Form 8-K CONAGRA FOODS INC /DE/ For: Sep 21

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): September 21, 2015

 

 

ConAgra Foods, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

 

1-7275		47-0248710
(Commission File Number)		(IRS Employer Identification No.)
One ConAgra Drive
Omaha, NE		68102
(Address of Principal Executive Offices)		(Zip Code)

(402) 240-4000

(Registrant’s Telephone Number, Including Area Code)

(Former Name or Former Address, if Changed Since Last Report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 1.01. Entry into a Material Definitive Agreement.

On September 21, 2015, ConAgra Foods, Inc. (the “Company”) entered into Amendment No. 4 to Revolving Credit Agreement (the “Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent and a lender (the “Agent”), and the other financial institutions party thereto (collectively, the “Revolving Lenders”), amending that certain Revolving Credit Agreement, dated as of September 14, 2011, as amended, among the Company, the Agent and the Revolving Lenders (the “Revolving Credit Agreement”). The Amendment amends the Revolving Credit Agreement to exclude certain non-cash goodwill and other intangible asset impairments from the calculation of the fixed charge coverage ratio.

A copy of the Amendment is filed herewith as Exhibit 10.1. The foregoing description of the Amendment is qualified in its entirety by reference to the full text of the Amendment, which is incorporated herein by reference.

Item 2.02. Results of Operations and Financial Condition.

On September 22, 2015, the Company issued a press release and posted a question and answer document (“Q&A”) on its website containing information on the Company’s first quarter fiscal 2016 financial results. The press release and Q&A are furnished with this Form 8-K as Exhibits 99.1 and 99.2, respectively.

The press release and Q&A include the non-GAAP financial measures of diluted earnings per share from continuing operations adjusted for items impacting comparability, adjusted operating profit for each of the Consumer Foods and Commercial Foods segments, adjusted unallocated corporate expense, effective tax rate excluding items impacting comparability and net debt. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the Company’s financial statements and believes these non-GAAP measures provide useful supplemental information to assess the Company’s operating performance and financial position. To the extent required, these measures are reconciled in the press release and Q&A to the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, the Company’s diluted earnings per share, operating performance and financial measures as calculated in accordance with GAAP. The inability to predict the amount and timing of future items makes a detailed reconciliation of projections of diluted EPS and effective tax rate adjusted for items impacting comparability, impracticable.

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Item 9.01. Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit 10.1		Amendment No. 4 to Revolving Credit Agreement, dated as of September 14, 2011, among the Company, JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other financial institutions party thereto
Exhibit 99.1		Press Release issued September 22, 2015
Exhibit 99.2		Questions and Answers

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

				CONAGRA FOODS, INC.
Date: September 22, 2015				By:		/s/ Lyneth Rhoten
						Name:		Lyneth Rhoten
						Title:		Vice President, Securities Counsel and Assistant Corporate Secretary

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Exhibit Index

 

Exhibit 10.1		Amendment No. 4 to Revolving Credit Agreement, dated as of September 14, 2011, among the Company, JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other financial institutions party thereto
Exhibit 99.1		Press Release issued September 22, 2015
Exhibit 99.2		Questions and Answers

EXHIBIT 10.1

AMENDMENT NO. 4

Dated as of September 21, 2015

to

REVOLVING CREDIT AGREEMENT

Dated as of September 14, 2011

THIS AMENDMENT NO. 4 (“Amendment”) is made as of September 21, 2015 (the “Amendment Effective Date”) by and among ConAgra Foods, Inc., as Company (the “Company”), the “Banks” listed on the signature pages hereof and party hereto, and JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”), under that certain Revolving Credit Agreement, dated as of September 14, 2011, by and among the Company, the financial institutions parties thereto as “Banks” (the “Banks”) and the Administrative Agent (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.

WHEREAS, the Company has requested that the Banks and the Administrative Agent agree to make certain modifications to the Credit Agreement; and

WHEREAS, the Company, the Banks and the Administrative Agent have so agreed on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, the Banks party hereto and the Administrative Agent hereby agree as follows.

