CHICAGO, March 23, 2017 /PRNewswire/ -- Today Conagra
Brands, Inc. (NYSE: CAG) reported results for the fiscal 2017 third
quarter ended February 26, 2017.
Highlights
(all comparisons are against the year
ago period, unless otherwise noted)
- Diluted EPS from continuing operations grew from $0.16 to $0.41;
adjusted diluted EPS from continuing operations grew 37.1% from
$0.35 to $0.48, despite the inclusion in the prior-year
period of the Spicetec Flavors and Seasonings and JM Swank
businesses, which were divested in the first quarter of fiscal year
2017.
- "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
financial measures.
- Net sales decreased 9.9%. Net sales excluding the impacts
of divestitures and foreign exchange decreased 4.8%, largely driven
by the Company's continued progress in building a higher quality
revenue base.
- Gross margin (net sales less cost of goods sold as a percent of
net sales) expanded 310 basis points, and adjusted gross margin
expanded 180 basis points.
CEO Perspective
Sean
Connolly, president and chief executive officer of Conagra
Brands, commented, "I am pleased with our ongoing progress in
reshaping our portfolio, capabilities, and culture. Our
disciplined focus on controlling costs and upgrading the quality of
our revenue base are delivering the desired impact. We are also
excited about our innovation lineup, which we expect to begin
hitting stores this summer."
He added, "Now that we have completed the third quarter, we are
updating our full year guidance to reflect the beneficial timing of
certain costs and the softer near-term macro environment. We expect
to deliver adjusted diluted EPS at or slightly above the high-end
of our range with net sales (excluding the impacts of divestitures
and foreign exchange) at or slightly below the low-end of our
range."
Total Company Results
Net sales decreased
9.9%. Net sales excluding the impacts of divestitures and
foreign exchange decreased 4.8%, primarily as a result of volume
declines associated with the Company's actions to build a higher
quality revenue base.
Gross margin increased 310 basis points from 28.2% to
31.3%. Adjusted gross margin increased 180 basis points to
31.6%. The increases were driven primarily by input cost
favorability, supply chain productivity, improved pricing, and the
impact of divesting lower margin businesses. These benefits
more than offset the volume declines, unfavorable mix, and the
negative effects of foreign exchange.
Diluted EPS from continuing operations increased from
$0.16 to $0.41, and adjusted diluted EPS from continuing
operations increased 37.1% from $0.35
to $0.48. The growth primarily
reflects lower selling, general, and administrative (SG&A)
expenses associated with cost savings programs, lower interest
expense as a result of debt reduction, and improved profitability
in the Ardent Mills joint venture. These benefits were
partially offset by volume declines and the impact of the
divestitures of the Spicetec Flavors and Seasonings and JM Swank
businesses in the first quarter of fiscal year 2017.
Grocery & Snacks Segment
Net sales for the Grocery
& Snacks segment decreased 5% to $850
million. Volume declined 5% resulting from a reduction
in promotional intensity and the planned exit of certain
lower-performing products. Price/mix was flat to the prior-year
period as the continued progress in pricing and trade productivity
was fully offset by unfavorable mix.
Operating profit for the segment increased 32%, and adjusted
operating profit increased 8%, reflecting continued margin
expansion in the quarter. Continued discipline on pricing and trade
promotion, favorable input costs, supply chain productivity, and
the benefits of our cost savings efforts more than offset decreased
net sales.
Refrigerated & Frozen Segment
Net sales for the
Refrigerated & Frozen segment decreased 6% to $666 million. Volume declined 6%, reflecting
the continued actions to upgrade the quality of the revenue base by
optimizing pricing and improving trade promotion productivity as
well as the planned discontinuation of certain lower- performing
products. Price/mix was flat compared to the prior-year period as
improvements in pricing and trade promotion practices across much
of the portfolio were completely offset by reduced prices in select
deflationary categories and unfavorable mix. Net sales growth
was also negatively affected by a transitory increase in Egg
Beaters' volume in the prior-year period associated with the avian
flu outbreak. 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 increased 10%, and adjusted
operating profit increased 5%. The benefits of favorable input
costs, supply chain productivity, and SG&A cost savings more
than offset lower sales. The Company estimates that the avian
flu-related benefits in the prior-year period reduced the segment's
operating profit growth, on a reported and adjusted basis, by
approximately 5 percentage points.
