CHICAGO, Dec. 21, 2017 /PRNewswire/ -- Today Conagra
Brands, Inc. (NYSE: CAG) reported results for the second quarter
fiscal year 2018, which ended on November
26, 2017.
Highlights
(all comparisons are against the prior
year fiscal period, unless otherwise noted)
- Net sales grew 4.1% and organic net sales1 grew 2.3%
in the quarter with growth in each operating segment. The Company
estimates that the recent hurricanes increased its net sales and
organic net sales growth rates by approximately 220 basis
points.
- Diluted earnings per share (EPS) from continuing operations
grew 107.7% from $0.26 to
$0.54 in the quarter;
adjusted2 diluted EPS from continuing operations grew
12.2% from $0.49 to $0.55.
- The Refrigerated & Frozen segment continued its growth
momentum in the second quarter with 4% volume growth.
- For fiscal 2018, the Company now expects its organic net sales
and adjusted EPS to be near the high end of their respective
guidance ranges.
- The Company bolstered its snacking and frozen platforms by
completing the acquisition of Angie's Artisan Treats, maker of
Angie's BOOMCHICKAPOP, during the quarter. Subsequent to quarter
close, the Company entered into a definitive agreement to acquire
the Sandwich Bros. of Wisconsin
frozen sandwich business.
CEO Perspective
Sean
Connolly, president and chief executive officer of Conagra
Brands, commented, "One year after becoming a pure-play, branded
food company, Conagra is growing again. Our work to upgrade
the quality of our revenue base and rebuild our innovation pipeline
is bearing fruit, particularly in our frozen business, where we put
much of our year-one focus. Better than expected top-line
performance through the second quarter is enabling us to invest
more in our U.S. retail business to enhance distribution,
merchandising, and consumer trial of our brands – especially where
we have new renovation or innovation. Accordingly, we are
updating our fiscal 2018 organic net sales and EPS guidance to near
the high end of their respective ranges."
He added, "Higher-than-anticipated inflation, hurricane-related
costs, and increased investments to drive distribution and consumer
trial are pressuring margins in the near term. We expect
fiscal 2018 operating margins to be near the low end of our
guidance range as a result of these factors, and our transformation
plan remains squarely on-track to achieve our fiscal 2020
targets."
Total Company Results
Net sales grew 4.1%, and organic
net sales grew 2.3%, reflecting continued improvements in domestic
retail volume growth, partially offset by increased investments to
drive distribution and consumer trial. The Company estimates
that the impacts of the recent hurricanes benefitted the net sales
and organic net sales growth rates by approximately 220 basis
points.
Gross profit increased $11 million
from $648 million to $658 million in the quarter. Adjusted gross
profit increased $5 million from
$650 million to $655 million, primarily driven by volume growth.
During the quarter, the Company experienced elevated input cost
inflation, including higher transportation costs driven by the
recent hurricanes. Additionally, the Company increased investments
in its brands to drive distribution and consumer trial. These
increased costs were partially offset by improvements in price/mix,
primarily in the Foodservice segment, and supply chain realized
productivity.
Diluted EPS from continuing operations grew from $0.26 to $0.54 in
the quarter; adjusted diluted EPS from continuing operations grew
12.2% from $0.49 to $0.55. The growth primarily reflects the benefit
of fewer shares outstanding, net sales growth, and lower interest
expense. These benefits were partially offset by input cost
inflation, planned increases in selling, general, and
administrative (SG&A) expenses, and a higher effective tax rate
compared to the prior year period. Additionally, total marketing
investments, which include advertising and promotion (A&P),
trade, and slotting, increased in the quarter.
