UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 27, 1995 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 Number 1-7275 ___________________________________________ CONAGRA, INC. __________________________________________________________________ (Exact name of registrant, as specified in charter) Delaware 47-0248710 __________________________________________________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One ConAgra Drive, Omaha, Nebraska 68102-5001 __________________________________________________________________ (Address of Principal Executive Offices) (Zip Code) (402) 595-4000 __________________________________________________________________ (Registrant's telephone number, including area code) NA __________________________________________________________________ (Former name, former address and former fiscal year, if changed since last report.) 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 _______ _______ Number of shares outstanding of issuer's common stock, as of September 24, 1995 was 238,471,961 PART I - FINANCIAL INFORMATION CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Millions) AUG 27, MAY 28, AUG 28, 1995 1995 1994 _________ _________ _________ ASSETS Current assets: Cash and cash equivalents $ 92.2 $ 60.0 $ 42.1 Receivables, less allowance for doubtful accounts of $61.3, $63.9 and $67.0 2,472.3 1,540.0 2,407.1 Margin deposits and segregated funds - - 344.8 Inventory: Hedged commodities 1,037.9 925.4 716.5 Other 2,471.8 2,241.9 2,465.2 _________ _________ _________ Total inventory 3,509.7 3,167.3 3,181.7 Prepaid expenses 401.5 372.9 239.3 _________ _________ _________ Total current assets 6,475.7 5,140.2 6,215.0 _________ _________ _________ Property, plant and equipment at cost, less accumulated depreciation of $1800.5, $1741.8 and $1629.7 2,865.7 2,796.0 2,695.7 Brands, trademarks and goodwill, at cost less accumulated amortization 2,519.1 2,420.1 2,626.2 Other assets 429.7 444.7 398.9 _________ _________ _________ $12,290.2 $10,801.0 $ 11,935.8 _________ _________ _________ _________ _________ _________ The accompanying notes are an integral part of the consolidated financial statements. CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Millions) AUG 27, MAY 28, AUG 28, 1995 1995 1994 _________ _________ _________ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable $ 3,062.5 $ - $ 2,860.3 Current installments of long-term debt 108.1 47.9 124.1 Accounts payable 1,004.1 1,574.8 1,031.4 Advances on sales 190.2 856.6 110.8 Payable to customers, clearing associations, etc. - - 346.0 Other accrued liabilities 1,463.1 1,485.6 1,303.7 _________ _________ _________ Total current liabilities 5,828.0 3,964.9 5,776.3 _________ _________ _________ Senior long-term debt, excluding current installments 1,664.2 1,770.0 1,423.9 Other noncurrent liabilities 920.4 940.8 1,065.1 Subordinated debt 750.0 750.0 766.0 Preferred securities of subsidiary company 525.0 525.0 275.0 Preferred shares subject to mandatory redemption 269.5 354.9 355.6 Common stockholders' equity: Common stock of $5 par value, authorized 1,200,000,000 shares, issued 252,922,486, 252,869,958 and 252,791,925 1,264.6 1,264.3 1,264.0 Additional paid-in capital 513.7 409.9 426.7 Retained earnings 1,748.1 1,712.5 1,452.8 Foreign currency translation adjustment (45.2) (44.9) (30.6) Less treasury stock, at cost, common shares 12,353,384, 7,172,312 and 4,696,512 (414.8) (206.9) (121.3) _________ _________ _________ 3,066.4 3,134.9 2,991.6 Less unearned restricted stock and value of 18,239,477, 19,423,916 and 21,544,551 common shares held in EEF (733.3) (639.5) (717.7) _________ _________ _________ Total common stockholders' equity 2,333.1 2,495.4 2,273.9 _________ _________ _________ $12,290.2 $10,801.0 $ 11,935.8 _________ _________ _________ _________ _________ _________ The accompanying notes are an integral part of the consolidated financial statements. CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Dollars and shares in millions except per share amounts) THIRTEEN WEEKS ENDED AUG 27, AUG 28, 1995 1994 _________ _________ Net sales $ 6,436.4 $ 6,245.9 _________ _________ Costs and expenses: Cost of goods sold 5,634.4 5,506.8 Selling, administrative and