Gary Rodkin – CEO Andre Hawaux – CFO Chris Klinefelter – IR Deane Hollis - President, Consumer Operations Greg Heckman – President, Commercial Operations

Christine McCracken - Cleveland Research Eric Serotta - Merrill Lynch David Driscoll - Citi Investment Research Andrew Lazar - Lehman Brothers Eric Katzman - Deutsche Bank Robert Moskow - Credit Suisse Edgar Roesch - Banc of America Securities Todd Duvick - Banc of America Pablo Zuanic – JP Morgan

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

Good morning. This is Gary Rodkin and I'm here with Andre Hawaux, our CFO and Chris Klinefelter, our VP of Investor Relations. I'm going to start with a few words about the EPS we just posted. I'll also briefly discuss our outlook for fiscal '08. After that, Andre will discuss a few financial matters and then we'll take your questions. Deane Hollis, President of Consumer Operations, and Greg Heckman, President of Commercial Operations, will join us for that portion of the call. Before we get started, Chris will say a few words about housekeeping matters. Chris Klinefelter : Good morning. During today's remarks, we will make some forward-looking statements and while we're making those statements in good faith and are confident about our company's direction, we do not have any guarantee about the results that we will achieve. So if you would like to learn more about the risks and factors that could influence and affect our business, I'll refer you to the documents we file with the SEC, which include some cautionary language. Also, we'll be discussing some non-GAAP financial measures during the call today and the reconciliations of those measures for Regulation G compliance can be found on our web site at http://investor.ConAgraFoods.com under the Financial Reports and Filings link, and then choosing non-GAAP Reconciliations. Now I'll turn it back over to Gary.

Thanks, Chris. We just released EPS of $0.36 for the quarter or $0.34 on a comparable basis. It is a strong start for the year’s EPS. There were several bright spots that put us ahead of what we originally expected. As you can tell from the top line trends in consumer foods, our new products are off to a great start. We're very pleased with that, but on the flip side, I'm not happy with the margin performance in Consumer Foods; more about that and our plans to address it in a minute. We're also very pleased with the continued top and bottom line momentum in our Food and Ingredients business and in a repeat of recent quarters, our Trading and Merchandising segment had another very strong quarter. Results there were certainly strong than what we planned for or what we view as a normalized run rate. Now I'll say a little bit more about each of these. Consumer Foods showed some very good sales trends. Sales were up 6% on a comparable basis which is excellent, and a really big improvement from what we've seen in recent years. Priority investment brands which represent more than 70% of the segment were up 7% on a comparable basis. That's the best organic top line brand performance anyone around here has seen for a long time. For those of you who have been following our news and events related to our new product pipeline, you know we introduced several new exciting products during the last three months, items like Healthy Choice Cafe Steamers and Paninis, Chef Boy-r-Dee Mac’n’Cheese, Hunt’s Fire Roasted Tomatoes, Orville Redenbacher's Natural Popcorn, and PAM Professional, just to name a few. The new product pipeline is off to a strong start and certainly made a big difference for the…

(Operator Instructions) Your first question comes from Christine McCracken - Cleveland Research. Christine McCracken - Cleveland Research : I just wanted to touch base on Food and Ingredients because you talked about commodity cost inflation in Consumer Foods, but if I'm not mistaken, you probably saw pretty significant headwinds in Food and Ingredients too; yet it seems like you were able to see a lot better margins there. I'm just wondering, is there a difference in how you passthrough price increases in your consumer products? It seems like in that area, you would be able to pass through pricing maybe a little bit easier than in Foodservice, for example.

Christine, I would tell you that we do manage it quite a bit differently. The businesses are more commodity-oriented. I also would tell you that we're very much on top of our businesses, businesses like Lamb Weston, Gilroy Spice, the flour business. Every day it's grind it out and make sure that we are passing the appropriate costs along. For a little bit more color, let me pass that over to Greg.

Morning, Christine. I wouldn't say it's any easier to pass price increases in our part of the business at all, but what I would say is that is more the nature of that entire industry to have volatility on the major commodity inputs and that market would be probably much more nimble to those changes in the short run. So whether it's ourselves, the other suppliers, or the customers, it's more the nature of the B2B space.