Grocery & Snacks Segment Results
Net sales for the
Grocery & Snacks segment grew 6% to $900
million in the quarter. The acquisitions of the Duke's,
BIGS, Frontera, and Angie's BOOMCHICKAPOP businesses added over 300
basis points to the net sales growth rate. Organic net sales grew
over 2%. The Company estimates that the recent hurricanes
benefitted the net sales and organic net sales growth rates by
approximately 200 basis points, primarily driven by inventory
builds in both customer warehouses and consumer pantries in the
second quarter which are expected to negatively impact the third
quarter of fiscal 2018. Volume increased over 3%, driven by
hurricane-related benefits. Additionally, consumer takeaway
trends improved in brands such as Ro*Tel, Chef Boyardee, Slim Jim,
and Peter Pan as well as the microwave popcorn businesses. The
Company invested in higher-quality merchandising events that
aligned with consumer purchase behavior in the quarter. These
investments, which are intended to drive increased brand saliency
with consumers, led to a decrease in price/mix of 1%.
Operating profit for the segment decreased 9%, and adjusted
operating profit decreased 5%. The decreases were driven by
the previously mentioned merchandising investments as well as the
impacts of higher input costs and costs associated with the recent
hurricanes. These increases in supply chain costs more than offset
the favorable impacts of net sales growth, supply chain realized
productivity, and decreased A&P investments.
Refrigerated & Frozen Segment Results
Net
sales for the Refrigerated & Frozen segment increased 2% to
$758 million in the quarter. Organic
net sales increased 2%, aided by core business improvements and
innovation launches by the Marie Callender's, Healthy Choice, and
Banquet businesses. Continued growth in the core Reddi-wip
business and the addition of frozen innovation launches by Frontera
also added to the net sales growth rate. Volume increased 4%,
driven by both core business improvements and innovation
launches. Investments to drive distribution, enhanced shelf
presence, and consumer trial led to a price/mix decrease of 2%.
Operating profit for the segment increased 9% in the quarter,
and adjusted operating profit increased 7%. The increases were
primarily driven by volume growth and supply chain realized
productivity. These benefits were partially offset by increased
input costs and investments to drive distribution, enhanced shelf
presence, and consumer trial.
International Segment Results
Net sales for the
International segment increased 4% to $220
million in the quarter, and organic net sales were
approximately flat compared to the year-ago period. Volume
decreased 2% and price/mix increased 2% as the segment executes the
value over volume strategy through reductions in promotional
intensity, improvements in pricing and trade productivity, and
planned discontinuations of certain lower-performing
products. Foreign exchange favorably impacted net sales by
approximately 400 basis points.
The segment reported an operating profit of $20 million compared to an operating loss of
$27 million in the prior-year period;
the prior-year period included pre-tax goodwill impairment charges
of approximately $44 million, driven
by a devaluation of the Mexican peso. Adjusted operating profit
increased 20% in the quarter behind increased pricing, favorable
brand margin mix, and the impact of favorable foreign exchange.
Foodservice Segment Results
Net sales for the
Foodservice segment increased 4% to $295
million in the quarter. The Company estimates that the
recent hurricanes benefitted the net sales growth rate by
approximately 10 percentage points. Volume decreased 7% as the
segment executed the value over volume strategy by exiting noncore
and lower-performing businesses. Price/mix increased 11% in
the quarter, primarily driven by favorable product and customer
mix, as well as the impact of inflation-driven increases in
pricing.
Operating profit increased 48% in the quarter driven by
increased net sales and favorable customer and product mix.
Other Items
Corporate expenses decreased 60% to
$45 million. Adjusted corporate
expenses increased 27% to $46
million, primarily driven by an increase in certain
self-insurance costs and a reduction in income from transition
service agreements.
A&P expense decreased 12% to $86
million in the quarter as the Company improved efficiencies
and optimized total marketing investments.
Equity method investment earnings increased $3 million to $21
million as the Ardent Mills joint venture benefitted from
continued improvements in operating efficiencies.
Net interest expense decreased 30% to $38
million in the quarter, driven by a significant reduction in
debt during the year-ago period.
Capital Allocation
In the second quarter, the Company
paid a quarterly dividend of $0.2125
per share. As previously announced, the Company's board of
directors approved a dividend payment at the quarterly rate of
$0.2125 per share to be paid on
March 1, 2018 to stockholders of
record as of the close of business on January 30, 2018.
In the second quarter, the Company repurchased approximately 8
million shares of its common stock for $280
million.
