Gary Rodkin - CEO André Hawaux - President, Consumer Foods John Gehring - CFO Chris Klinefelter - VP, IR

Bryan Spillane - Bank of America David Driscoll - Citi Investment Research Andrew Lazar - Barclays Capital Terry Bivens - JPMorgan Eric Katzman - Deutsche Bank Chris Growe - Stifel Nicolaus Vincent Andrews - Morgan Stanley Robert Moskow - Credit Suisse Alexia Howard - Sanford Bernstein

Good morning, and welcome to today's ConAgra Foods first quarter earnings conference call. (Operator Instructions) At this time, I'd like to introduce your host for today's program, Gary Rodkin, Chief Executive Officer of ConAgra Foods.

Good morning. Welcome to the call and thanks for joining us. This is Gary Rodkin and I'm here with André Hawaux, President of Consumer Foods; John Gehring, our CFO; and Chris Klinefelter, our VP of Investor Relations. Over the next few minutes, André, John and I will provide our views about the strategic operating and financial aspects of the quarter, but before we get started, Chris will say a few words about housekeeping matters.

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 could influence and affect our business, I'll refer you to the documents we filed 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, our Q&A, or on our website under the Financial Reports and Filings link, and then choosing Non-GAAP Reconciliations. Now I'll turn it back over to Gary.

