ConAgra Foods, Inc Bryna Fugate ACG2021.002

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ConAgra Foods, IncBryna FugateACG2021.002
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Executive Summary

• The company needs to raise their net income.
• One good point is that they reduced the time they
  have inventory on hand.
• They are slowly improving there Debt to Equity
  Ratio.
• With their future plans and good outlook I feel
  that they are on the right track to improving
  there company and its numbers.
• 2005 Annual Report

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The Company

• Bruce Rhode, Chairman and Executive Officer
• Home Office One ConAgra Drive
• Omaha, NE 68102-5001
• The ending date of the last fiscal year was May
  29, 2005.
• ConAgra has three segments Retail, Foodservice,
  and Food Ingredients. Some of the companys
  products include Processed prepared meats,
  condiments, cooking products, frozen entrees and
  side dishes, and cooking ingredients.
• ConAgra is a global company but its main
  distribution is in the United States.

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Audit Report

• Deloitte and Touch LLP
• Omaha, NE
• The statements are accurate in stating the
  position of the company. Also, they changed its
  method of accounting for variable interest
  entities and asset retirement obligations in
  2004. It also changed its methods of accounting
  for goodwill and other intangible assets in 2003.

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Stock Market Information

• Stock Price 20.99
• Twelve month trading range 28.39-19.99
• Dividend per share .2725
• March 2, 2006
• I would recommend holding because the success is
  increasing so the stock price will probably go
  down.

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Industry Situation and Company Plans

• ConAgra is a company that has a wide variety of
  brands and offers a wide variety of foods. From
  reading about the company they seem to care about
  your family. They offer easy, quick, but healthy
  foods. The company focuses on long-term growth.
  They seem to stress that they want to improve
  relations between their company and its
  customers. Also, making processes more productive
  and streamlining the supply chain. (P. 4, Annual
  Report) They also want to make healthier foods
  for families. (P. 18, Annual Report)

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Income Statement

• ConAgra uses a Multi-Step income statement.
• Financial Highlights Page 5
• There was not a large amount of increases or
  decreases. However, the decreases they did have
  was that they went down 2,000 employees, the
  diluted earnings per share of discontinued
  operations went down .14, and net income went
  down 120.

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Balance Sheet

• Balance Sheet Page 56 Page 56
• The Cash, Other Assets, Notes Payable, and
  Current Liabilities of discontinued Operations
  all decreased. Accumulated other Comprehensive
  Income increased. The Current Installment on
  Long Term Debt changed the most. It decreased
  about 270.

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Statement of Cash Flows

• The cash flows are down about 100 or so from
  the past two years.
• The company is not really growing through
  investing activities. However, they did buy
  some furniture and office equipment.
• ConAgras primary source of financing is through
  long-term loans.
• Cash has decreased over the past two years.

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Accounting Policies

• Cash and Cash Equivalents
• All highly liquid investments with a maturity of
  three months or less at the date of acquisition,
  including short-term time deposits, government
  agency and corporate obligations, are classified
  as cash and cash equivalents.
• Inventories
• The company primarily uses the lower of cost
  (determined using the first-in, first-out method)
  or market for valuing inventories not hedged.
  Grain, flour and major feed ingredient
  inventories are hedged to the extent practicable
  and are primarily stated at market, in including
  adjustment to market of open contracts for
  purchases and sales.
• Property, Plant, and Equipment
• Carried at cost. Depreciation is calculated
  using primarily the straight-line method over the
  estimated useful lives.

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Financial AnalysisLiquidity Ratios

• Working Capital 2005 2135.1 2004 2144.8
• The working capital did not change.
• Current Ratio 2005 1.89 2004 1.80
• Although the ratio could stand to be higher, it
  is a decent number to have.
• Receivable Turnover 2005 11.23 2004 13.62
  times 11.23 is not a bad number to have, but
  compared to last years it is a little on the
  low side.
• Average days sales uncollected 2005
  32.50 2004 26.8
• 32.54 days to collect an account may not sound
  like a lot but compared to last year, the days
  increasing by 6 is not a good thing.
• Inventory Turnover 2005 4.47 2004 2.18
• Whatever the company did to make their
  turnover double, they need to keep the trend
  going.
• Average Days Inventory on hand 2005 81.6
  2004 167.43
• These numbers reflect the turnover rate and it
  is very impressive that they cut the days in
  half.

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Financial AnalysisProfitability Ratios

• Profit margin 2005 4.4 2004 5.7
• For every dollar of net sales in 2005,
  the company made .04. Even though they only
  decreased by 1 percent. That difference can
  decide if that year was a profitable year or a
  fair one.
• Asset turnover 2005 1.08 2004 .96
• The company used their assets more efficiently
  this year than last.
• Return on assets 2005 4.8 2004 5.5
• The assets did not produce as much net income
  as did last year.
• Return on equity 2005 6.65 2004 17.1
• This drop on ROE most likely does not look too
  good to the investors.

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Financial AnalysisSolvency Ratio

• Debt to equity 2005 1.65
• 2004 1.97
• In 2004, the ratio was very high. The
  companys creditors controlled it. In 2005, even
  though the ratio is still high, they did make an
  improvement. Hopefully it is the beginning of a
  trend.

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Financial AnalysisMarket Strength Ratios

• Price/Earnings per share 2005 16.2 times
• 2004 18.5 times
• That is relatively low. The investors are not
  paying very much compared to earnings.
• Dividend yield 2005 1.3 2004 1.2
• The investors should be happy because the
  amount of dividends has been rather constant
  over the past two years.