Today Conagra Brands, Inc. (NYSE: CAG) reported results for the
fiscal 2017 second quarter ended November 27, 2016.
Highlights
(all comparisons are against the year ago period, unless
otherwise noted)
- Diluted EPS from continuing operations
grew 44.4% from $0.18 to $0.26; adjusted diluted EPS from
continuing operations grew 25.6% to $0.49, despite the inclusion of
Spicetec Flavors and Seasoning and JM Swank in the prior year.
- “Adjusted” financial measures exclude
the comparability items summarized at the end of this release and
are non-GAAP. Please see the end of this release for
reconciliations to the most directly comparable GAAP measures.
- Net sales decreased 11.5%, largely
driven by the Company’s continued progress in building a higher
quality revenue base. The Company estimates that the impacts of
divestitures and foreign exchange lowered sales by 5.5%.
- Gross margin (net sales less cost of
goods sold as a percent of net sales) expanded 270 basis points,
and adjusted gross margin expanded 250 basis points.
- The Company completed the spin-off of
Lamb Weston in the quarter. Lamb Weston has been re-classified as
discontinued operations for all periods presented.
CEO Perspective
Sean Connolly, president and chief executive officer of Conagra
Brands, commented, “We are successfully reshaping our portfolio,
capabilities, and culture. Our increased focus and discipline on
driving value over volume are enabling us to expand our margins as
we build a higher-quality revenue base, improve efficiency, and
deliver stronger, more consistent performance.”
He added, “We expect to improve sales growth trends in the
second half of the fiscal year as we begin to lap the pricing and
trade actions we undertook last year. Accordingly, we are
reaffirming the fiscal 2017 guidance we provided at our investor
day on Oct. 18, 2016.”
Total Company Results
Net sales decreased 11.5% as a result of volume declines
associated with the Company’s actions to build a higher quality
revenue base, divestitures, and foreign exchange. The Company
estimates that the impacts of divestitures and foreign exchange
lowered sales by 5.5%.
As a percentage of net sales, gross profit increased 270 basis
points from 28.3% to 31.0%. Adjusted gross profit as a percentage
of net sales increased 250 basis points to 31.1%. The increases
were driven primarily by improved price/mix, supply chain
productivity, input cost favorability, and an inventory write-down
in the prior year associated with exiting a non-core business in
the Foodservice segment. These benefits more than offset the
decline in volume and negative effects of foreign exchange.
Diluted EPS from continuing operations increased 44.4% from
$0.18 to $0.26, and adjusted diluted EPS from continuing operations
increased 25.6% to $0.49. The growth reflects lower selling,
general, and administrative (SG&A) expenses associated with
cost savings programs and the timing of planned expenses, and lower
interest expense as a result of debt reduction. These benefits were
partially offset by volume declines and the inclusion of Spicetec
and JM Swank in the prior year period.
Grocery & Snacks
Segment
Net sales for the segment decreased 6% to $854 million. More
disciplined pricing and trade promotion practices resulted in
price/mix increasing 1% while volume declined 7%.
Operating profit for the segment increased 19%, and adjusted
operating profit increased 18%, reflecting strong margin expansion
in the quarter. Continued discipline on pricing and trade
promotion, supply chain productivity, favorable input costs, and
the benefits of our cost savings efforts more than offset decreased
sales.
Refrigerated & Frozen
Segment
Net sales for the segment decreased almost 11% to $740 million.
Price/mix increased 1% and volume declined over 11%, reflecting the
continued actions to upgrade the volume base by optimizing pricing,
improving trade promotion productivity, and SKU rationalization.
Net sales were also negatively affected by a transitory increase in
Egg Beaters’ volume last year. The Company’s egg supply was
unaffected by last year’s avian flu outbreak, resulting in
incremental sales for the brand.
Operating profit for the segment decreased 5%, and adjusted
operating profit decreased 8%. Lower volume more than offset
improved pricing actions, favorable input costs and supply chain
productivity. The Company estimates that 5 points of the decline,
on a reported and adjusted basis, relate to the avian flu-related
benefits in the prior year.