I would tell you that we are extremely pleased with the way they've been able to manage this very difficult inflationary environment. They've done an excellent job. That's why the margins are as good as you see. Christine McCracken - Cleveland Research : If I'm not mistaken, a few years ago you had some issues with garlic and with the news this week on China restricting their exports of garlic to the U.S., are you a importer at this point of Chinese garlic and is that going to be a big issue for you?

As the leading domestic garlic producer, we're keenly watching that market, as we have. We are an importer of some quality garlic, but long term which is how this will play out, we see that high-quality standards absolutely are the best thing for us as a quality provider and the best thing for our customers as they want to protect their brands. So anything that places the quality is a long term a positive for us.

I would say that's probably an advantage for us.

Your next question comes from Eric Serotta - Merrill Lynch. Eric Serotta - Merrill Lynch : A couple questions. First, in terms of the very impressive top line growth that you had in Consumer Foods in the quarter, I know you said that not all of it was attributable to new products, but within the part that was attributable to new products, how much was attributable to pipeline fill or shipment in advance of demand?

Eric, I would tell you that that we really have not built a big pipeline. We've seen the turns, the velocity, be very, very good. So it's really moving through. We don't have any issue. Our reorders have been excellent. Eric Serotta - Merrill Lynch : Then in terms of your full-year guidance, just doing a little bit of arithmetic, if I take the 33 or 34, depending on how it is calculated, the EPS that you reported for the first quarter and your $0.40 or roughly flat guidance for the second quarter, and your full year guidance of about $1.48, it implies that your second half EPS is about flat year over year. Now, I realize you have to a tough comp in the fourth quarter in particular given the over-delivery on the trading, but that doesn't seem to be that consistent with the comment in the press release that you're expecting to show solid EPS progress in the second half. Could you explain what I'm missing there?

When you look at the second half of the year, remember when we gave our guidance about fiscal '08, we went through the exercise to get you to the proper base in fiscal '07 on which to base those fiscal '08 projections. In that we adjusted for both peanut butter recall costs and the over-delivery of the trading businesses. If you do those exercises in the second half of last year, we printed EPS of $0.75 last year before you adjust for either of those items. If you take the $0.75 and adjust for $0.08 of peanut butter recall costs, you're now at $0.83; and you back off $0.16 for trading over-delivery and now you're at a $0.68 comparison, so when we talk about solid EPS progress, we mean on that adjusted basis. Eric Serotta - Merrill Lynch : That would be helpful to put in the press release next time off the adjusted base, just because it's a little bit confusing. It reads almost as if you're talking about off the reported numbers or the numbers ex-items in there. Just as a final question. I know in the outlook section you reaffirmed your longer-term financial goal. Gary, if you're talking about Consumer Foods operating margin percentage being about flattish this year, which I believe I heard Andre say, that implies that you guys are looking for over 250 basis points of margin expansion in fiscal 2009 and 2010. Do you still think that's achievable and could you go into that a bit?

I think we believe in terms of the guidelines that we've talked about that we see ourselves continuing to push forth our operating profit margin in our consumer business to get closer and closer to our peers as we move out. That's very much consistent with what we plan on doing.

Eric, I'd just say we remain very confident in our goal on operating margin improvement and the mix of variables might change a bit, but we're still going to drive the same algorithm.

Your next question comes from David Driscoll - Citi Investment Research. David Driscoll - Citi Investment Research : Gary, can you get back into the pricing discussion? You indicated, I think on your prepared comments, that promotion reduction would be a key ingredient here to what you said, but I think you were trying to say that reducing trade promotion would be the way that you would affect a price increase. Is that accurate, or should we be looking for list price increase announcements coming up?

It's really both, David. We will be taking list prices up in a number of categories more and we will be taking trade spending down, much more from an effectiveness standpoint. We're in the process of implementing new systems that really will get more traction as we get toward the back half, but we still are very confident that from a net pricing standpoint, you will see significant improvement. I guess the way I see it, David, I don't think we were as aggressive as we should have been but we did realize 2% net pricing on our priority brands and we do have more brands taking planned increases in Q2 and Q3 in important categories, some that we've already announced like frozen and tomato products and then getting the level of inflation and start-up inefficiencies that we're experiencing here in the first half. We're going to go broader and deeper across our portfolio and categories where inflation is hitting us the hardest. We'll see significantly better net price realization in the back half. Then finally one last point on that, we made some investments with our customers on trade programs that will pay us dividends in the back half of the fiscal year as we manage to our annual numbers versus quarterly numbers. David Driscoll - Citi Investment Research : If you could quantify that for me, would a 3% on-average price increase across the consumer foods portfolio in the back half of the year, is that a ballpark of a type of a realization that you're looking for?

