10-Q 1 e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2000 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C., 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 333-18859 ---------- INTERNATIONAL HOME FOODS, INC. (Exact name of registrant as specified in its charter) DELAWARE 13-3377322 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 NORTHFIELD STREET, GREENWICH, CT. 06830 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 622-6010 ---------- 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 [ ] The number of shares outstanding of registrant's common stock, par value $0.01 per share, at June 30, 2000 was 74,224,484. 1 2 INTERNATIONAL HOME FOODS, INC. INDEX TO FORM 10-Q

2 3 INTERNATIONAL HOME FOODS, INC. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) (UNAUDITED)

See accompanying notes to consolidated financial statements. 3 4 INTERNATIONAL HOME FOODS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) (UNAUDITED)

See accompanying notes to consolidated financial statements. 4 5 INTERNATIONAL HOME FOODS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED)

See accompanying notes to consolidated financial statements. 5 6 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 1. ACCOUNTING POLICIES Interim Financial Statements In the opinion of International Home Foods, Inc. ("the Company"), the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of June 30, 2000 and the results of operations for the three and six months ended June 30, 2000 and 1999 and cash flows for the six months ended June 30, 2000 and 1999. The results of operations for the three and six month periods are not necessarily indicative of the results to be expected for the full year. The December 31, 1999 consolidated balance sheet was derived from the Company's audited financial statements but does not include all disclosures required by generally accepted accounting principles. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K. Use of Estimates The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on judgments and estimates made by management. Actual results could differ from these estimates. Estimates are used when accounting for potential bad debts, inventory obsolescence and spoilage, trade and promotion allowances, coupon redemptions, depreciation and amortization, stock option compensation, deferred income taxes and tax valuation allowances, pension and post-retirement benefits, restructuring charges and contingencies, among other items. Reclassifications Certain 1999 amounts have been reclassified to conform with the 2000 presentation. 2. INVENTORIES Inventories consist of:

6 7 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 3. COMPREHENSIVE INCOME Comprehensive income is as follows:

The following amounts are included in Accumulated other comprehensive loss at June 30, 2000 and December 31, 1999:

4. BUSINESS SEGMENT INFORMATION The Company manufactures and markets a diversified portfolio of shelf-stable food products including entrees, side dishes, snacks, canned fish, canned meats as well as refrigerated surimi. The Company sells its products primarily in the United States, Canada and Mexico, and is not dependent on any single or major group of customers for its sales. The Company has three reportable business segments - Branded Products, Seafood and Private Label and Foodservice. Branded Products is defined as U.S. grocery sales for the following products: Chef Boyardee(R), Canned Meats (Libby's(R) and Dennison's(R)), Southwest brands (Ro*Tel(R), Luck's(R) and Ranch Style(R)), Specialty and Snack brands (PAM(R), Gulden's(R), Maypo(R), Wheatena(R), Maltex(R), G. Washington's(R), Crunch 'n Munch(R), Jiffy pop(R) and Campfire(R)). Seafood includes all sales for the Bumble Bee(R), Orleans(R), Libby's, Clover Leaf(R), Paramount(R) and Louis Kemp(R) brands of seafood products as well as private label and foodservice seafood sales. Private Label and Foodservice includes all private label canned pasta, cooking spray, fruit snacks, ready-to-eat cereals, wholesome snack bars, pie crust and personal care products and the sales to foodservice distributors. The All Other category is comprised of sales to the military, contract sales to Nestle, sales of Polaner(R) products and international sales which includes branded, private label and foodservice sales in Canada, Mexico, Puerto Rico, and other export sales. The Company sold its Polaner fruit spreads and spices business on February 5, 1999 (Note 6). 7 8 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Business Segment Information, (Continued) The Company sells the products in each of its segments primarily to grocery wholesalers and distributors, grocery stores and supermarkets, convenience stores, drug and mass merchants and warehouse clubs. The Company evaluates segment performance based upon segment operating income (earnings before interest expense, net other [income] expense, and income taxes excluding unusual or infrequently occurring items, restructuring charge and stock compensation expense [income]). Certain centrally incurred costs (Corporate), are not allocated to the operating segments. The Company allocates certain charges, including depreciation, amortization, agent and broker commissions, storage, packing and shipping charges, and administrative costs for salaries, insurance and employee benefits, to its Branded Products segment, and to its Private Label and Foodservice segment based on a percentage of net sales.