International Segment
Net sales for the segment decreased 5% to $211 million. A 2%
increase in price/mix was offset by a 4% decrease in foreign
exchange and 3% decrease in volume.
The segment reported an operating loss of $27 million compared
with operating profit of $20 million in the year-ago period,
reflecting goodwill impairment charges of approximately $44 million
pre-tax, driven by a devaluation of the Mexican peso. Adjusted
segment operating profit decreased 17% to $18 million, primarily
driven by the impact of foreign exchange.
Foodservice Segment
Net sales for the segment decreased 1% to $283 million. Volume
was flat to the prior year’s quarter while price/mix decreased
1%.
Operating profit for the segment grew 56% as the business wrote
down inventory in the prior year while exiting a non-core business.
The Company estimates that the impact from the exited business
added 52 percentage points to segment operating profit growth.
Corporate Expenses
Corporate expenses decreased 36% from $178 million to $113
million, and adjusted corporate expenses decreased 33% to $36
million, reflecting planned benefits from the Company’s cost
savings efforts.
Other Items
Advertising & Promotion expense decreased 9% to $97 million
in the quarter, reflecting timing of planned expenses and improved
efficiency in spend.
Equity method investment earnings decreased 2% to $17 million as
the Company’s Ardent Mills joint venture performed below
expectations due to market conditions.
Net interest expense decreased 32% to $54 million, driven by
significant debt reduction over the past several quarters.
Capital Allocation
In the second quarter, the Company paid a quarterly dividend of
$0.25 per share.
As previously announced, the Board of Directors approved its
first dividend since the completion of the spin-off of the Lamb
Weston business on November 9, 2016. A quarterly dividend payment
of $0.20 per share will be paid on March 1, 2017 to stockholders of
record as of the close of business on January 30, 2017.
The Company also repurchased approximately 2.2 million shares
for $85 million during the quarter.
Outlook
The Company is reaffirming its fiscal year 2017 outlook. The
Company expects net sales to decrease between 4% and 5% (excluding
the impacts of divestitures), and to achieve adjusted gross margin
of 30.4% to 30.6%, adjusted operating margin of 15.3% to 15.5%, and
adjusted EPS of between $1.65 and $1.70.
The inability to predict the amount and timing of items
impacting comparability makes a detailed reconciliation of these
forward looking measures impracticable. Please see the end of this
release for more information.
Major Items Affecting Second Quarter
Fiscal 2017 EPS Comparability
Included in the $0.26 diluted EPS from continuing operations for
the second quarter of fiscal 2017 (EPS amounts rounded and after
tax)
- Approximately $0.03 per diluted share
of net expense, or $20 million pre-tax ($13 million after tax),
related to restructuring plans ($2 million in cost of goods sold
and $18 million in SG&A)
- Approximately $0.09 per diluted share
of net expense, or $61 million pre-tax ($39 million after tax),
related to extinguishment of debt (all SG&A)
- Approximately $0.09 per diluted share
of net expense, or $44 million pre-tax ($41 million after tax),
related to an impairment of goodwill in the Mexican business (all
SG&A)
- Approximately $0.02 per diluted share
of net expense related to tax items associated with the Spicetec
and JM Swank divestitures.
Included in the $0.18 diluted EPS from continuing operations for
the second quarter of fiscal 2016 (EPS amounts rounded and after
tax)
- Approximately $0.19 per diluted share
of net expense, or $133 million pre-tax ($82 million after tax),
related to restructuring plans ($6 million in cost of goods sold,
$127 million in SG&A)
- Approximately $0.02 per diluted share
of net expense related to tax items in connection with an
international tax matter
Discussion of Results
Conagra Brands will host a webcast and conference call at 9:30
a.m. Eastern Time today to discuss the results. Following the
company’s remarks, the call will include a question-and-answer
session with the investment community. Domestic and international
participants may access the conference call toll-free by dialing
1-877-719-9810 and 1-719-325-4896, respectively, and providing the
conference ID of 1870935. The live audio webcast and presentation
slides will be available on conagrabrands.com/investor-relations
under Events & Presentations.