International Segment
Net sales for the International
segment decreased 3% to $205
million. A 3% increase in price/mix was more than
offset by a 2% decrease in foreign exchange and 4% decrease in
volume.
Operating profit for the segment increased 10%, and adjusted
operating profit increased 7% behind higher price/mix and lower
SG&A expenses.
Foodservice Segment
Net sales for the Foodservice
segment decreased 3% to $260 million.
Volume decreased 6% and price/mix increased 3%, primarily
reflecting the impact of exiting a non-core business in the
prior-year period.
Operating profit for the segment was flat to the prior-year
period, reflecting general stability in the business.
Corporate Expenses
Corporate expenses decreased 31%
from $152 million to $105 million, and adjusted corporate expenses
decreased 23% to $53 million,
reflecting planned benefits from the Company's cost savings
efforts.
Other Items
Advertising and promotion expense
decreased 3% to $91 million in the
quarter, reflecting improved efficiency in spend and alignment of
investments with the Company's portfolio segmentation.
Equity method investment earnings increased $13 million to $22
million as a result of improved performance in the Ardent
Mills joint venture.
Net interest expense decreased 40% to $46
million, driven by significant debt reduction over the past
several quarters.
Capital Allocation
In the third quarter, the Company
paid a quarterly dividend of $0.25
per share to shareholders of record at the close of business on
October 31, 2016. During the third
quarter, the Board of Directors of Conagra Brands also approved its
first dividend since the completion of the spin-off of the Lamb
Weston business at the quarterly rate of $0.20 per share.
The Company repurchased approximately 11 million shares for
$425 million during the
quarter. In fiscal 2017 through the end of the third quarter,
the Company had repurchased approximately 15 million shares for
$595 million.
During the third quarter, the Company used approximately
$504 million of cash to redeem senior
debt.
Outlook
With three fiscal quarters complete, the
Company is updating its fiscal year 2017 outlook. Adjusted
diluted EPS is expected to be at or slightly above the high-end of
the $1.65 to $1.70 range. Net sales
(excluding the impacts of divestitures and foreign exchange) are
expected to be at or slightly below the low-end of the range of
down 4% to 5%. Adjusted gross margin is expected to be within range
of 30.4% to 30.6%. Adjusted operating margin is expected to be
slightly above the range of 15.3% to 15.5%.
The inability to predict the amount and timing of items
impacting comparability makes a detailed reconciliation of these
forward-looking non-GAAP financial measures impracticable. Please
see the end of this release for more information.
Major Items Affecting Third Quarter Fiscal 2017 EPS
Comparability
Included in the $0.41 diluted
EPS from continuing operations for the third quarter of fiscal 2017
(EPS amounts rounded and after tax)
- Approximately $0.02 per diluted
share of net expense, or $14 million
pre-tax ($9 million after tax),
related to restructuring plans ($5
million in cost of goods sold and $9
million in SG&A)
- Approximately $0.02 per diluted
share of net expense, or $14 million
pre-tax ($9 million after tax),
related to a pension settlement (all SG&A)
- Approximately $0.05 per diluted
share of net expense, or $33 million
pre-tax ($21 million after tax),
related to extinguishment of debt (all SG&A)
- Approximately $0.02 per diluted
share of net benefit related to the receipt of foreign tax
incentives.