general expenses 578.3 545.1 Interest expense, net 75.9 68.7 _________ _________ 6,288.6 6,120.6 _________ _________ Income before equity in earnings of affiliates and income taxes 147.8 125.3 Equity in earnings(loss) of affiliates (0.2) 2.7 _________ _________ Income before income taxes 147.6 128.0 Income taxes 60.5 51.2 _________ _________ Net income 87.1 76.8 Less preferred dividends 5.1 6.0 _________ _________ Net income available for common stock $ 82.0 $ 70.8 _________ _________ _________ _________ Earnings per common and common equivalent share $ 0.36 $ 0.31 _________ _________ _________ _________ Weighted average number of common and common equivalent shares outstanding 227.5 228.6 _________ _________ _________ _________ Cash dividends declared per common share $ 0.208 $ 0.180 _________ _________ _________ _________ The accompanying notes are an integral part of the consolidated financial statements. CONAGRA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Millions) THIRTEEN WEEKS ENDED AUG 27, AUG 28, Increase (decrease in Cash and Cash Equivalents) 1995 1994 _________ _________ Cash flows from operating activities: Net income $ 87.1 $ 76.8 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and other amortization 87.2 77.9 Goodwill amortization 17.7 17.1 Other noncash items (includes nonpension postretirement benefits) 16.7 17.4 Change in assets and liabilities before effects from business acquisitions (2,600.0) (2,651.6) _________ _________ Net cash flows from operating activities (2,391.3) (2,462.4) _________ _________ Cash flows from investing activities: Sale of property, plant and equipment 8.6 1.9 Additions to property, plant and equipment (120.9) (76.6) Payment for business acquisitions (162.7) (163.0) Decrease in notes receivable-Monfort Finance Company 39.8 64.8 Other items 0.4 (31.9) _________ _________ Net cash flows from investing activities (234.8) (204.8) _________ _________ Cash flows from financing activities: Net short term borrowings 3,062.5 2,441.3 Proceeds from exercise of employee stock options 17.4 5.4 Cash dividends paid (53.1) (46.6) Repayment of long-term debt (46.5) (14.0) Treasury stock purchases (311.6) - Issuance of preferred securities of a subsidiary company - 175.0 Employee Equity Fund stock transactions 1.9 1.0 Other items (12.3) (19.2) _________ _________ Net cash flows from financing activities 2,658.3 2,542.9 _________ _________ Net increase (decrease) in cash & cash equivalents 32.2 (124.3) Cash and cash equivalents at beginning of year 60.0 166.4 _________ _________ Cash and cash equivalents at end of period $ 92.2 $ 42.1 _________ _________ _________ _________ The accompanying notes are an integral part of the consolidated financial statements. CONAGRA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS AUGUST 27, 1995 (1) The information furnished herein relating to interim periods has not been examined by independent Certified Public Accountants. In the opinion of management, all adjustments necessary for a fair statement of the results for the periods covered have been included. All such adjustments are of a normal recurring nature. The accounting policies followed by the Company, and additional footnotes, are set forth in the financial statements included in the Company's 1995 annual report, which report was incorporated by reference in Form 10-K for the fiscal year ended May 28, 1995. (2) The composition of inventories is as follows (in millions): AUG 27, MAY 28, AUG 28, 1995 1995 1994 ________ ________ ________ Hedged commodities $1,037.9 $ 925.4 $ 716.5 Food products and livestock 1,253.8 1,232.2 1,386.0 Agricultural chemicals, fertilizer and feed 583.8 323.1 499.8 Retail merchandise 180.2 196.4 176.0 Other, principally ingredients and supplies 454.0 490.2 403.4 ________ ________ ________ $3,509.7 $3,167.3 $3,181.7 ________ ________ ________ ________ ________ ________ (3) Following is a condensed statement of common stockholders' equity (in millions): <TABLE> <captions> Unearned Add'l Foreign Restricted Common Paid-In Retained Curr Treasury & EEF Stock Capital Earnings Trns Adj Stock Stock Total __________ __________ __________ __________ __________ __________ __________ <S> <C> <C> <C> <C> <C> <C> <C> Balance 