8 9 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 5. ACQUISITIONS On July 19, 1999, the Company, through its subsidiary Bumble Bee Seafoods, Inc., acquired the manufacturing, sales distribution and marketing operations of Louis Kemp from Tyson Foods, Inc. for $68,792, including transaction fees. The Company financed this acquisition with borrowings under its Senior Bank Facilities. Louis Kemp manufactures and sells refrigerated and frozen surimi products. Surimi-based products are made from North Pacific ocean pollack and whiting fish meats. These products are primarily sold under the tradename Louis Kemp and other tradenames such as Captain Jac(R), SeaFest(R) and Pacific Mate(R). On January 19, 1999, the Company, through its subsidiary Bumble Bee Seafoods, Inc., acquired the Clover Leaf and Paramount canned seafood brands and business of British Columbia Packers ("Clover Leaf/Paramount brands") from George Weston Ltd. of Canada for a total purchase price of $40,394, including transaction fees. The acquisition was funded with borrowings under the Company's Senior Bank Facilities and cash on hand. The excess of cost over fair value of net assets acquired for the above acquisitions is amortized over 40 years for identifiable intangibles and for goodwill. These acquisitions have been accounted for using the purchase method of accounting, and the operating results of the acquired companies have been included in the consolidated financial statements from the dates of acquisition. The information below includes non-cash investing and financing activities supplemental to the consolidated statements of cash flows. A summary of the excess of cost over fair value of net assets acquired resulting from purchase price allocations for the 1999 acquisitions is as follows:

9 10 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Acquisitions, (Continued) The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Clover Leaf/Paramount and Louis Kemp and divestiture of Polaner had occurred as of the beginning of 1999 and reflect proforma adjustments for goodwill, interest expense and tax expense:

(1) Excludes operations of and gain on sale of Polaner (See Note 6). (2) Amounts include Louis Kemp and Clover Leaf/Paramount brands. The unaudited pro forma consolidated results do not purport to be indicative of results that would have occurred had the acquisitions been in effect for the period presented, nor do they purport to be indicative of the results that will be obtained in the future. 6. SALE OF BUSINESS On February 5, 1999 the Company sold its Polaner fruit spreads and spices business to B&G Foods, Inc. for approximately $30.0 million in cash, resulting in a gain of $15.8 million ($9.6 million, net of tax or $0.13 per diluted share). 7. RELATED PARTY TRANSACTIONS Effective November 1, 1996, the Company entered into a 10-year monitoring and oversight agreement with an affiliate of its largest stockholder. The agreement provides for an annual fee of the greater of $1,000 or 0.1% of the budgeted consolidated net sales of the Company for the current year. In addition, effective November 1, 1996, the Company entered into a financial advisory agreement with the affiliate under which the affiliate will be entitled to a fee of 1.5% of the transaction value, as defined, for each add-on transaction, as defined. The Company incurred monitoring and oversight fees of $579 and $487 for the three months ended June 30, 2000 and 1999 and $1,158 and $974 for the six months ended June 30, 2000 and 1999, respectively. In addition, the Company incurred financial advisory fees of $0 for the three and six months ended June 30, 2000. The Company incurred financial advisory fees of $0 and $546 for the three and six months ended June 30, 1999, respectively. 10 11 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 8. GUARANTOR FINANCIAL DATA The Company's Senior Subordinated Notes are fully and unconditionally guaranteed by each of the Company's subsidiary guarantors on a joint and several basis. The Company has not presented separate financial statements and other disclosures concerning each of the subsidiary guarantors because management has determined that such information is not material to the holders of the Senior Subordinated Notes. The financial information for 2000 reflects the corporate re-organization, resulting from the Company's tax restructuring, effective January 1, 2000. Certain intercompany sales transactions between the parent and guarantor subsidiaries have been eliminated. Presented below is consolidating financial information including summarized combined financial information of the subsidiary guarantors:

11 12 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Guarantor Financial Data, (Continued)

The 1999 amounts have been restated from amounts previously reported. Amounts are not intended to report results as if the subsidiaries were separate stand-alone entities. (1) Includes an after-tax gain of $9.6 million ($15.8 million pre-tax) from sale of the Polaner fruit spread and spice business. 12 13 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 9. IMPACT OF RECENT ACCOUNTING STANDARDS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition", which provides guidelines in applying generally accepted accounting principles to selected revenue recognition issues. The SAB is effective in the fourth fiscal quarter of fiscal years beginning after December 15, 1999, or as of October 1, 2000 in the Company's case. The Company does not expect this statement to have a material impact on its financial statements. In May 2000 and July 2000, the Emerging Issues Task Force ("EITF") issued guidance on how to classify certain revenues and costs in a company's financial statements. EITF No. 00-10 "Accounting for Shipping and Handling Revenues and Costs" requires that companies classify all amounts billed to customers related to shipping and handling cost as revenue. This statement will be effective in the fourth quarter of 2000 and is not expected to have any effect on the financial statements. EITF No. 00-14 "Accounting for Coupons, Rebates and Discounts" requires that manufacturing companies classify these costs as a reduction in net sales rather than as a marketing expense. This statement will also be effective in the fourth quarter of 2000 and is not expected to have a material effect on the financial statements. It will result in a reduction of marketing expense and net sales but will be neutral to overall net income. In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", was issued to establish standards for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. This statement requires all derivatives to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS 133. SFAS 133, as amended by SFAS 137, "Deferral of the effective date of SFAS 133", is effective for fiscal years beginning after June 15, 2000. The Company is currently evaluating the effect this statement will have on its financial statements. 10. EARNINGS PER SHARE The table below summarizes the numerator and denominator for the basic and diluted earnings per share calculations (in thousands, except per share amounts).

