign currency translation adjustment (65.9) (67.6) Less treasury stock, at cost, common shares 31,475,678 and 30,011,958 (749.9) (705.2) ----------- ----------- 3,371.6 3,482.0 Less unearned restricted stock and value of 17,184,831 and 21,376,632 common shares held in Employee Equity Fund (Note 12) (462.8) (643.0) ----------- ----------- Total common stockholders' equity 2,908.8 2,839.0 ----------- ----------- $ 12,146.1 $ 11,808.5 ----------- ----------- ----------- -----------
The accompanying notes are an integral part of the consolidated financial statements. 45 ConAgra, Inc. 1999 Annual Report 85 CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY CONAGRA, INC. AND SUBSIDIARIES FOR FISCAL YEARS ENDED MAY COLUMNAR AMOUNTS IN MILLIONS
- --------------------------------------------------------------------------------------------------------------------------------- FOREIGN EEF* ADDITIONAL CURRENCY STOCK COMMON COMMON PAID-IN RETAINED TRANSLATION TREASURY AND SHARES STOCK CAPITAL EARNINGS ADJUSTMENT STOCK OTHER TOTAL - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 26, 1996 522.9 $1,307.3 $ 416.0 $1,746.6 $ (39.3) $ (390.0) $ (686.9) $2,353.7 Shares issued Stock option and incentive plans .3 .6 2.0 .4 3.0 EEF*: stock option, incentive and other employee benefit plans 13.0 78.8 91.8 Fair market valuation of EEF shares 204.8 (204.8) - Acquisitions .1 1.1 4.3 5.5 Shares acquired Incentive plans (10.1) 1.3 (8.8) Treasury shares purchased (266.5) (266.5) Shares retired (.5) (1.2) (5.6) 6.8 - Foreign currency translation adjustment 7.6 7.6 Dividends declared Common stock, $.528 per share (237.3) (237.3) Pooled companies (15.9) (15.9) Net income 637.9 637.9 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 25, 1997 522.7 1,306.8 636.9 2,125.7 (31.7) (655.1) (811.6) 2,571.0 Shares issued Stock option and incentive plans .6 2.8 4.0 .5 7.3 EEF*: stock option, incentive and other employee benefit plans 34.7 70.5 105.2 Fair market valuation of EEF shares (97.1) 97.1 - Acquisitions 1.3 6.7 .4 3.3 2.2 12.6 Shares acquired Incentive plans (19.4) 1.0 (18.4) Treasury shares purchased (153.3) (153.3) Shares retired (5.2) (26.2) (93.7) 119.9 - Two-for-one stock split 1,307.0 (258.9) (1,048.1) - Foreign currency translation adjustment (35.9) (35.9) Dividends declared Common stock, $.605 per share (273.6) (273.6) Pooled companies (2.9) (2.9) Net income 627.0 627.0 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 31, 1998 519.4 2,597.1 320.0 1,337.7 (67.6) (705.2) (643.0) 2,839.0 Shares issued Stock option and incentive plans .2 1.1 1.8 .5 3.4 EEF*: stock option, incentive and other employee benefit plans 13.6 62.3 75.9 Fair market valuation of EEF shares (116.4) 116.4 - Acquisitions .4 2.2 2.6 Shares acquired Incentive plans (16.6) 1.5 (15.1) Treasury shares purchased (31.0) (31.0) Shares retired (.2) .2 - Foreign currency translation adjustment 1.7 1.7 Dividends declared Common stock, $.69175 per share (324.9) (324.9) Pooled companies (1.2) (1.2) Net income 358.4 358.4 - --------------------------------------------------------------------------------------------------------------------------------- BALANCE AT MAY 30, 1999 519.6 $2,598.2 $ 219.4 $1,369.8 $ (65.9) $ (749.9) $ (462.8) $2,908.8 ----- -------- -------- -------- --------- --------- --------- -------- ----- -------- -------- -------- --------- --------- --------- --------
The accompanying notes are an integral part of the consolidated financial statements. *Employee Equity Fund (Note 12) 46 ConAgra, Inc. 1999 Annual Report 86 CONSOLIDATED STATEMENTS OF CASH FLOWS CONAGRA, INC. AND SUBSIDIARIES FOR THE FISCAL YEARS ENDED MAY DOLLARS IN MILLIONS
- -------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 ---------- --------- --------- Cash flows from operating activities Net income $ 358.4 $ 627.0 $ 637.9 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and other amortization 430.4 389.0 357.2 Goodwill amortization 69.4 67.8 69.0 Cumulative effect of change in accounting and non-recurring charges 440.8 24.0 - Other noncash items (includes nonpension postretirement benefits) 87.8 86.5 92.7 Change in assets and liabilities before effects from business acquisitions Receivables (296.0) (191.4) 104.7 Inventories and prepaid expenses (68.0) (270.5) 321.3 Accounts payable and accrued liabilities 156.7 (109.2) (615.4) ---------- --------- --------- Net cash flows from operating activities 1,179.5 623.2 967.4 ---------- --------- --------- Cash flows from investing activities Additions to property, plant and equipment (662.3) (583.7) (682.7) Payment for business acquisitions (421.9) (33.7) (197.8) Sale of businesses and property, plant and equipment 48.5 225.9 31.4 Notes receivable and other items 25.5 (3.9) (40.5) ---------- --------- --------- Net cash flows from investing activities (1,010.2) (395.4) (889.6) ---------- --------- --------- Cash flows from financing activities Net short-term borrowings (22.7) 317.7 104.2 Proceeds from issuance of long-term debt 595.2 311.8 483.2 Repayment of long-term debt (602.5) (490.8) (184.4) Accounts receivable sold 125.5 (10.0) (11.9) Cash dividends paid (312.4) (263.2) (229.9) Cash distributions of pooled companies (1.2) (3.8) (16.7) Treasury stock purchases (31.0) (153.3) (266.5) Employee Equity Fund stock transactions 7.1 43.6 17.3 Other items 27.1 21.7 20.5 ---------- --------- --------- Net cash flows from financing activities (214.9) (226.3) (84.2) ---------- --------- --------- Net increase (decrease) in cash and cash equivalents (45.6) 1.5 (6.4) Cash and cash equivalents at beginning of year 108.4 106.9 113.3 ---------- --------- --------- Cash and cash equivalents at end of year $ 62.8 $ 108.4 $ 106.9 ---------- --------- --------- ---------- --------- ---------
The accompanying notes are an integral part of the consolidated financial statements. 47 ConAgra, Inc. 1999 Annual Report 87 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONAGRA, INC. AND SUBSIDIARIES YEARS ENDED MAY 30, 1999, MAY 31, 1998 AND MAY 25, 1997 COLUMNAR AMOUNTS IN MILLIONS EXCEPT PER SHARE AMOUNTS - ------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FISCAL YEAR - The fiscal year of ConAgra ("ConAgra" or the "Company") ends the last Sunday in May. The fiscal years for the consolidated financial statements presented consist of 52-week periods (fiscal 1999 and 1997) or 53-week periods (fiscal 1998). The accounts of two wholly owned subsidiaries, ConAgra Fertilizer Company and United Agri Products, Inc., have been consolidated on the basis of a year ending in February. Such fiscal period corresponds with those companies' natural business year. BASIS OF CONSOLIDATION - The consolidated financial statements include the accounts of ConAgra, Inc. and all majority-owned subsidiaries, except certain foreign companies that are not material to the Company. The investments in and the operating results of these foreign companies and 50%-or-less-owned entities are included in the financial statements on the basis of the equity method of accounting. All significant intercompany investments, accounts and transactions have been eliminated. USE OF ESTIMATES - Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates or assumptions affect reported amounts of assets, liabilities, revenue and expenses as reflected in the financial statements. Actual results could differ from estimates. INVENTORIES - Grain, flour and major feed ingredient inventories are hedged to the extent practicable and are generally stated at market, including adjustment to market of open contracts for purchases and sales. Short-term interest expense incurred to finance hedged inventories is included in cost of sales in order to properly reflect gross margins on hedged transactions. Inventories not hedged are priced at the lower of average cost or market. PROPERTY AND DEPRECIATION - Property, plant and equipment are carried at cost. Depreciation has been calculated using primarily the straight-line method over the estimated useful lives of the respective classes of assets as follows:
