Gary Rodkin - CEO John Gehring - CFO Chris Klinefelter - VP, IR Tom McGough - President, Consumer Foods Paul Maass - President, Private Brands & Commercial Foods

Andrew Lazar - Barclays Capital David Driscoll - Citi Jason English - Goldman Sachs Akshay Jagdale - KeyBanc Capital Markets Robert Moskow - Credit Suisse Jonathan Feeney - Athlos Research Alexia Howard - Sanford C. Bernstein & Company

Welcome to today’s ConAgra Foods First Quarter Earnings Conference Call. This program is being recorded. My name is Jessica Morgan and I will be your conference facilitator. (Operator Instructions). At this time, I'd like to introduce your host for today's program, Gary Rodkin, Chief Executive Officer of ConAgra Foods. Please go ahead, Mr. Rodkin.

Good morning and welcome to our first quarter earnings call. Thanks for joining us today. I am Gary Rodkin and as usual I am here with John Gehring, our CFO and Chris Klinefelter, our VP of Investor Relations. Before we get started, Chris has a few words.

Good morning. During today's remarks, we will make some forward-looking statements, and while we’re making those statements in good faith and are confident about our company's direction, we do not have any guarantee about the results that we will achieve. So if you'd like to learn more about the risks and factors that can influence and impact our expected results perhaps materially, I'll refer you to the documents we file with the SEC, which include cautionary language. Also, we'll be discussing some non-GAAP financial measures during the call today, and the reconciliations of those measures to the most directly comparable measures for Regulation G compliance can be found in either the earnings press release, the Q&A or on our website. Now I'll turn it back over to Gary.

Thanks Chris. First quarter diluted EPS on a comparable basis was $0.39 versus $0.37 a year ago which is ahead of where we expect it to be. During our first quarter of fiscal ’15 we drove progress in a number of areas. First, Consumer Foods volumes strengthened, we improved share, made sales gains in alternative channels and posted good productivity savings. Also we continue to improve the underlying health of our Private Brands operations positioning us for margin expansion and new business as the year progresses and within commercial foods we continue to pick up new business through Lamb Weston. We’re pleased with our start to the fiscal year and we see the hard work from last year beginning to show returns. We know that one quarter does not make a year and that there is a lot of time left in fiscal ’15. I feel good about the underlying progress. We continue to have a very high sense of focus and urgency against our objectives and we look forward to delivering the full potential of ConAgra Foods. With this good start to the year we are very confident in our full year EPS projections. I want to acknowledge the news I shared last month about my intent to retire at the end of this fiscal year. The reason I'm retiring is simply that I want to spend more time on the personal side. At this point I have had an all-encompassing corporate job for a very long time and I'm ready to devote more time to family, friends and outside interest. I feel honored to have led ConAgra Foods for the past nine years. It's been a meaningful journey personally and professionally and I believe the dramatic changes we have made at ConAgra Foods in terms of the operations,…

Thank you Gary. Good morning everyone. I'm going to touch on four points this morning, I will start with some comments on our fiscal first quarter performance. Next I will cover comparability matters and then on the cash flow capital on balance sheet items and finally I will provide some comments on our outlook for the balance of the fiscal year. Let’s start with our performance, overall for the fiscal first quarter the results were a bit better than our expectations and reflect progress against several key focus areas for fiscal 2015. We have reaffirmed our full year goals and continue to expect fiscal 2015 results to reflect stabilization and recovery. Before I cover some of the details I would remind everyone that with the formation of Ardent Mills early in the fiscal quarter flouring milling results prior to the formation of the JV are reflected as discontinued operations. Historical results from continuing operations reflect this change most notably within EPS and the results of the commercial food segment. We have provided revised numbers in the written Q&A document associated with this release. Also our share of earnings from our 44% interest in Ardent Mills is included in equity method investment earnings. Importantly we continue to use $2.17 of a share as are comparable 2014 earnings base. For the fiscal first quarter we reported net sales of $3.7 billion in-line with the year-ago quarter. For the quarter we reported earnings per share from continuing operations of $0.25 versus $0.30 in the year ago period. Adjusting for items impacting comparability fully diluted earnings per share were $0.39 up $0.02 over comparable year-ago amounts reflecting strong performance in our consumer food segment, increased equity method investment earnings and lower interest and corporate expenses offset by lower earnings in our commercial foods and…

(Operator Instructions). And it looks like our first question will come from Andrew Lazar with Barclays Capital.

