ConAgra Foods Reports Very Strong First-Quarter

The Consumer Foods segment posted sales of $2,043 million and operating profit of $235 million for the first quarter. Sales increased 8%, reflecting 8% contribution from acquisitions, 5% favorable price/mix, and a 4% organic volume decline. Foreign exchange rates negatively impacted sales by 1%.

21 Sep 2012 --- ConAgra Foods, Inc., one of North America's leading packaged food companies, today reported results for the fiscal 2013 first quarter ended Aug. 26, 2012. Diluted EPS from continuing operations was $0.61 in the current quarter, up 177% over $0.22 earned in the year-ago period. Excluding $0.17 of net benefit in the current quarter and $0.09 of net expense in the year-ago period from items impacting comparability, current quarter comparable EPS of $0.44 was 42% above the comparable $0.31 earned in the year-ago period. Items impacting comparability in the current year and prior year are summarized toward the end of this release and reconciled for Regulation G purposes starting on page 10.

Gary Rodkin, ConAgra Foods' chief executive officer, said, "We are very pleased with our strong start to fiscal 2013. Based on continued momentum in our potato operations, effective margin management initiatives across the portfolio, and contribution from acquisitions, we are able to post a strong EPS performance in the midst of difficult marketplace conditions. It is clear that our operating capabilities, strategic initiatives, and prudent capital allocation are accelerating EPS performance. We have raised our EPS expectations for fiscal 2013 while continuing to make strong levels of marketing investment as part of long-term brand building initiatives."

The Consumer Foods segment posted sales of $2,043 million and operating profit of $235 million for the first quarter. Sales increased 8%, reflecting 8% contribution from acquisitions, 5% favorable price/mix, and a 4% organic volume decline. Foreign exchange rates negatively impacted sales by 1%.

•  Brands posting sales growth for the quarter include ACT II, Lightlife, Marie Callender's, Orville Redenbacher's, PAM, Peter Pan, Reddi-wip, Ro*Tel, Rosarita, Slim Jim, Wesson, and others.
•  More brand details can be found in the Q&A document accompanying this release.

Operating profit of $235 million grew 20% over $196 million in the year-ago period, as reported. After adjusting for $7 million of net expense in the current period, and $16 million of net expense a year ago, from items impacting comparability, current-quarter operating profit of $242 million increased 14% over the comparable $212 million a year ago. Marketing investment increased at a double-digit rate, as planned, reflecting the company's commitment to building long-term brand strength. Operating profit growth reflects success with margin management initiatives (notably, price increases necessitated by inflation, and productivity programs that target in excess of $240 million of cost savings this fiscal year), as well as less severe inflation (approximately 3% of cost of goods sold this quarter), contribution from acquisitions, and favorable product mix.

Despite the recent increase in many commodities prices, net inflation for the Consumer Foods segment is expected to be slightly lower than originally planned; this reflects the company's effective procurement and hedging programs as well as the nature of the company's raw input needs. The segment's year-over-year volume performance is expected to improve throughout the fiscal year as the company laps the volume impact of price increases taken in fiscal 2012; the segment's innovation pipeline and increased marketing investment are expected to contribute to sequentially improved volume performance as the fiscal year progresses.

Sales for the Commercial Foods segment were $1,269 million, 5% above year-ago amounts. The sales increase was due to a strong top-line performance for the Lamb Weston potato operations, which posted good volume growth, particularly in international markets, as well as favorable price/mix. All of the segment's product lines posted volume growth.

Segment operating profit was $140 million, 43% above year-ago amounts as reported. After adjusting for $4 million of net expense from items impacting comparability in the year-ago period, current quarter profits increased 37% on a comparable basis. Lamb Weston's potato operations drove the segment's profit growth due to strong sales and a focus on operating efficiencies; international results for Lamb Weston were notably strong. Flour milling profits were in line with year-ago amounts.

The company recorded $130 million of net hedge gains in the current quarter, and $34 million of net hedging loss in the year-ago period, as unallocated Corporate expense. The company identifies these amounts as items impacting comparability. Hedge gains and losses are 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.

Based on the strong start to the fiscal year, the company now expects fiscal 2013 diluted EPS to be in the range of $2.03 - $2.06, adjusted for items impacting comparability.

The company expects its operating capabilities, strategic initiatives, and prudent capital allocation to continue to drive good underlying performance for the remainder of fiscal 2013. Relative to the strong comparable year-over-year EPS growth rate posted for the fiscal first quarter, the remaining fiscal quarters of fiscal 2013 are expected to show more modest rates of comparable year-over-year EPS growth, reflecting more difficult year-over-year comparisons as well as continued increases in marketing investment.