As you can see from the release, comparable EPS was $0.34. We revised yearly EPS growth expectations to 5% to 7% and we raised our dividend 15%. Consumer Food sales were down 2% and operating profit was down 14% as reported. And Commercial Foods segment profits were also down. That's up a quarter, but not reflective of our current expectations for the full fiscal year or beyond. It goes without saying that we are not pleased with the quarter's EPS. We have already implemented course-correcting actions to improve the overall year, and you'll hear about those actions over the next few minutes. I want to use our time this morning to give you a deeper insight into our first quarter, and more clarity on our outlook for the rest of the year. I'll get into some specifics as will John, and I've asked André to share some of his perspective on the consumer business as well. As I indicated, Q1 was definitely tougher than we planned for. The degree and depth of promotional activity was greater than expected, and inflation outpaced cost savings. And while we knew we would have some carryover profitability issues in Lamb Weston due to last year's poor potato crop and the soft restaurant industry, those costs were more than expected. Given that we have been implementing changes to course-correct and deliver good EPS growth this year, the actions we've taken and will continue to take give us confidence in our ability to improve results in the second half of the year and beyond. This is a stronger ConAgra Foods, and because of that fact, we are very confident we have the foundation including robust innovation, marketing that resonates productivity, and the brands to generate solid earnings growth this year. Let's talk more about this quarter, starting with the macro environment for Consumer Foods. Our Q1 represented a very challenging marketplace. The strong, deal-seeking mindset consumers developed earlier in the recession has become the new normal. As consumers continue to tighten their purse strings and whittle down their pantries, retailers and manufacturers have discounted more heavily to re-energize sales. We saw softness in some of our key categories despite higher trade costs which impacted our margins and profits. This downward turn in the market environment exacerbated a Q1 that we had planned to be our softest comparison for F '11. We planned for a softer Q1 because of the following factors. One, the potato crop issue I already mentioned; two, our net cost savings, meaning productivity above and beyond inflation would be skewed to the back half of F '11 versus the first half of F '10. And three, our Consumer Foods new product introductions coming late in the quarter compared to last year when they were launched just prior to the beginning of Q1. This meant we absorbed the expense this quarter but not the volume deficit. Because the negative impact of these three factors are specific to Q1 and because our SG&A costs in the back half would be lower, we have a high degree of confidence that our results will improve significantly, particularly in the second half. So how will we navigate in an environment like this one? In a nutshell, our focus is on bringing value based innovation, the right marketing and promotion strategies, and accelerating productivity. We understand the changed marketplace, and our portfolio is capable of succeeding in it. I believe as we go forward that winning food manufacturers will be those who can deliver highly relevant messaging and innovation wrapped in a very strong price value equation. We're pretty certain that the more intent value mindset of consumers is here to stay. The food industry, both manufacturers and retailers will not win by continuously dropping prices. Value does not just mean achieve a price; it's much more holistic. We're responding to this environment by accelerating our efforts to better leverage the inherent value of our portfolio. What do I mean by the inherent value of our portfolio? I mean the already built-in bundle of benefits, a great deal for the brand user at the normal price points like banquet meals for a dollar or snack pack pudding for $0.25 per cup. I could give you many examples, but the point is we are working with our retail partners on pricing architecture and pricing thresholds for better overall top and bottomline results. Sometimes the inherent value is locked up in specific nutritional benefits that we need to market more directly like a healthy choice for egg beaters. Or it might be superior quality like Hunt's Tomatoes or Hebrew National hot dogs. Net-net, we are working toward leveraging a portfolio that we know delivers great price value in a more meaningful way. That's how we'll succeed as we go forward. And that's how we're working our innovation strategy; starting with the price form we know works for consumers and working backward to meaningful new products that are compelling. Banquet fruit pies are one example where we're leveraging existing infrastructure and making a play in an adjacent category and seeing strong early results. Healthy Choice Lunch Steamers launched in August move us more into the frozen entree lunch occasion and deliver a great price value, particularly compared to lunch alternatives. Our Marie Callender steaks are another new item off to a good early start, these meals are an incredible value for the consumer and are built on robust abilities and throes at insights, innovation, manufacturing and marketing give us a stronger position in multi-serve meals. André will talk a bit more about our consumer business including the frozen category. But let me just emphasize that we believe our innovative new products and our compelling price value equation will be positive differentiators for us. As we've said before our strategy is to make a significant difference with fewer bigger and better innovations; frozen categories is a good example of that. During our Q1, we were able to grow share in the category despite the heavy competitive discounting. We are starting to see some improving trends from the last four to six weeks of syndicated sales data. And our consumer food shipment trends have also broadly and gradually improved over the past six to eight weeks. While we obviously had our challenges given the quarter's performance for commercial foods, there are also some encouraging signs in this segment. Lamb Weston delivered topline growth this quarter. And the signs are that the restaurant industry has started to pick up again. Our new sweet potato facility in Louisiana will begin ramping up production in October. And will help us capitalize on that growing portion of our business. Along with the dynamics of a more normal crop just coming into production; we're optimistic we're having a much improved second half at Lamb Weston. Sales for ConAgra Mills declined in the quarter. Primarily a reflection of lower pass-through process on wheat, but profitability was very strong. We're confident that year-over-year profitability will increase for the commercial segment with that progress coming in the second half of the year. While we clearly have a high sense of urgency on our near term challenges, we continue to keep a long term prospective. One of the ways we're demonstrating that in our Commercial Food segment, I just mentioned was the investment in our new sweet potato plant, that's indicative of our firm commitment to ongoing reinvestment in growth across ConAgra Foods. One of the ways we're demonstrating this long term commitment in our Consumer Food segment is in our A&P, our advertising