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ConAgra Foods Reports Fiscal 2014 First-Quarter Performance

Given the gradual nature of the anticipated recovery from the volume challenges, the company expects its fiscal 2014 second-quarter diluted EPS to be in the range of $0.55, adjusted for items impacting comparability. The company therefore expects the full year’s growth in EPS to occur in the second half of the fiscal year.

The company continues to expect approximately $0.25 of EPS contribution from Ralcorp this fiscal year, adjusted for items impacting comparability. The company also continues to expect approximately $0.10 of negative diluted EPS impact from the combination of customer transition issues at Lamb Weston and dilution from the formation of Ardent Mills, as previously discussed. The company notes that within the first-quarter comparable EPS of $0.37, there was approximately $0.04 per share of expense related to supporting new product introductions within the Consumer Foods segment; this expense was planned, and no such level of new-product-related marketing expense will repeat this fiscal year. The company also notes that fiscal first-quarter sales and profit contribution from the Ralcorp business is expected to be the lowest of the fiscal year, reflecting seasonality.

The company’s long-term EPS growth rates, and multi-year synergy goals related to the Ralcorp acquisition, are unchanged from prior estimates. The company expects at least 10% annual comparable EPS growth in fiscal 2015-2017 period, and expects the synergies from the Ralcorp transaction to reach $300 million of annual pretax cost-related synergies by the end of fiscal 2017.

Major Items Impacting First-quarter Fiscal 2014 EPS Comparability

Included in the $0.33 diluted EPS from continuing operations for the first quarter of fiscal 2014 (EPS amounts rounded and after tax):

  • Approximately $0.05 per diluted share of net expense, or $37 million pretax, resulting from restructuring, integration, and transaction costs (including acquisition-related restructuring). $34 million of this is classified as unallocated Corporate expense (SG&A), $2 million is classified within the Consumer Foods segment (essentially all SG&A), and $1 million is classified within the Ralcorp Food Group segment (essentially all SG&A).
  • Approximately $0.03 per diluted share of net expense, or $21 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 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.
  • Approximately $0.05 per diluted share of net benefit related to unusual tax matters, primarily resulting from a change in estimate related to the tax methods used for certain international sales.

Included in the $0.61 diluted EPS from continuing operations for the first quarter of fiscal 2013 (EPS amounts rounded and after tax):

  • Approximately $0.20 per diluted share of net benefit, or $130 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 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.
  • Approximately $0.02 per diluted share of net expense, or $8 million pretax, related to historical legal matters, classified as unallocated Corporate expense. This amount is not tax-deductible.
  • Approximately $0.01 per diluted share of net expense, or $4 million pretax, related to restructuring activities designed to improve efficiencies. $3 million of these are in the Consumer Foods segment ($2 million cost of goods sold (COGS) / $1 million SG&A), and $1 million is in unallocated Corporate expense (SG&A).
  • Approximately $0.01 per diluted share of net expense, or $7 million pretax, from acquisition and related costs. $4 million is classified within the Consumer Foods segment ($2 million COGS, $2 million in SG&A) and $3 million is classified within unallocated Corporate expense (SG&A).

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 1-888-437-9481 and 1-719-325-2322, 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 9522575. A rebroadcast also will be available on the company’s website.

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