As previously disclosed, on October 12,
2017, the Company issued $500
million aggregate principal amount of floating rate notes
due 2020. The notes bear interest at a rate equal to
three-month LIBOR plus 0.50% per annum.
Portfolio Update
During the quarter, the Company
closed the acquisition of Angie's Artisan Treats, LLC, the maker of
Angie's BOOMCHICKAPOP ready-to-eat popcorn, for approximately
$250 million.
As previously disclosed, on May 30,
2017, the Company entered into a definitive agreement to
sell the Wesson oil business to The J.M. Smucker Company. The
transaction is subject to certain customary closing conditions,
including the termination or expiration of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR
Act).
Also as previously disclosed, on August
28, 2017, Smucker and the Company each received a request
for additional information under the HSR Act (a second request)
from the U.S. Federal Trade Commission (FTC) in connection with the
FTC's review of the transaction. The parties are cooperating fully
with the FTC as it conducts its review of the transaction.
As previously disclosed, the Company announced that it has
entered into a definitive agreement to acquire the Sandwich Bros.
of Wisconsin business from
Kangaroo Brands, Inc. The transaction is expected to close in
early 2018, subject to customary closing conditions, including the
receipt of regulatory approvals. The business has seen rapid
growth with approximately $60 million
in net sales for the twelve months ending November 2017.
Fiscal 2018 Outlook
The Company is updating its fiscal
2018 guidance as summarized below:
- Organic net sales growth near the high end of the range of (2)%
to flat.
- Reported net sales growth is expected to be 100 to 150 basis
points higher than the organic net sales growth rate due to the
impacts of acquisitions and foreign exchange.
- Adjusted operating margin near the low end of the range of
15.9% to 16.3%.
- Effective tax rate of in the range of 33.5% to 34.5%. This
estimate excludes any potential impact from pending federal tax
legislation.
- Adjusted diluted EPS from continuing operations near the high
end of the range of $1.84 to
$1.89.
- The Company continues to expect to repurchase approximately
$1.1 billion of shares of its common
stock in the fiscal year, subject to market and other
conditions.
- Input cost inflation is now expected to be approximately 3.7%
for the full fiscal year. This includes higher transportation costs
driven by the recent hurricanes.
The fiscal 2018 outlook includes the expected results of the
Wesson oil business for the full fiscal year.
The inability to predict the amount and timing of the impacts of
foreign exchange, acquisitions, divestitures, and other 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.
Items Affecting Second Quarter Fiscal 2018
Comparability
Included in the $0.54 diluted EPS from continuing operations for
the second quarter of fiscal 2018 (EPS amounts rounded and after
tax)
- Approximately $0.01 per diluted
share of net expense, or $7.1 million
pre-tax ($4.6 million after tax),
related to restructuring plans ($3.4
million in cost of goods sold (COGS) and $3.7 million in SG&A)
- Approximately $0.01 per diluted
share of net expense, or $7.8 million
pre-tax ($5.0 million after tax),
related to costs associated with acquisitions and planned
divestitures (all SG&A)
- Approximately $0.01 of per
diluted share of net expense, or $4.1
million pre-tax ($2.5 million
after tax), related to a pension remeasurement
- Approximately $0.01 per diluted
share of net benefit, or $7.1 million
pre-tax ($4.4 million after tax),
related to hedging derivative gains (all COGS)
- Approximately $0.01 per diluted
share of net tax benefit, or $5.3
million, related to unusual tax items (all Tax), related to
an adjustment to the estimated tax expense on the earnings of
foreign entities resulting from the repatriation of cash that
occurred in the second quarter and the estimated taxes recorded in
the first quarter on earnings of foreign entities that were not
permanently reinvested
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 $19.8
million pre-tax ($12.9 million
after tax), related to restructuring plans ($1.8 million in COGS and $18.0 million in SG&A)
- Approximately $0.09 per diluted
share of net expense, or $60.6
million pre-tax ($39.2 million
after tax), related to extinguishment of debt (all SG&A)
- Approximately $0.09 per diluted
share of net expense, or $43.9
million pre-tax ($40.7 million
after tax), related to an impairment of goodwill in the Mexican
business (all SG&A)
- Approximately $0.02 per diluted
share, or $0.5 million pre-tax
($7.7 million after tax), of net
expense related to tax items associated with the Spicetec and JM
Swank divestitures ($0.5 million in
SG&A and $7.2 million in
tax)
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
1-877-883-0383 for participants in the continental U.S. and
1-412-902-6506 for all other participants and using passcode
3074204. Please dial in 10 to 15 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 on
conagrabrands.com/investor-relations under Events &
Presentations for one year beginning Thursday, December 21, 2017 one hour after the
conference call ends.