and promotion plans this year. We plan to keep our A&P spend in line with last years levels. While due cuts may tempting as a short term fix for profitability, we're choosing to continue making smart infrastructure, marketing and innovation investments for the sustainable health of the business. In summary, Q1 was a difficult quarter for a number of reasons. And we've taken action based on our learnings. We believe the rest of the year will still have its challenges and the economy will continue to force consumers and customers to be very value conscious for example. But on the positive side, we do expect to see a more rational promotional environment for the next several months, particularly given commodity costs and margin pressures in the industry. To be clear, we're not expecting an easy competitive environment, but we do think inflating will cause some of the recent promotional intensity to lessen. And as we said in the release, we expect the second quarter to fall a bit below last year. But we are set up for a good strong EPS growth in the second half of F11. And we will turn in a respectable number for full fiscal year '11 because one; our volume and margins of Lamb Weston will improve as the new crop in sweet potato production come on board. 2; we believe our gradually improving volume in Consumer Foods will continue and we will benefit from our recent new product launches as well as some new items coming in the back half. Three; we'll also benefit from contributions from our recent acquisitions Elan and American Pie. 4; our cost savings will be stronger later in the year. And for the year, we'll meet or exceed our goal helping us better offset increasing inflation. 5; our SG&A will come down, due in large part to reduced incentive costs. 6; our quarterly comparables will become easier particularly in Q4. And of course we'll have some leverage from our share repurchases. Because of the change to dynamics in the marketplace, we thought it would be helpful to have André share his perspective on the Consumer business as well as some examples of what we're doing to operate with these consumer dynamics in mind. André Hawaux: Thanks, Gary, and good morning, everyone. Let me take a couple of minutes to give you a more granular view of Consumer Food's results and outlook. As you heard from Gary and saw in our release, aside from the timing and acceleration of cost saving, we expect innovation and more effective promotional strategies to drive improvements in our back half. Let me use examples in our Frozen and our Snacks platform to give you a better sense of what we expect. Our goals in Frozen are straight forward. First, we want to win in Single-Serve, where today we have plus 30 shares. Two, we want to establish the position in the fast growing Multi-Serve segment. And three, we want to capture strategic (adjencies), such as appetizers and desserts. While we weren't satisfied with our Frozen performance in Q1, we made good progress towards our long term goals. We gained share in single Serve-Meals led by Banquet, a brand clearly built for these times. Banquet grew share, grew volume, gross margin and profit in Q1. In Single-Serve, the Healthy segment was the most challenging by far for the following reasons: aggressive competitive discounting, flat merchandising activity versus a year ago. And we invested significantly in slotting to support our new lunch steamer platform which shipped at the end of the quarter. We believe the balance of the year will show solid Single-Serve results driven by the strength of the Banquet brand, innovation, both Lunch Steamers and the Marie Callender steam fresh meals. More effective merchandising programs enabled by the broadening of our portfolio, especially in entrees, where we now have critical scale. New break-through marketing campaigns which are just kicking off. And cost that are essentially front loaded in Q1 and Q2 for slotting and marketing launch expenses. This quarter we also launched our first significant foray into Multi-Serve Frozen meals wit Marie Callendar signature bakes. It's a wonderful product that leverages technology to produce oven baked classics with the convenience of microwave cooking. Trade acceptance has been very good, and we're already at solid levels of ACP distribution. The marketing campaign trial vehicles and media are just starting under the theme of time to savor. We feel very good about prospects in Multi-Serve Frozen. Finally, with the respect to strategic adjencies our Banquet Fruit Pies are off to a strong start. We also feel very good about our acquisition and integration of American Pie and the contribution it will make to our Frozen business. Now given some of the upfront and M&A related cost, this new platform will be a more significant profit contributor for Q2 and beyond. So net-net, lots of solid progress on our long term goals. We made significant investments in slotting for new items and new marketing campaigns. And have solid merchandising plans in place. I feel very good about the balance of the year in the Frozen segment. We turn now to snacks. I want to share a few highlights with you on some of our brands in this pillar. Our Slim Jim recovery has been better than planned with our SKU showing better velocities than before the Garner accident. We've also regained our entire lost share and continue to build out our distribution and ramp up our supply chain capacity. In shelf-stable pudding, Snack Pack is up over 4% for the past 13 weeks. Three of the four points are coming from base, not promotions which is a very positive sign. Our store brand cereal bar business continues to grow at double digits, which validates our Elan acquisition even more. Not only does Elan acquisition give us additional capacity, it also gives us capabilities beyond cereals and food and grain bars. Now, despite this good news, popcorn continues to be a tough category story. We're putting in place programs to reverse these trends. We have a three pronged strategy to address both the short and long term issues based on this business. The first is very tactical as we get our pricing architecture right and focus our sales teams on feature and display execution. Secondly, in the mid term we are looking to capture key holidays and locking in promotional partners such as Red Box to bring excitement not just price promotion to this category. We have an innovative Pop & Win promotion slated for the holidays. This is something that was extremely successful with us in Canada where Orville Redenbacher's enjoyed a strong share and is growing. The third prong is long term innovation, which we believe will play a key roll. For competitive reasons, I won't discuss this in great detail other than to say that you'll see something from us in the back half of the year. And the quarter ended August 29, all outlet share review we have seen progress with our popcorn business and believe this will continue with the programs I have just described. Let us summarize, I feel good about the back half of the year in Consumer Foods for three reasons. One, we will have the full effect of our innovation in the back half of the year. We will be adjusting our promotional activities to reflect the new retail and consumer environment that Gary talked about. We also see acceleration of cost savings helping us more in the back half. Hopefully, this provides some context for our performance and has given you some inside direction of the Consumers business for the balance of the year. I'd now like to turn this over to John Gehring our CFO, John.