Included in the $0.16 diluted
EPS from continuing operations for the third quarter of fiscal 2016
(EPS amounts rounded and after tax)
- Approximately $0.16 per diluted
share of net expense, or $109 million
pre-tax ($70 million after tax),
related to restructuring plans ($36
million in cost of goods sold, $73
million in SG&A)
- Approximately $0.04 per diluted
share of net expense, or $24 million
pre-tax ($15 million after tax),
related to extinguishment of debt (all SG&A)
Discussion of Results
Conagra Brands will host a
webcast and conference call at 9:30 a.m.
Eastern Time today to discuss the results. The live
audio webcast and presentation slides will be available on
conagrabrands.com/investor-relations under Events &
Presentations. The conference call may be accessed by dialing
877-627-6582 for U.S. and Canada
participants and 719-325-4807 for international participants and
using passcode 6267701. Please dial in 10 minutes prior to the call
start time. Following the Company's remarks, the conference call
will include a question-and-answer session with the investment
community.
A replay of the webcast will be available for one year beginning
today at 12:30 p.m. ET on
conagrabrands.com/investor-relations under Events &
Presentations.
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 document
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 document 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 document. These risks and uncertainties include, among other
things: our ability to achieve the intended benefits of
acquisitions and divestitures, including 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; 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; 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 document, which speak only as of the
date of this document.
Conagra Brands,
Inc.
|
Consolidated
Statements of Operations
|
(in
millions)
|
(unaudited)
|
|
|
|
THIRD
QUARTER
|
|
|
Thirteen weeks
ended
|
|
Thirteen weeks
ended
|
|
|
|
|
February 26,
2017
|
|
February 28,
2016
|
|
Percent
Change
|
Net sales
|
|
$
|
1,981.2
|
|
|
$
|
2,199.3
|
|
|
(9.9)
|
%
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of goods
sold
|
|
1,360.2
|
|
|
1,579.5
|
|
|
(13.9)
|
%
|
Selling, general and
administrative expenses
|
|
349.7
|
|
|
447.0
|
|
|
(21.8)
|
%
|
Interest expense,
net
|
|
45.7
|
|
|
76.4
|
|
|
(40.2)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
225.6
|
|
|
96.4
|
|
|
134.0
|
%
|
|
|
|
|
|
|
|
Income tax
expense
|
|
67.9
|
|
|
33.6
|
|
|
102.1
|
%
|
Equity method
investment earnings
|
|
21.8
|
|
|
8.6
|
|
|
153.5
|
%
|
Income from
continuing operations
|
|
179.5
|
|
|
71.4
|
|
|
151.4
|
%
|
Income from
discontinued operations, net of tax
|
|
0.7
|
|
|
134.9
|
|
|
(99.5)
|
%
|
Net income
|
|
$
|
180.2
|
|
|
$
|
206.3
|
|
|
(12.7)
|
%
|
Less: Net income
attributable to noncontrolling interests
|
|
0.5
|
|
|
1.7
|
|
|
(70.6)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
179.7
|
|
|
$
|
204.6
|
|
|
(12.2)
|
%
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.16
|
|
|
156.3
|
%
|
Income from
discontinued operations
|
|
0.01
|
|
|
0.30
|
|
|
(96.7)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.42
|
|
|
$
|
0.46
|
|
|
(8.7)
|
%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
431.7
|
|
|
435.7
|
|
|
(0.9)
|
%
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.41
|
|
|
$
|
0.16
|
|
|
156.3
|
%
|
Income from
discontinued operations
|
|
—
|
|
|
0.30
|
|
|
(100.0)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.41
|
|
|
$
|
0.46
|
|
|
(10.9)
|
%
|
|
|
|
|
|
|
|
Weighted average
share and share equivalents outstanding
|
|
436.4
|
|
|
439.6
|
|
|
(0.7)
|
%
|
Conagra Brands,
Inc.