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®, Frontera®, Duke's® and Angie's®
BOOMCHICKAPOP®, offer choices for every occasion. 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. 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: the ability and timing to obtain required regulatory
approvals and satisfy other closing conditions for the pending
Wesson divestiture and the pending acquisition of the Sandwich
Bros. of Wisconsin business; our
ability to achieve the intended benefits of recent and pending
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 from cost-saving initiatives and to benefit
from trade optimization programs; the effectiveness of our hedging
activities, and our ability to respond to volatility in
commodities; 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. We
undertake no responsibility to update these statements.
Note on Non-GAAP Financial Measures
This document
includes certain non-GAAP financial measures, including adjusted
diluted EPS from continuing operations, organic net sales, adjusted
gross profit, adjusted operating profit, adjusted corporate
expenses, adjusted SG&A, 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 organic net sales,
adjusted operating margin, and adjusted diluted EPS from continuing
operations, are forward-looking. Historically, the Company has
excluded the impact of certain items impacting comparability, such
as, but not limited to, restructuring expenses, the impact of the
extinguishment of debt, the impact of foreign exchange, the impact
of acquisitions and divestitures, hedging gains and losses,
impairment charges, the impact of legacy legal contingencies, and
the impact of 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: Brian Kearney
312-549-5002
ir@conagra.com
Conagra Brands,
Inc.
|
Consolidated
Statements of Operations
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
SECOND
QUARTER
|
|
|
Thirteen weeks
ended
|
|
Thirteen weeks
ended
|
|
|
|
|
November 26,
2017
|
|
November 27,
2016
|
|
Percent
Change
|
Net sales
|
|
$
|
2,173.4
|
|
|
$
|
2,088.4
|
|
|
4.1
|
%
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of goods
sold
|
|
1,515.1
|
|
|
1,440.9
|
|
|
5.1
|
%
|
Selling, general and
administrative expenses
|
|
307.3
|
|
|
417.9
|
|
|
(26.5)
|
%
|
Interest expense,
net
|
|
38.0
|
|
|
54.1
|
|
|
(29.8)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
313.0
|
|
|
175.5
|
|
|
78.4
|
%
|
|
|
|
|
|
|
|
Income tax
expense
|
|
109.5
|
|
|
78.4
|
|
|
39.6
|
%
|
Equity method
investment earnings
|
|
20.6
|
|
|
17.2
|
|
|
19.1
|
%
|
Income from
continuing operations
|
|
224.1
|
|
|
114.3
|
|
|
96.1
|
%
|
Income from
discontinued operations, net of tax
|
|
0.4
|
|
|
11.6
|
|
|
(97.0)
|
%
|
Net income
|
|
$
|
224.5
|
|
|
$
|
125.9
|
|
|
78.3
|
%
|
Less: Net income
attributable to noncontrolling interests
|
|
1.0
|
|
|
3.8
|
|
|
(74.6)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
223.5
|
|
|
$
|
122.1
|
|
|
83.1
|
%
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.55
|
|
|
$
|
0.26
|
|
|
111.5
|
%
|
Income from
discontinued operations
|
|
—
|
|
|
0.02
|
|
|
(100.0)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.55
|
|
|
$
|
0.28
|
|
|
96.4
|
%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
406.5
|
|
|
437.7
|
|
|
(7.1)
|
%
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.54
|
|
|
$
|
0.26
|
|
|
107.7
|
%
|
Income from
discontinued operations
|
|
—
|
|
|
0.02
|
|
|
(100.0)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.54
|
|
|
$
|
0.28
|
|
|
92.9
|
%
|
|
|
|
|
|
|
|
Weighted average
share and share equivalents outstanding
|
|
410.4
|
|
|
441.3
|
|
|
(7.0)
|
%
|
Conagra Brands,
Inc.