I'm going to touch on five topics this morning. I'll begin with our first quarter performance. Next, I'll address comparability matters. And then comment on portfolio changes. Then, onto cash flow, capital and balance sheet items. And finally, I'll share some comments on our updated outlook for Fiscal 2011. Starting with our first quarter performance, for the quarter we reported net sales of $2.8 billion, down 2% driven by softness in the Consumer segment and the impact of lower wheat prices in our flour milling operations. We reported fully diluted earnings per share from continuing operations of $0.32 versus $0.37 in the year ago period. Adjusting for items impact in comparability fully diluted earnings per share from continuing operations were $0.34. While Gary and André have addressed the Consumer segment results in some detail, I would like to touch on a few key metrics. First Consumer Food net sales were $1.8 billion down 2%. Inflation for our Consumer Food business in the quarter was up from prior year slightly over 5%, and a bit more than our expectations. Our Consumer Food supply chain cost reduction efforts continue to yield good results, and we delivered cost savings of approximately $60 million in the quarter. And we expect our programs to deliver in the range of $275 million for the year consistent with our previous estimates. Overall, Consumer Foods gross margin percentage was down about one point due to pricing pressure and inflation. On Marketing, Consumer Foods advertising and promotion expense for the quarter was $88 million down $7 million from the prior year. The decrease potentially reflects timing differences versus the prior year. For the full year we expect A&P to be inline with prior year as we continue to prioritize investment behind our key brand, and our innovation and initiatives. For this quarter, foreign exchange had an immaterial impact on net sales, and contributed approximately $10 million of operating profit to the Consumer Foods segments results. Also for this quarter, new businesses net of divested businesses contributed $29 million of net sales, but have an immaterial impact on operating profit. Turning now to our Commercial Food segment, net sales were $993 million or down 3%. The decrease was driven primarily by the impact of lower wheat cost in our flour milling business. At our Lamb Weston business, however, net sales were up 2% on stronger volumes. Overall, segment operating profit was down 17%. The decline was due principally to the unfavorable product cost in our Lamb Weston business resulting from a high cost poor quality potato carried into the year. Operating profit for the balance of the segment was up slightly; as our Mills business performed well with continued strong operating profit. For the total company, selling, general and administrative expenses were down $23 million on a comparable basis driven by lower incentives and our continued focus on cost control. Corporate expenses for the quarter on a comparable basis were $78 million versus $93 million in the year ago quarter. The reduction relates principally to lower incentives. The tax rate for the quarter was 32% slightly below our estimated four year rate of 34%. Moving to portfolio changes, we completed several transactions during the past quarter that support our portfolio optimization objectives. First, we closed our acquisition of the asset of American Pie, which produces Frozen Dessert Pies under the Marie Callenders and Claim Jumper brands. We funded the purchase price of approximately $130 million out of cash on hand. This business provides us a strategic adjacency to our core frozen platform. We also closed on the sale of the Gilroy Foods & Flavors dehydrated vegetable business to Olam International. Proceeds from this transaction were approximately $250 million. As we go forward, we will continue to look for additional growth and portfolio improvement opportunities. Now I move to my third topic, items impacting comparability. Overall, we have $0.02 per diluted share of net expense in this quarter related to two items. First, hedging; for the quarter, net hedging loss included in corporate expense was $6 million or $0.01 per share. In addition, we incurred $8 million or $0.01 per share of restructuring charges related to the relocation of our meat snacks production from Garner North Carolina, to Troy, Ohio. And the relocation of administrative functions principally related to our snacks business from Edina, Minnesota to an existing office facility in Naperville, Illinois. Now, let's turn to cash flow capital and balance sheet items for the quarter. First, we closed the quarter with over $800 million of cash on hand, and no outstanding commercial payable borrowings. On cash flow, we continue to emphasize cash flow within our business. And we expect to deliver strong operating cash flow in the range of $1.1 billion for the year, down slightly from our previous estimate of $1.2 billion. This decrease is due mainly to our decision to make approximately $110 million of discretionary pension plan contributions during the first quarter. On working capital, we continue to make progress against our working capital initiatives. The first quarter reflects a slight use of cash for working capital due principally to the seasonal nature of our businesses. However, for the full year, we still expect that working capital improvement in our base business will generate in the range of $100 million of cash flow from continuing operations. Next on capital expenditures; for the quarter, we had capital expenditures of $129 million dollars versus $117 million in the prior year. For the full year, we expect CapEx to be approximately $525 million. This amount includes outlays related to the recovery of our Meat Snacks business, which we expect to be substantially funded by insurance proceeds as well as expenditures related to our new Sweet Potato Plant. And as we said before, the mix of our capital expenditures continues to shift away from infrastructure into more innovation and growth investments. Net interest expense was $37 million in the first quarter versus $41 million in the prior year. Interest income from the notes receivable associated with the sale of our trading and merchandising operations was $18 million in the current quarter and $20 million in the year ago period. We remain very comfortable with the collectibility of these notes. Dividends for the quarter increased to $88 million from $85 million in the prior year. And as I previously noted, during the first quarter we contributed approximately $110 million to our pension plans. Now, let update you on some capital allocation matters. First, we remain committed to a top-tier dividend payout, in that regard. And reflecting the confidence in our ability to generate strong cash flows, our Board has recently approved a $0.03 per share or 15% increase in our quarterly dividend from $0.20 to $0.23 per share effective with the December payments. In addition, during the first quarter, we acquired approximately 4.2 million shares or about $100 million under the $500 million share repurchase program that our Board authorized during the third quarter of fiscal 2010. We have approximately $300 million remaining under this program. We also remain focused on growth and profit enhancement investments, including new product introductions and capacity expansions. And we also continue to pursue acquisitions that meet our established criteria. Finally, subsequent to quarter end, we repaid approximately $250 million of 7.875% notes that matured on September 15, 2010. Now, I would like to share some comments on our updated fiscal 2011 outlook. As Gary mentioned, we expect fiscal 2011 diluted earnings per share adjusted for items impacting comparability to grow at a rate of 5% to 7% from our 2010 base of $1.74 per share. Beyond fiscal 2011, we remain committed to our long term financial goals which include annual EPS growth of 8% to 10%. Our updated 2011 earnings estimate reflects revenue growth in the range of 2% versus our original expectation of 3%. And for fiscal 2011, we are on track to deliver approximately $275 million of cost savings in our consumer business. The outlook also reflects a continued focus on selling, general and administrative cost control, and an effective tax rate for continuing operations in the range of 34% for the full year, although this rate may fluctuate somewhat quarter-to-quarter. By segment, we expect earnings for the full year and our Consumer Food segment to be in line with the prior year with back half earnings growth offsetting first half weakness. And in our Commercial Food segment, we expect earnings growth in the full year to be in the mid-single digits reflecting both revenue recovery and improved product cost in our Lamb Weston business, as well as continued strong performance in our meals business. In developing our revised outlook, we have reviewed all of the key factors and variables of our business plans. And as we noted previously we expect EPS growth to be concentrated in the second half of the fiscal year. As Gary noted, there are several key factors which contribute to this timing, but which also support our confidence in achieving our revised earnings targets. Let me touch on these factors. First, in our consumer food segment, we expect cost savings to accelerate over the balance of the year. We also expect meaningful contributions from our new products introductions. In addition, our recently acquired businesses Elan and American Pie will contribute to earnings growth over the balance of the year. In our Commercial segment, as you've heard us say, at Lamb Weston the poor quality crop that we carried into this year is a significant burden to our first quarter results. We are substantially through the old crop now and the early indications are that the new crop is much better. So while the first quarter comparison to prior year was negatively impacted, we expect that the current fourth quarter to compare slight favorably to the prior year fourth quarter, which was significantly burdened by the same poor crop issues. Also, we are seeing positive trend lines as on the topline at Lamb Weston, which should contribute to improve year-over-year performance. At the corporate level, several items will drive favorability over the balance of the year, particularly in the back half of the year, including lower incentive cost, lower interest cost and leverage from share repurchases. Overall, while we have no illusions about the difficulty of the current environment, we believe that our balance of the year business plans reflect both the challenges we face and a realistic view of the results that we will be able to achieve. And finally, on our Garner insurance claim, to date we have received approximately $100 million in connection with our insurance claim. And we currently expect to settle our insurance claim during fiscal 2011. That concludes my remarks. I want to thank you for your interest in ConAgra Foods. Gary and I along with André Hawaux and Rob Sharpe will be happy to take your questions. However, I will now turn it back over to Gary for some brief final comments before our Q&A session.