|
Consolidated
Statements of Operations
|
(in
millions)
|
(unaudited)
|
|
|
|
THIRD
QUARTER
|
|
|
Thirty-nine weeks
ended
|
|
Thirty-nine weeks
ended
|
|
|
|
|
February 26,
2017
|
|
February 28,
2016
|
|
Percent
Change
|
Net sales
|
|
$
|
5,965.2
|
|
|
$
|
6,611.1
|
|
|
(9.8)
|
%
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of goods
sold
|
|
4,152.1
|
|
|
4,762.0
|
|
|
(12.8)
|
%
|
Selling, general and
administrative expenses
|
|
999.3
|
|
|
1,293.0
|
|
|
(22.7)
|
%
|
Interest expense,
net
|
|
158.0
|
|
|
235.7
|
|
|
(33.0)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
655.8
|
|
|
320.4
|
|
|
104.7
|
%
|
|
|
|
|
|
|
|
Income tax
expense
|
|
315.5
|
|
|
126.0
|
|
|
150.4
|
%
|
Equity method
investment earnings
|
|
52.1
|
|
|
50.7
|
|
|
2.8
|
%
|
Income from
continuing operations
|
|
392.4
|
|
|
245.1
|
|
|
60.1
|
%
|
Income (loss) from
discontinued operations, net of tax
|
|
103.7
|
|
|
(1,031.9)
|
|
|
N/A
|
|
Net income
(loss)
|
|
$
|
496.1
|
|
|
$
|
(786.8)
|
|
|
N/A
|
|
Less: Net income
attributable to noncontrolling interests
|
|
8.1
|
|
|
7.8
|
|
|
3.8
|
%
|
Net income (loss)
attributable to Conagra Brands, Inc.
|
|
$
|
488.0
|
|
|
$
|
(794.6)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share - basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.90
|
|
|
$
|
0.56
|
|
|
60.7
|
%
|
Income (loss) from
discontinued operations
|
|
0.22
|
|
|
(2.40)
|
|
|
N/A
|
|
Net income (loss)
attributable to Conagra Brands, Inc.
|
|
$
|
1.12
|
|
|
$
|
(1.84)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
436.0
|
|
|
433.3
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
Earnings (loss) per
share - diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.89
|
|
|
$
|
0.56
|
|
|
58.9
|
%
|
Income (loss) from
discontinued operations
|
|
0.22
|
|
|
(2.39)
|
|
|
N/A
|
|
Net income (loss)
attributable to Conagra Brands, Inc.
|
|
$
|
1.11
|
|
|
$
|
(1.83)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
Weighted average
share and share equivalents outstanding
|
|
440.0
|
|
|
437.6
|
|
|
0.5
|
%
|
Conagra Brands,
Inc.
|
Segment Operating
Results
|
(in
millions)
|
(unaudited)
|
|
|
|
THIRD
QUARTER
|
|
|
Thirteen weeks
ended
|
|
Thirteen weeks
ended
|
|
|
|
|
February 26,
2017
|
|
February 28,
2016
|
|
Percent
Change
|
SALES
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
849.8
|
|
|
$
|
898.0
|
|
|
(5.4)
|
%
|
Refrigerated &
Frozen
|
|
666.4
|
|
|
708.9
|
|
|
(6.0)
|
%
|
International
|
|
205.2
|
|
|
211.6
|
|
|
(3.0)
|
%
|
Foodservice
|
|
259.8
|
|
|
266.6
|
|
|
(2.6)
|
%
|
Commercial
|
|
—
|
|
|
114.2
|
|
|
(100.0)
|
%
|
Total
|
|
1,981.2
|
|
|
2,199.3
|
|
|
(9.9)
|
%
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
201.9
|
|
|
$
|
153.4
|
|
|
31.6
|
%
|
Refrigerated &
Frozen
|
|
128.9
|
|
|
116.8
|
|
|
10.4
|
%
|
International
|
|
18.1
|
|
|
16.4
|
|
|
10.4
|
%
|
Foodservice
|
|
27.8
|
|
|
27.9
|
|
|
(0.4)
|
%
|
Commercial
|
|
(0.2)
|
|
|