5/28/95 $ $1,264.3 $ $409.9 $ $1,712.5 $ ($44.9)$ ($206.9)$ ($639.5) $ $2,495.4 Shares issued Employee stock options 0.2 0.3 0.1 (0.1) 0.5 EEF* stock option, incentive and other employee benefit plans (2.0) 32.3 30.3 Fair market valuation of EEF shares 126.2 (126.2) - Acquisitions 0.1 0.4 0.5 Conversion of preferred stock (21.1) 106.5 85.4 Shares acquired Incentive plans (2.9) 0.2 (2.7) Treasury shares purchased (311.6) (311.6) Foreign currency translation adjustment (0.3) (0.3) Cash dividends declared (51.5) (51.5) Net income 87.1 87.1 __________ __________ __________ __________ __________ __________ __________ Balance 8/27/95 $ $1,264.6 $ $513.7 $ $1,748.1 $ ($45.2)$ ($414.8)$ ($733.3) $ $2,333.1 __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ *Employee Equity Fund </TABLE> (4) On August 14, 1990, ConAgra acquired Beatrice Company (Beatrice). As a result of the acquisition and the significant pre-acquisition tax and other contingencies of the Beatrice businesses and its former subsidiaries, the consolidated post-acquisition financial statements of ConAgra have reflected significant liabilities and valuation allowances associated with the estimated resolution of these contingencies. Subsequent to the acquisition of Beatrice by ConAgra, the Internal Revenue Service completed its audit of the federal income tax returns of Beatrice and its predecessors for the fiscal years ended in 1985 through 1987 and issued an examining agent's report. The findings contained in the report were protested by Beatrice. Agreement was reached with the Internal Revenue Service regarding these matters in August 1995. This settlement resolves all deficiencies proposed by the Internal Revenue Service for 1987 and prior years, including deficiencies relating to previously-filed carry-back claims. The settlement allowed ConAgra to better estimate the amounts of Beatrice state tax liabilities that will ultimately be paid to various state tax authorities, and the amounts of state tax and interest that will be deductible for federal income tax purposes. Prior to the settlement, ConAgra had recorded a valuation allowance against deferred tax assets of approximately $230.0 million due to uncertainties as to the ultimate realization of these assets. As a result of the settlement, ConAgra has released the $230.0 million valuation allowance and has reduced noncurrent liabilities by $135.0 million, with a resulting reduction of goodwill associated with the Beatrice acquisition of $365.0 million. Federal income tax returns of Beatrice for fiscal years ended 1988, 1989 and 1990 and various state tax returns remain open. However, after taking into account the foregoing adjustments, management believes that the ultimate resolution of all remaining pre-acquisition Beatrice tax contingencies should not exceed the reserves established for such matters. Beatrice is also 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 42 Superfund, proposed Superfund or state-equivalent sites. Beatrice has paid or is in the process of paying its liability share at 33 of these sites. Beatrice's known volumetric contribution exceeds 4% at seven of the sites. Beatrice has established substantial reserves for these matters. The environmental reserves are based on Beatrice'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 liable responsible parties and Beatrice's prior experience in remediating sites. Management believes the ultimate resolution of such Beatrice legal and environmental contingenices should not exceed the reserves established for such matters. 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 operation or liquidity. (5) Earnings per common and common equivalent share are calculated on the basis of the weighted average outstanding common shares and, when applicable, those outstanding options that are dilutive and after giving effect to the preferred stock dividend requirements. Fully diluted earnings per share did not differ significantly from primary earnings per share in any period presented. CONAGRA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and operating results for the periods included in the accompanying consolidated condensed financial statements. Results for the fiscal 1996 