1. Amendment to the Credit Agreement. Effective as of the Amendment Effective Date, but subject to the satisfaction of the condition precedent set forth in Section 2 below, Section 6.3 of the Credit Agreement is hereby amended and restated in its entirety as follows:

6.3 Fixed Charge Coverage. The Company and its Subsidiaries will maintain, on a consolidated basis, a ratio of (i) Profit Before Taxes and Extraordinary Items plus Fixed Charges plus amortization of intangible assets minus equity in earnings of Affiliates to (ii) Fixed Charges greater than 1.75 to 1.0 on a four-quarter rolling basis calculated at each quarter end; provided, however, that non-cash impairment charges for the Company’s (i) fourth fiscal quarter of 2014, (ii) second fiscal quarter of 2015, (iii) third fiscal quarter of 2015, (iv) fourth fiscal quarter of 2015, and (v) first fiscal quarter of 2016 shall be excluded from the

 

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Company’s computation of its compliance herewith for such fiscal quarters. With respect to the Company’s first fiscal quarter of 2016, an Authorized Officer of the Company shall deliver to the Administrative Agent a written certification as to the amount of such excluded non-cash impairment charges for such quarter, including reasonable detail as to the nature of such charges. Such written certification shall be delivered together with the financials for such quarter as required under Section 5.1.1 hereof.

2. Conditions of Effectiveness. The effectiveness of this Amendment is subject only to the conditions precedent that (a) the Administrative Agent shall have received counterparts of this Amendment duly executed by the Company, the Banks required to execute and deliver this Amendment in order to give effect hereto, and the Administrative Agent, (b) the Administrative Agent shall have received from an Authorized Officer of the Company a written certification as to the amounts of the non-cash impairment charges excluded pursuant to Section 1 of this Amendment for the Company’s fourth fiscal quarter of 2014, second fiscal quarter of 2015, third fiscal quarter of 2015, and fourth fiscal quarter of 2015, including reasonable detail as to the nature of such charges, and (c) the Administrative Agent, on behalf of each Bank that executes and delivers to the Administrative Agent its signature page hereto by 3:00 p.m. New York City time on September 18, 2015 (with the Administrative Agent determining whether any page has been delivered by such cut-off time), shall have received from the Company an amendment fee in immediately available funds equal to 0.05% multiplied by such approving Bank’s Commitment in effect as of the Amendment Effective Date.

3. Representations and Warranties of the Company. The Company hereby represents and warrants as follows:

(a) This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b) As of the date hereof and immediately after giving effect to the terms of this Amendment, (i) no Event of Default or Potential Default shall have occurred and be continuing and (ii) the representations and warranties of the Company set forth in the Credit Agreement, as amended hereby, are true and correct in all material respects as of the date hereof; provided, that to the extent such representations and warranties are expressly stated to be made as of an earlier date, such representations and warranties shall be true and correct in all material respects as of such earlier date.

4. Reference to and Effect on the Credit Agreement.

(a) Upon the effectiveness of this Amendment, (a) this Amendment shall be a Loan Document and (b) on and after the date hereof, each reference in the Credit Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to the Credit Agreement, as amended hereby.

 

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(b) Except as specifically amended above, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed.

(c) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Banks, nor constitute a waiver of any provision of the Credit Agreement.

5. Costs and Expenses. The Company shall pay on demand all reasonable invoiced costs and out-of-pocket expenses paid or incurred by the Administrative Agent (including the reasonable and invoiced fees, costs and expenses of external counsel to the Administrative Agent) incurred in connection with the preparation, execution and delivery of this Amendment.

6. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

7. Execution. This Amendment may be executed in any number of counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or other electronic imaging shall be effective as delivery of a manually executed counterpart of this Amendment.

8. Headings. Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

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Signature Page to

ConAgra 2011 Revolving Credit Agreement

Amendment No. 4

Exhibit 99.1

 

		News Release

 

 

 

CONAGRA FOODS COMPARABLE Q1 EPS EXCEEDS EXPECTATIONS;

STRONG MARGIN EXPANSION IN CONSUMER, COMMERCIAL SEGMENTS;

IMPLEMENTING STRATEGIC PLAN;

DIVESTITURE OF PRIVATE LABEL ON TRACK

OMAHA, Neb., Sept 22, 2015 — Today ConAgra Foods, Inc., (NYSE: CAG) reported results for the fiscal 2016 first quarter ended August 30, 2015.

Highlights (% cited indicates change vs. year-ago amounts, where applicable. SG&A refers to selling, general, and administrative expense, and COGS refers to cost of goods sold)

 

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Diluted EPS from continuing operations as reported was $0.38, compared to $0.22 in the year-ago period. After adjusting for items impacting comparability, diluted comparable EPS of $0.45 this quarter exceeded $0.39 in the year-ago period.

 

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Consumer Foods posted strong operating profit growth and more than 250 basis points of comparable margin improvement through a combination of favorable price/mix and increased productivity.

 

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Commercial Foods posted good sales and operating profit performance, primarily due to strong volumes, favorable mix, and efficiencies for Lamb Weston.