I probably don't want to get that specific, David, but I would tell you that we are taking significant pricing in a number of our categories and some of the categories we've already taken are north of that. David Driscoll - Citi Investment Research : Then moving on but related here, on the commodity cost side, what's your new forecast for the year? I don't actually think you said it on the prepared comments.

I think we talked about 7% inflation. Just to point out, that's probably a little bit higher than what you've heard from a few of our competitors, and that's the makeup of our portfolio. Probably the biggest piece of that is in oils. We've got big business in Weston oil and then in our margin spreads. That inflation input cost is through the roof.

Your next question comes from Andrew Lazar - Lehman Brothers. Andrew Lazar - Lehman Brothers : Andre, is there a range or how should we think about operating cash flow that you're targeting for this year given some of the working capital changes that you talked about? I'm trying to get a sense if the free cash flow, how to think about free cash flow given the CapEx of roughly $4.50?

I think we're talking about our free cash flow moving roughly in line, slightly lower than what we're expecting from an EPS growth perspective. Andrew Lazar - Lehman Brothers : In terms of Trading and Merchandising and the volatility, I know historically you've talked about that business, to some extent, being a natural hedge when we get into difficult environments from an input cost standpoint or on the consumer products piece. Is that still the case, and it's that input costs are off the charts in certain respects, so it's not quite making up for that? I am trying to get a sense if that's changed at all.

I think the way we mean it is, when we've got a lot of volatility like this we tend to do quite well in our Trading and Merchandising business, which you've seen in the last few quarters and particularly you've seen it this quarter; that is what we really mean when we say a natural hedge. We expect a high likelihood of significant over-delivery and real volatile times, which could help offset some of the input cost inflation on our consumer brands.

Your next question comes from Eric Katzman - Deutsche Bank. Eric Katzman - Deutsche Bank : Just one clarification and then a follow-up. The $1.48 excluding items, what are the items? In particular, are you excluding the $12 million peanut butter recall costs that you identified this quarter in that $1.48?

We are excluding peanut butter recall costs and restructuring and things like that. So the items you see listed in the earnings release, those are the items we are calling out. Eric Katzman - Deutsche Bank : Should we expect more of those either restructuring or other ones that you can at least identify at this point going forward?

Eric, we don't see a whole lot more restructuring going forward. I would say on peanut butter recall, I would say we probably have a little bit of a tail on that as we start to settle some of these claims but I would hope that that would be de minimus going forward. We've gotten the bulk of that behind us and we've booked all the things that we can appropriately book from a GAAP perspective. We don't see a whole lot more coming down the pike on that at all. We don't have any major restructuring dollars planned in the back half of the year.

Your next question comes from Robert Moskow - Credit Suisse.

Just a question about the trade spending during this quarter. Your predecessor, Gary, had talked in the past about some of his frustration of being able to implement lower trade spending or net pricing. It gave you the sense that if there's a corporate directive that sometimes it doesn't get executed out in the field, I'm just wondering, how are the systems that you're putting into place, maybe you can give us a little bit more color on how that's going to improve your ability to influence what gets executed? I imagine it's a visibility issue, but are you then giving that information to people in the field so they can make better decisions or giving the information directly to your customers so they can make better decisions? Can you give us a little bit more color on it?

I would say first of all, it's really important to remember that the systems that we have historically been working with basically are not systems. We are coming from a real deep hole from that perspective. We are putting trade management programs in place as we speak as we implement our nucleus project, our SAP, and the mandate is very clear, it's ROI and really getting more out of with a we spend. Those systems have not yet been implemented. We've got a lot of discussion going on in terms of how we're going to implement those, but I think you're going to see in the back half that you will start to see some of the impact of that increased efficiency and effectiveness on trade spending. Brands are really getting stronger through innovation and A&P spending and that's really what we're hoping to redeploy; savings from a trade standpoint into marketing. The real mandate is to build the base versus chase the case. That's what we're looking forward to as we get toward the second half of the year.