13 14 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 11. RESTRUCTURING In September 1998, in conjunction with management's plan to reduce costs and improve operational efficiencies, the Company recorded a restructuring charge of $118.1 million ($75.3 million after tax). The principal actions in the restructuring plan involved the closure of the Vacaville, California and Clearfield, Utah production facilities and the related impact of the transfer of production to other facilities, mainly Milton, Pennsylvania, and the write-down of goodwill associated with the Campfire crisp rice snack bar brand and the Polaner fruit spreads brand. The Polaner business was subsequently sold (Note 6). At June 30, 2000, $2.5 million of restructuring charges remained in other accrued liabilities. This amount is comprised of multi-employer pension plan settlements and certain other employee benefit related costs. Payments totalling $8.6 million have been made to date, including $0.5 million and $0.7 million for the three months and six months ended June 30, 2000, respectively. 12. FINANCIAL INSTRUMENTS The Company currently does not use derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. In accordance with the Senior Bank Facilities, the Company is required to enter into interest rate protection agreements to the extent necessary to provide that, when combined with the Company's Senior Subordinated Notes, at least 50% of the Company's aggregate indebtedness, excluding the revolving credit facility, is subject to either fixed interest rates or interest rate protection. At June 30, 2000, more than 50% of the Company's aggregate indebtedness, excluding the revolving credit facility, is subject to such protection. Under these agreements the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts based on agreed upon notional principal amounts. The notional amounts of interest rate agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. In accordance with the interest rate agreements, the measurement of 3 month LIBOR and 6 month LIBOR, respectively, occurs on the first day of each calculation period. For interest rate instruments that effectively hedge interest rate exposures, the net cash amounts paid or received on the agreements are accrued as incurred and recognized as an adjustment to interest expense. The Company is exposed to credit loss in the event of non-performance by the other parties to the interest rate swap agreements. All counterparties are at least A rated by Moody's and Standard & Poor's. Accordingly, the Company does not anticipate non-performance by the counterparties. 14 15 INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Financial Instruments, (Continued) As of June 30, 2000, the Company had the following interest rate instruments in effect for which the fair value of these instruments is based on the current settlement cost (dollar amounts are in millions):