 

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The divestiture process for the private label operations is proceeding as planned, and the company expects to have an announcement on the outcome of this process later this fall. The company recognized a large impairment charge for the private label operations, based on preliminary estimates, in connection with the reclassification of this business into assets held for sale.

CEO Perspective:

Sean Connolly, chief executive officer of ConAgra Foods, said, “We are off to a strong start in fiscal 2016. While early days, we are making good progress against our plan to drive margin improvement within a more focused portfolio. In the near-term, we expect to

 

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CONAGRA FOODS

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grow profits modestly in fiscal 2016 across the Consumer Foods and Commercial Foods segments by building on the stronger foundations established last fiscal year, with an emphasis on improving price/mix and implementing relentless cost discipline.”

“Our entire organization is focused on delivering long-term top- and bottom-line improvement. Rigorous portfolio segmentation work and improving innovation capabilities should benefit our top line over time, and we are in the midst of developing aggressive cost savings plans to drive improved SG&A, trade spend efficiency, and COGS. We are confident in our ability to unlock long-term value as we execute our plans to become a leaner, more focused company.”

Overall Quarterly Results

For the fiscal 2016 first quarter ended August 30, 2015, diluted earnings per share from continuing operations were $0.38 as reported, vs. $0.22 for the first quarter of fiscal 2015. After adjusting for items impacting comparability, comparable diluted EPS was $0.45 this quarter and $0.39 in the year-ago period. Items impacting comparability are summarized toward the end of this release and reconciled for Regulation G purposes starting on page 10.

The private label operations have been reclassified as discontinued operations given the company’s plans to exit this business, and there is no longer a Private Brands segment. In connection with the pending divestiture, the company has also moved small amounts across segments, and this has slightly altered historical presentation of results.

Consumer Foods Segment

Branded food items sold worldwide in retail channels.

The Consumer Foods segment posted sales of approximately $1.7 billion and operating profit of $242 million, as reported. Sales were flat as reported, with flat volume, a 2% benefit from price/mix, and 2% unfavorable impact of foreign exchange (all rounded).

 

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In fiscal 2016, the Consumer Foods segment is focused on continuing to strengthen its core business by emphasizing its highest-potential brands, focusing on the most promising sales channels, expanding margins, and getting more brands ready for stronger marketing support in the future. The segment is showing early progress.

 

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Brands posting sales growth for the quarter include Chef Boyardee, Egg Beater’s, Hebrew National, Hunt’s, Marie Callender’s, Orville Redenbacher’s, PAM, PF Chang’s, Reddi-wip, Ro*Tel, Rosarita, Slim Jim, Swiss Miss, and Wolf.

 

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Other brand details are in the written Q&A document accompanying this release.

Segment operating profit was $242 million versus $193 million in the year-ago period, as reported. After adjusting for $7 million of net expense in the current quarter and $10 million of net expense in the year-ago period from items impacting comparability, current quarter operating profit of $248 million increased 22% over comparable year-ago amounts. Advertising investment increased $5 million, or 7%. Comparable operating margin increased more than 250 basis points, reflecting the benefit of better price/mix as well as good productivity. The impact of foreign exchange negatively impacted profitability, while commodity inflation was not material this quarter.

Commercial Foods Segment

Specialty potato, seasonings, blends, flavors, and bakery products, as well as consumer branded and private label packaged food items, sold to restaurants, foodservice and commercial channels worldwide.

Sales for the Commercial Foods segment were $1.1 billion, ahead of $1.1 billion (rounded) a year ago, and operating profit was $139 million, ahead of $119 million a year ago, as reported. Sales for Lamb Weston’s potato operations grew globally, with domestic growth outpacing international growth. International sales are on track to return to normal levels in fiscal 2016 following the impact of the West Coast port labor dispute that was resolved last fiscal year. Sales for the rest of the segment were in line with year-ago amounts.

Segment operating profit grew 17% as reported and 13% after adjusting for items impacting comparability. All major business lines in the segment posted comparable profit growth. Lamb Weston made the most significant contribution to the segment’s profit increase, reflecting its strong sales performance, favorable mix, and operating efficiencies from good raw potato crop quality.

 

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Hedging Activities

Hedge gains and losses are generally aggregated, and net amounts are reclassified from unallocated Corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold. The net of these activities resulted in $2 million of net expense in the current quarter and $33 million of net expense in the year-ago period. The company identifies these amounts as items impacting comparability within the discussion of unallocated Corporate results.

Other Items

 

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Unallocated Corporate amounts were $85 million of expense in the current quarter and $115 million of expense in the year-ago period. Current-quarter amounts include $2 million of hedge-related expense and $11 million of expense from other items impacting comparability. Year-ago period amounts include $33 million of hedge-related expense and $24 million of net expense related to other items impacting comparability. Excluding these amounts, unallocated Corporate expense was $72 million for the current quarter and $58 million in the year-ago period.