first quarter are not necessarily indicative of results which may be attained in the future. FINANCIAL CONDITION During the first quarter of fiscal 1996, the Company's capital investment (working capital plus noncurrent assets) decreased $373.9 million. Working capital decreased $527.6 million and noncurrent assets increased $153.7 million. The decrease in working capital resulted from an increase in notes payable due to a business acquisition and normal property, plant and equipment additions, and from treasury stock purchases (see below). The increase in notes payable was was also due to the normal seasonal increase in accounts receivable and inventory. The decrease in payables to customers and margin deposits and segregated funds from the prior year first quarter is the result of the sale of Geldermann, Inc. during the third quarter of fiscal 1995. The increase in other noncurrent assets is primarily due to a business acquisition and normal additions to property, plant and equipment. Versus the same period last year, property, plant and equipment increased $170 million, mainly as the result of acquisitions. This increase was funded by a combination of operating cash flow and an increase in notes payable. The Company's objective is that senior long-term debt normally will not exceed 30 percent of total long-term debt plus equity. At August 27, 1995, senior long-term debt was 30 percent of total long-term debt plus equity compared to 30 percent at May 28, 1995 and 28 percent at August 28, 1994. The Company has indicated it intends to call some or all of its Class E $25.00 cumulative convertible preferred stock during calendar year 1995, subject to market conditions and director approval. As of September 26, 1995 the Company has purchased, in the open market, 14,436,587 shares of common stock at an aggregate cost of $516.8 million since February 1995. Such purchases are intended to cover the anticipated conversion of the Class E preferred stock. On September 30, 1995 the Company commenced a tender offer for all outstanding common stock of Canada Malting Co. Limited, one of the world's largest producers of malted barley. The tender offer is subject to certain conditions and is scheduled to expire October 31, 1995, subject to extension. If the tender offer is successful, the total amount required to purchase the common stock and pay related expenses is approximately U.S. $296.0 million. OPERATING RESULTS A summary of the period to period increases (decreases) in the principal components of operations is shown below (dollars in millions, except per share amounts). COMPARISON OF THE PERIODS ENDED AUG. 27, 1995 & AUG. 28, 1994 THIRTEEN WEEKS DOLLARS % ________________ Net sales 190.5 3.1 Cost of goods sold 127.6 2.3 Gross profit 62.9 8.5 Selling, administrative and general expense 33.2 6.1 Interest expense, net 7.2 10.5 Income before equity in earnings of affiliates and income taxes 22.5 18.0 Equity in earnings of affiliates (2.9) NM* Income before income taxes 19.6 15.3 Income taxes 9.3 18.2 Net income 10.3 13.4 Earnings per common and common equivalent share 0.05 16.1 *Not Measurable All three of ConAgra's industry segments, Food Inputs & Ingredients, Refrigerated Foods and Grocery/Diversified Products achieved operating profit growth in the first quarter of fiscal 1996 over fiscal 1995's first quarter. Sources of increased sales and expenses during the first quarter included the international trading businesses, the grocery products companies and the potato products businesses. In the Refrigerated Foods segment, a major contributor to the growth in operating profit was the fresh meat business as beef margins benefited from abundant raw materials and good demand. Branded packaged meats, turkey products and cheese products also contributed to earnings gains. Chicken products earnings declined, but are expected to improve as the year progresses. In the Grocery/Diversified segment, all three major businesses contributed to first quarter operating profit growth. The growth in earnings in the Lamb-Weston potato products business was due, in part, to an acquisition last year. Healthy Choice products continued to contribute to the earnings growth in consumer frozen foods while