10.2
|
|
|
N/A
|
|
Total operating
profit for segments
|
|
376.5
|
|
|
324.7
|
|
|
16.0
|
%
|
|
|
|
|
|
|
|
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
|
|
(105.2)
|
|
|
(151.9)
|
|
|
(30.7)
|
%
|
Interest expense,
net
|
|
(45.7)
|
|
|
(76.4)
|
|
|
(40.2)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
$
|
225.6
|
|
|
$
|
96.4
|
|
|
134.0
|
%
|
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)
|
|
|
|
THIRD
QUARTER
|
|
|
Thirty-nine weeks
ended
|
|
Thirty-nine weeks
ended
|
|
|
|
|
February 26,
2017
|
|
February 28,
2016
|
|
Percent
Change
|
SALES
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
2,460.9
|
|
|
$
|
2,604.6
|
|
|
(5.5)
|
%
|
Refrigerated &
Frozen
|
|
2,011.0
|
|
|
2,193.3
|
|
|
(8.3)
|
%
|
International
|
|
611.3
|
|
|
639.3
|
|
|
(4.4)
|
%
|
Foodservice
|
|
810.9
|
|
|
822.2
|
|
|
(1.4)
|
%
|
Commercial
|
|
71.1
|
|
|
351.7
|
|
|
(79.8)
|
%
|
Total
|
|
5,965.2
|
|
|
6,611.1
|
|
|
(9.8)
|
%
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
602.7
|
|
|
$
|
478.6
|
|
|
25.9
|
%
|
Refrigerated &
Frozen
|
|
339.0
|
|
|
321.7
|
|
|
5.4
|
%
|
International
|
|
(157.8)
|
|
|
53.0
|
|
|
N/A
|
|
Foodservice
|
|
81.4
|
|
|
74.5
|
|
|
9.3
|
%
|
Commercial
|
|
202.6
|
|
|
35.3
|
|
|
473.9
|
%
|
Total operating
profit for segments
|
|
1,067.9
|
|
|
963.1
|
|
|
10.9
|
%
|
|
|
|
|
|
|
|
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
|
|
(254.1)
|
|
|
(407.0)
|
|
|
(37.6)
|
%
|
Interest expense,
net
|
|
(158.0)
|
|
|
(235.7)
|
|
|
(33.0)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
$
|
655.8
|
|
|
$
|
320.4
|
|
|
104.7
|
%
|
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 Balance
Sheet
|
(in
millions)
|
(unaudited)
|
|
|
|
February 26,
2017
|
|
May 29,
2016
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
683.6
|
|
|
$
|
798.1
|
|
Receivables, less
allowance for doubtful accounts
|
|
|
|
|
of $3.7 and
$3.2
|
|
601.4
|
|
|
650.1
|
|
Inventories
|
|
1,046.4
|
|
|
1,083.2
|
|
Prepaid expenses and
other current assets
|
|
207.7
|
|
|
148.6
|
|
Current assets of
discontinued operations
|
|
—
|
|
|
779.7
|
|
Current assets held
for sale
|
|
—
|
|
|
117.0
|
|
Total current
assets
|
|
2,539.1
|
|
|
3,576.7
|
|
Property, plant and
equipment, net
|
|
1,655.8
|
|
|
1,701.6
|
|
Goodwill
|
|
4,251.7
|
|
|
4,396.2
|
|
Brands, trademarks
and other intangibles, net
|
|
1,253.1
|
|
|
1,237.2
|
|
Other
assets
|
|
797.6
|
|
|
905.5
|
|
Noncurrent assets of
discontinued operations
|
|
—
|
|
|
1,339.3
|
|
Noncurrent assets
held for sale
|
|
1.7
|
|
|
234.1
|
|
|
|
$
|
10,499.0
|
|
|
$
|
13,390.6
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Notes
payable
|
|
$
|
3.7
|
|
|
$
|
13.9
|
|
Current installments
of long-term debt
|
|
128.8
|
|
|
559.4
|
|
Accounts
payable
|
|
690.1
|
|
|
706.7
|
|
Accrued
payroll
|
|
148.4
|
|
|
220.8
|
|
Other accrued
liabilities
|
|
593.9
|
|
|
567.7
|
|
Current liabilities
of discontinued operations
|
|