A rebroadcast of the webcast and conference call will be
available after 1 p.m. Eastern Time today. To access the digital
replay, a pass code number will be required. Domestic and
international participants may access the digital replay by dialing
1-888-203-1112 and 1-719-457-0820, respectively, and entering the
pass code of 1870935. A rebroadcast also will be available on the
company’s website.
About Conagra Brands
Conagra Brands, Inc. (NYSE: CAG), headquartered in Chicago, is
one of North America’s leading branded food companies. Guided by an
entrepreneurial spirit, Conagra Brands combines a rich heritage of
making great food with a sharpened focus on innovation. The
company’s portfolio is evolving to satisfy people’s changing food
preferences. Conagra’s iconic brands, such as Marie Callender’s®,
Reddi-wip®, Hunt’s®, Healthy Choice®, Slim Jim® and Orville
Redenbacher's®, as well as emerging brands, including Alexia®,
Blake’s® and Frontera®, offer choices for every occasion. With an
ongoing commitment to corporate citizenship, Conagra Brands has
been named to the Dow Jones Sustainability™ North America Index for
six consecutive years. For more information, visit
www.conagrabrands.com.
Note on Forward-looking
Statements
This press release contains forward-looking statements within
the meaning of the federal securities laws. These forward-looking
statements are based on management's current expectations and are
subject to uncertainty and changes in circumstances. We undertake
no responsibility for updating these statements. Readers of this
press release should understand that these statements are not
guarantees of performance or results. Many factors could affect our
actual financial results and cause them to vary materially from the
expectations contained in the forward-looking statements, including
those set forth in this press release. These risks and
uncertainties include, among other things: our ability to achieve
the intended benefits of the recent spin-off of our Lamb Weston
business; general economic and industry conditions; our ability to
successfully execute our long-term value creation strategy; our
ability to access capital; our ability to execute our operating and
restructuring plans and achieve our targeted operating
efficiencies, cost-saving initiatives, and trade optimization
programs; the effectiveness of our hedging activities, including
volatility in commodities that could negatively impact our
derivative positions and, in turn, our earnings; the competitive
environment and related market conditions; our ability to respond
to changing consumer preferences and the success of our innovation
and marketing investments; the ultimate impact of any product
recalls and litigation, including litigation related to the lead
paint and pigment matters; actions of governments and regulatory
factors affecting our businesses, including the Patient Protection
and Affordable Care Act; the availability and prices of raw
materials, including any negative effects caused by inflation or
weather conditions; risks and uncertainties associated with
intangible assets, including any future goodwill or intangible
assets impairment charges; our ability to realize the synergies and
benefits contemplated by the Ardent Mills joint venture; the costs,
disruption, and diversion of management's attention associated with
campaigns commenced by activist investors; and other risks
described in our reports filed from time to time with the
Securities and Exchange Commission. We caution readers not to place
undue reliance on any forward-looking statements included in this
press release, which speak only as of the date of this press
release.
Conagra Brands, Inc.
Segment Operating Results
(in millions)
(unaudited)
SECOND QUARTER Thirteen weeks ended Thirteen
weeks ended November 27, 2016 November 29, 2015 Percent
Change
SALES
Grocery & Snacks $ 853.9 $ 906.1 (5.8 )% Refrigerated &
Frozen 740.0 826.8 (10.5 )% International 211.4 221.3 (4.5 )%
Foodservice 283.1 285.0 (0.7 )% Commercial — 119.6
(100.0 )% Total 2,088.4 2,358.8 (11.5 )%
OPERATING
PROFIT
Grocery & Snacks $ 220.3 $ 185.7 18.6 % Refrigerated &
Frozen 117.9 123.8 (4.8 )% International (26.7 ) 20.1 N/A
Foodservice 31.9 20.4 56.4 % Commercial (0.5 ) 13.0 N/A
Total operating profit for segments 342.9 363.0 (5.5 )%
Reconciliation of total operating profit to income from
continuing operations before income taxes and equity method
investment earnings Items excluded from segment operating
profit: General corporate expense (113.3 ) (178.2 ) (36.4 )%
Interest expense, net (54.1 ) (79.2 ) (31.7 )% Income from
continuing operations before income taxes and equity method
investment earnings $ 175.5 $ 105.6 66.2 %
Segment operating profit excludes general corporate expense,
equity method investment earnings, and net interest expense.