 

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Equity method investment earnings were $37 million for the current quarter and $26 million in the year-ago period; the year-over-year increase mostly reflects the inclusion of a full quarter’s profits for the Ardent Mills joint venture (only two months of activity were included in the year-ago amounts).

 

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Net interest expense was $80 million in the current quarter and $83 million in the year-ago period.

Capital Items

 

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The company is committed to an investment grade debt rating, and plans a balanced approach to capital allocation in fiscal 2016, including further debt reduction, repurchasing shares as market conditions warrant, and a top tier dividend. The company will assess opportunities to increase the dividend after it is further along with the strategic plan outlined at the end of fiscal 2015.

 

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Dividends for the quarter totaled $107 million versus $105 million in the year-ago period.

 

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The company did not repurchase any shares during the quarter.

 

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For the current quarter, capital expenditures for property, plant and equipment were $108 million, compared with $90 million in the year-ago period. Depreciation and amortization expense was approximately $92 million for the fiscal first quarter; this compares with a total of $96 million in the year-ago period.

Discontinued Operations:

Discontinued operations (currently the private label operations) posted a loss of ($3.23) per diluted share this quarter, reflecting a significant impairment charge related to the reclassification of assets as held for sale. After adjusting for this charge, the private label operations earned $0.04 per diluted share this quarter. Expected earnings from the private label operations were included in the company’s previously issued guidance.

Discontinued operations in the first quarter of fiscal 2015 contributed $0.90 per diluted share as reported and $0.08 per diluted share after adjusting for items impacting comparability. The largest item impacting comparability for that period was a gain related to Ardent Mills; the fair value of the company’s interest in Ardent Mills exceeded the carrying value of the former ConAgra Mills assets contributed in the formation of that entity.

The company notes that because the private label operations are now classified as assets held for sale, there will no longer be any depreciation or amortization expense for these assets. Due to timing, this change had a slight benefit in the current quarter and should have a larger benefit in subsequent quarters.

 

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Outlook

The company will offer more details on fiscal 2016 EPS guidance once it is further along with the process of divesting the private label operations, determining associated SG&A reduction targets, and finalizing investment levels for the remaining segments. The company expects the Consumer Foods and Commercial Foods segments to post modest comparable operating profit growth for the full fiscal year.

With regard to the second quarter of fiscal 2016, the company expects diluted EPS, adjusted for items impacting comparability, to be approximately in line with year-ago comparable amounts. Despite strong fundamentals and expectations for continued margin expansion, comparable operating profits for the Consumer Foods segment in the fiscal second quarter are expected to be negatively impacted by foreign exchange, as well as a planned increase in marketing investment. Profits for the Commercial Foods segment are expected to post an increase in profitability year-over-year in the fiscal second quarter. Expected contribution from the private label operations, which are now in discontinued operations, is included in this guidance. As previously mentioned, results from the private label operations will benefit from the absence of depreciation and amortization.

As announced on June 30, 2015, the company is focused on the divestiture of the private label operations, as well as on creating long-term value by:

 

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Aggressively reducing costs, with an increased focus on SG&A and the elimination of stranded costs once the sale of the private label operations is complete,

 

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Growing consumer brands (Consumer Foods segment) and Lamb Weston (within the Commercial Foods segment), as well as

 

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Balanced capital allocation.

These plans are still being developed, and the company will offer long-term financial expectations about these plans in due course.

 

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Major Items Impacting First-quarter Fiscal 2016 EPS Comparability

Included in the $0.38 diluted EPS from continuing operations for the first quarter of fiscal 2016 (EPS amounts rounded and after tax):

 

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Approximately $0.02 per diluted share of net expense, or $17 million pretax, related to restructuring charges. $10 million of this is classified within unallocated Corporate expense (all SG&A) and $7 million is classified within the Consumer Foods segment ($4 million COGS/$3 million SG&A).

 

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Note: Comparable EPS contribution from the private label operations, now classified as discontinued operations, was approximately $0.04 per diluted share. Contribution from the private label operations was included in original guidance. The $0.04 per diluted share excludes an impairment charge of $3.27 per diluted share, or $1.95 billion pretax. These amounts are shown as part of the Regulation G reconciliation on page 10.

Included in the $0.22 diluted EPS from continuing operations for the first quarter of fiscal 2015 (EPS amounts rounded and after tax):

 

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Approximately $0.05 per diluted share of net expense, or $33 million pretax, related to the mark-to-market impact of derivatives used to hedge input costs, temporarily classified in unallocated Corporate expense. Hedge gains and losses are generally aggregated, and net amounts are reclassified from unallocated Corporate expense to the operating segments when the underlying commodity or foreign currency being hedged is expensed in segment cost of goods sold.