13. OTHER EVENTS On June 23, 2000, ConAgra signed a definitive agreement to acquire International Home Foods, in a transaction valued at approximately $2.9 billion, including the assumption of $1.3 billion in debt. International Home Foods shareholders will receive $22 per share, half of which will be paid in cash and half of which will be paid in ConAgra stock. The stock portion of the consideration will be determined by dividing $11 by an average of ConAgra stock price for a fixed period prior to the closing, but will be no more than .61111 shares nor less than .50 shares for each International Home Foods share. The sale, which is subject to approval by International Home Foods shareholders, regulatory approvals, and other customary closing conditions, is expected to close in the third quarter of calendar 2000. A special meeting of shareholders is scheduled for August 22, 2000 to vote on the proposed merger. A Registration Statement on Form S-4 has been filed with the Securities and Exchange Commission in connection with the proposed merger. It contains a proxy statement/ prospectus with information about ConAgra, International Home Foods, the sale, and about persons soliciting proxies in the sale, including officers and directors of International Home Foods, and their interest in the sale. C.Dean Metropoulos, International Home Foods chairman and chief executive officer and certain investment partnerships controlled by Hicks, Muse, Tate & Furst Incorporated, holders of an aggregate of approximately 43% of the International Home Foods shares, have entered into agreements to vote for the merger. 15 16 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS - Three and Six Months Ended June 30, 2000 and 1999. NET SALES - The Company's net sales were $530.6 million for the three months ended June 30, 2000, an increase of $18.1 million or 3.5%, from the comparable 1999 quarter. Approximately $25.7 million of the increase was related to sales of Louis Kemp, which was acquired in July 1999 and was not reflected in the 1999 amounts. Excluding the aforementioned, declines related to Seafood ($9.6 million) and All Other ($6.9 million) were partially offset by increases in the Company's Branded Products ($4.3 million) and Private Label and Food Service ($4.7 million) segments. (See "Results by Segment"). The Company's net sales were $1,092.0 million for the six months ended June 30, 2000, an increase of $65.3 million or 6.4%, from the comparable 1999 period. Approximately $51.2 million of the increase was related to sales of companies acquired during 1999 (Clover Leaf/Paramount and Louis Kemp), which were not fully reflected in the 1999 amounts, offset by $5.0 million of lower sales due to the sale of Polaner in February 1999. The remaining $19.0 million increase primarily reflects increases in sales of Branded Products ($18.9 million) and Private Label and Foodservice ($5.4 million). Excluding acquisitions and the divestiture, the increase in All Other ($2.5 million) is offset by Seafood's decrease ($7.7 million). (See "Results by Segment"). COST OF GOODS SOLD - Cost of goods sold was $270.5 million for the three months ended June 30, 2000 as compared to $272.1 million for the three months ended June 30, 1999. Expressed as a percentage of net sales, cost of goods sold decreased to 51.0% from 53.1% in 1999. The improvement in cost of goods sold as a percentage of net sales primarily is due to the savings associated with the Company's previously announced restructuring program, lower purchasing costs, continued improvement in operating efficiencies and product mix. Cost of goods sold was $563.6 million for the six months ended June 30, 2000 as compared to $552.5 million for the six months ended June 30, 1999. Expressed as a percentage of net sales, cost of goods sold decreased to 51.6% from 53.8% in 1999. Excluding the results of the acquired and divested businesses during 1999, cost of goods sold declined to 50.5% of net sales from 52.1% in 1999. The improvement in cost of goods sold as a percentage of net sales primarily is due to the savings associated with the Company's previously announced restructuring program, lower purchasing costs, continued improvement in operating efficiencies and product mix. MARKETING EXPENSES - Marketing expenses increased by $8.5 million to $120.0 million for the three months ended June 30, 2000 from $111.5 million in 1999. Expressed as a percentage of net sales, marketing expenses increased to 22.6% from 21.8% from the comparable 1999 period. The increase was primarily attributable to Seafood ($5.4 million), of which $2.7 million relates to Louis Kemp which was not reflected in 1999, and Ro*Tel ($2.0 million) to support its increased distribution. Marketing expenses increased by $27.4 million to $248.6 million for the six months ended June 30, 2000 from $221.2 million in 1999. Expressed as a percentage of net sales, marketing expenses increased to 22.8% from 21.5% from the comparable 1999 period. The increase was primarily attributable to the 1999 acquisitions ($11.0 million), Ro*Tel ($8.0 million) to support its increased distribution, Libby's canned meats ($4.4 million) and Chef Boyardee ($3.9 million), mostly due to incremental investments in introductory promotion allowances to launch new products. 16 17 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations SELLING, GENERAL AND ADMINISTRATIVE ("S,G & A") EXPENSES - S,G & A expenses were $68.9 million for the three months ended June 30, 2000 as compared to $62.0 million in 1999, an increase of $6.9 million. S,G & A expenses as a percentage of net sales increased to 13.0% in the three months ended June 30, 2000 from 12.1% in the comparable 1999 quarter. The 1999 acquisitions contributed $4.1 million to the increase of S,G & A expenses. The remainder of the increase is primarily due to higher distribution costs. S,G & A expenses were $140.4 million for the six months ended June 30, 2000 as compared to $123.0 million in 1999, an increase of $17.4 million. S,G & A expenses as a percentage of net sales increased to 12.9% in the six months ended June 30, 2000 from 12.0% in the comparable 1999 period. The 1999 acquisitions contributed $8.0 million to the increase of S,G & A expenses. The remainder of the increase is primarily due to the increase in sales volume and higher distribution costs. INTEREST EXPENSE - Interest expense for the three months ended June 30, 2000 was $24.3 million as compared to $24.6 million for the same period in 1999. The decrease in interest expense is attributable to lower average outstanding debt levels. Interest expense for the six months ended June 30, 2000 was $49.3 million as compared to $50.4 million for the same period in 1999. The decrease in interest expense is attributable to lower average outstanding debt levels partially offset by higher interest rates. GAIN ON SALE OF BUSINESS - On February 5, 1999 the Company sold its Polaner fruit spreads and spices business to B&G Foods, Inc. for $30.0 million in cash, resulting in a gain of $15.8 million ($9.6 million, net of tax, or $0.13 per diluted share). PROVISION FOR INCOME TAXES - Income taxes increased to $17.7 million for the three months ended June 30, 2000 from $16.7 million in the comparable 1999 quarter due to higher income before taxes. Income taxes decreased to $34.0 million for the six months ended June 30, 2000 from $37.5 million in the comparable 1999 quarter due to lower income before taxes, as a result of the gain on sale of business in the prior year. The effective tax rate decreased to 38.0% for the three and six month periods ended June 30, 2000 from 39.0% in the comparable 1999 periods, reflecting the Company's tax restructuring program which was substantially implemented by December 31, 1999. The Company anticipates sufficient future income to realize deferred tax assets recorded at June 30, 2000. In the event management determines that sufficient future taxable income may not be generated to fully realize the deferred tax assets, the Company will provide a valuation allowance by a charge to income tax expense in the period of such determination. 