Buildings 15 - 40 years Machinery and equipment 5 - 20 years Other fixed assets 5 - 15 years
88 BRANDS, TRADEMARKS, GOODWILL AND LONG-LIVED ASSETS - Brands and goodwill arising from the excess of cost of investment over fair value of net assets at date of acquisition and trademarks are amortized using the straight-line method, principally over a period of 40 years. As required by Statement of Financial Accounting Standards ("SFAS") No. 121, an impairment is recognized when future undiscounted cash flows of assets are estimated to be insufficient to recover their related carrying value. The Company considers continued operating losses, or significant and long-term changes in business conditions, to be its primary indicators of potential impairment. Recoverability of goodwill not identified with impaired assets under SFAS No. 121 is evaluated on the basis of management's estimates of future undiscounted operating income associated with the acquired business. DERIVATIVE INSTRUMENTS - The Company uses derivatives for the purpose of hedging commodity price and, to a lesser extent, interest rate exposure, that exist as a part of its ongoing business operations. INTEREST RATE SWAP AGREEMENTS - The Company utilizes interest rate swap agreements to reduce the risk of changes in interest rates. Interest differentials to be paid or received on such swaps are recognized in income as incurred, as a component of interest expense. COMMODITY CONTRACTS - The Company uses commodity futures and option contracts, swaps and forward contracts to reduce the risk of price fluctuations in various commodities traded or used in its businesses. In the trading businesses, commodity contracts are marked-to-market with net amounts due to or from counterparties recorded in accounts receivable or payable and the related gains or losses recorded in the statement of earnings. The Company's processing businesses reflect commodity contract gains and losses as adjustments to the basis of underlying hedged commodities purchased; gains or losses are recognized in the statement of earnings as a component of cost of goods sold upon sale of the hedged commodity. In general, derivatives used as hedges must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Changes in market values of derivative instruments must be highly correlated with changes in market values of underlying hedged items both at inception of the hedge and over the life of the hedge contract. Deferred gains or losses related to any instrument 1) designated but ineffective as a hedge of existing assets, liabilities, or firm commitments, or 2) designated as a hedge of an anticipated transaction which is no longer likely to occur, are recognized immediately in the statement of earnings. 48 ConAgra, Inc. 1999 Annual Report 89 Cash flows related to derivative financial instruments are classified in the statements of cash flows in a manner consistent with those of transactions being hedged. NET SALES - Gross margins earned from grain, international fertilizer and feed ingredients merchandised, which are included in net sales, total $147.3 million, $214.3 million and $176.8 million for fiscal 1999, 1998 and 1997, respectively. Sales and cost of sales, if reported on a gross basis for these activities, would be increased by $4.9 billion, $6.0 billion and $6.0 billion for fiscal 1999, 1998 and 1997, respectively. FAIR VALUES OF FINANCIAL INSTRUMENTS - Unless otherwise specified, the Company believes the book value of financial instruments approximates their fair value. COMPREHENSIVE INCOME - Comprehensive income for all periods presented consists of net income and foreign currency translation adjustments. ConAgra deems its foreign investments to be permanent in nature and does not provide for taxes on currency translation adjustments arising from converting the investment in a foreign currency to U.S. dollars. There are no reclassification adjustments to be reported in periods presented. ACCOUNTING CHANGES -In fiscal 1999, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE INCOME; SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION and SFAS No. 132, EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS. These standards expanded or modified disclosures and had no effect on the Company's consolidated financial position, results of operations or cash flows. See Notes 18 and 19. In the third quarter of fiscal 1998, the Company recorded a one-time, after-tax, non-cash charge of $14.8 million to comply with a recently issued ruling by the Financial Accounting Standards Board's Emerging Issues Task Force: (EITF) No. 97-13. This EITF requires business process re-engineering costs associated with computer systems development to be expensed as incurred. Previously, the Company had capitalized such costs as development costs. In June 1998, Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, was issued. This standard will become effective in fiscal 2001. The Company has not quantified the impact, if any, resulting from adoption of this standard. 90 2. BUSINESS COMBINATIONS On July 31, 1998, GoodMark Foods, Inc. (GoodMark) merged with ConAgra through an exchange of shares. ConAgra issued approximately 7.8 million shares of common stock for all outstanding shares of GoodMark. On July 31, 1998, Fernando's Foods Corporation (Fernando's) merged with ConAgra through an exchange of shares. ConAgra issued approximately 1.3 million shares of common stock for all outstanding shares of Fernando's. During fiscal 1998, ConAgra completed mergers with Hester Industries, Inc. (Hester) and A.M. Gilardi & Sons, Inc. (Gilardi), exchanging 3.7 million and 3.8 million shares of ConAgra stock, for all outstanding shares of Hester and Gilardi. The above business combinations have been accounted for as poolings of interest. The historical financial statements of the Company were restated to give effect to all of the above acquisitions as though the companies had operated together from the beginning of the earliest period presented. Results of operations of the acquired businesses for periods prior to acquisition date were as follows:
1998 1997 --------- --------- Net sales $ 379.0 $ 443.1 Net income $ 13.8 $ 22.9
In the first quarter of fiscal 1999, ConAgra acquired the Egg Beaters and tablespreads business from Nabisco, Inc. for $400 million. The tablespreads business manufactures and markets margarine under Parkay, Blue Bonnet, Fleischmann's, Touch of Butter, Chiffon and Move Over Butter brand names. Egg Beaters is an egg alternative product. Annual sales of the combined businesses are approximately $480 million. The acquisition was accounted for as a purchase. 3. NON-RECURRING CHARGES On May 12, 1999, the Company approved a 36-month restructuring plan aimed at eliminating overcapacity, streamlining operations and improving profitability through margin improvement and expense reductions. Employee separations of approximately 6,700 employees will occur over the next 36 months, primarily in manufacturing and operating facilities. At May 30, 1999, 3,160 employees had been notified of separation. The decision to exit certain facilities, product lines and businesses resulted in decreased expected future cash flows, triggering asset impairment under SFAS 121. The amount of impairment of such assets was calculated using discounted cash flow and other business valuation methodologies. 49 ConAgra, Inc. 1999 Annual Report 91 The estimated cost of this plan is $880 million, $440.8 million of which is reflected in the current fiscal year. The remainder of the cost will be recognized when plans become finalized, assets become available for sale or employees are notified. The restructuring charges and write-downs of impaired assets held for use are: RESTRUCTURING ASSET CHARGES IMPAIRMENT TOTAL ------------- ------------ ------------ Packaged Foods $ 36.8 $ 3.9 $ 40.7 Refrigerated Foods 53.6 303.3 356.9 Agricultural Products 31.4 11.8 43.2 ------------- ------------ ------------ Total $ 121.8 $ 319.0 $ 440.8 ------------- ------------ ------------ ------------- ------------ ------------