Management believes such amounts are not directly associated with
segment performance results for the period. Management believes the
presentation of total operating profit for segments facilitates
period-to-period comparison of results of segment operations.
Conagra Brands, Inc.
Segment Operating Results
(in millions)
(unaudited)
SECOND QUARTER Twenty-six weeks ended
Twenty-six weeks ended November 27, 2016 November 29, 2015
Percent Change
SALES
Grocery & Snacks $ 1,611.1 $ 1,706.6 (5.6 )% Refrigerated &
Frozen 1,344.6 1,484.4 (9.4 )% International 406.1 427.7 (5.1 )%
Foodservice 551.1 555.6 (0.8 )% Commercial 71.1 237.5
(70.1 )% Total 3,984.0 4,411.8 (9.7 )%
OPERATING
PROFIT
Grocery & Snacks $ 400.8 $ 325.2 23.2 % Refrigerated &
Frozen 210.1 204.9 2.5 % International (175.9 ) 36.6 N/A
Foodservice 53.6 46.6 15.0 % Commercial 202.8 25.1
708.0 % Total operating profit for segments 691.4 638.4 8.3 %
Reconciliation of total operating profit to income from
continuing operations before income taxes and equity method
investment earnings Items excluded from segment operating
profit: General corporate expense (148.9 ) (255.1 ) (41.6 )%
Interest expense, net (112.3 ) (159.3 ) (29.5 )% Income from
continuing operations before income taxes and equity method
investment earnings $ 430.2 $ 224.0 92.1 %
Segment operating profit excludes general corporate expense,
equity method investment earnings, and net interest expense.
Management believes such amounts are not directly associated with
segment performance results for the period. Management believes the
presentation of total operating profit for segments facilitates
period-to-period comparison of results of segment operations.
Conagra Brands, Inc.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
SECOND QUARTER Thirteen weeks ended Thirteen
weeks ended November 27, 2016 November 29, 2015 Percent
Change Net sales $ 2,088.4 $ 2,358.8 (11.5 )% Costs and expenses:
Cost of goods sold 1,440.9 1,690.8 (14.8 )% Selling, general and
administrative expenses 417.9 483.2 (13.5 )% Interest expense, net
54.1 79.2 (31.7 )% Income from continuing operations
before income taxes and equity method investment earnings 175.5
105.6 66.2 % Income tax expense 78.4 43.1 81.9 % Equity
method investment earnings 17.2 17.6 (2.3 )% Income
from continuing operations 114.3 80.1 42.7 % Income from
discontinued operations, net of tax 11.6 79.2 (85.4
)% Net income $ 125.9 $ 159.3 (21.0 )% Less: Net
income attributable to noncontrolling interests 3.8 4.4
(13.6 )% Net income attributable to Conagra Brands, Inc. $
122.1 $ 154.9 (21.2 )% Earnings per share -
basic Income from continuing operations $ 0.26 $ 0.18 44.4 %
Income from discontinued operations 0.02 0.18 (88.9
)% Net income attributable to Conagra Brands, Inc. $ 0.28 $
0.36 (22.2 )% Weighted average shares outstanding
437.7 433.8 0.9 % Earnings per share - diluted
Income from continuing operations $ 0.26 $ 0.18 44.4 %
Income from discontinued operations 0.02 0.17 (88.2
)% Net income attributable to Conagra Brands, Inc. $ 0.28 $
0.35 (20.0 )% Weighted average share and share
equivalents outstanding 441.3 437.9 0.8 %
Conagra Brands, Inc.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
SECOND QUARTER Twenty-six weeks ended
Twenty-six weeks ended November 27, 2016 November 29, 2015
Percent Change Net sales $ 3,984.0 $ 4,411.8 (9.7 )% Costs and
expenses: Cost of goods sold 2,791.9 3,182.5 (12.3 )% Selling,
general and administrative expenses 649.6 846.0 (23.2 )% Interest
expense, net 112.3 159.3 (29.5 )% Income from