17 18 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations NET INCOME - For the three month period ended June 30, 2000, net income was $29.0 million, an increase of $2.9 million over the comparable 1999 period due to the factors discussed above. Basic earnings per share were $0.39 and $0.36 for the three months ended June 30, 2000 and 1999, respectively, and diluted earnings per share were $0.38 and $0.34 for the three months ended June 30, 2000 and 1999, respectively. For the six month period ended June 30, 2000, net income was $55.5 million, a decrease of $3.1 million over the comparable 1999 period, primarily reflecting the gain on sale of business ($9.6 million net of tax or $0.13 per share) in 1999 offset by the factors discussed above. Basic earnings per share were $0.75 and $0.80 for the six months ended June 30, 2000 and 1999, respectively, and diluted earnings per share were $0.73 and $0.77 for the six months ended June 30, 2000 and 1999, respectively. RESULTS BY SEGMENT - The Company has three reportable business segments - Branded Products, Seafood and Private Label and Foodservice. Refer to Footnote 4 on page 7 for further details. BRANDED PRODUCTS - The Branded Products segment net sales increased $4.3 million, or 2.0% for the three months ended June 30, 2000 versus the comparable 1999 period. This increase is primarily due to increased sales of Chef Boyardee ($3.8 million), Ro*Tel ($1.6 million) and Libby's canned meats ($1.1 million), partially offset by lower sales of Crunch 'n Munch ($2.2 million). Sales of the Chef Boyardee brand increased approximately 3.8% for the three months ended June 30, 2000 versus the comparable 1999 period. Canned pasta sales increased 6.3% partially offset by a decline in Pizza Kits and Dinners, while microwave was flat. The increase in sales of canned pasta is due to the national launch of four new items (two new offerings in each of the Homestyle and Overstuffed product lines). Libby's canned meat sales increased 4.1%, primarily due to increased distribution of several new products. Ro*Tel salsa sales increased as distribution expanded. Crunch 'n Munch experienced a slower than anticipated roll-out of the direct store delivery ("DSD") program which resulted in lower sales. The Branded Products segment operating income increased $2.6 million largely reflecting the factors discussed above. As a percentage of net sales, segment operating income increased to 19.3% during the three months ended June 30, 2000 from 18.4% for the same period in 1999. The Branded Products segment net sales increased $18.9 million, or 4.5% for the six months ended June 30, 2000 versus the comparable 1999 period. This increase is primarily due to increased sales of Chef Boyardee ($18.0 million), Libby's canned meats ($4.5 million), Ro*Tel ($3.1 million), partially offset by lower sales of Crunch 'n Munch ($4.3 million) and Campfire marshmallows ($1.9 million). 18 19 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations Results by Segment (continued) BRANDED PRODUCTS Sales of the Chef Boyardee brand increased approximately 8.7% for the six months ended June 30, 2000 versus the comparable 1999 period. Canned pasta sales increased 11.4% partially offset by a slight decline in microwave and dinners, while pizza kits were flat. The increase in sales of canned pasta is driven by new products and a new advertising campaign focusing on mothers and teens. Libby's canned meat sales increased 9.3% for the six months ended June 30, 2000 verses the comparable 1999 period, primarily due to increased distribution of several new products. Ro*Tel salsa also experienced increasing distribution. Crunch 'n Munch experienced a slower than anticipated roll-out of the direct store delivery ("DSD") program. The Branded Products segment operating income increased $4.1 million largely reflecting the factors discussed above. As a percentage of net sales, segment operating income increased slightly to 19.0% during the six months ended June 30, 2000 from 18.9% for the same period in 1999. SEAFOOD - The Seafood segment net sales for the three months ended June 30, 2000 increased $16.0 million or 10.4% over the comparable 1999 period, due to the acquisition of Louis Kemp ($25.7 million), partially offset by decreases in Bumble Bee sales ($4.3 million) and Clover Leaf/Paramount sales ($5.4 million). Bumble Bee's sales decline resulted from an industry-wide list price rollback on light meat tuna, in response to lower raw material costs, and competitive pricing pressures in the white meat category. Clover Leaf/Paramount's reduction resulted from the planned exit from the low margin international seafood business. The Seafood segment operating income increased $1.2 million or 12.1%. As a percentage of net sales, segment operating income increased from 6.2% during the three months ended June 30, 1999 to 6.3% for the same period in 2000. The Seafood segment net sales for the six months ended June 30, 2000 increased $43.5 million or 13.9% over the comparable 1999 period, due to the acquisition of Louis Kemp ($53.2 million), offset by decreases in Bumble Bee sales ($7.7 million) and Clover Leaf/Paramount sales ($2.1 million). Bumble Bee's sales decline resulted from an industry-wide list price rollback on light meat tuna, in response to lower raw material costs, and competitive pricing pressures in the white meat category. Clover Leaf/Paramount's reduction resulted from the planned exit from the low margin international seafood business. The segment operating income increased $4.4 million or 22.5%, reflecting the Company's focus on optimizing seafood profitability, driven by operating efficiencies associated with the integration of the 1999 acquisitions. As a percentage of net sales, segment operating income increased from 6.2% during the six months ended June 30, 1999 to 6.7% for the same period in 2000, reflecting the addition of the higher margin Louis Kemp surimi products. 19 20 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations Results by Segment (continued) PRIVATE LABEL AND FOODSERVICE - Net sales of the Private Label and Foodservice segment increased $4.7 million to $75.7 million for the three months ended June 30, 2000. Segment operating income increased $4.5 million, or 45.8%. As a percentage of net sales, segment operating income increased from 13.8% during the three months ended June 30, 1999 to 18.9% for the same period in 2000, primarily reflecting a margin improvement in private label canned pasta. Net sales of the Private Label and Foodservice segment increased $5.4 million to $155.0 million for the six months ended June 30, 2000. Segment operating income increased $7.9 million, or 39.3%. As a percentage of net sales, segment operating income increased from 13.5% during the six months ended June 30, 1999 to 18.2% for the same period in 2000, reflecting a higher mix of high margin private label canned pasta and operating efficiencies. The All Other net sales decreased $6.9 million, or 8.9% for the three months ended June 30, 2000, due to a decrease in Puerto Rico ($3.3 million) and a decline in low-margin third-party contract manufacturing sales ($3.9 million). Segment operating income decreased only slightly to $7.6 million. The