The after-tax effect of the non-recurring charges in fiscal 1999 was $337.9 million or $.72 for basic income per share and $.71 for diluted income per share. Restructuring reserves were established in fiscal 1999 totaling $121.8 million. Of this amount, $69.4 million was recorded for assets to be disposed of at 36 facilities, $45.1 million for employee-related cash outlays and $7.3 million for other cash charges relating to the restructuring initiative. The other charges consist of $2.5 million for lease termination costs and $4.8 million for other contractual termination costs. The Company expects to dispose of the assets within twelve months and will continue to depreciate the assets during the period facilities are operational. No significant payments were made in fiscal 1999. The asset impairment charge of $319.0 million includes $114.1 million in write-downs of property, plant and equipment and $204.9 million in reductions of intangible and other assets. The intangible and other asset write-downs occurred primarily in the Refrigerated Foods segment as a result of management's decision to consolidate and reorganize its turkey businesses. 4. INCOME PER SHARE Basic income per share is calculated on the basis of weighted average outstanding common shares. Diluted income per share is computed on the basis of weighted average outstanding common shares plus equivalent shares assuming exercise of stock options and conversion of outstanding convertible securities, where dilutive. 92 The following table reconciles the income and average share amounts used to compute both basic and diluted income per share: 1999 1998 1997 --------- --------- --------- NET INCOME Income before cumulative effect of change in accounting $ 358.4 $ 641.8 $ 637.9 Cumulative effect of change in accounting - (14.8) - --------- --------- --------- Net income $ 358.4 $ 627.0 $ 637.9 --------- --------- --------- --------- --------- --------- INCOME PER SHARE - BASIC Weighted average shares outstanding 470.0 465.5 468.1 --------- --------- --------- --------- --------- --------- INCOME PER SHARE - DILUTED Weighted average shares outstanding - basic 470.0 465.5 468.1 Add shares contingently issuable upon exercise of stock options 6.7 9.8 8.1 --------- --------- --------- Weighted average shares outstanding 476.7 475.3 476.2 --------- --------- --------- --------- --------- ---------
At May 30, 1999, there were 8.9 million options outstanding with exercise prices exceeding the market value of common stock that were therefore excluded from the computation of shares contingently issuable upon exercise of the options. 5. RECEIVABLES The Company has agreements to sell interests in pools of receivables, in an amount not to exceed $675 million at any one time. Participation interests in new receivables may be sold, as collections reduce previously sold participation interests. The participation interests are sold at a discount that is included in selling, administrative and general expenses in the Consolidated Statements of Earnings. Gross proceeds from the sales were $649 and $524 million at fiscal year end 1999 and 1998, respectively. 6. INVENTORIES The major classes of inventories are as follows: 1999 1998 ---------- ---------- Hedged commodities $ 1,306.2 $ 1,199.3 Food products and livestock 1,144.7 1,263.3 Agricultural chemicals, fertilizer and feed 597.4 581.4 Other, principally ingredients and supplies 591.6 496.8 ---------- ---------- $ 3,639.9 $ 3,540.8 ---------- ---------- ---------- ----------
50 ConAgra, Inc. 1999 Annual Report 93 7. CREDIT FACILITIES AND BORROWINGS At May 30, 1999, the Company has credit lines from banks which total approximately $5.4 billion, including: $1.75 billion of long-term revolving credit facilities maturing in September 2003; $1.75 billion short-term revolving credit facilities maturing in September 1999; and uncompensated bankers' acceptance and money market loan facilities approximating $1.9 billion. Borrowings under the revolver agreements are at or below prime rate and may be prepaid without penalty. The Company pays fees for its revolving credit facilities. The Company finances its short-term needs with bank borrowings, commercial paper borrowings and bankers' acceptances. The average consolidated short-term borrowings outstanding under these facilities for the 1999 fiscal year were $3,052 million. This excludes an average of $383 million of short-term borrowings that were classified as long-term throughout the fiscal year (see Note 8). The highest period-end short-term indebtedness during fiscal 1999 was $4,153.2 million. Short-term borrowings were at rates below prime. The weighted average interest rate was 5.58% and 5.78%, respectively, for fiscal 1999 and 1998. In fiscal 1999, 1998 and 1997, the Company entered into interest rate swap agreements to reduce the impact of changes in short-term borrowing rates. At May 30, 1999, the Company had outstanding interest rate swap agreements effectively changing the interest rate exposure on $650 million of short-term borrowings from variable to a 5.8% fixed rate. The swap agreements will mature on December 31, 1999. At May 31, 1998, the Company had outstanding interest rate swap agreements effectively changing the interest rate exposure on $600 million of short-term borrowings from variable to a 6% fixed rate. The swap agreements matured in fiscal 1999. At May 25, 1997, the Company had outstanding interest rate swap agreements effectively changing the interest rate exposure on $1,400 million of short-term borrowings from variable to fixed rates (ranging from 5.8% to 6.4%). The swap agreements matured in fiscal 1998. The net cost in fiscal 1999, 1998 and 1997, and the estimated fair value of these agreements as of May 30, 1999 and May 31, 1998, were not material. 94 8. SENIOR LONG-TERM DEBT, SUBORDINATED DEBT AND LOAN AGREEMENTS 1999 1998 -------- -------- Senior Debt Commercial paper backed by long-term revolving credit agreements $ 153.2 $ 685.6 7.00% senior debt due in 2028 396.4 - 6.70% senior debt due in 2027 (redeemable at option of holders in 2009) 300.0 300.0 7.125% senior debt due in 2026 (redeemable at option of holders in 2006) 397.7 397.6 9.875% senior debt due in 2006 100.0 100.0 5.50% senior debt due in 2002 199.0 - 9.87% to 9.95% unsecured senior notes due in various amounts through 2009 53.7 66.5 8.1% to 9.0% publicly issued unsecured medium-term notes due in various amounts through 2004 117.0 119.5 5.75% to 9.28% Industrial Development Revenue Bonds (collateralized by plant and equipment) due on various dates through 2017 29.0 31.3 Miscellaneous unsecured 47.1 53.0 -------- -------- Total senior debt 1,793.1 1,753.5 -------- -------- Subordinated Debt 9.75% subordinated debt due in 2021 400.0 400.0 7.375% to 7.4% subordinated debt due through 2005 350.0 350.0 -------- -------- Total subordinated debt 750.0 750.0 -------- -------- Total long-term debt, excluding current installments $2,543.1 $2,503.5 -------- -------- -------- --------
The aggregate minimum principal maturities of the long-term debt for each of the five fiscal years following May 30, 1999 are as follows: 2000 $ 21.1 2001 19.8 2002 123.4 2003 208.3 2004 164.4