 

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Approximately $0.04 per diluted share of net expense, or $25 million pretax, related to extinguishing debt. This is classified within unallocated Corporate expense.

 

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Approximately $0.02 per diluted share of net expense, or $16 million pretax, resulting from restructuring activities. $10 million of this is classified within the Consumer Foods segment ($8 million COGS/$2 million SG&A), $4 million within the Commercial Foods segment (all SG&A) and $2 million within unallocated Corporate expense (essentially all SG&A).

 

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Approximately $0.01 per diluted share of net benefit, or $2 million pretax, related to historical legal matters, a portion of which is not taxable, within unallocated Corporate expense.

 

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Note: Prior year comparable EPS included approximately $0.08 from operations subsequently reclassified to discontinued operations. The $0.08 per diluted share excludes items impacting comparability, which are shown on page 10.

Discussion of Results

ConAgra Foods will host a conference call at 9:30 a.m. EDT today to discuss the results. Following the company’s remarks, the call will include a question-and-answer session with the investment community. Domestic and international participants may access the conference call toll-free by dialing 1-877-627-6582 and 1-719-325-4785, respectively. No confirmation or pass code is needed. This conference call also can be accessed live on the Internet at http://investor.conagrafoods.com.

A rebroadcast of the conference call will be available after 1 p.m. EDT today. To access the digital replay, a pass code number will be required. Domestic participants should dial 1-888-203-1112, and international participants should dial 1-719-457-0820 and enter pass code 6589833. A rebroadcast also will be available on the company’s website.

In addition, the company has posted a question-and-answer supplement relating to this release at http://investor.conagrafoods.com. To view recent company news, please visit http://media.conagrafoods.com.

ConAgra Foods, Inc., (NYSE: CAG) is one of North America’s largest packaged food companies with branded and private branded food found in 99 percent of America’s households, as well as a strong commercial foods business serving restaurants and foodservice operations globally. Consumers can find recognized brands such as Banquet^®, Chef Boyardee^®, Egg Beaters^®, Healthy Choice^®, Hebrew National^®, Hunt’s^®, Marie Callender’s^®, Orville Redenbacher’s^®, PAM^®, Peter Pan^®, Reddi-wip^®, Slim Jim^®, Snack Pack^® and many other ConAgra Foods brands, along with food sold by ConAgra Foods under private brand labels, in grocery, convenience, mass merchandise, club and drug stores. Additionally, ConAgra Foods supplies frozen potato and sweet potato products as well as other vegetable, spice, bakery and grain products to commercial and foodservice customers. ConAgra Foods operates ReadySetEat.com, an interactive recipe website that provides consumers with easy dinner recipes and more. For more information, please visit us at www.conagrafoods.com.

 

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Note on Forward-looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These risks and uncertainties include, among other things: ConAgra Foods’ ability to successfully execute an exit option for its private label operations within the expected time frame or at all; ConAgra Foods’ ability to realize the synergies and benefits contemplated by the Ardent Mills joint venture; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; the availability and prices of raw materials, including any negative effects caused by inflation or weather conditions; the effectiveness of ConAgra Foods’ product pricing, including product innovation, any pricing actions and changes in promotional strategies; the ultimate outcome of litigation, including litigation related to the lead paint and pigment matters; future economic circumstances; industry conditions; the effectiveness of ConAgra Foods’ hedging activities, including volatility in commodities that could negatively impact ConAgra Foods’ derivative positions and, in turn, ConAgra Foods’ earnings; ConAgra Foods’ ability to execute its operating and restructuring plans and achieve operating efficiencies; the success of ConAgra Foods’ cost-saving initiatives, innovation, and marketing investments; the competitive environment and related market conditions; the ultimate impact of any ConAgra Foods’ product recalls; access to capital; actions of governments and regulatory factors affecting ConAgra Foods’ businesses, including the Patient Protection and Affordable Care Act; the amount and timing of repurchases of ConAgra Foods’ common stock and debt, if any; the costs, disruption and diversion of management’s attention associated with campaigns commenced by activist investors; and other risks described in ConAgra Foods’ reports filed with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors and security holders are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. ConAgra Foods disclaims any obligation to update or revise statements contained in this press release to reflect future events or circumstances or otherwise.