—
|
|
|
409.2
|
|
Current liabilities
held for sale
|
|
—
|
|
|
54.7
|
|
Total current
liabilities
|
|
1,564.9
|
|
|
2,532.4
|
|
Senior long-term
debt, excluding current installments
|
|
2,645.8
|
|
|
4,685.5
|
|
Subordinated
debt
|
|
195.9
|
|
|
195.9
|
|
Other noncurrent
liabilities
|
|
1,788.2
|
|
|
1,875.7
|
|
Noncurrent
liabilities of discontinued operations
|
|
—
|
|
|
304.8
|
|
Noncurrent
liabilities held for sale
|
|
—
|
|
|
1.5
|
|
Total stockholders'
equity
|
|
4,304.2
|
|
|
3,794.8
|
|
|
|
$
|
10,499.0
|
|
|
$
|
13,390.6
|
|
Conagra Brands,
Inc. and Subsidiaries Condensed Consolidated Statements of Cash
Flows
|
(in millions,
unaudited)
|
|
|
Thirty-nine weeks
ended
|
|
February 26,
2017
|
|
February 28,
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
496.1
|
|
|
$
|
(786.8)
|
|
Income (loss) from
discontinued operations
|
103.7
|
|
|
(1,031.9)
|
|
Income from
continuing operations
|
392.4
|
|
|
245.1
|
|
Adjustments to
reconcile income from continuing operations to net cash flows from
operating activities:
|
|
|
|
Depreciation and
amortization
|
199.8
|
|
|
210.6
|
|
Asset impairment
charges
|
221.9
|
|
|
8.4
|
|
Gain on
divestitures
|
(197.4)
|
|
|
—
|
|
Loss on
extinguishment of debt
|
93.3
|
|
|
23.9
|
|
Lease cancellation
expense
|
—
|
|
|
55.6
|
|
Earnings of
affiliates in excess of distributions
|
(21.6)
|
|
|
(10.3)
|
|
Share-based payments
expense
|
28.1
|
|
|
29.5
|
|
Contributions to
pension plans
|
(9.8)
|
|
|
(9.3)
|
|
Pension expense
(benefit)
|
(16.2)
|
|
|
13.8
|
|
Other
items
|
25.5
|
|
|
25.3
|
|
Change in operating
assets and liabilities excluding effects of business acquisitions
and dispositions:
|
|
|
|
Accounts
receivable
|
49.5
|
|
|
(99.3)
|
|
Inventory
|
35.0
|
|
|
(65.1)
|
|
Deferred income taxes
and income taxes payable, net
|
135.6
|
|
|
(160.0)
|
|
Prepaid expenses and
other current assets
|
8.2
|
|
|
8.2
|
|
Accounts
payable
|
13.3
|
|
|
(104.6)
|
|
Accrued
payroll
|
(71.5)
|
|
|
24.2
|
|
Other accrued
liabilities
|
(82.6)
|
|
|
78.3
|
|
Net cash
flows from operating activities — continuing operations
|
803.5
|
|
|
274.3
|
|
Net cash flows
from operating activities — discontinued operations
|
43.0
|
|
|
464.3
|
|
Net cash
flows from operating activities
|
846.5
|
|
|
738.6
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
Additions to
property, plant and equipment
|
(158.5)
|
|
|
(171.1)
|
|
Sale of property,
plant and equipment
|
12.5
|
|
|
19.4
|
|
Proceeds from
divestitures
|
489.0
|
|
|
—
|
|
Purchase of business
and intangible assets
|
(108.1)
|
|
|
(10.4)
|
|
Other
items
|
—
|
|
|
0.3
|
|
Net cash
flows from investing activities — continuing operations
|
234.9
|
|
|
(161.8)
|
|
Net cash
flows from investing activities — discontinued
operations
|
(123.7)
|
|
|
2,418.2
|
|
Net cash
flows from investing activities
|
111.2
|
|
|
2,256.4
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
Net short-term
borrowings
|