Gary on your last call I think you guys mentioned that you expected consumer volume for the year to be flat maybe just slightly down I guess for the full year and then with sequential improvement throughout the year. I'm trying to get a sense if that’s still your thinking because obviously you started out the year with flat volume there and if it is still the case is it possible we will see a step back in volume maybe over the next quarter or two just because of the way either comps flow or what you’re doing on the merchandising plan. Trying to get a sense how we should view that?

Yes Andrew, I would tell you that we feel really good about the start on consumer volume. A really intense focus on the fundamentals, we call it perfect at retail, is gaining traction and it's demonstrating it's power in Consumer Foods. So I think that the traction is real. Let me turn it to Tom for some more color.

Sure Andrew. You know what we expect is the foundational progress that we made in Q1 we should sustain throughout the year. What we will be facing going in the Q2 is we’re going to be executing pricing based on the commodity increases that we have seen in several of our businesses that will create a headwind but overall we expect the volume to be fairly flat for the year.

We have heard here and there of some let’s call it smaller frozen entree players that are really more in the health and wellness arena that are trying to be pretty aggressive about or expecting to get one or two full doors of placement in the freezer case that some retailers going forward. Obviously that would add significant pressure to the incumbent brand that are currently there and we will see how successful these companies ultimately are but I'm trying to get a sense of whether that’s something you see in your conversations with retailers or is that a risk that perhaps is something that we should worry a bit less about given what you’re doing around SKU reduction at Healthy Choice and focusing on the steamer line?

Yes Andrew, I would tell you we certainly do see some of that. There is always smaller players looking to get in and that is the case in the freezer case. But I can tell you we have got really good feedback from our customers that given our performance in frozen and what we have been doing to try and grow the business and obviously gain share that it will impact us in a very immaterial way. Our competitors will potentially feel more of that but that really shouldn’t disrupt us at all.

We will move now to Citi’s, David Driscoll.

Gary, can you describe the current service levels to your private label customers and kind of how things have changed over the last maybe two quarters and can you discuss related to this the process of private label contract rebidding, how long did these contracts typically go? Is it a six months? Is it a year? And just trying to get a sense for what we should expect going forward on the progression and recovery of this operation?

Yes David, I could tell you that we feel really good about the service levels in Private Brands, it's night and day difference from a year ago, Paul, maybe a little more.

Yes, especially a year ago and seasonality, the second quarter is a really important quarter and we are working through just very significant issues. Our service levels are where they need to be in the 98% range, we measure them consistently. Big focus area for us and the good news is that our sales team is on their heels reacted to a bunch of issues, we’re really managing the business the way it needs to be managed. On the color on the rebidding, I would say on Private Brands it's part of the business so it's ongoing element that we manage through. There is different things that will trigger a rebid by category, by customer, our focus is on the fundamentals, we’re building the business out the right way, developing stronger customer partnerships making a ton of progress and have confidence in how things will evolve as we go through the year.

A separate question, I think you guys said that the Ralcorp-ConAgra savings are now expected at 350 million. Do I remember correctly that the original forecast was 300, is this a $50 million step-up and can you give us any color as to the specific savings expected this year fiscal ‘15?

Yes David let me clarify that for you. I think the two numbers are a little mixed up there. We continue to see that the synergies from the Ralcorp deal by fiscal 2017 to be a run-rate of 300 million. The $350 million that I referred to is our total productivity for our supply chain across all of the company for fiscal 2015 and probably subsequent years also as what we talked about at CAGNY last year. So 300 million run-rate by fiscal 2017 for Ralcorp synergies, total productivity and supply chain this year of about 350 million. This year and as it relates to our Private Brands business. We’re probably looking at something in the range of a $125 million to $150 million for productivity there most -- big chunk of that is synergies.

We will take our question now from Jason English with Goldman Sachs.

Congratulations on a sequential progress. I was hoping I could understand some of the drivers of the profit erosion in private label little bit more. When you disclose sales growth of one on 3% volume decline implicitly we’re talking about 1% price growth but you’re referencing price concession. So how do I foot those two numbers?

Yes let me start with that Jason. So, we made as we have talked a lot about, we were on our heels very reactive last year and those price concessions that we made are still with us. So those are in our base but as we move forward and we start to selectively manage our mix and we take some pricing on some of the new business that starts to eat into those price concessions and that’s why we have got that dynamic. Paul?