Under the long-term credit facility referenced in Note 7, the Company has agreements that allow it to borrow up to $1.75 billion through September 2003. The most restrictive note agreements (the revolving credit facilities and certain privately placed long-term debt) require the Company to repay the debt if Consolidated Funded Debt exceeds 60% of Consolidated Capital Base or if Fixed Charges coverage is less than 1.75 to 1.0 as such terms are defined in applicable agreements. 51 ConAgra, Inc. 1999 Annual Report 95 Net interest expense consists of: 1999 1998 1997 --------- --------- --------- Long-term debt $ 194.6 $ 206.9 $ 204.7 Short-term debt 166.5 143.2 129.2 Interest income (37.6) (38.0) (43.5) Interest capitalized (6.9) (11.4) (11.2) --------- --------- --------- $ 316.6 $ 300.7 $ 279.2 --------- --------- --------- --------- --------- ---------
Net interest paid was $308.5 million, $300.6 million and $276.6 million in fiscal 1999, 1998 and 1997, respectively. Short-term debt interest expense of $20.0 million, $19.1 million and $21.8 million in fiscal 1999, 1998 and 1997, respectively, incurred to finance hedged inventories, has been charged to cost of goods sold. The carrying amount of long-term debt (including current installments) was $2,564.2 million and $2,556.2 million as of May 30, 1999 and May 31, 1998, respectively. Based on current market rates primarily provided by outside investment bankers, the fair value of this debt at May 30, 1999 and May 31, 1998 was estimated at $2,665.1 million and $2,792.9 million, respectively. The Company's long-term debt is generally not callable until maturity. 9. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities primarily consist of: 1999 1998 --------- --------- Legal and environmental liabilities primarily associated with the Company's acquisition of Beatrice Company (acquired in fiscal 1991) $ 169.2 $ 279.9 Estimated postretirement health care and pensions 589.2 552.2 Deferred taxes and other 100.4 98.4 --------- --------- 858.8 930.5 Less estimated current portion 76.0 83.2 --------- --------- $ 782.8 $ 847.3 --------- --------- --------- ---------
10. PREFERRED SECURITIES OF SUBSIDIARY COMPANY ConAgra Capital, L.C., an indirectly controlled subsidiary of the Company, has the following Preferred Securities outstanding: 4 MILLION SHARES OF 9% SERIES A CUMULATIVE PREFERRED ("SERIES A SECURITIES") Distributions are payable monthly. 96 7 MILLION SHARES OF SERIES B ADJUSTABLE RATE CUMULATIVE PREFERRED ("SERIES B SECURITIES") Distributions are payable monthly at a rate per annum, which is adjusted to 95% of the highest of three U.S. Treasury security indices, subject to a floor of 5.0% and a ceiling of 10.5% per annum. The distribution rate in fiscal 1999 ranged from 5.0% to 5.6%. 10 MILLION SHARES OF 9.35% SERIES C CUMULATIVE PREFERRED ("SERIES C SECURITIES") Distributions are payable monthly. For financial statement purposes, distributions on these Securities are included in selling, administrative and general expenses in the Consolidated Statements of Earnings as such amounts represent minority interests. The above Securities were issued at a price of $25 per share. All such Securities are non-voting (except in certain limited circumstances), and are guaranteed on a limited basis by ConAgra and, in certain limited circumstances, are exchangeable for debt securities of ConAgra. The Securities are redeemable at the option of ConAgra Capital, L.C. (with ConAgra's consent) in whole or in part, on or after May 31, 1999 with respect to Series A Securities, June 30, 1999 with respect to Series B Securities, and February 29, 2000 with respect to Series C Securities, at $25 per security plus accumulated and unpaid distributions to the date fixed for redemption. 11. CAPITAL STOCK The Company has authorized shares of preferred stock as follows: Class B - $50 par value; 150,000 shares Class C - $100 par value; 250,000 shares Class D - without par value; 1,100,000 shares Class E - without par value; 16,550,000 shares There are no preferred shares issued or outstanding as of May 30, 1999. In connection with a two-for-one split of the Company's common stock, effective October 1, 1997, the Company issued 261.4 million shares (including 17.1 million shares and 12.2 million shares added to treasury stock and the Employee Equity Fund, respectively) in the form of a stock dividend. All references in the financial statements with regard to number of shares of common stock, related dividends and per share amounts have been restated to reflect this stock split. 12. EMPLOYEE EQUITY FUND In fiscal 1993, the Company established a $700 million Employee Equity Fund ("EEF"), a newly formed grantor trust, to pre-fund future stock-related obligations of the Company's compensation and benefit plans. The EEF supports existing, previously approved employee plans that use ConAgra common stock and does not change those plans or the amounts of stock expected to be issued for those plans. 52 ConAgra, Inc. 1999 Annual Report 97 For financial reporting purposes the EEF is consolidated with ConAgra. The fair market value of the shares held by the EEF is shown as a reduction to common stockholders' equity in the Company's Consolidated Balance Sheets. All dividends and interest transactions between the EEF and ConAgra are eliminated. Differences between cost and fair value of shares held and/or released are included in consolidated additional paid-in capital. Following is a summary of shares held by the EEF: 1999 1998 ---------- ---------- Shares held (in millions) 17.2 21.4 Cost - per share $ 14.552 $ 14.552 Cost - total 250.1 311.1 Fair market value - per share $ 26.0625 $ 29.25 Fair market value - total 447.9 625.3
13. STOCK OPTIONS AND RIGHTS Stock option plans approved by the stockholders provide for granting of options to employees for purchase of common stock generally at prices equal to fair market value at the time of grant, and for issuance of restricted or bonus stock without direct cost to the employee. During fiscal 1999, 1998 and 1997, 195,825 shares, 274,926 shares and 565,722 shares of restricted stock (including stock issued under incentive plans) were issued. The value of the restricted stock, equal to fair market value at the time of grant, is being amortized as compensation expense over the vesting period. This compensation expense was not significant for fiscal 1999, 1998 and 1997. Options become exercisable under various vesting schedules and generally expire ten years after the date of grant. Option shares and prices are adjusted for common stock splits and changes in capitalization. The changes in the outstanding stock options during the three years ended May 30, 1999 are summarized below: 1999 1998 1997 ----------------------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ----------------------------------------------------------------------------------- Beginning of year 23.6 $20.91 23.1 $17.01 23.3 $14.66 Granted 4.8 28.15 5.2 33.57 5.7 24.03 Exercised (3.3) 14.70 (3.4) 13.80 (4.3) 13.72 Canceled (1.6) 26.76 (1.3) 20.52 (1.6) 16.43 End of year 23.5 $22.86 23.6 $20.91 23.1 $17.01 Exercisable at end of year 14.4 $19.58 13.8 $16.99 13.0 $14.40
98 The following summarizes information about stock options outstanding as of May 30, 1999: OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE REMAINING EXERCISE EXERCISE RANGE OF EXERCISE PRICE SHARES LIFE PRICE SHARES PRICE ------------------------------------------------------------------------------------------------------- $ 4.97 - $ 6.42 0.1 1.9 $ 5.15 0.1 $ 5.15 7.63 - 11.33 1.3 0.9 9.66 1.3 9.66 11.54 - 16.88 5.9 4.2 14.79 5.9 14.79 19.50 - 29.00 11.8 7.8 24.55 5.4 23.07 29.50 - 36.81 4.4 8.4 33.73 1.7 33.74 $ 4.97 - $ 36.81 23.5 6.6 $ 22.86 14.4 $ 19.58