 

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Regulation G Disclosure

Below is a reconciliation of Q1 FY16 and Q1 FY15 diluted earnings per share from continuing operations, Consumer Foods segment operating profit, and Commercial Foods segment operating profit, adjusted for items impacting comparability. Amounts may be impacted by rounding.

Q1 FY16 & Q1 FY15 Diluted EPS from Continuing Operations

 

		Q1 FY16				Q1 FY15				% change
Diluted EPS from continuing operations		$	0.38			$	0.22				73	%
Items impacting comparability:
Net expense related to restructuring charges			0.02				0.02
Net expense related to unallocated mark-to-market impact of derivatives			—				0.05
Net expense related to extinguishment of debt			—				0.04
Net benefit related to historical legal matters			—				(0.01	)
Rounding			0.01				(0.01	)
Diluted EPS from continuing operations, adjusted for items impacting comparability		$	0.41			$	0.31
Net EPS contribution subsequently reclassified to discontinued operations (included in guidance/base)*:		$	0.04			$	0.08
Diluted EPS, adjusted for items impacting comparability		$	0.45			$	0.39				15	%

Consumer Foods Segment Operating Profit Reconciliation

 

(Dollars in millions)		Q1 FY16				Q1 FY15				% change
Consumer Foods Segment Operating Profit		$	242			$	193				25	%
Total restructuring charges			7				10
Consumer Foods Segment Adjusted Operating Profit		$	248			$	203				22	%

Commercial Foods Segment Operating Profit Reconciliation

 

(Dollars in millions)		Q1 FY16				Q1 FY15				% change
Commercial Foods Segment Operating Profit		$	139			$	119				17	%
Total restructuring charges			—				4
Commercial Foods Segment Adjusted Operating Profit		$	139			$	123				13	%
		Q1 FY16				Q1 FY15
*Diluted EPS from discontinued operations		$	(3.23	)		$	0.90
Items impacting comparability:
Net expense related to impairment of goodwill and other intangible assets		$	3.27			$	—
Net expense related to restructuring charges			0.01				0.01
Milling results including gain			—				(0.87	)
Net expense related to unallocated mark-to-market impact of derivatives			—				0.02
Rounding			(0.01	)			0.02
Diluted EPS from discontinued operations, adjusted for items impacting comparability		$	0.04			$	0.08

 

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ConAgra Foods, Inc.

Segment Operating Results

(in millions)

(unaudited)

 

		FIRST QUARTER
		Thirteen weeks ended				Thirteen weeks ended
		August 30, 2015				August 24, 2014				Percent Change
SALES
Consumer Foods		$	1,697.2			$	1,703.0				(0.3	)%
Commercial Foods			1,096.6				1,060.0				3.5	%
Total			2,793.8				2,763.0				1.1	%
OPERATING PROFIT
Consumer Foods		$	241.5			$	193.1				25.1	%
Commercial Foods			138.8				118.9				16.7	%
Total operating profit for segments			380.3				312.0				21.9	%
Reconciliation of total operating profit to income from continuing operations before income taxes and equity method investment earnings
Items excluded from segment operating profit:
General corporate expense			(84.9	)			(115.0	)			(26.2	)%
Interest expense, net			(80.3	)			(83.3	)			(3.6	)%
Income from continuing operations before income taxes and equity method investment earnings		$	215.1			$	113.7				89.2	%

Segment operating profit excludes general corporate expense, equity method investment earnings, and net interest expense. Management believes such amounts are not directly associated with segment performance results for the period. Management believes the presentation of total operating profit for segments facilitates period-to-period comparison of results of segment operations.

 

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ConAgra Foods, Inc.

Consolidated Statement of Operations

(in millions)

(unaudited)

 

		FIRST QUARTER
		Thirteen weeks ended				Thirteen weeks ended
		August 30, 2015				August 24, 2014				Percent Change
Net sales		$	2,793.8			$	2,763.0				1.1	%
Costs and expenses:
Cost of goods sold			2,093.0				2,172.2				(3.6	)%
Selling, general and administrative expenses			405.4				393.8				2.9	%
Interest expense, net			80.3				83.3				(3.6	)%
Income from continuing operations before income taxes and equity method investment earnings			215.1				113.7				89.2	%
Income tax expense			84.9				43.1				97.0	%
Equity method investment earnings			37.0				25.6				44.5	%
Income from continuing operations			167.2				96.2				73.8	%
Income (loss) from discontinued operations, net of tax			(1,406.9	)			388.3				N/A
Net income (loss)		$	(1,239.7	)		$	484.5				N/A
Less: Net income attributable to noncontrolling interests			1.7				2.2				(22.7	)%
Net income (loss) attributable to ConAgra Foods, Inc.		$	(1,241.4	)		$	482.3				N/A
Earnings (loss) per share - basic
Income from continuing operations		$	0.38			$	0.22				72.7	%
Income (loss) from discontinued operations			(3.26	)			0.92				N/A
Net income (loss) attributable to ConAgra Foods, Inc.		$	(2.88	)		$	1.14				N/A
Weighted average shares outstanding			430.7				423.9				1.6	%
Earnings (loss) per share - diluted
Income from continuing operations		$	0.38			$	0.22				72.7	%
Income (loss) from discontinued operations			(3.23	)			0.90				N/A
Net income (loss) attributable to ConAgra Foods, Inc.		$	(2.85	)		$	1.12				N/A
Weighted average share and share equivalents outstanding			435.7				429.3				1.5	%