All Other net sales decreased $2.5 million, or 1.7% for the six months ended June 30, 2000, primarily due to higher sales in Mexico ($6.2 million) and Canada ($1.7 million) offset by a decline in low-margin third-party contract manufacturing sales ($5.6 million). Also, the Company sold its Polaner business in February 1999, and accordingly, sales for Polaner decreased $5.0 million as compared to the comparable 1999 period. Segment operating income decreased slightly to $13.1 million. RESTRUCTURING - In September 1998, in conjunction with management's plan to reduce costs and improve operational efficiencies, the Company recorded a restructuring charge of $118.1 million ($75.3 million after tax). The principal actions in the restructuring plan involved the closure of the Vacaville, California and Clearfield, Utah production facilities and the related impact of the transfer of production to other facilities, mainly Milton, Pennsylvania, and the write-down of goodwill associated with the Campfire crisp rice snack bar brand and the Polaner fruit spreads brand. The Polaner business was subsequently sold (Note 6). At June 30, 2000, $2.5 million of restructuring charges remained in other accrued liabilities. This amount is comprised of multi-employer pension plan settlements and certain other employee benefit related costs. Payments totaling $8.6 million have been made to date, including $0.5 million and $0.7 million for the three months and six months ended June 30, 2000, respectively. 20 21 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES CASH FLOWS - Net cash provided by operating activities for the six months ended June 30, 2000 was $72.7 million, a $22.3 million increase from the comparable 1999 period, due to improvement in working capital levels, primarily accounts receivable and inventory. Net cash used by investing activities for the six months ended June 30, 2000 was $27.2 million compared to $31.5 million for the same period in 1999. Capital expenditures decreased $0.3 million in 2000. No acquisitions or divestitures occurred in 2000, however the Company paid $4.1 million relating to a prior acquisition. In 1999, the Company through its subsidiary, Bumble Bee Seafoods, Inc., acquired the Clover Leaf/Paramount brands for approximately $38.1 million, net of cash acquired and received $30.0 million in proceeds from the sale of Polaner. Cash used in financing activities was $43.8 million for the six month period ended June 30, 2000, versus $17.2 million in the comparable 1999 period. In 2000, the Company borrowed $133.1 million from its revolving credit facility and repaid $125.5 million and $51.5 million under the terms of its revolving credit facility and its Senior Bank Facilities, respectively. In 1999, the Company repaid $31.3 million and $40.9 million under the terms of its revolving credit facility and its Senior Bank Facilities, respectively, and borrowed $45.0 million, of which $13.1 million was to partially fund the Clover Leaf/Paramount brands acquisition. The Company is highly leveraged with Senior Bank Facilities that comprise (i) a $516.5 million Tranche A term loan facility of which $412.3 million is outstanding at June 30, 2000, maturing in 2004, (ii) a $149.8 million Tranche B term loan facility of which $149.0 million is outstanding at June 30, 2000, maturing in 2005, (iii) a $100.0 million Tranche B-1 term loan facility of which $99.6 million is outstanding at June 30, 2000, maturing in 2006, and (iv) a $230.0 million revolving credit facility, maturing in 2004 or earlier upon repayment of the Tranche A term loans. As of June 30, 2000, the outstanding balance of the Senior Bank Facilities was $746.1 million, which included $85.2 million of borrowings under the revolving credit facility. In addition to scheduled periodic repayments aggregating $36.5 million for the remainder of 2000, the Company is also required to make mandatory repayments of the loans under the Senior Bank Facilities with a portion of its excess cash flow. The Company also has outstanding $385.0 million of 10 3/8% Senior Subordinated Notes due 2006, without any scheduled repayments of principal prior to maturity, requiring semi-annual interest payments. In March 2000, the Company repurchased and immediately retired $15.0 million of Notes, at slightly above par value, the results of which were not material. 21 22 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations Both the Senior Bank Facilities and the Senior Subordinated Notes contain a number of significant covenants that, among other things, restrict the ability of the Company to dispose of assets, incur additional indebtedness, repay other indebtedness or amend other debt instruments, pay dividends, create liens on assets, enter into capital leases, make investments or acquisitions, engage in mergers or consolidations, make capital expenditures, engage in certain transactions with affiliates and otherwise restrict corporate activities. In addition, under the Senior Bank Facilities the Company is required to comply with specified minimum interest coverage, maximum indebtedness to earnings before interest, taxes, depreciation and amortization (EBITDA) and minimum fixed charge coverage ratios. Management believes that cash generated from operations and borrowings under the Senior Bank Facilities will be sufficient to satisfy working capital requirements and required capital expenditures. Further expansion of the business through acquisitions may require the Company to incur additional indebtedness or issue equity securities. There can be no assurance that additional debt or equity will be available to the Company, or if available, will be on terms acceptable to the Company. FINANCIAL INSTRUMENTS The Company currently does not use derivative financial instruments for trading or speculative purposes, nor is the Company a party to leveraged derivatives. In accordance with the Senior Bank Facilities, the Company is required to enter into interest rate protection agreements to the extent necessary to provide that, when combined with the Company's Senior Subordinated Notes, at least 50% of the Company's aggregate indebtedness, excluding the revolving credit facility, is subject to either fixed interest rates or interest rate protection. At June 30, 2000, more than 50% of the Company's aggregate indebtedness, excluding the revolving credit facility, is subject to such protection. Under these agreements the Company agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts based on agreed upon notional principal amounts. The notional amounts of interest rate agreements are used to measure interest to be paid or received and do not represent the amount of exposure to credit loss. In accordance with the interest rate agreements, the measurement of 3 month LIBOR and 6 month LIBOR, respectively, occurs on the first day of each calculation period. For interest rate instruments that effectively hedge interest rate exposures, the net cash amounts paid or received on the agreements are accrued as incurred and recognized as an adjustment to interest expense. The Company is exposed to credit loss in the event of non-performance by the other parties to the interest rate swap agreements. All counterparties are at least A rated by Moody's and Standard & Poor's. Accordingly, the Company does not anticipate non-performance by the counterparties. 22 23 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations Financial Instruments, (Continued) As of June 30, 2000, the Company had the following interest rate instruments in effect for which the fair value of these instruments is based on the current settlement cost (dollar amounts are in millions):