(10.1)
|
|
|
10.5
|
|
Repayment of
long-term debt
|
(1,062.3)
|
|
|
(2,519.9)
|
|
Payment of intangible
asset financing arrangement
|
(14.9)
|
|
|
—
|
|
Repurchase of Conagra
Brands, Inc. common shares
|
(594.6)
|
|
|
—
|
|
Cash dividends
paid
|
(328.9)
|
|
|
(323.5)
|
|
Exercise of stock
options and issuance of other stock awards
|
66.6
|
|
|
164.6
|
|
Other
Items
|
(1.9)
|
|
|
—
|
|
Net
cash flows from financing activities — continuing
operations
|
(1,946.1)
|
|
|
(2,668.3)
|
|
Net
cash flows from financing activities — discontinued
operations
|
839.1
|
|
|
(4.7)
|
|
Net cash flows
from financing activities
|
(1,107.0)
|
|
|
(2,673.0)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
(1.6)
|
|
|
(2.5)
|
|
Net change in cash
and cash equivalents
|
(150.9)
|
|
|
319.5
|
|
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
|
—
|
|
|
36.6
|
|
Cash and cash
equivalents at beginning of period
|
798.1
|
|
|
134.1
|
|
Cash and cash
equivalents at end of period
|
$
|
683.6
|
|
|
$
|
466.0
|
|
See notes to the condensed consolidated financial
statements.
Q3 FY17 & Q3
FY16 Diluted EPS from Continuing Operations
|
|
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Diluted EPS from
continuing operations
|
$
|
0.41
|
|
|
$
|
0.16
|
|
|
156.3
|
%
|
Net expense related
to restructuring plans
|
0.02
|
|
|
0.16
|
|
|
|
Net expense related
to early extinguishment of debt
|
0.05
|
|
|
0.04
|
|
|
|
Net expense related
to salaried pension plan lump sum settlement
|
0.02
|
|
|
—
|
|
|
|
Net benefit related
to unusual tax items
|
(0.02)
|
|
|
—
|
|
|
|
Rounding
|
—
|
|
|
(0.01)
|
|
|
|
Adjusted Diluted
EPS from continuing operations
|
$
|
0.48
|
|
|
$
|
0.35
|
|
|
37.1
|
%
|
Grocery &
Snacks Foods Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Grocery &
Snacks Segment Operating Profit
|
$
|
201.9
|
|
|
$
|
153.4
|
|
|
31.6
|
%
|
Net expense related
to restructuring plans
|
9.1
|
|
|
43.2
|
|
|
|
Net expense related
to intangible impairment charges
|
1.1
|
|
|
—
|
|
|
|
Grocery &
Snacks Segment Adjusted Operating Profit
|
$
|
212.1
|
|
|
$
|
196.6
|
|
|
7.9
|
%
|
Refrigerated &
Frozen Foods Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Refrigerated &
Frozen Segment Operating Profit
|
$
|
128.9
|
|
|
$
|
116.8
|
|
|
10.4
|
%
|
Net (income) expense
related to restructuring plans
|
(1.1)
|
|
|
4.8
|
|
|
|
Refrigerated &
Frozen Segment Adjusted Operating Profit
|
$
|
127.8
|
|
|
$
|
121.6
|
|
|
5.1
|
%
|
International
Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
International
Segment Operating Profit
|
$
|
18.1
|
|
|
$
|
16.4
|
|
|
10.4
|
%
|
Net (income) expense
related to restructuring plans
|
(0.3)
|
|
|
0.2
|
|
|
|
International
Segment Adjusted Operating Profit
|
$
|
17.8
|
|
|
$
|
16.6
|
|
|
7.2
|
%
|
Foodservice
Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Foodservice
Segment Operating Profit
|
$
|
27.8
|
|
|
$
|
27.9
|
|
|
(0.4)
|
%
|
Net expense related