continuing operations before income taxes and equity method
investment earnings 430.2 224.0 92.1 % Income tax expense
247.6 92.4 168.0 % Equity method investment earnings 30.3
42.1 (28.0 )% Income from continuing operations 212.9 173.7
22.6 % Income (loss) from discontinued operations, net of tax 103.0
(1,166.8 ) N/A Net income (loss) $ 315.9 $ (993.1 )
N/A Less: Net income attributable to noncontrolling interests 7.6
6.1 24.6 % Net income (loss) attributable to Conagra
Brands, Inc. $ 308.3 $ (999.2 ) N/A Earnings (loss)
per share - basic Income from continuing operations $ 0.48 $
0.40 20.0 % Income (loss) from discontinued operations 0.22
(2.71 ) N/A Net income (loss) attributable to Conagra Brands, Inc.
$ 0.70 $ (2.31 ) N/A Weighted average shares
outstanding 438.4 432.1 1.5 % Earnings (loss)
per share - diluted Income from continuing operations $ 0.48
$ 0.40 20.0 % Income (loss) from discontinued operations 0.22
(2.69 ) N/A Net income (loss) attributable to Conagra
Brands, Inc. $ 0.70 $ (2.29 ) N/A Weighted average
share and share equivalents outstanding 442.1 436.7
1.2 %
Conagra Brands, Inc.
Consolidated Balance Sheet
(in millions)
(unaudited)
November 27, 2016 May 29, 2016
ASSETS
Current assets Cash and cash equivalents $ 1,442.5 $ 798.1
Receivables, less allowance for doubtful accounts of $4.1 and $3.2
699.5 650.1 Inventories 1,113.7 1,083.2 Prepaid expenses and other
current assets 89.3 148.6 Current assets of discontinued operations
— 779.7 Current assets held for sale — 117.0 Total current assets
3,345.0 3,576.7 Property, plant and equipment, net 1,669.3 1,701.6
Goodwill 4,248.7 4,396.2 Brands, trademarks and other intangibles,
net 1,260.9 1,237.2 Other assets 899.4 905.5 Noncurrent assets of
discontinued operations — 1,339.3 Noncurrent assets held for sale
1.7 234.1 $ 11,425.0 $ 13,390.6
LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 6.7 $
13.9 Current installments of long-term debt 231.0 559.4 Accounts
payable 784.1 706.7 Accrued payroll 124.9 220.8 Other accrued
liabilities 598.7 567.7 Current liabilities of discontinued
operations — 409.2 Current liabilities held for sale — 54.7 Total
current liabilities 1,745.4 2,532.4 Senior long-term debt,
excluding current installments 3,018.4 4,685.5 Subordinated debt
195.9 195.9 Other noncurrent liabilities 1,908.0 1,875.7 Noncurrent
liabilities of discontinued operations — 304.8 Noncurrent
liabilities held for sale — 1.5 Total stockholders' equity 4,557.3
3,794.8 $ 11,425.0 $ 13,390.6
Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions, unaudited)
Twenty-six weeks ended November 27,
2016 November 29, 2015 Cash flows from
operating activities: Net income (loss) $ 315.9 $ (993.1 ) Income
(loss) from discontinued operations 103.0 (1,166.8 ) Income
from continuing operations 212.9 173.7 Adjustments to reconcile
income from continuing operations to net cash flows from operating
activities: Depreciation and amortization 133.5 141.2 Asset
impairment charges 211.9 1.7 Gain on divestitures (197.5 ) — Loss
on extinguishment of debt 60.6 — Lease cancellation expense — 48.5
Earnings of affiliates in excess of distributions (23.4 ) (41.6 )
Share-based payments expense 18.3 16.7 Contributions to pension
plans (5.9 ) (6.0 ) Pension benefit (20.6 ) (7.9 ) Other items 23.9
(13.7 ) Change in operating assets and liabilities excluding
effects of business acquisitions and dispositions: Accounts
receivable (49.2 ) (98.6 ) Inventory (32.2 ) (165.0 ) Deferred
income taxes and income taxes payable, net 183.5 (100.2 ) Prepaid