|
Consolidated
Statements of Operations
|
(in millions, except
per share data)
|
(unaudited)
|
|
|
|
FIRST HALF
|
|
|
Twenty-six weeks
ended
|
|
Twenty-six weeks
ended
|
|
|
|
|
November 26,
2017
|
|
November 27,
2016
|
|
Percent
Change
|
Net sales
|
|
$
|
3,977.6
|
|
|
$
|
3,984.0
|
|
|
(0.2)
|
%
|
Costs and
expenses:
|
|
|
|
|
|
|
Cost of goods
sold
|
|
2,800.3
|
|
|
2,791.9
|
|
|
0.3
|
%
|
Selling, general and
administrative expenses
|
|
546.3
|
|
|
649.6
|
|
|
(15.9)
|
%
|
Interest expense,
net
|
|
74.4
|
|
|
112.3
|
|
|
(33.8)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
556.6
|
|
|
430.2
|
|
|
29.4
|
%
|
|
|
|
|
|
|
|
Income tax
expense
|
|
229.5
|
|
|
247.6
|
|
|
(7.3)
|
%
|
Equity method
investment earnings
|
|
50.6
|
|
|
30.3
|
|
|
66.7
|
%
|
Income from
continuing operations
|
|
377.7
|
|
|
212.9
|
|
|
77.4
|
%
|
Income from
discontinued operations, net of tax
|
|
0.1
|
|
|
103.0
|
|
|
(99.9)
|
%
|
Net income
|
|
$
|
377.8
|
|
|
$
|
315.9
|
|
|
19.6
|
%
|
Less: Net income
attributable to noncontrolling interests
|
|
1.8
|
|
|
7.6
|
|
|
(76.2)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
376.0
|
|
|
$
|
308.3
|
|
|
22.0
|
%
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.91
|
|
|
$
|
0.48
|
|
|
89.6
|
%
|
Income from
discontinued operations
|
|
—
|
|
|
0.22
|
|
|
(100.0)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.91
|
|
|
$
|
0.70
|
|
|
30.0
|
%
|
|
|
|
|
|
|
|
Weighted average
shares outstanding
|
|
411.1
|
|
|
438.4
|
|
|
(6.2)
|
%
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations
|
|
$
|
0.91
|
|
|
$
|
0.48
|
|
|
89.6
|
%
|
Income from
discontinued operations
|
|
—
|
|
|
0.22
|
|
|
(100.0)
|
%
|
Net income
attributable to Conagra Brands, Inc.
|
|
$
|
0.91
|
|
|
$
|
0.70
|
|
|
30.0
|
%
|
|
|
|
|
|
|
|
Weighted average
share and share equivalents outstanding
|
|
415.1
|
|
|
442.1
|
|
|
(6.1)
|
%
|
Conagra Brands,
Inc.