The Company has elected to account for its employee stock option plans using the intrinsic value method of accounting. Accordingly, no compensation expense is recognized for stock options because the exercise price of the stock options equals the market price of the underlying stock on the date of the grant. Pro forma information regarding net income and income per share is required by SFAS No. 123, assuming the Company accounted for its employee stock options using the fair value method. The fair value of options was estimated at the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions for 1999, 1998 and 1997, respectively: risk-free interest rate of 4.29%, 6.03% and 6.40%; a dividend yield of 2.2%, 2.1% and 2.2%; expected volatility of 20.0%, 19.1% and 20.9%; and an expected option life of six years. The weighted average fair value of options granted in fiscal 1999, 1998 and 1997 was $6.12, $8.53 and $6.54, respectively. Pro forma net income and income per share are as follows (because SFAS No. 123 is applicable only to options granted subsequent to fiscal 1995, its pro forma effect will not be fully reflected until fiscal 2000): 1999 1998 1997 ------ ------ ------ Pro forma net income $344.3 $615.9 $631.2 Pro forma basic income per share .73 1.32 1.35 Basic income per share - as reported .76 1.35 1.36 Pro forma diluted income per share .72 1.30 1.33 Diluted income per share - as reported .75 1.32 1.34
At May 30, 1999, approximately 10.5 million shares were reserved for granting additional options and restricted or bonus stock awards. 53 ConAgra, Inc. 1999 Annual Report 99 Each share of common stock carries with it one-half preferred stock purchase right ("Right"). The Rights become exercisable 10 days after a person (an "Acquiring Person") acquires or commences a tender offer for 15% or more of the Company's common stock. Each Right entitles the holder to purchase one one-thousandth of a share of a new series of Class E Preferred Stock at an exercise price of $200, subject to adjustment. The Rights expire on July 12, 2006, and may be redeemed at the option of the Company at $.01 per Right, subject to adjustment. Under certain circumstances, if (i) any person becomes an Acquiring Person or (ii) the Company is acquired in a merger or other business combination after a person becomes an Acquiring Person, each holder of a Right (other than the Acquiring Person) will have the right to receive, upon exercise of the Right, shares of common stock (of the Company under (i) and of the acquiring company under (ii)) having a value of twice the exercise price of the Right. The Rights were issued pursuant to a dividend declared by the Company's Board of Directors on July 12, 1996, payable to stockholders of record on July 24, 1996. The one Right for each outstanding share was adjusted to one-half Right for each share effective October 1, 1997 as a result of the two-for-one stock split. At May 30, 1999, the Company has reserved 1 million Class E preferred shares for exercise of the Rights. 14. PRETAX INCOME AND INCOME TAXES Income before taxes and cumulative effect of change in accounting consisted of the following: 1999 1998 1997 -------- -------- -------- United States $ 570.8 $ 968.9 $ 997.4 Foreign 111.5 72.1 46.6 -------- -------- -------- $ 682.3 $1,041.0 $1,044.0 -------- -------- -------- -------- -------- --------
The provision for income taxes includes the following: 1999 1998 1997 -------- -------- -------- Current Federal $ 280.7 $ 287.0 $ 271.8 State 52.1 56.6 59.0 Foreign 24.5 12.3 8.0 -------- -------- -------- 357.3 355.9 338.8 -------- -------- -------- Deferred Federal (30.0) 38.8 60.6 State (3.4) 4.5 6.7 Foreign - - - -------- -------- -------- (33.4) 43.3 67.3 -------- -------- -------- $ 323.9 $ 399.2 $ 406.1 -------- -------- -------- -------- -------- --------
100 Income taxes computed by applying statutory rates to income before income taxes are reconciled to the provision for income taxes set forth in the Consolidated Statements of Earnings as follows:
1999 1998 1997 ---------- ---------- ---------- Computed U.S. federal income taxes $ 238.8 $ 364.3 $ 365.4 State income taxes, net of U.S. federal tax benefit 31.6 39.7 42.9 Nondeductible amortization of goodwill and other intangibles 21.5 20.1 21.7 Export and jobs tax credits (12.2) (7.5) (6.3) Permanent differences due to non-recurring charges 57.3 - - Other (13.1) (17.4) (17.6) ---------- --------- ---------- $ 323.9 $ 399.2 $ 406.1 ========== ========= ==========
Income taxes paid were $344.5 million, $282.3 million and $318.3 million in fiscal 1999, 1998 and 1997, respectively. The Internal Revenue Service has closed examinations of the Company's tax returns through fiscal 1992. The IRS has proposed certain adjustments for later years, some of which are being contested by the Company. The Company believes that it has made adequate provisions for income taxes payable. The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following:
1999 1998 ------------------------------------------------------- ASSETS LIABILITIES ASSETS LIABILITIES ------------------------------------------------------- Depreciation and amortization $ - $361.2 $ - $ 342.8 Nonpension postretirement benefits 171.1 - 170.2 - Other noncurrent liabilities which will give rise to future tax deductions 194.2 - 216.0 - Accrued expenses 76.5 - 74.5 - Other 68.3 128.5 82.4 108.7 Non-recurring charges 150.6 - 59.5 - ------- ------- ------- ------- $ 660.7 $ 489.7 $ 602.6 $ 451.5 ======= ======= ====== =======
54 ConAgra, Inc. 1999 Annual Report 101 15. COMMITMENTS The Company leases certain facilities and transportation equipment under agreements that expire at various dates. Management expects that in the normal course of business, leases that expire will be renewed or replaced by other leases. Substantially all leases require payment of property taxes, insurance and maintenance costs in addition to rental payments. A summary of rent expense charged to operations follows:
1999 1998 1997 --------- --------- --------- Cancelable $ 154.8 $ 153.2 $ 134.4 Noncancelable 117.9 115.1 112.4 --------- --------- --------- $ 272.7 $ 268.3 $ 246.8 ========= ========= =========
A summary of noncancelable operating lease commitments for fiscal years following May 30, 1999 is as follows:
TYPE OF PROPERTY ------------------------------------------ REAL AND OTHER TRANSPORTATION PROPERTY EQUIPMENT ------------------------------------------ 2000 $ 76.5 $ 31.6 2001 66.9 23.1 2002 56.0 11.4 2003 45.7 4.3 2004 36.8 2.1 Later years 59.0 6.5 ------- ------- $ 340.9 $ 79.0 ======= =======
The Company had letters of credit, performance bonds and other commitments and guarantees outstanding at May 30, 1999 aggregating approximately $217.9 million. 16. CONTINGENCIES In fiscal 1991, ConAgra acquired Beatrice Company ("Beatrice"). As a result of the acquisition and the significant pre-acquisition contingencies of the Beatrice businesses and its former subsidiaries, the consolidated post-acquisition financial statements of ConAgra reflect significant liabilities associated with the estimated resolution of these contingencies. Beatrice also is engaged in 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 44 Superfund, proposed Superfund or state-equivalent sites. Beatrice has paid or is in the process of paying its liability share at 41 of these sites. Substantial reserves for these 102 matters have been established based on the Company's best estimate of its undiscounted remediation liabilities, which estimates include evaluation of investigatory studies, extent of required cleanup, the known volumetric contribution of Beatrice and other potentially responsible parties, and its experience in remediating sites. ConAgra is party to a number of other lawsuits and claims arising out of the operation of its businesses. After taking into account liabilities recorded for all of the foregoing matters, management believes the ultimate resolution of such matters should not have a material adverse effect on ConAgra's financial condition, results of operations or liquidity. 17. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses interest rate swaps to manage its interest rate risk, as outlined in Note 7. In addition, the Company's energy subsidiary uses derivative financial instruments in its trading activities in energy markets. At May 30, 1999 the Company's energy subsidiary was party to natural gas price swaps with a notional value of $265.9 million. The swap agreements are settled in cash based on the difference between a fixed and floating (index-based) price for the underlying commodity. All swaps expire within twelve months, while most have a duration of no more than six months. At May 31, 1998 the notional value of these financial instruments was $509.7 million. All contracts are marked-to-market, with gains and losses recorded in the income statement, consistent with all trading business activity within the Company. The market risk on the net position in energy derivative financial instruments was not material. The Company performs credit assessments on all counterparties and obtains additional guarantees of financial performance, if deemed necessary. The predominance of these trades are swaps, where the Company pays or receives only the difference between the contract value and the market value. The amount at risk is therefore limited to the gain on the swap. The Company does not anticipate any material loss because of nonperformance by a counterparty. Certain of the Company's operations use foreign exchange forwards to hedge fixed purchase and sales commitments denominated in a foreign currency. The fair value of these foreign exchange positions was not material as of May 30, 1999 and May 31, 1998. 18. PENSION AND POSTRETIREMENT BENEFITS RETIREMENT PENSION PLANS The Company and its subsidiaries have defined benefit retirement plans ("Plan") for eligible salaried and hourly employees. Benefits are based on years of credited service and average compensation or stated amounts for each year of service. 55 ConAgra, Inc. 1999 Annual Report 103 Components of pension benefit costs and weighted average actuarial assumptions are:
1999 1998 1997 --------- --------- --------- PENSION BENEFIT COST Service cost $ 48.5 $ 44.4 $ 45.9 Interest cost 97.7 92.5 87.0 Expected return on plan assets (101.4) (92.4) (85.0) Amortization of prior service costs 3.8 4.4 4.2 Amortization of transition obligation (2.7) (2.7) (2.7) Recognized net actuarial loss 1.9 2.3 9.7 Curtailment (gain) loss and special benefits - (.1) .9 --------- --------- --------- Pension benefit cost - Company plans 47.8 48.4 60.0 Pension benefit cost - Multi-employer plans 9.1 9.5 8.8 --------- --------- --------- Total pension benefit cost $ 56.9 $ 57.9 $ 68.8 ========= ========= ========= ACTUARIAL ASSUMPTIONS Discount rate 7.25% 7.50% 7.00% Long-term rate of return on plan assets 8.75 9.25 9.25 Long-term rate of compensation increase 5.50 5.50 5.50
The change in projected benefit obligation, change in plan assets and funded status of the plans at February 28, 1999 and 1998 were:
1999 1998 --------- --------- CHANGE IN PROJECTED BENEFIT OBLIGATION Projected benefit obligation at beginning of year $ 1,376.3 $ 1,261.2 Service cost 48.5 44.4 Interest cost 97.7 92.5 Plan participants' contributions 0.1 0.1 Amendments 4.3 7.2 Actuarial loss 110.6 40.9 Other 1.4 - Benefits paid (77.7) (70.0) ---------- --------- Projected benefit obligation at end of year 1,561.2 1,376.3 ---------- ---------
104
1999 1998 --------- -------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 1,504.6 1,254.7 Actual return on plan assets 103.8 288.2 Employer contributions 13.9 40.4 Plan participants' contributions 0.1 0.1 Investment and administrative expenses (10.7) (8.8) Other 1.8 - Benefits paid (77.7) (70.0) --------- -------- Fair value of plan assets at end of year 1,535.8 1,504.6 --------- -------- FUNDED STATUS (25.4) 128.3 Unrecognized actuarial gain (135.3) (252.5) Unrecognized prior service cost 27.4 26.9 Unrecognized transition amount (9.3) (11.6) --------- -------- Accrued benefit cost $ (142.6) $ (108.9) --------- -------- --------- -------- ACTUARIAL ASSUMPTIONS Discount rate 6.75% 7.25% Long-term rate of compensation increase 5.50 5.50 The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with accumulated benefit obligations in excess of plan assets at May 30, 1999 and May 31, 1998 were: 1999 1998 --------- -------- Projected benefit obligation $ 229.6 $ 190.3 Accumulated benefit obligation 215.7 174.5 Fair value of plan assets 143.2 131.0
Plan assets are primarily invested in equity securities, corporate and government debt securities and common trust funds. Included in plan assets are 5.1 million shares of the Company's common stock at a fair market value of $152.7 million at February 28, 1999. The Company funds these plans in accordance with the minimum and maximum limits established by law. Certain employees of the Company are covered under defined contribution plans. The expense related to these plans was $29.7 million, $29.0 million and $28.6 million in fiscal 1999, 1998 and 1997, respectively. 56 ConAgra, Inc. 1999 Annual Report 105
POSTRETIREMENT BENEFITS The Company's postretirement plans provide certain medical and dental benefits to qualifying U.S. employees. Components of postretirement benefit costs and weighted average actuarial assumptions are: 1999 1998 1997 --------- -------- --------- POSTRETIREMENT BENEFIT COST Service cost $ 2.8 $ 2.7 $ 3.9 Interest cost 24.7 25.1 29.1 Expected return on plan assets (0.6) (0.7) (0.7) Amortization of prior service cost (0.1) (0.1) (0.1) Amortization of transition obligation 0.1 0.1 0.1 Recognized net actuarial (gain) loss (3.0) (3.7) - Curtailment (gain) loss - 0.1 (1.0) --------- -------- --------- $ 23.9 $ 23.5 $ 31.3 --------- -------- --------- --------- -------- --------- ACTUARIAL ASSUMPTIONS Discount rate 7.25% 7.50% 7.00% Long-term rate of return on plan assets 13.70 13.70 13.70 The change in accumulated benefit obligation, change in plan assets and funded status of the plans at February 28, 1999 and 1998 were: 1999 1998 --------- --------- CHANGE IN ACCUMULATED BENEFIT OBLIGATION Accumulated benefit obligation at beginning of year $ 351.5 $ 350.4 Service cost 2.8 2.7 Interest cost 24.7 25.1 Plan participants' contributions 2.6 2.2 Actuarial (gain) loss (5.5) 0.5 Acquisition 5.6 - Benefits paid (31.0) (29.3) Curtailments - (0.1) --------- --------- Accumulated benefit obligation at end of year 350.7 351.5 --------- --------- CHANGE IN PLAN ASSETS Fair value of plan assets at beginning of year 5.5 5.7 Actual return on plan assets 0.7 0.7 Employer contributions 27.5 26.3 Plan participants' contributions 2.6 2.2 Benefits paid (31.0) (29.4) --------- --------- Fair value of plan assets at end of year 5.3 5.5 --------- --------- FUNDED STATUS (345.4) (346.0) Unrecognized net gain (92.5) (90.8) Unrecognized transition amount 0.7 0.8 Unrecognized prior service cost (1.4) (1.5) --------- --------- Accrued benefit cost $ (438.6) $ (437.5) --------- --------- --------- --------- ACTUARIAL ASSUMPTIONS Discount rate 6.75% 7.25%
106 Benefit costs were generally estimated assuming retiree health care costs would initially increase at a 6.0% annual rate for all participants. The rates are assumed to decrease to a 5.5% annual growth rate in fiscal 2000 and remain at that level thereafter. A one percentage point change in assumed health care cost rates would have the following effect:
One Percent One Percent Increase Decrease ----------- ----------- Total service and interest cost components $ 3.3 $ (2.9) Postretirement benefit obligation 33.0 (28.0) The Company generally intends to fund claims as reported.