expenses and other current assets 0.2 (2.3 ) Accounts payable 71.7
(10.2 ) Accrued payroll (95.5 ) (1.7 ) Other accrued liabilities
(31.6 ) 82.0 Net cash flows from operating activities —
continuing operations 460.6 16.6 Net cash flows from operating
activities — discontinued operations 81.6 335.5 Net
cash flows from operating activities 542.2 352.1 Cash
flows from investing activities: Additions to property, plant and
equipment (118.3 ) (110.4 ) Sale of property, plant and equipment
11.3 16.2 Proceeds from divestitures 489.1 — Purchase of business
and intangible assets (108.2 ) (10.1 ) Net cash flows from
investing activities — continuing operations 273.9 (104.3 ) Net
cash flows from investing activities — discontinued operations
(123.7 ) (132.7 ) Net cash flows from investing activities 150.2
(237.0 ) Cash flows from financing activities: Net
short-term borrowings (7.2 ) 177.3 Repayment of long-term debt
(555.8 ) (254.5 ) Payment of intangible asset financing arrangement
(14.9 ) — Repurchase of Conagra Brands, Inc. common shares (170.1 )
— Cash dividends paid (219.4 ) (215.0 ) Exercise of stock options
and issuance of other stock awards 47.4 119.2 Net
cash flows from financing activities — continuing operations (920.0
) (173.0 ) Net cash flows from financing activities — discontinued
operations 839.1 6.2 Net cash flows from financing
activities (80.9 ) (166.8 ) Effect of exchange rate changes on cash
and cash equivalents (3.5 ) (3.0 ) Net change in cash and cash
equivalents 608.0 (54.7 ) Discontinued operations cash activity
included above: Add: Cash balance included in assets held for sale
and discontinued operations at beginning of period 36.4 49.0 Less:
Cash balance included in assets held for sale and discontinued
operations at end of period — 56.4 Cash and cash equivalents at
beginning of period 798.1 134.1 Cash and cash
equivalents at end of period $ 1,442.5 $ 72.0
See notes to the condensed consolidated
financial statements.
Q2 FY17 & Q2 FY16 Diluted EPS from
Continuing Operations
Q2 FY17 Q2 FY16 % Change Diluted EPS
from continuing operations $ 0.26 $
0.18 44.4 % Net expense related to
restructuring plans 0.03 0.19 Net expense related to early
extinguishment of debt 0.09 — Net expense related to goodwill and
intangible impairment charges 0.09 — Net expense related to unusual
tax items 0.02 0.02
Diluted EPS from
continuing operations, adjusted for items impacting
comparability $ 0.49 $ 0.39
25.6 %
Grocery & Snacks Segment Operating
Profit Reconciliation
(Dollars in millions)
Q2 FY17 Q2 FY16 %
Change Grocery and Snacks Segment Operating Profit
$ 220.3 $ 185.7 18.6 %
Net expense related to restructuring plans 1.4 2.3
Grocery and Snacks Segment Adjusted Operating Profit
$ 221.7 $ 188.0
17.9 %
Refrigerated & Frozen Segment
Operating Profit Reconciliation
(Dollars in millions)
Q2 FY17 Q2 FY16 %
Change Refrigerated and Frozen Segment Operating Profit
$ 117.9 $ 123.8 (4.8 )%
Net expense related to restructuring plans 2.2 6.1
Refrigerated and Frozen Segment Adjusted Operating
Profit $ 120.1 $ 129.9
(7.5 )%
International Segment Operating Profit
Reconciliation
(Dollars in millions)
Q2 FY17 Q2 FY16 %
Change International Segment Operating Profit (loss)
$ (26.7 ) $ 20.1 N/A Net
expense related to restructuring plans 0.4 1.1 Net expense related
to goodwill and intangible impairment charges 43.9
—
International Segment Adjusted Operating
Profit $ 17.6 $ 21.2
(17.0 )%
Commercial Segment Operating Profit
Reconciliation
(Dollars in millions)
Q2 FY17 Q2 FY16 %
Change Commercial Segment Operating Profit $