Thanks, John. I just want to close with a couple of key points. Make no mistake about it, I am disappointed in our performance in Q1 and we have already and will continue to make adjustments. But I am confident in our outlook based on the strong foundation we've built and our ability to operate in this environment. To start, the year gets progressively better because we're lapping easier comparables. We have greater SG&A and productivity savings coming and because we'll have a commercial profit issue behind us. More importantly though I'm confident in the quarters and years ahead, because our brands and fundamentals are sound and our efficiencies and cost savings keep getting better and better. We have the wherewithal and the ability to adjust to changing marketplace dynamics. And we will always do what we believe is in the best for the long-term health of ConAgra Foods. Thanks for joining us and I'll turn it back to the operator for Q&A.

(Operator Instructions) And our first question comes from Bank of America, Bryan Spillane. Bryan Spillane - Bank of America: Just a couple of questions. First, just so I'm clear, what was different in the first quarter relative to what your expectations were going in? How much of it was that your cost inflation was higher than you thought, and how much of it is, if I'm hearing it right, that the price points that you had on your merchandizing at least in some products just weren't low enough relative to where your competitors were?

I would say I'm going to comment on the first part and then ask Gary to comment on the second piece. Clearly in the first quarter, I'd say two things on the cost side that were probably worse than our expectations, one would be inflation, was probably just north of 5%. And I think when we came into the year, we're looking at that number being more in the range of 4%. And then also I would tell you that the crop issue in Lamb Weston, the quality of that crop deteriorated probably even further and faster than we had anticipated. We knew we had a problem, but the crop did not hold even as well as we though as we ran out the rest of it. I'll turn it back to Gary for the comments on pricing.

Yes, Bryan, I'd say the good consumer behavior is a little bit further in a more cherry picking and more, or I should say, lower inventory or less stock up behavior. So it really was a more challenging Q1 from a consumer standpoint than we had anticipated. Customers are really driving food traffic with aggressive discounting, sometimes extremely low prices for major brand names. This is not how we want to do business, but sometimes your hand is forced to sustain the game. A good example is our frozen business where there were more and deeper deals this summer than we've seen in the last two years. When deals are layered on top of more deals, the ultimate effectiveness is going to be reduced, particularly when the consumers as I said are not stocking up as much. Though net-net, we spent more than we planned to, and didn't get as much for it, but we do believe this is going to abate in the next few months for two key reasons, one, that the commodity costs like proteins and grains, which impact margins will bring more rationality. And two, this consumer pantry deloading is going to bottom out as consumers work through their own inventory pipelines. Bryan Spillane - Bank of America/Merrill Lynch: So Gary, when you talk about adjusting your merchandizing I guess for the balance of the year, is it that you're going to promote somehow differently than you did in the first quarter? I'm just trying to get a sense for what's going to change in the back of the year, what you're doing that's going to be different in the back of the year. André Hawaux: Let me try and touch on that. I think those are several things that we're looking at right now, some of which as Gary mentioned we've already put into place. But couple of things; one is, we need to look at what's working and not working relative to this notion of multiples. You see multiples a lot. You see given are out there, and given that you see consumer behavior being different relative to stock up and cherry picking, we have to take a look at that. We see some movement right now to where people are going to single price points as opposed to multiples, and if not, they're certainly reducing their ten for tens to maybe five for fives and things like that. So we have to take a look at that to see what ultimately benefits the list. We also have to take a look at some frequency in some of the categories. And then we need to take a look at certain key price points and what still makes sense in the new environment.

Our next question is from David Driscoll with Citi Investment Research. David Driscoll - Citi Investment Research: Couple of questions. The first one is, the quarter I think was light by about a about a nickel. Your full year guidance is down by a nickel. Is it correct to say that the remaining three quarters are unchanged, and if so, why? Just conceptually it seems as if the promotional intensity is still quite high. So can you just kind of reconcile the factors?

David, your math is about right. I wouldn't project quarter-by-quarter. We've talked about the growth coming in the second half, but the basic math is right and we do believe there are a number of things that give us a high degree of confidence in the back half. We talked about the Lamb Weston issue. As we already know, that's going to improve the new crop and the sweet potatoes come on board. We are seeing signs in our consumer foods that the volume is gradually improving, and we'll get the benefit of the recent new product launches and there's more to come in the back half. We've got our acquisitions. The recent acquisition, the American Pie, clearly the math is much better on our cost savings which are stronger later in the year, which will more than offset inflation in the back half. We talked about our SG&A coming down in the back half, and you clearly know that the comparables are much easier in the back half. So when we put that all together, it gives us a very high degree of confidence in what our guidance is. David Driscoll - Citi Investment Research: I just have one other question on Consumer Foods. In the press release, Gary you said "unit market share has improved". However, Consumer Foods volume was down 3%. So what was the comparable volume figure for your categories, and how do you explain such weak growth overall?