19. BUSINESS SEGMENTS During the fourth quarter of fiscal 1999, the Company adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. This statement establishes standards for the way public companies report information about operating segments that is consistent with that made available to the management of the Company in allocating resources and assessing performance. The Company has three segments, which are organized based upon similar economic characteristics and are similar in the nature of products and services offered, the nature of production processes, the type or class of customer and distribution methods. Packaged Foods includes companies that produce shelf-stable and frozen foods. This segment markets food products in retail and foodservice channels. Refrigerated Foods includes companies that produce and market branded processed meats, beef, pork, chicken and turkey. Agricultural Products includes companies involved in distribution of agricultural inputs and procurement, processing, trading and distribution of commodity food ingredients and agricultural commodities. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less all identifiable operating expenses and includes the related equity in earnings of companies included on the basis of the equity method of accounting. General corporate expense, goodwill amortization, interest expense and income taxes have been excluded from segment operations. All assets other than cash and those assets related to the corporate office have been identified with the segments to which they relate. The Company operates principally in the United States. 57 ConAgra, Inc. 1999 Annual Report 107 1999 1998 1997 --------- --------- --------- Sales to unaffiliated customers Packaged Foods $ 7,465.5 $ 7,192.2 $ 7,054.2 Refrigerated Foods 11,549.3 11,416.2 11,769.4 Agricultural Products 5,579.5 5,611.1 5,621.6 --------- --------- --------- Total $24,594.3 $24,219.5 $24,445.2 --------- --------- --------- --------- --------- --------- Intersegment sales Packaged Foods $ 36.4 $ 34.1 $ 26.4 Refrigerated Foods 221.7 193.4 76.5 Agricultural Products 288.0 220.0 255.5 --------- --------- --------- 546.1 447.5 358.4 Intersegment elimination (546.1) (447.5) (358.4) --------- --------- --------- Total $ - $ - $ - --------- --------- --------- --------- --------- --------- Net sales Packaged Foods $ 7,501.9 $ 7,226.3 $ 7,080.6 Refrigerated Foods 11,771.0 11,609.6 11,845.9 Agricultural Products 5,867.5 5,831.1 5,877.1 Intersegment elimination (546.1) (447.5) (358.4) --------- --------- --------- Total $24,594.3 $24,219.5 $24,445.2 --------- --------- --------- --------- --------- --------- Operating profit (Note a) Packaged Foods $ 951.4 $ 978.1 $ 884.4 Refrigerated Foods 4.0 204.6 358.2 Agricultural Products 311.6 390.2 328.2 --------- --------- --------- Total operating profit 1,267.0 1,572.9 1,570.8 Interest expense 316.6 300.7 279.2 General corporate expenses 198.7 163.4 178.6 Goodwill amortization 69.4 67.8 69.0 --------- --------- --------- Income before tax and cumulative effect of change in accounting $ 682.3 $ 1,041.0 $ 1,044.0 --------- --------- --------- --------- --------- --------- Identifiable assets Packaged Foods $ 4,752.7 $ 4,327.5 $ 4,284.2 Refrigerated Foods 3,411.0 3,830.3 3,675.4 Agricultural Products 3,582.8 3,249.1 3,042.0 Corporate 399.6 401.6 450.2 --------- --------- --------- Total $12,146.1 $11,808.5 $11,451.8 --------- --------- --------- --------- --------- --------- Additions to property, plant and equipment - including businesses acquired Packaged Foods $ 376.9 $ 263.2 $ 267.0 Refrigerated Foods 224.5 206.9 296.0 Agricultural Products 136.1 124.1 173.5 Corporate 25.7 8.6 5.6 --------- --------- --------- Total $ 763.2 $ 602.8 $ 742.1 --------- --------- --------- --------- --------- ---------
108 1999 1998 1997 --------- --------- --------- Depreciation and amortization Packaged Foods $ 243.9 $ 221.6 $ 212.1 Refrigerated Foods 190.9 175.9 156.8 Agricultural Products 63.2 56.8 55.8 Corporate 1.8 2.5 1.5 --------- --------- --------- Total $ 499.8 $ 456.8 $ 426.2 --------- --------- --------- --------- --------- ---------
Note a: Fiscal 1999 includes before-tax non-recurring charges of $440.8 million (Note 3). The charges were included in operating profit as follows: $40.7 million in Packaged Foods; $356.9 million in Refrigerated Foods; and $43.2 million in Agricultural Products. 58 ConAgra, Inc. 1999 Annual Report 109 20. QUARTERLY RESULTS (UNAUDITED)
INCOME (LOSS) NET PER SHARE STOCK MARKET PRICE DIVIDENDS NET GROSS INCOME ------------------ -------------------- DECLARED SALES PROFIT (LOSS) BASIC DILUTED HIGH LOW PER SHARE ---------------------------------------------------------------------------------------------- 1999 ---- First $ 6,483.4 $ 917.5 $ 109.3 $ .23 $ .23 $ 33.25 $ 22.56 $ .15625 Second 6,404.4 1,105.9 219.0 .47 .46 32.44 24.63 .17850 Third 5,693.3 1,007.1 171.4 .36 .36 34.38 29.25 .17850 Fourth 6,013.2 1,007.6 (141.3)* (.30)* (.30)* 31.25 23.13 .17850 ----------- ----------- -------- ------- ------- --------- Year $ 24,594.3 $ 4,038.1 $ 358.4* $ .76* $ .75* $ 34.38 $ 22.56 $ .69175 ----------- ----------- -------- ------- ------- --------- ----------- ----------- -------- ------- ------- --------- 1998 ---- First $ 6,262.8 $ 883.4 $ 118.3 $ .25 $ .25 $ 35.81 $ 29.63 $ .13625 Second 6,548.1 1,037.2 217.2 .47 .46 37.25 28.69 .15625 Third 5,468.0 875.5 133.7** .29** .28** 38.75 27.00 .15625 Fourth 5,940.6 1,014.4 172.6 .37 .36 32.94 27.88 .15625 ----------- ----------- -------- ------- ------- --------- Year $ 24,219.5 $ 3,810.5 $ 641.8** $ 1.38** $ 1.35** $ 38.75 $ 27.00 $ .60500 ----------- ----------- -------- ------- ------- --------- ----------- ----------- -------- ------- ------- ---------
* Includes non-recurring charges of $337.9, or $.72 and $.71 for basic and diluted income per share, respectively (See Note 3). ** Amounts presented exclude one-time cumulative effect of change in accounting for business process re-engineering costs associated with computer systems development of $14.8 million after-tax or $.03 per share for both basic and diluted income per share. 59 ConAgra, Inc. 1999 Annual Report 110 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors ConAgra, Inc. We have audited the accompanying consolidated balance sheets of ConAgra, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998, and the related consolidated statements of earnings, comprehensive income, common stockholders' equity and cash flows for each of the three years in the period ended May 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ConAgra, Inc. and subsidiaries as of May 30, 1999 and May 31, 1998, and the results of their operations and their cash flows for each of the three years in the period ended May 30, 1999 in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Deloitte & Touche LLP July 9, 1999 Omaha, Nebraska 111 THE CONDUCT OF OUR AFFAIRS The major objectives of the company are expressed in terms of return on stockholders' equity and growth in trend line earning power. As we conduct ourselves in the pursuit of our existing businesses and in the growth of our businesses in an ethical and moral way, we must also fulfill our commitments to our government, to our society and to ourselves as individuals. In one sense, ethics involves the point of view that suggests we live in a glass bowl, and we should feel comfortable with any actions we take, if they were shared publicly. Further, we will conduct our affairs within the law. Should there be evidence of possible malfeasance on the part of any officer or member of management, each employee must feel the responsibility to communicate that to the appropriate party. This is a commitment that each of us must undertake and not feel that it is a high-risk communication, but that it is expected and, indeed, an obligation. - - from CONAGRA'S PHILOSOPHY, page 6 (originally published in 1976) PRINCIPAL OFFICERS The principal officers of the company include, among others, those listed on pages 62 and 63 of this report. The principal officers are responsible for maintaining throughout the company a system of internal controls which protect the assets of the company on a reasonable and economic basis. They also are responsible for maintaining records which permit the preparation of financial statement that fairly present the financial condition and results of operations of the company in accordance with generally accepted accounting principles. AUDIT COMMITTEE OF THE BOARD The Audit Committee of ConAgra's Board of Directors is composed entirely of outside directors and recommends the appointment of the company's independent public accountants. The Audit Committee meets regularly, and when appropriate separately, with the independent public accountants, the internal auditors and financial management. Both the independent public accountants and the internal auditors have unrestricted access to the Audit Committee. 60 ConAgra, Inc. 1999 Annual Report 112 EX-21 9 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF CONAGRA ConAgra, Inc. is the parent corporation owning 100% (unless otherwise noted) of the voting securities of the following subsidiaries as of May 30, 1999:
