Grainnet

Conagra Foods Reports 60% Increase in Third Quarter Profits

Omaha, NE—ConAgra Foods, Inc., (NYSE: CAG) one of North America's leading packaged food companies, today reported results for the fiscal 2008 third quarter ended Feb. 24, 2008.

Current-quarter diluted EPS from continuing operations was $0.63; items impacting comparability did not have a significant net effect on EPS.

Prior-year diluted EPS from continuing operations of $0.37 included net expense of $0.07 from items impacting comparability.

Items impacting comparability in the current and prior years are summarized toward the end of this release.

Gary Rodkin, chief executive officer of ConAgra Foods, commented, "Our Food & Ingredients segment had terrific results, and our Consumer Foods segment demonstrated top-line progress.

"Consumer Foods sales grew 8%, or 6% on a comparable basis, and pricing played a larger role in that segment's sales performance.

"I congratulate our team on the successes and improvements to date, and expect momentum to build as we go forward."

Operating profit declined 8% as reported; the comparable decline was 26%, as detailed on page 10.

The current quarter's high operating costs primarily reflect a challenging input cost environment, which negatively impacted cost of goods sold by approximately $130 million.

Substantial pricing actions that took effect this week should benefit this segment's operating profits in the future.

Trading and merchandising agricultural commodities, fertilizer, and energy worldwide.

During the quarter, sales for the Trading and Merchandising segment were $564 million, 92% ahead of year-ago amounts; operating profit was $199 million, more than three times the dollar amount earned in the year-ago period.

Agricultural trading and merchandising, most notably for wheat, posted a very strong quarter by capitalizing on continued unprecedented market volatility; fertilizer profits also grew, reflecting rising prices and continued strong domestic and global demand.

Energy trading results improved slightly over the prior year.

As communicated in the company's press release earlier today, the company has entered an agreement to divest this segment and expects the transaction to be complete within the next 60 days.

For additional information on this pending transaction, including details on customary closing conditions, refer to that release and the related 8-K.

International Foods Segment (5% of year-to-date sales)

Branded consumer products sold internationally to retail channels.

During the quarter, sales for the International Foods segment were $165 million, 6% ahead of year-ago amounts. Excluding the benefit of a weaker dollar, sales declined approximately 1%.

Mexico, the Caribbean, and Latin America posted increased sales, with the strongest overall segment category performances coming from popcorn, cooking oil, and cooking sprays.

Sales in Canada, the largest geographic market in the segment, were below strong year-ago amounts.

Operating profit of $13 million was 16% below year-ago amounts, as reported, due to $6 million of restructuring costs related to SG&A efficiency initiatives.

Excluding these restructuring costs in the current quarter, as well as $2 million of peanut butter recall costs in the year-ago period, operating profit was ahead of comparable year-ago amounts.

Other Items

—Corporate expense was $84 million for the quarter and $86 million in the year-ago period.

—Equity method investment earnings were $45 million for the third quarter, significantly above $10 million in the year-ago period, reflecting strong results for a potato processing joint venture and a grain export joint venture.

—Net interest expense was $62 million in the current quarter and $56 million in the year-ago period.

—The effective tax rate was 33% in the current quarter; the EPS impact of the lower-than-expected tax rate is listed as an item impacting comparability.

The company continues to project fiscal 2008's effective tax rate to be in the range of 34%-35% for continuing operations, excluding items impacting comparability.

Capital Items

—Dividends paid during the quarter totaled $93 million versus $91 million last year.

—For the quarter, capital expenditures from continuing operations for property, plant, and equipment were $72 million compared with $147 million in the year-ago period. Depreciation and amortization expense from continuing operations was approximately $78 million for the quarter; this compares with a total of $91 million in the year-ago period.

—Subsequent to quarter end, ConAgra Foods' Lamb Weston purchased Watts Brothers Farms, which owns and operates agricultural and farming businesses in Washington and Oregon. In addition to being a leading supplier of vegetables, Watts Brothers also expands Lamb Weston's potato growing operations. The purchase price was approximately $130 million in cash, plus the assumption of approximately $85 million of interest-bearing debt.

Outlook

—The company expects fiscal 2008 EPS to be in the range of $1.80-$1.85, excluding items impacting comparability.

Given that the Trading & Merchandising transaction is expected to be completed over the next few months, Trading & Merchandising results likely will be classified as discontinued operations in future financial statements.

—While several details of the fiscal 2009 operating plans are still being finalized, the company currently expects fiscal 2009 EPS, excluding items impacting comparability, to be at least $1.55. Due to the pending transaction, the company is assuming no operating profit from Trading & Merchandising operations in its fiscal 2009 EPS estimates, but is assuming EPS benefit from allocating transaction proceeds primarily toward share repurchases and from interest income on the note receivable from the buyer.

The company expects strong margins and operating profitability for the core food operations in fiscal 2009 due to the innovation, pricing, marketing, and cost-saving initiatives under way.

After the fiscal 2009 operating plans are finalized, the company will provide more specificity regarding fiscal 2009 expectations with its fiscal 2008 fourth-quarter earnings release scheduled for June 26, 2008.