(0.5 ) $ 13.0 N/A Net benefit
related to gain on Spicetec sale 0.2 — Net benefit related to gain
on JM Swank sale 0.3 —
Commercial Segment
Adjusted Operating Profit $ — $
13.0 (100.0 )%
Corporate Expense
Reconciliation
(Dollars in millions)
Q2 FY17 Q2 FY16 %
Change Selling, general and administrative expenses
$ 417.9 $ 483.2 (13.5 )%
Less: selling, general and administrative expenses from reporting
segments 305.4 305.6 Plus: Corporate cost of goods sold 0.8
0.6
Corporate expenses $ 113.3 $
178.2 Net expense related to restructuring plans (15.8 )
(123.5 ) Net expense related to early extinguishment of debt (60.6
) — Net expense related to hedging (0.8 ) (0.6 )
Corporate adjusted expenses $ 36.1
$ 54.1 (33.3 )%
Gross Margin Reconciliation
Gross Margin: Gross Profit as a % of Net sales
Q2
FY17 Q2 FY16 Net sales $ 2,088.4 $ 2,358.8 Cost of goods
sold 1,440.9 1,690.8
Gross Profit $
647.5 $ 668.0 Net expense related to
restructuring plans included in cost of goods sold 1.8 5.8 Net
expense related to hedging 0.8 0.6
Gross Profit
adjusted for items impacting comparability $
650.1 $ 674.4 Adjusted Gross Margin
31.1 % 28.6 %
This press release includes certain non-GAAP financial measures,
including adjusted diluted earnings per share from continuing
operations, adjusted operating profit for certain segments,
corporate adjusted expenses, adjusted gross margin and adjusted
operating margin. Management considers GAAP financial measures as
well as such non-GAAP financial information in its evaluation of
the company’s financial statements and believes these non-GAAP
measures provide useful supplemental information to assess the
company’s operating performance and financial position. These
measures should be viewed in addition to, and not in lieu of, the
company’s diluted earnings per share, operating performance and
financial measures as calculated in accordance with GAAP.
Certain of these non-GAAP measures, such as adjusted gross
margin, adjusted operating margin, and adjusted EPS, are
forward-looking. Historically, the Company has excluded the impact
of certain items impacting comparability, such as, but not limited
to, restructuring expense, extinguishment of debt, hedging gains
and losses, impairment charges and unusual tax items, from the
non-GAAP financial measures it presents. Reconciliations of these
forward-looking non-GAAP financial measures to the most directly
comparable GAAP financial measures are not provided because the
Company is unable to provide such reconciliations without
unreasonable effort, due to the uncertainty and inherent difficulty
of predicting the occurrence and the financial impact of such items
impacting comparability and the periods in which such items may be
recognized. For the same reasons, the Company is unable to address
the probable significance of the unavailable information, which
could be material to future results.
Hedge gains and losses are generally aggregated, and net amounts
are reclassified from unallocated corporate expense to the
operating segments when the underlying commodity or foreign
currency being hedged is expensed in segment cost of goods sold.
The Company identifies these amounts as items that impact
comparability within the discussion of unallocated Corporate
results.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161222005130/en/
Conagra Brands, Inc.MEDIA:Mike Cummins,
312-549-5257Michael.Cummins@conagra.comorINVESTORS:Johan Nystedt,
312-549-5002ir@conagrafoods.com
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