It's really about this stocking up kind of behavior where consumers are going to a bit more, I'd say, call it 'just in time inventory'. So they are deloading their pantries and their refrigerators and not buying as much each trip. So clearly, there is an adjustment taking place. André, maybe more specifics? André Hawaux: Well, I think two things David. Just to make sure we're talking apples-to-apples here, on the one matter you're talking about our share performance. Some of our categories were significantly down, and we gained share in them because we were down less than the categories if you will. The other piece that you referenced also is our volume. That we also shared in the release also includes what we actually shipped. So there are two different numbers, one is share, and that's consumption and what consumer offtake is, and the other is our volume shipment. But the largest piece of the gain in share piece was driven by the fact that a lot of our categories are down and we were not down as much in some of those categories and we did pick up share.

We'll move now to Andrew Lazar with Barclays Capital. Andrew Lazar - Barclays Capital: In speaking about your revised top line growth of about 2% for the full year in consumer, that clearly implies a pretty big recovery at over 3% for the balance of the year going forward. So I'm just trying to get a sense of your visibility to that how realistic that is in the current environment. And then when you think about changes in your promotional strategy, and given categories, how much of your merchandising activity at this stage is really all kind of locked in for a good six months or so, and how realistic is it that you can actually change these things, as you talked about course-correcting kind of intra-quarter?

Andrew, I'd tell you, we are already seeing signs of improvement, certainly in our shipments over the last six or eight weeks, and also in some of our all outlet consumption. So we're starting to see signs of bending that trend. You know that obviously lower and lower prices are not good for us, and they're not good for compotators, and they're not good for retailers. What we really need to do is define this price value as much more than just lower prices. We believe that we've got a portfolio that can resonate with a broader group of consumers, particularly in this kind of environment, brands that can meet the needs of shoppers that may not currently be buying our products or buying as much. And it's up to us to make that connection with more direct functional benefits for our packaging, our advertising, our in-store merchandising, targeted innovation, and that's what we are really doing is, is talking about working on, and not just talking about doing it, bringing the inherent value in our products to life in a more meaningful way. Obviously, merchandising is a part of that. André, you want to comment on that? André Hawaux: I'll make another comment too Andrew, just to build on what Gary said. I think your math is correct. I don't believe we have to do, from my perspective anything heroic in the back half of the year relative to volume. I think a lot of the new items and the innovation that I talked about which really takes hold now, Q2 and beyond, the acquisitions that we've added on really help us get there. So again, we're not expecting our portfolio in this environment to do anything heroic volumetrically. So I think that's number one. Number two, on the merchandising question, there are elements obviously of our promotional planners and calendars that are locked in with customers. I'd say at the beginning in any quarter, I'd say about 60% to 65% is locked in. But I kid you not, there's still a lot of discussion that goes on between ourselves and customers during the quarter as we come up to events, everything from price points to feature and display to what kind of things that you going to get as a result of the price that you are providing. So there's still a lot of room and a lot of latitude with respect to a lot of our customers and our plans in any given quarter when we start that quarter. Obviously as you get further in, you get further locked in. Andrew Lazar - Barclays Capital: Gary, in your comments around the more recent trends around shipments and a little bit around all out consumption for your key categories, is it going too far to suggest that that's something you are starting to see a little bit more broadly in the overall food group at this stage, or is that more common around your key categories at this stage?

I think we see it a bit overall. We see it more clearly, as obviously we've got more insight into our numbers. But we do see a bit of that in the overall data.

Andrew, I'd just say, we're seeing stronger volume consumption in our category, specifically with our business. And we're also starting to see dollars turn a little bit more favorable than we have seen over the last 13 weeks.

Andrew, I'd just say, we're seeing stronger volume consumption in our category, specifically with our business. And we're also starting to see dollars turn a little bit more favorable than we have seen over the last 13 weeks.

We'll hear now from JPMorgan and Terry Bivens. Terry Bivens - JPMorgan: My question is kind of the spending counterpart to what Andrew just asked. I don't pretend to analyze every category you guys have, but if you look for example at your biggest one, Frozen, it looks like you've really backed off on promotion at a time when the competitors seemed to have really stepped it up. And when you have gone on deal, you've been less aggressive, so the lifts aren't there. So I guess what I am trying to understand is the pacing of your promotional and merchandising support in the second half. Why wouldn't it require a much stronger outlay I guess is the real question?

I think, Q1, obviously our merchandising was not as great as our competition. We saw much more than we had in the last several years from one of the biggest players. We have made some adjustments. We have chosen not to go incredibly deep but in a bit more measured way. But we think between the innovation, the marketing and some adjustment in our merchandising that we will have a good year in Frozen. Terry Bivens - J.P. Morgan: If you look at total distribution by companies, you guys are clearly a leader. Where is that coming from and when can we expect to perhaps see a better company wide effect from that stronger distribution?