 

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ConAgra Foods, Inc.

Consolidated Balance Sheet

(in millions)

(unaudited)

 

		August 30, 2015				May 31, 2015
ASSETS
Current assets
Cash and cash equivalents		$	114.3			$	164.7
Receivables, less allowance for doubtful accounts of $4.4 and $4.1			837.3				772.5
Inventories			1,827.3				1,715.2
Prepaid expenses and other current assets			181.3				276.3
Current assets held for sale			765.7				739.0
Total current assets			3,725.9				3,667.7
Property, plant and equipment, net			2,659.0				2,694.0
Goodwill			4,689.5				4,699.5
Brands, trademarks and other intangibles, net			1,392.7				1,313.4
Other assets			973.3				933.5
Noncurrent assets held for sale			2,251.6				4,234.1
		$	15,692.0			$	17,542.2
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Notes payable		$	13.1			$	7.9
Current installments of long-term debt			1,557.3				1,008.0
Accounts payable			1,159.0				1,138.8
Accrued payroll			153.4				218.2
Other accrued liabilities			677.7				649.4
Current liabilities held for sale			285.6				287.9
Total current liabilities			3,846.1				3,310.2
Senior long-term debt, excluding current installments			6,103.7				6,653.0
Subordinated debt			195.9				195.9
Other noncurrent liabilities			1,980.0				2,023.2
Noncurrent liabilities held for sale			209.2				749.9
Total stockholders’ equity			3,357.1				4,610.0
		$	15,692.0			$	17,542.2

 

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ConAgra Foods, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in millions)

(unaudited)

 

		Thirteen weeks ended
		August 30, 2015				August 24, 2014
Cash flows from operating activities:
Net income (loss)		$	(1,239.7	)		$	484.5
Income (loss) from discontinued operations			(1,406.9	)			388.3
Income (loss) from continuing operations			167.2				96.2
Adjustments to reconcile income (loss) from continuing operations to net cash flows from operating activities:
Depreciation and amortization			91.6				96.0
Asset impairment charges			0.6				1.3
Loss on sale of fixed assets			2.2				0.9
Earnings of affiliates in excess of distributions			(33.9	)			(24.4	)
Share-based payments expense			20.6				14.5
Contributions to pension plans			(2.7	)			(2.8	)
Pension expense			—				(2.3	)
Other items			(9.0	)			23.0
Change in operating assets and liabilities excluding effects of business acquisitions and dispositions:
Accounts receivable			(64.6	)			(16.6	)
Inventory			(111.8	)			(92.1	)
Deferred income taxes and income taxes payable, net			(22.2	)			(17.0	)
Prepaid expenses and other current assets			10.9				13.5
Accounts payable			54.6				71.4
Accrued payroll			(55.3	)			32.3
Other accrued liabilities			(5.1	)			(33.6	)
Net cash flows from operating activities — continuing operations			43.1				160.3
Net cash flows from operating activities — discontinued operations			23.7				73.3
Net cash flows from operating activities			66.8				233.6
Cash flows from investing activities:
Additions to property, plant and equipment			(108.0	)			(90.4	)
Sale of property, plant and equipment			12.9				1.8
Purchase of business, net of cash acquired			—				(75.4	)
Purchase of intangible assets			(10.4	)			—
Return of investment in equity method investee			—				402.9
Net cash flows from investing activities — continuing operations			(105.5	)			238.9
Net cash flows from investing activities — discontinued operations			(20.0	)			92.7
Net cash flows from investing activities			(125.5	)			331.6
Cash flows from financing activities:
Net short-term borrowings			5.2				407.3
Issuance of long-term debt			—				550.0
Repayment of long-term debt			(2.5	)			(1,486.7	)
Cash dividends paid			(107.1	)			(105.5	)
Exercise of stock options and issuance of other stock awards			119.9				27.1
Other items			(1.4	)			(5.9	)
Net cash flows from financing activities:			14.1				(613.7	)
Effect of exchange rate changes on cash and cash equivalents			(1.6	)			(0.9	)
Net change in cash and cash equivalents			(46.2	)			(49.4	)
Discontinued operations cash activity included above:
Add: Cash balance included in assets held for sale at beginning of period			18.4				64.9
Less: Cash balance included in assets held for sale at end of period			22.6				21.9
Cash and cash equivalents at beginning of period			164.7				118.2
Cash and cash equivalents at end of period		$	114.3			$	111.8

See notes to the condensed consolidated financial statements.