to restructuring plans
|
—
|
|
|
—
|
|
|
|
Foodservice
Segment Adjusted Operating Profit
|
$
|
27.8
|
|
|
$
|
27.9
|
|
|
(0.4)
|
%
|
Commercial Segment
Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Commercial Segment
Operating Profit (Loss)
|
$
|
(0.2)
|
|
|
$
|
10.2
|
|
|
N/A
|
|
Adjustment related to
gain on JM Swank sale
|
0.2
|
|
|
—
|
|
|
|
Commercial Segment
Adjusted Operating Profit
|
$
|
—
|
|
|
$
|
10.2
|
|
|
(100.0)
|
%
|
Corporate Expense
Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Selling, general
and administrative expenses
|
$
|
349.7
|
|
|
$
|
447.0
|
|
|
(21.8)
|
%
|
Less: selling,
general and administrative expenses from reporting
segments
|
244.0
|
|
|
293.3
|
|
|
|
Plus: Corporate cost
of goods sold
|
(0.5)
|
|
|
(1.8)
|
|
|
|
Corporate
expenses
|
$
|
105.2
|
|
|
$
|
151.9
|
|
|
|
Net expense related
to restructuring plans
|
(6.0)
|
|
|
(60.9)
|
|
|
|
Net expense related
to early extinguishment of debt
|
(32.7)
|
|
|
(23.9)
|
|
|
|
Net expense related
to salaried pension plan lump sum settlement
|
(13.8)
|
|
|
—
|
|
|
|
Net income related to
hedging
|
0.5
|
|
|
1.8
|
|
|
|
Adjusted Corporate
expenses
|
$
|
53.2
|
|
|
$
|
68.9
|
|
|
(22.8)
|
%
|
Net Sales
Reconciliation
|
|
(Dollars in
millions)
|
Q3
FY17
|
|
Q3
FY16
|
|
%
Change
|
Net
Sales
|
$
|
1,981.2
|
|
|
$
|
2,199.3
|
|
|
(9.9)
|
%
|
Impact of foreign
exchange
|
3.8
|
|
|
—
|
|
|
|
Net sales from
divested businesses
|
—
|
|
|
(114.2)
|
|
|
|
Net Sales,
excluding the impacts of divestitures and foreign
exchange
|
$
|
1,985.0
|
|
|
$
|
2,085.1
|
|
|
(4.8)
|
%
|
Gross Margin
Reconciliation
|
|
Gross Margin: Gross
Profit as a % of Net sales
|
|
|
|
|
Q3
FY17
|
|
Q3
FY16
|
Net sales
|
$
|
1,981.2
|
|
|
$
|
2,199.3
|
|
Cost of goods
sold
|
1,360.2
|
|
|
1,579.5
|
|
Gross
Profit
|
$
|
621.0
|
|
|
$
|
619.8
|
|
|
|
|
|
Net expense related
to restructuring plans included in cost of goods sold
|
4.7
|
|
|
35.9
|
|
Net income related to
hedging
|
(0.5)
|
|
|
(1.8)
|
|
Adjusted Gross
Profit
|
$
|
625.2
|
|
|
$
|
653.9
|
|
Adjusted Gross
Margin
|
31.6
|
%
|
|
29.7
|
%
|
This document includes certain non-GAAP financial measures,
including adjusted diluted earnings per share from continuing
operations, net sales excluding the impacts of divestitures and
foreign exchange, adjusted operating profit for certain segments,
adjusted corporate 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, net sales excluding the impacts
of divestitures and foreign exchange, and adjusted diluted 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, pension plan
lump sum settlement, foreign exchange, the impact of divestitures,
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.
For more information, please contact:
MEDIA:
Mike Cummins
312-549-5257
Michael.Cummins@conagra.com
INVESTORS: Johan Nystedt
312-549-5002
ir@conagra.com
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SOURCE Conagra Brands, Inc.