You mentioned ROI as the key measurement. How long will it take you to get maybe historical data so that you can get better measurement as to what your ROI growth is or is that one of the obstacles here that you need some historical data so that you can show what works and what doesn't from a trade management perspective?

I think that's part of what we're doing right now, we're populating the database so we can go forward. That's really the first real step in this and that's happening as we speak.

Your next question comes from Edgar Roesch - Banc of America Securities. Edgar Roesch - Banc of America Securities : It sounds like an encouraging start to some of the new products. Just wanted to ask you, Gary, I understand new products and innovation is important for the health of the pricing component to your top line, but in the short-term when you're rolling out a lot of new items like you did last quarter, is it helping or hurting your price on that short-term basis?

I would tell you that it's helping. Clearly, you have to have some introductory costs, slotting, et cetera, but from a mix standpoint, it clearly is a positive and a great example of that would be in Healthy Choice where you're going to see some significant price realization across the year. In fact we're starting to see that already along with market share increases. PAM's another great example where we introduced a premium product, very high margin that will help the mix there as well. Edgar Roesch - Banc of America Securities : But having said that, there are also some concessions on the initial shipments that will naturally lead to better pricing, it sounds like, in the coming quarters; is that fair?

I'm not sure I understand that question on new products. Edgar Roesch - Banc of America Securities : You said with respect to slotting and things like that. So even if it's a net positive in the past quarter, you still had some concessions that had to be made.

That's always the case and the margins will get better as the products get more seated.

Your next question comes from Eric Katzman - Deutsche Bank. Eric Katzman - Deutsche Bank : A bigger picture question in terms of the consumer area, the idea I think was you inherited some brands which hadn't received any support or minimal support. You had enough cost savings to basically fund a much more aggressive A&P budget, probably without really needing or expecting to take price. So I'm wondering, what are the risks now that inflation is eating into the cost savings that because you have to rely on pricing, it becomes a little bit tougher? Irene at Kraft isn't going to just simply allow Mac & Cheese to be hit or Nestle or Stouffer's without a bit of a fight which it seems to me would translate into either more promotional spending which would partially offset the pricing. So how should we think about that versus the initial plans?

I think it's pretty clear across all of our peers, the whole industry, that this inflation is for real and most likely will continue for a while and therefore expect to see a little bit more rational behavior than we might have in the past as it pertains to pricing. Again, even in Q1, our priority brands have 2% net price realization on a comparable basis. We expect to see that continue to go as we take smart, surgical advances where the inflation really requires it and as we start to implement our trade management program systems, we'll with much more effective with the trade spend, so we'll get a much better ROI than we have historically. All of that is to come in the back half.

Your next question comes from Todd Duvick - Banc of America. Todd Duvick - Banc of America : I had a quick question from the a fixed income standpoint. First of all, I appreciate the guidance on operating cash flow this year. Thinking beyond this year, are there opportunities in working capital management to really improve that and maybe accelerate the operating cash flow such that it may grow faster than EPS in the future?

The answer is, we can always get better at working capital, absolutely. We are putting in place programs where we can improve our cash conversion cycle. As I said on the call, we have a commodity element in our business like our mills business that actually is prone to commodity spikes in terms of costs and that, plus the fact that our Trading and Merchandising segment uses a working capital very effectively with very high ROICs, when they see opportunities, that's one of the things that we're always very cautious on. We can improve working capital, but we've got to be mindful of the way we run our business. Todd Duvick - Banc of America : Going forward, would you say that the primary driver to operating cash flow growth is still just going to be net income growth primarily?

I would say that that plus the spread between depreciation and CapEx and we're going to continue to try to squeeze a little bit out of working capital year on year. Todd Duvick - Banc of America : Also, I think you indicated that you have used up your share repurchase program. Can we expect a new authorization in the near future?

To the first part of your question, yes, we have finished the program that the board approved. We discuss with our board all the elements of our cap structure. When we do have something new, we will actually talk to you about it.

Your next question comes from David Driscoll - Citi Investment Research. David Driscoll - Citi Investment Research : A follow-up on the commodity costs. Can you tell us what's changed from your commodity cost forecast? It's 7% now, I believe on the last call, Andre, you had indicated approximately 4%. Can you tell us what percent of your commodity costs are hedged for the balance of the year?