|
Segment Operating
Results
|
(in
millions)
|
(unaudited)
|
|
|
|
SECOND
QUARTER
|
|
|
Thirteen weeks
ended
|
|
Thirteen weeks
ended
|
|
|
|
|
November 26,
2017
|
|
November 27,
2016
|
|
Percent
Change
|
SALES
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
900.4
|
|
|
$
|
853.2
|
|
|
5.5
|
%
|
Refrigerated &
Frozen
|
|
758.1
|
|
|
740.7
|
|
|
2.3
|
%
|
International
|
|
220.3
|
|
|
211.4
|
|
|
4.2
|
%
|
Foodservice
|
|
294.6
|
|
|
283.1
|
|
|
4.1
|
%
|
Commercial
|
|
—
|
|
|
—
|
|
|
—
|
%
|
Total
|
|
$
|
2,173.4
|
|
|
$
|
2,088.4
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
199.8
|
|
|
$
|
220.2
|
|
|
(9.2)
|
%
|
Refrigerated &
Frozen
|
|
128.5
|
|
|
118.0
|
|
|
8.9
|
%
|
International
|
|
20.2
|
|
|
(26.7)
|
|
|
N/A
|
|
Foodservice
|
|
47.4
|
|
|
31.9
|
|
|
48.4
|
%
|
Commercial
|
|
—
|
|
|
(0.5)
|
|
|
(100.0)
|
%
|
Total operating
profit for segments
|
|
$
|
395.9
|
|
|
$
|
342.9
|
|
|
15.5
|
%
|
|
|
|
|
|
|
|
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
|
|
(44.9)
|
|
|
(113.3)
|
|
|
(60.4)
|
%
|
Interest expense,
net
|
|
(38.0)
|
|
|
(54.1)
|
|
|
(29.8)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
$
|
313.0
|
|
|
$
|
175.5
|
|
|
78.4
|
%
|
|
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)
|
|
|
|
FIRST HALF
|
|
|
Twenty-six weeks
ended
|
|
Twenty-six weeks
ended
|
|
|
|
|
November 26,
2017
|
|
November 27,
2016
|
|
Percent
Change
|
SALES
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
1,646.2
|
|
|
$
|
1,610.4
|
|
|
2.2
|
%
|
Refrigerated &
Frozen
|
|
1,373.8
|
|
|
1,345.3
|
|
|
2.1
|
%
|
International
|
|
411.2
|
|
|
406.1
|
|
|
1.2
|
%
|
Foodservice
|
|
546.4
|
|
|
551.1
|
|
|
(0.9)
|
%
|
Commercial
|
|
—
|
|
|
71.1
|
|
|
(100.0)
|
%
|
Total
|
|
$
|
3,977.6
|
|
|
$
|
3,984.0
|
|
|
(0.2)
|
%
|
|
|
|
|
|
|
|
OPERATING
PROFIT
|
|
|
|
|
|
|
Grocery &
Snacks
|
|
$
|
376.0
|
|
|
$
|
400.7
|
|
|
(6.2)
|
%
|
Refrigerated &
Frozen
|
|
230.4
|
|
|
210.2
|
|
|
9.6
|
%
|
International
|
|
39.1
|
|
|
(175.9)
|
|
|
N/A
|
|
Foodservice
|
|
70.6
|
|
|
53.6
|
|
|
31.5
|
%
|
Commercial
|
|
—
|
|
|
202.8
|
|
|
(100.0)
|
%
|
Total operating
profit for segments
|
|
$
|
716.1
|
|
|
$
|
691.4
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
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
|
|
(85.1)
|
|
|
(148.9)
|
|
|
(42.9)
|
%
|
Interest expense,
net
|
|
(74.4)
|
|
|
(112.3)
|
|
|
(33.8)
|
%
|
Income from
continuing operations before income taxes and equity method
investment earnings
|
|
$
|
556.6
|
|
|
$
|
430.2
|
|
|
29.4
|
%
|
|
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)
|
|
|
|
November 26,
2017
|
|
May 28,
2017
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
84.0
|
|
|
$
|
251.4
|
|
Receivables, less
allowance for doubtful accounts
|
|
|
|
|
of $3.4 and
$3.1
|
|
683.8
|
|
|
563.4
|
|
Inventories
|
|
1,059.2
|
|
|
934.2
|
|
Prepaid expenses and
other current assets
|
|
183.5
|
|
|
228.7
|
|
Current assets held
for sale
|
|
45.8
|
|
|
35.5
|
|
Total current
assets
|
|
2,056.3
|
|
|
2,013.2
|
|
Property, plant and
equipment, net
|
|
1,642.0
|
|
|
1,655.0
|
|
Goodwill
|
|
4,457.0
|
|
|
4,301.1
|
|
Brands, trademarks
and other intangibles, net
|