Yes and the other element I would mention John referenced in his remarks supply chain initiatives and the picture I will paint it's really about taking one step back to take two steps forward. We’re changing our broad [ph] distribution network to optimize how we execute there. In the short term that adds costs but in the long term it puts us in an advantage position to execute the business. We’re also consolidating production at certain plants, increases capacity utilization. Again these are expensive things to execute that hurts the profit performance in the short term but really positions us better in the longer term and that’s what we’re driving against and that’s what you see coming through.

Do you guys have a sense of the magnitude of these incremental costs that may prove transitory that you are not excluding as onetime items?

Jason, I believe in the range of $30 million this year.

We will take our question now from Akshay Jagdale with KeyBanc Capital Markets.

My first question is on Consumer Foods and the advertising promotion expense. I know you had a tough lap, what's the expectation for the year? And Gary, since you've been on at ConAgra, in-charge rather, you've tried to increase advertising promotion generally over a longer term. Are you resetting that now to a much lower level? I mean what's the number for this year and what's the sustainable advertising promotion number for the Consumer Foods business? And with the lower number this year what impact might that have on sales?

You know philosophically I would say the most important thing -- two things, one last year we spent heavily on some new product introductions that didn’t live up to expectations and that out of the numbers this year so that’s a big impact. Maybe more importantly we’re working smarter and deploying our resources more judiciously and that’s really about demanding and raising the bar for our folks to say, if we are going to spend the resources we need to see the growth that comes along with it. So Tom, maybe some more details.

Sure. As Gary said, as with any investment we make we have a very sharp ROI focus on allocating those resources. Given the breadth of our portfolio, we are investing but we’re going to get the highest returns. Those include many of the businesses that Gary highlighted earlier, Marie Callender, a tomato crop [ph] platform, crop platform, Slim Jim, Reddi-wip. We will continue to invest, but we’re getting a very strong ROI. Overall our FY ’15 spending for the balance of the year will be roughly in-line with year ago levels.

Just on Private Brands, are you in a position now to look at this business since it's stabilized in terms of its performance, look at it longer term and give us some guidance in what a long term margin profile for this could look like? I mean your long term targets imply that we should get somewhere close to double digit segment EBIT margins on Private Brands, but is that something that's achievable?

As you know from our statements we expect modest growth this year for things to accelerate over ’16 and ’17. In terms of giving a hard number we haven't cited one, but I can tell you is reaching double digits in a reasonable amount of time of long term is not out of the question.

We will move now to Robert Moskow with Credit Suisse.

A couple of questions. One is on the synergies for the Private Brands business, the 300 million. I'm sure you've addressed this before, but to what extent does that entail consolidating the Private Brands supply chain with the Consumer Foods supply chain? Have you announced those types of steps yet, if there are any at all? And the reason I ask, Gary, is that I'm sure that the Board in the future will continue to evaluate the role of Private Brands in the portfolio. And as you integrate them together, perhaps you even take the step to pull them apart at some point? And then I had a quick follow-up?

Yes let me just tell you that our objective is to really leverage the infrastructure that we have that’s what we have talked about when we made the acquisition and we still are aligned through the Board on that strategy but John?

Yes just a follow-up we have done a lot of integration I think you know this year for instance the big portion of the ramp-up in our synergies is coming from procurement and it's really leveraging the buy of really common materials across all of those businesses and then certainly from rolling out our manufacturing cost savings initiatives within the plants we really are doing a fair amount of integration of these businesses and the supply chains in particular. Other thing you think about things like distribution networks and how we move product to customer. So there is an awful lot of progress we have made there and more to come but clearly we’re looking at a total supply chain.

Rob, one other thing I would just mention as you think about it on a go forward basis, most of our competitors are pretty small in Private Brands and when you think about total delivered cost and ultimately and this is going to take a bit longer but ultimately the total delivered cost just from a logistics standpoint of being able to combine loads and deliver is certainly going to be an advantage for us. So that’s just one other example of what we have to look forward to.

Okay. I get it. My follow-up was about the R&D capabilities in the private label business. Your competitor in private label talks a lot about how they use their R&D and marketing capability to come up with ways to segment the market for their private label customers. Gary, you gave a lot of good detail on private label during the quarter, but I was wondering, if you get these new business wins, are they asking you to leverage your R&D capability to come up with new product ideas or premium versions or is it just like you are bidding for business and you're displacing someone else?