Dave, I'm going to have to look at the last script, but I don't believe I was ever down around 4%. I believe last time we talked around 5% to 6%, if I'm not mistaken. So what's changed is I think one of the things that Gary articulated, the place where we have the highest amount of inflation right now in our portfolio is in fats and oils. It's a big piece of our portfolio and the inflation is very significant. So that's the first part of your question. What was the second part, David, I apologize? David Driscoll - Citi Investment Research : Percent hedged for the balance of the year on commodities?

We would prefer not to discuss those publicly. David Driscoll - Citi Investment Research : What were the shipments of peanut butter in the quarter? I think you had a press release out saying that you started shipping in August, but I'm a little bit confused on some of the comments on whether this on balance was a negative in the quarter or whether it was neutral in the quarter?

We shipped only about $8 million, $9 million because it was just a couple of weeks' worth at the end of the quarter. So clearly peanut butter was a significant shortfall for us from a total profitability standpoint versus a year ago.

The $9 million of sales this quarter, if you see the tables in the release on page 10, we've excluded those sales in the comparable sales results. We're moving both this year and last year. They're not at the 6% sales growth to consumer.

Your next question comes from Pablo Zuanic – JP Morgan. Pablo Zuanic – JP Morgan : The first question is more just on specific numbers. Your $1.48 guidance for the year assumes a run rate of $400 million in corporate expense and $200 million in Trading and Merchandising EBIT; is that correct?

In terms of corporate, you're probably looking something around 350, 360; we budget around [$90] million a quarter, it doesn't always come out that way but that is how we think about it. In terms of Trading and Merchandising, it's very difficult to call something normal there. The historical range has been between 100 and 200. You could call it 200, it would be within the range, toward the high end.

I think you answered it, Chris, that's spot on.

Your next question comes from Andrew Lazar - Lehman Brothers. Andrew Lazar - Lehman Brothers : Any opportunities to accelerate some of the productivity opportunities you have? I know you talked about phase 2. I don't remember getting details yet or when would we perhaps see what's coming down the pipe from the Phase 2?

We have not publicly talked about Phase 2, so we're still on Phase 1. I think one of the things you have to remember, Andrew, one of the things Gary articulated in his speech, we did too much too fast on the productivity. To answer your question, would we want to accelerate some things? I think one of the things we learned this quarter is that we had a lot on our people's pates in a lot on our plans and I think we probably feel that we know what we need to do there and accelerating it probably may not be the answer.

Your next question comes from Christine McCracken - Cleveland Research. Christine McCracken - Cleveland Research : You mentioned some of these start-up inefficiencies and transferring production. It sounds like you did have a lot going on. Did that translate into out of stock issues at the retail level, or is it really just costs that were added that you'll cycle out of as the year progresses?

Very astute, Christine. Yes, we did have some blips in our service levels in some of these transformation projects, which should be correcting as the year goes on. So you're right, it has a lot of reverberations when you load your plate up too much. I think it's just real important to remember and this is a big mea culpa for me, we had so much the major diversion of resources from getting peanut butter back on track coupled with too many projects for our product supply folks and engineering to handle stretched the resources just too thin and that's a tough lesson learned, but we're course correcting as we speak. Christine McCracken - Cleveland Research : You mentioned some of it, though, I think maybe a shortfall in systems and I'm wondering, is that something that's going to take a while to fix, or is it that it was just stretching what you have too far?

Christine, I'm sorry, I didn't quite understand that. What was the question about systems? Christine McCracken - Cleveland Research : You had mentioned in an answer to one of the earlier questions that systems kind of let you down, I'm just wondering is it that the systems are an impediment, is that going to take a while to fix?

I don't remember that particular comment. It may be related to our trade management program. I think that's probably what the system that I mentioned, that we don't have the systems in place yet for our trade management and that is really coming, starting in the second half. That's I think the only system that we talked about.

This concludes our question-and-answer session. Mr. Klinefelter, I'll hand the conference back to you for final remarks and closing comments.

Just as a reminder, this conference is being recorded and will be archived on the web, as detailed in our news release. As always, we're available for discussions. Thank you very much for your interest in ConAgra Foods.