Jurisdiction of Subsidiary Incorporation - ---------- -------------- A.M. Gilardi & Sons, Inc. Ohio Alabama Processors, Inc. Alabama Armour Food Co. - Iowa Iowa Arrow CAG, Inc. Delaware Arrow Industries, Inc. Texas Banquet Foods (Canada) Corporation Canada BCF, Inc. Texas Brown Water Towing, Inc. Delaware CAG 31, Inc. Delaware CAG Real Estate, Inc. Nebraska CG REIT, Inc. Nebraska ConAgra Brands, Inc. Nebraska ConAgra Capital L.C. (indirectly controlled) Iowa ConAgra Caribbean Distributors, Inc. Puerto Rico ConAgra Energy Services, Inc. Delaware ConAgra Fertilizer Company Nebraska ConAgra Foreign Sales Corporation, Inc. Guam ConAgra Functional Foods, Inc. Nebraska ConAgra Grocery Products Company (owns 100% of the voting securities of ten domestic corporations, 70% of one foreign corporation and 100% of three foreign corporations, all engaged principally in the production and marketing of retail, foodservice and industrial food products) Delaware ConAgra International (Far East) Limited (owns 100% of the voting securities of four foreign corporations engaged principally in the worldwide commodities trading business) Hong Kong ConAgra International Fertilizer Company Delaware
113 EXHIBIT 21 (CONTINUED)
Jurisdiction of Subsidiary Incorporation - ---------- -------------- ConAgra International, Inc. (owns 100% of the voting securities of 17 foreign corporations, 99% of ten foreign corporations, 98% of two foreign corporations, 85% of one foreign corporation, 50% of two foreign corporations and 30% of two foreign corporations, all engaged principally in the worldwide commodities trading business and the processing of beef, wool and malt) Delaware ConAgra International, S.A. Spain ConAgra Lonergan Corporation Nebraska ConAgra Poultry Company (owns 100% of two domestic corporations engaged principally in poultry operations) Delaware ConAgra Relocation Services, Inc. Delaware ConAgra Shared Purchasing, Inc. Delaware ConAgra Trade Group, Inc. (owns 100% of the voting securities of one domestic corporation) Delaware ConAgra Transportation, Inc. Delaware Council Bluffs Payroll Company Delaware Fernando's Foods Corporation California Golden Valley Microwave Foods, Ltd. United Kingdom GoodMark Foods, Inc. (owns 100% of the voting securities of three domestic corporations and one foreign corporation) North Carolina Hester Industries, Inc. Virginia Holly Ridge Foods, Inc. North Carolina Illini, Inc. Delaware International Pizza Corporation Ohio Investment Resource Services, Inc. Delaware J.R.R.W. Transport, Inc. Iowa Kurt A. Becher GmbH & Company KG Germany Lamb-Weston, Inc. (owns 100% of the voting securities of two domestic corporations and one foreign corporation, all engaged in the potato products business) Delaware Lovette Company, Inc. North Carolina Meridian Seafood Products, Inc. (owns 100% of the voting securities of one domestic corporation) Delaware
114 EXHIBIT 21 (CONTINUED)
Jurisdiction of Subsidiary Incorporation - ---------- -------------- MHC, Inc. Oregon Miller Bros. Company, Inc. Utah Molinos de Puerto Rico, Inc. Nebraska Monfort, Inc. (owns 100% of the voting securities of four domestic corporations and one foreign corporation, all engaged principally in the livestock feeding and processing business) Delaware Rygmyr Foods, Inc. Minnesota Sergeant's Pet Products, Inc. Delaware Superior Barge Lines, Inc. (80% owned) Delaware Swift & Company Delaware To-Ricos, Inc. Nebraska United Agri Products, Inc. (owns 100% of the voting securities of 29 domestic corporations, all engaged principally in the agricultural chemicals business) Delaware USFI-Gilroy, Inc. Delaware Weld Insurance Company, Inc. Colorado Zoll Foods Corporation Illinois The corporations listed above and on the previous page are included in the consolidated financial statements, which are a part of this report.
115 EXHIBIT 21 (CONTINUED) ConAgra and its subsidiaries account for the following investments using the equity method of accounting:
Jurisdiction of Subsidiary Incorporation - ---------- ------------- Saprogal (99.98% owned) Spain Sapropor (99.87% owned) Portugal Barrett Burston Malting Co. Pty. Ltd. (50% owned) Australia Agri-Pacific Co., Ltd. (50% owned) Taiwan CAG 29, B.V. (50% owned) Denmark Canada Malting Company Limited (50% owned) Canada Concampo S.A. de C.V. (50% owned) Mexico European Oat Millers Ltd. (50% owned) United Kingdom Great Western Malting Co. (50% owned) Delaware IMEX International Pty. Ltd. (50% owned) South Africa Malt Real Property Pty. Ltd. (50% owned) Australia Pecom-Agra, S.A. (50% owned) Argentina Productos Verde Valle S.A. de C.V. (50% owned) Mexico Tecnica Agricola de Mexico S.A. de C.V. (50% owned) Mexico Tradoil, Inc. (50% owned) Panama Ulgrave Limited (50% owned) United Kingdom
116 EX-23 10 EXHIBIT 23 EXHBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in all currently effective Registration Statements of ConAgra, Inc. on Form S-3 and on Form S-8 (including any Post Effective Amendments thereto) filed on or before August 25, 1999, of our reports dated July 9, 1999, appearing in and incorporated by reference in the Annual Report on Form 10-K of ConAgra, Inc. for the year ended May 30, 1999. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Omaha, Nebraska August 25, 1999 117 EX-24 11 EXHIBIT 24 EXHIBIT 24 POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Mogens C. Bay ------------------------------ Mogens Bay 118 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Philip B. Fletcher ------------------------------- Philip B. Fletcher 119 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ C. M. Harper ------------------------------ C. M. Harper 120 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Robert A. Krane ------------------------------ Robert A. Krane 121 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Carl E. Reichardt ------------------------------ Carl E. Reichardt 122 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Ronald W. Roskens ------------------------------ Ronald W. Roskens 123 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Marjorie M. Scardino ------------------------------ Marjorie M. Scardino 124 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Walter Scott, Jr. ------------------------------ Walter Scott, Jr 125 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Kenneth E. Stinson ------------------------------ Kenneth E. Stinson 126 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Thomas R. Williams ------------------------------ Thomas R. Williams 127 EXHBIT 24 (CONTINUED) POWER OF ATTORNEY The undersigned Director of ConAgra, Inc., a Delaware corporation, hereby constitutes and appoints Bruce C. Rohde as Attorney-in-Fact in his name, place and stead to execute ConAgra's Annual Report on Form 10-K for the fiscal year ended May 30, 1999, together with any and all subsequent amendments thereof, in his capacity as a Director and hereby ratifies all that said Attorney-in-Fact may do by virtue thereof. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal this 9th day of July, 1999. /s/ Clayton K. Yeutter ------------------------------ Clayton K. Yeutter 128 EX-27 12 EXHIBIT 27
5 1,000 YEAR MAY-30-1999 JUN-01-1998 MAY-30-1999 62,800 0 1,697,500 60,000 3,639,900 5,656,100 6,213,800 2,599,600 12,146,100 5,386,400 2,543,100 0 525,000 2,598,200 310,600 12,146,100 24,594,300 24,594,300 20,556,200 20,556,200 3,039,200 0 316,600 682,300 323,900 358,400 0 0 0 358,400 0.76 0.75
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