I'd think a couple of areas there. Terry, I imagine you're looking at total distribution across all channels. But again, the innovation specifically in Frozen, where with respect to our steaming platform, the things you're seeing with both are on Healthy and Marie Callender. And actually we've had good distribution additions to Banquet as well, including things like food pipe, et cetera, et cetera. So we feel very good about what we're doing. I think that was the lion's share of your question. I don't know if I caught all of it.

We'll take a question now from Eric Katzman with Deutsche Bank. Eric Katzman - Deutsche Bank: I guess a couple of questions. Maybe Gary, a little broader, on the dividend increase. I was kind of surprised at such a big increase. I guess your cash flow is down because of the pension contribution, but maybe you could kind of go into like what investors should expect from a return to shareholders' allocation going forward? Is this kind of a signal that dividends may be more of a priority than repurchase?

Eric I would tell you that first, our cash position is very strong. We clearly had a huge jump up last year, but this year will continue to be a very, very good cash position for ConAgra Foods. We have always committed to having a top tier dividend, and we believe that what we have done is consistent with that and we think it expresses the confidence that we've got in our future. And our payout ratio is competitive. So we looked hard at this and believe it's the right thing to do from an overall shareholder return standpoint. John?

I think you captured most of it, Gary. Certainly, I would say this doesn't really represent any change in our basic capital allocation approach. I think we've talked about having a top tier dividend. I think we've talked about also looking at growth investments, but also understanding that that share repurchase is a part of the equation. So I think generally there is no real change in the balance there. I would echo one of the things Gary said about what we try to focus on. Our dividend policy is our payout ratio, and bluntly, I think our payout ratio was lagging some of the earnings growth we had over the last couple of years. And we think this increase kind of gets it back in line to where we thought it should be. Eric Katzman - Deutsche Bank: And then on a completely different issue, with the grain milling, I guess I was kind of surprised given the run up in weed that pricing was down there. And so maybe you could talk a little bit about that and then what we should expect from that business' influence on sales given the weak cost up? Are you positioned okay given all the volatility in wheat of late?

Let me try and give you a couple of different perspectives on that. A lot of the volatility you saw in wheat is in the future prices going way up. Year-over-year, you had a decline in this quarter. And for the balance of the year, there won't be that a particularly big influence on the topline one way or the other. As far as the volatility, keep in mind that we are not in this to speculate. The volatility is good for our business, because in essence it brings customers to us who are ready to commit to longer-term purchases. That in essence gives us more time to buy the wheat that we are going to make their flour with. And that's good news for us. The near end volatility doesn't really impact our current results except to the extent that we can buy grain more intelligently for those long-term commitments. So it's a good news for us and we are well positioned. Eric Katzman - Deutsche Bank: In looking at the second half, I know you can't talk to the consumer and lot of the things that you are doing. But is it pretty critical that the new products that you are putting into the market kind of win with the consumer to the extent that those I assume are going to be not just volume drivers, but also a mix shift positive? I guess that's what we should look for in terms of consumer meeting its recovery in the next couple of quarters?

Yes, I would tell you that a basic principle we've got is that the innovation is both top and bottomline accretive. So we keep the bar pretty high on that, and that is what we've got in our expectations.

And we'll hear a question now from Chris Growe with Stifel Nicolaus. Chris Growe - Stifel Nicolaus: I just had a couple of questions for you. The first one would be you re-rated guidance at the end of July, and you've also talked about what seems to be certain improving trends in the last six to eight weeks. I just want to put those two together. Was it still that the topline trends were improving a bit and maybe volumes for promotion were still heavy? Can you put this together for me, Gary?

Yes, I would tell you that what we are not going to do is burn the furniture to make our numbers. So we are keeping the balance of the short-term challenges and the long-term perspective. And therefore we really don't believe that we can really make up the debit that we've created in Q1. Yes, we are seeing the topline start to improve. There is still in a way a significant challenge ahead of us in terms of the way we balance our trade spend. But as the second half approaches, we do believe that there will be moderation in that and we will clearly benefit from both the top and bottomline in the second half. Chris Growe - Stifel Nicolaus: Within your Consumer Foods division, the negative 1% price mix, is there some price increases in there as well? I don't look at the negative one as a terribly bad promotional environment. But is it just that it's bad in certain categories or is there some pricing a mix offsetting some of the aggressive promotion that you are seeing? André Hawaux: There was a little bit of positive mix. There were some categories that were down further than the 1%. We have broad portfolio placed across a very wide slot of the consumer landscape. So I'd say the unbalanced, we netted out about 1%. There were some that were deeper and some other that were in a better shape. Chris Growe - Stifel Nicolaus: The last question I had for you was, in your Consumer Foods division and sort of the cost savings versus inflation in the first quarter, that was a negative spread where the inflation was more. Do you have hedges on the rest of the year that gives you a little confidence that the cost inflation will be a little lower, plus you'll have a little bit more on the way cost savings are more back half loaded? Is that the way to kind of look at the breakdown? André Hawaux: Yes, that's pretty fair. Certainly as years goes on, we'd lock in a lot more of our commodity needs. So we've got more positions on substantial amount for the back part of the year. So I think your assessment is pretty clear there.

We take a question now from Morgan Stanley in Vincent Andrews. Vincent Andrews - Morgan Stanley: In the years past, when there was inflation, you had to do some work around bank to maintain the $1 price point. Is there anything right now going on in your portfolio that you are concentrating on or focused on that really needs to get done?