 

# # #

Exhibit 99.2

 

Q1 FY16 Question & Answer

September 22, 2015

 

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

 

- Chef Boyardee		- Libby’s		- PF Chang’s		- Swiss Miss
- Egg Beater’s		- Manwich		- Reddi-wip		- Wolf
- Hebrew National		- Marie Callender’s		- Ro*Tel
- Hunt’s		- Orville Redenbacher’s		- Rosarita
- La Choy		- PAM		- Slim Jim

 

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

 

- ACT II		- Crunch ’n Munch		- Peter Pan
- Andy Capp’s		- DAVID		- Snack Pack
- Banquet		- Healthy Choice		- Van Camp’s
- Bertolli		- Kid Cuisine		- Wesson
- Blue Bonnet		- Parkay

 

3.	How much were capital expenditures from continuing operations for the quarter?

Approximately $108 million in Q1 FY16 (versus approximately $90 million in Q1 FY15).

 

4.	How much was total depreciation and amortization from continuing operations for the quarter?

Approximately $92 million in Q1 FY16 (versus approximately $96 million in Q1 FY15).

 

5.	What was the net interest expense for the quarter?

Approximately $80 million in Q1 FY16 (versus approximately $83 million in Q1 FY15).

 

6.	What was Corporate expense for the quarter?

Unallocated Corporate amounts were $85 million of expense in the current quarter and $115 million of expense in the year-ago period. Current-quarter amounts include $2 million of hedge-related expense and $11 million of expense from other items impacting comparability. Year-ago period amounts include $33 million of hedge-related expense and $24 million of net expense related to other items impacting comparability. Excluding these amounts, unallocated Corporate expense was $72 million for the current quarter and $58 million in the year-ago period.

 

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

Approximately $107 million in Q1 FY16 (versus approximately $105 million in Q1 FY15).

 

8.	What was the weighted average number of diluted shares outstanding for the quarter (rounded)?

Approximately 436 million shares for the quarter.

 

9.	Did the company repurchase any shares during the quarter?

The company did not repurchase any shares of common stock during the quarter.

 

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

 

		Q1 FY16
Total debt*		$	7,870
Less: Cash on hand		$	114
Net debt		$	7,756

 

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

 

11.	What is the net-debt-to-total-capital ratio at quarter end?

The net-debt-to-total-capital ratio for the quarter was 70%.

This ratio is defined as net debt divided by the sum of net debt plus shareholders’ equity. See question No. 10 for the components of net debt.

 

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Note on Forward-looking Statements:

This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. These risks and uncertainties include, among other things: ConAgra Foods’ ability to successfully execute an exit option for its private label operations within the expected time frame or at all; ConAgra Foods’ ability to realize the synergies and benefits contemplated by the Ardent Mills joint venture; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; the availability and prices of raw materials, including any negative effects caused by inflation or weather conditions; the effectiveness of ConAgra Foods’ product pricing, including product innovation, any pricing actions and changes in promotional strategies; the ultimate outcome of litigation, including litigation related to the lead paint and pigment matters; future economic circumstances; industry conditions; the effectiveness of ConAgra Foods’ hedging activities, including volatility in commodities that could negatively impact ConAgra Foods’ derivative positions and, in turn, ConAgra Foods’ earnings; ConAgra Foods’ ability to execute its operating and restructuring plans and achieve operating efficiencies; the success of ConAgra Foods’ cost-saving initiatives, innovation, and marketing investments; the competitive environment and related market conditions; the ultimate impact of any ConAgra Foods’ product recalls; access to capital; actions of governments and regulatory factors affecting ConAgra Foods’ businesses, including the Patient Protection and Affordable Care Act; the amount and timing of repurchases of ConAgra Foods’ common stock and debt, if any; the costs, disruption and diversion of management’s attention associated with campaigns commenced by activist investors; and other risks described in ConAgra Foods’ reports filed with the Securities and Exchange Commission, including its most recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. Investors and security holders are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. ConAgra Foods disclaims any obligation to update or revise statements contained in this document to reflect future events or circumstances or otherwise.

 

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