IMPACT OF RECENT ACCOUNTING STANDARDS In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition", which provides guidelines in applying generally accepted accounting principles to selected revenue recognition issues. The SAB is effective in the fourth fiscal quarter of fiscal years beginning after December 15, 1999, or as of October 1, 2000 in the Company's case. The Company does not expect this statement to have a material impact on its financial statements. In May 2000 and July 2000, the Emerging Issues Task Force ("EITF") issued guidance on how to classify certain revenues and costs in a company's financial statements. EITF No. 00-10 "Accounting for Shipping and Handling Revenues and Costs" requires that companies classify all amounts billed to customers related to shipping and handling cost as revenue. This statement will be effective in the fourth quarter of 2000 and is not expected to have any effect on the financial statements. EITF No. 00-14 "Accounting for Coupons, Rebates and Discounts" requires that manufacturing companies classify these costs as a reduction in net sales rather than as a marketing expense. This statement will also be effective in the fourth quarter of 2000 and is not expected to have a material effect on the financial statements. It will result in a reduction of marketing expense and net sales but will be neutral to overall net income. 23 24 INTERNATIONAL HOME FOODS, INC. Item 2 Management's Discussion And Analysis of Financial Condition and Results of Operations IMPACT OF RECENT ACCOUNTING STANDARDS (continued) In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", was issued to establish standards for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. This statement requires all derivatives to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS 133. SFAS 133, as amended by SFAS 137, "Deferral of the effective date of SFAS 133", is effective for fiscal years beginning after June 15, 2000. The Company is currently evaluating the effect this statement will have on its financial statements. OTHER EVENTS On June 23, 2000, ConAgra signed a definitive agreement to acquire International Home Foods, in a transaction valued at approximately $2.9 billion, including the assumption of $1.3 billion in debt. International Home Foods shareholders will receive $22 per share, half of which will be paid in cash and half of which will be paid in ConAgra stock. The stock portion of the consideration will be determined by dividing $11 by an average of ConAgra stock price for a fixed period prior to the closing, but will be no more than .61111 shares nor less than .50 shares for each International Home Foods share. The sale, which is subject to approval by International Home Foods shareholders, regulatory approvals, and other customary closing conditions, is expected to close in the third quarter of calendar 2000. A special meeting of shareholders is scheduled for August 22, 2000 to vote on the proposed merger. A Registration Statement on Form S-4 has been filed with the Securities and Exchange Commission in connection with the proposed merger. It contains a proxy statement/prospectus with information about ConAgra, International Home Foods, the sale, and about persons soliciting proxies in the sale, including officers and directors of International Home Foods, and their interest in the sale. C. Dean Metropoulos, International Home Foods Chairman and Chief Executive Officer and certain investment partnerships controlled by Hicks, Muse, Tate & Furst Incorporated, holders of an aggregate of approximately 43% of the International Home Foods shares, have entered into agreements to vote for the merger. INFORMATION ABOUT FORWARD LOOKING STATEMENTS The Company may make statements about the trends, future plans and the Company's prospects. Actual results may differ from those described in such forward looking statements based on the risks and uncertainties facing the Company, including but not limited to changes in the economic conditions and changes in the food products manufacturing industry, possible acquisitions of assets or business and other factors. 24 25 INTERNATIONAL HOME FOODS, INC. PART II ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS (a) The matters described under item 4 (c) below were submitted to a vote of security holders, through the solicitation of proxies pursuant to Section 14 under the Securities Exchange Act of 1934, as amended, at the Annual Meeting of Stockholders held on May 3, 2000 (the "Annual Meeting"). (b) Not applicable (c) The following describes the matters voted upon at the Annual Meeting and sets forth the number of votes cast for, against or withheld and the number of abstentions as to each such matter: (i) Election of directors:

(ii) Ratification of the appointment of PricewaterhouseCoopers LLP as independent auditors for 2000:

(d) Not applicable 25 26 INTERNATIONAL HOME FOODS, INC. PART II ITEM 6 EXHIBITS AND REPORT ON FORM 8-K (a) Exhibits: (12) Statements showing computation of ratio of earnings to fixed charges based on SEC Regulation S-K, Item 503. (27) Financial Data Schedule (b) Reports on Form 8-K: Dated June 23, 2000 under Item 5 (Other Events) and Item 7 (Financial Statements and Exhibits). 26 27 INTERNATIONAL HOME FOODS, INC. (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. International Home Foods, Inc. (Registrant) Date: August 11, 2000 /s/ C. Dean Metropoulos ------------------------------------ C. Dean Metropoulos Chairman of the Board and Chief Executive Officer Date: August 11, 2000 /s/ Lawrence K. Hathaway ------------------------------------ Lawrence K. Hathaway President and Chief Operating Officer Date: August 11, 2000 /s/ Craig D. Steeneck ------------------------------------ Craig D. Steeneck Senior Vice President and Chief Financial Officer 27 28 INTERNATIONAL HOME FOODS, INC. INDEX TO EXHIBITS

INTERNATIONAL HOME FOODS INC 10-Q