Vincent, there absolutely is. There is very significant opportunity for us, and we have started to capture that, but there is a lot more to come. So you are right on the mark. Vincent Andrews - Morgan Stanley: But I guess you're looking at it more from reward perspective and may be I'll ask it the other way. Is there any risk that there is any pricing you need to take anywhere in the portfolio, you follow what I'm saying?

Obviously the opportunity arose to take pricing with costs going up, we'd certainly be there. But right now we are not planning for that in this environment. Vincent Andrews - Morgan Stanley: So the answer is that you are comfortable. You can read it on any products to take cost out, to maintain the price plans, is that clear?

That is what we are planning to do and we are confident, yes. Vincent Andrews - Morgan Stanley: And then my last question would just be, it's clear there is a consumer deload going on not just in your category, but pretty much across the store? So maybe twofold, do you really think innovation is what will unlock that deload? I would argue it's probably more macro factors that need to improve from a consumer perspective. And then secondly, is there any risk from a customer perspective that they're going to make adjustments relative to what the consumers done from a deload perspective.

I think its like anything else. Any kind of organization with inventory, there does come a point where it kind of bottoms out and it kind of self adjusts. And we think we are starting to reach that point. And we've got pretty good insight into this; has been draining their pantries, their freezers, their refrigerators. And there will come a point where that kind of bottom's out. So, I'm not saying that we're going to go back to huge stock up purchases. But, we think that delta will change.

We'll take a question now from Robert Moskow with Credit Suisse. Robert Moskow - Credit Suisse: I got a couple of questions. The first one is, gross margin adjusted is down I think about a 140 basis points year-over-year. And I think a lot of it has to do with volume leverage because your volume is down quite a bit. Since you are assuming that volume's going to improve by the back half of the year, can you give us a sense of how that might help your gross margin in terms of comparisons or is it still going to be a very tough gross margin comparisons year-over-year? And then secondly, its the first I've heard about the cost savings being back half loaded. Was that always the plan or is there something new in terms of the pace of the savings as we flow through?

Let me take the second one first. I don't think we've had any substantial change in flow of our cost savings from the beginning of the year. I think the first quarter was planned to be our lightest quarter. And it certainly picks up and is more even over the balance of the three quarters that the balance of the year, although there is still some waiting towards the back half. And your gross margin question, I am not sure I followed it all.

John, I'll take that. Robert, I think it is mostly about the comparables. So the first half was a lot tougher in terms of the improvement that we made on the margins a year ago. Things will flatten out. Margins will improve more in the back half. And part of that obviously is the cost savings versus inflation as well. So a lot of it is just almost mechanical, the math that we've built into our plan. So that's why we'll see it improve in the back half. Robert Moskow - Credit Suisse: Maybe, John, you could think of it this way, your gross margin is down year-over-year. Do you have a sense of how much that is due to operational leverage from declining volume?

I don't think lot of it is due to that. I think it's more of the inflation and cost savings spread. And one of the reasons I say that is we don't have a big penalty in terms of absorption. That may be ultimately where your question gets at. We're not seeing a big issue there. So I really think it's more of the inflation and cost savings related.

And we'll move now to Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford Bernstein: Can I ask a question about the pace of innovation? Where are you now in terms of percentage of sales of new products? Do you anticipate that that's going to step up during the course of fiscal '11? You had a lot of new product launches in fiscal '10 that were very platform-based, very broad. Do you anticipate that the new products launches this year are going to be similar in scale and scope? André Hawaux: Let me take the first one. Your first question about the percentage of our sales coming from innovation, I think we measure it correctly in terms of year-on-year innovation. It's about 5%. And as we take a look at your second question on platform innovation, I think we've said it multiple times we're not going to be the ones that are the most prolific with number of SKUs. We're going to look for sticky innovation, and that's all platform-based. So the things that you've seen for instance relative to steaming and frozen are things that we're continuing to do now that will bring a net offering to lunch steamers. The things you're seeing us do with our Trade technology with respect to Marie Callender base, you can see that application is going to go into other platforms as well or other things we do in Frozen, they are very much platform-based, very broad. And again, as Gary has said, we look for that high batting average for our innovation.

And we'll take a follow-up question now from David Driscoll with Citi Investment Research. David Driscoll - Citi Investment Research: Two questions. Gary, I believe ConAgra is the first company to report a quarter with inflation higher than cost savings. So really, can you give us any comments about either what you've announced to the trade already regarding price increases or what you're just hearing generally within the category that you compete in on this topic?

David, we have not talked to the trade about pricing. I don't think they are in an extremely receptive mood to be looking to raise prices at this point. Obviously, we will be opportunistic, but we don't think it's prudent for us to plan on that in this environment. And therefore, all the things we're doing from a productivity standpoint are really the way. Both productivity and mix are the way that we are choosing to deal with this, at least in the near term.

And there are no further questions Mr. Klinefelter, so I'll hand the conference back to you for final remarks.

This concludes our conference call. And just as a reminder, this conference is being recorded and it will be archived on the web as detailed in our news release. And as always, we are available for discussions. Thank you very much for your interest in ConAgra Foods.

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