Hunt Foods drove Hunt-Wesson's operating profit growth. In the Food Inputs & Ingredients segment, the principal sources of first quarter operating profit growth were grain merchandising, international fertilizer marketing and management actions last year to eliminate unhealthy businesses. Grain processing earnings decreased due to weak flour milling results. Crop input earnings declined as wet weather deferred pesticide and fertilizer sales from the first to second quarter. Specialty retailing earnings were down. Acquisitions, as well as unit volume increases, contributed to ConAgra's first quarter sales growth, partially offset by the divestiture of non-core businesses and the weather-related decline in crop input sales. Operating profit 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, interest expense (except financial businesses) income taxes and goodwill amortization are excluded from segment operations. For financial businesses, operating profit includes the effect of interest, which is a large element of their operating costs. ConAgra's first quarter effective tax rate increased from 40 percent in fiscal 1995 to 41 percent in fiscal 1996 principally because of lower equity in earnings of affiliates. Weighted average shares outstanding decreased in fiscal 1996's first quarter over fiscal 1995's first quarter primarily as a result of common stock repurchases. Preferred dividends decreased because of conversion of a portion of Class E preferred stock. ConAgra is in the process of divesting certain non-core businesses. During fiscal 1995, ConAgra divested Consumer Direct (direct mail marketing), Dyno Merchandise, Inc. (home sewing accessories), Geldermann, Inc. (financial services), and Berliner & Marx, Inc. (meat products). In July 1995, ConAgra also completed the sale of Petrosul International (sulfur processing and marketing) and Alum Rock Foodservice (cheese distribution). In October 1995, ConAgra completed the sale of Omaha Vaccine (animal care products). Sales and earnings of the businesses divested and identified for divestiture are not material to ConAgra's results of operations. The company expects that the ultimate gain or loss on the divestiture program will not be significant to ConAgra's results of operations. ConAgra is required to adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," no later than fiscal 1997. ConAgra has not yet quantified the effect, if any, of implementation on the financial statements. CONAGRA, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. ConAgra's annual meeting of stockholders was held on September 28, 1995. The stockholders elected four directors to serve three-year terms, approved ConAgra's 1995 Stock Plan, and ratified the appointment of Deloitte & Touche to examine ConAgra's financial statements. Voting on these items was as following: 1. ELECTION OF DIRECTORS. FOR WITHHELD C. M. Harper 200,507,381 7,585,304 Carl E. Reichardt 206,617,544 1,475,141 Marjorie M. Scardino 206,321,727 1,770,985 William G. Stocks 206,286,287 1,806,398 2. RATIFICATION OF ACCOUNTANTS FOR: 206,528,601 AGAINST: 679,105 ABSTAIN: 884,979 BROKER/NON-VOTES: -0- 3. APPROVAL OF CONAGRA'S 1995 STOCK PLAN FOR: 178,255,617 AGAINST: 27,439,082 ABSTAIN: 2,397,986 BROKER/NON-VOTES: -0- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (A) EXHIBITS. 10.1 - ConAgra 1995 Stock Plan 12 - Statement regarding computation of ratio of earnings to fixed charges, and ratio of earnings to combined fixed charges and preferred dividends. 27 - Financial Data Schedule. (B) REPORTS ON FORM 8-K. ConAgra did not file any reports on Form 8-K for the quarter ended August 27, 1995. CONAGRA, INC. By: /s/ James P. O'Donnell ________________________ James P. O'Donnell Senior Vice President and Chief Financial Officer By: /s/ Kenneth W. DiFonzo _____________________________ Kenneth W. DiFonzo Vice President and Controller Dated this 10 day of October, 1995. EXHIBIT INDEX EXHIBIT DESCRIPTION PAGE 10.1 - ConAgra 1995 Stock Plan....................... 12 - Statement regarding computation of ratio of earnings to fixed charges, and ratio of earnings to combined fixed charges and preferred dividends....................... 27 - Financial Data Schedule.......................