I would just describe national brand emulation is a critical part. We have really strong capabilities especially of the categories that we’re in as a core competence that is required for success, effective interaction with our customers and developing the right products. So leveraging our total R&D capabilities across our company is absolutely part of our total value proposition and we believe it gives us competitive advantage and we’re leaning into it and frankly back on the comments on the supply chain, I would put supply chain in that same realm and the same outlook. It's a strong capability, we’re leveraging it to help us win over the long haul.

Yes I mean so the sweating the assets clearly important. Getting the emulation right, that’s kind of the bread and butter of the business but clearly our customers are really excited about our capabilities on the innovation side, that’s to come as we go forward, we dabbled in that in a small way thus far and have some wins there but that’s going to become a bigger piece of the business as we go forward particularly as the customers go up market.

And Jonathan Feeney with Athlos Research has our next question.

I wanted to come at the margin question on Private Brands a little bit different way. If we go back to -- I mean forget about the run-up between -- around the time of the transaction -- but we will take an average of ’08 through 2012. If you look at the legacy Ralcorp business, pre-synergy you were looking at excluding the branded side of that business, excluding the post-acquisition of theirs and anything related to that. You were talking about 10% to 12% operating margins -- segment margins and so 2% of that was corporate overhead. So level is already higher than what you are reporting and talking about and then, you take another $300 million I mean significantly, 500, 600 basis points incremental in terms of the legacy Ralcorp sales to where that is. So, I'm trying to bridge maybe where -- have competitive conditions changed that you just can't sustain those kinds of margins and so that 12%, 13% isn't attainable? How much of this is temporary dislocation related to the problems last year and how much of this is any change in the marketplace that might have happened due to higher commodity prices, more competition from brands? Just your thoughts on that, Gary? Thanks.

:

Yes and just a little color, I would start with our current margin performance is not acceptable and our focus is on improving it. A lot of effort around the top line working with customers and just basic blocking and tackling - filling distribution voids, gaining new business, getting it in market all the things that we talked about from a supply chain leveraging our R&D capabilities. So we’re making progress, there is sequential improvement, feel good about the outlook but also acknowledge that the current margin structure is not where it needs to be and the one that we haven't hit on much is pricing and we’re surgical pricing low margin SKUs that’s an element of it and that where we were a year ago we had to give a lot of pricing and that was just a situation we were in, but we’re fundamentally changing it and know we have to get a better outcome.

And we will hear a question now from Alexia Howard with Sanford C. Bernstein. Alexia Howard - Sanford C. Bernstein & Company : Can I ask about the progress that you're making on what you've termed the troubled brands before? I think a while ago, you were saying it's very hard to recruit new consumers into those brands. From your comments today, it looks as though they are still seeing negative sales growth. I'm not sure how negative that is, but it sounds as though you’re making progress. Was it as simple as just putting the little snap-top lids on the Chef Boyardee? Or is there merchandising, pricing, other marketing or innovation activity that's allowing you to see a bit of progress there? And will we see positive growth on those brands at some point soon? Thank you.

As you have highlighted we have talked a lot about these brands, we have been working to stabilize the three businesses of Chef Boyardee, Healthy Choice, and Orville Redenbacher's and it is focused on getting the fundamentals right and being perfect at retail. In Q1, we made very tangible progress in improving the trends. Specifically on Chef Boyardee it's been a combination of two factors, certainly adding our easy open lid to the product has improved our non-promoted velocities, but we have also been more effective in our in-store merchandising. On Healthy Choice, while the nutritional segment continues to be challenging we’re transforming our product line around Cafe Steamers, which is a very proprietary format for us. It's growing at strong double digit rates. This is work we’re going to continue throughout FY ’15 and then finally on Orville Redenbacher we will be fielding several initiatives in the latter part of this calendar year to get those fundamentals right and we anticipate improving trends in the second half. Microwave popcorn is a category that we believe and we’re confident we can grow and I think you can see that in our Act II performance that we’re posting very significant year-on-year increases in our consumption as we have gotten the fundamentals right on that business. So overall we expect to see continued sequential improvement from these brands as we progress through the year.

There are no further questions Mr. Klinefelter. I will hand the conference back to you for final remarks or closing comments.

So thank you. This concludes our call today and just as a reminder this is being recorded and will be archived on the web as detailed in our news release and as always we’re available for discussions. Thank you very much for your interest in ConAgra Foods.

Thank you. This concludes today’s ConAgra Foods first quarter earnings conference call. Thank you again for attending and have a good day.