|
1,298.2
|
|
|
1,229.3
|
|
Other
assets
|
|
846.1
|
|
|
790.6
|
|
Noncurrent assets
held for sale
|
|
100.5
|
|
|
107.1
|
|
|
|
$
|
10,400.1
|
|
|
$
|
10,096.3
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Notes
payable
|
|
$
|
67.1
|
|
|
$
|
28.2
|
|
Current installments
of long-term debt
|
|
198.8
|
|
|
199.0
|
|
Accounts
payable
|
|
886.7
|
|
|
773.1
|
|
Accrued
payroll
|
|
131.9
|
|
|
167.6
|
|
Other accrued
liabilities
|
|
565.8
|
|
|
552.6
|
|
Total current
liabilities
|
|
1,850.3
|
|
|
1,720.5
|
|
Senior long-term
debt, excluding current installments
|
|
3,065.9
|
|
|
2,573.3
|
|
Subordinated
debt
|
|
195.9
|
|
|
195.9
|
|
Other noncurrent
liabilities
|
|
1,501.5
|
|
|
1,528.8
|
|
Total stockholders'
equity
|
|
3,786.5
|
|
|
4,077.8
|
|
|
|
$
|
10,400.1
|
|
|
$
|
10,096.3
|
|
Conagra Brands,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(in
millions)
|
(unaudited)
|
|
|
Twenty-six weeks
ended
|
|
November
26, 2017
|
|
November
27, 2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
377.8
|
|
|
$
|
315.9
|
|
Income from
discontinued operations
|
0.1
|
|
|
103.0
|
|
Income from
continuing operations
|
377.7
|
|
|
212.9
|
|
Adjustments to
reconcile income from continuing operations to net cash flows from
operating activities:
|
|
|
|
Depreciation and
amortization
|
129.0
|
|
|
133.5
|
|
Asset impairment
charges
|
8.8
|
|
|
211.9
|
|
Gain on
divestitures
|
—
|
|
|
(197.5)
|
|
Loss on
extinguishment of debt
|
—
|
|
|
60.6
|
|
Earnings of
affiliates in excess of distributions
|
(50.6)
|
|
|
(23.4)
|
|
Stock-settled
share-based payments expense
|
17.7
|
|
|
18.3
|
|
Contributions to
pension plans
|
(6.1)
|
|
|
(5.9)
|
|
Pension
benefit
|
(21.5)
|
|
|
(20.6)
|
|
Other
items
|
3.8
|
|
|
23.9
|
|
Change in operating
assets and liabilities excluding effects of business acquisitions
and dispositions:
|
|
|
|
Receivables
|
(109.8)
|
|
|
(49.2)
|
|
Inventories
|
(130.5)
|
|
|
(32.2)
|
|
Deferred income taxes
and income taxes payable, net
|
95.3
|
|
|
183.5
|
|
Prepaid expenses and
other current assets
|
0.1
|
|
|
0.2
|
|
Accounts
payable
|
110.6
|
|
|
71.7
|
|
Accrued
payroll
|
(39.7)
|
|
|
(95.5)
|
|
Other accrued
liabilities
|
(1.8)
|
|
|
(31.6)
|
|
Net cash flows from
operating activities — continuing operations
|
383.0
|
|
|
460.6
|
|
Net cash flows from
operating activities — discontinued operations
|
16.0
|
|
|
81.6
|
|
Net cash flows from
operating activities
|
399.0
|
|
|
542.2
|
|
Cash flows from
investing activities:
|
|
|
|
Additions to
property, plant and equipment
|
(101.7)
|
|
|
(118.3)
|
|
Sale of property,
plant and equipment
|
6.9
|
|
|
11.3
|
|
Proceeds from
divestitures
|
—
|
|
|
489.1
|
|
Purchase of
businesses
|
(249.6)
|
|
|
(108.2)
|
|
Net cash flows from
investing activities — continuing operations
|
(344.4)
|
|
|
273.9
|
|
Net cash flows from
investing activities — discontinued operations
|
—
|
|
|
(123.7)
|
|
Net cash flows from
investing activities
|
(344.4)
|
|
|
150.2
|
|
Cash flows from
financing activities:
|
|
|
|
Net short-term
borrowings
|
38.9
|
|
|
(7.2)
|
|
Issuance of long-term
debt, net of debt issuance costs
|
497.4
|
|
|
—
|
|
Repayment of
long-term debt
|
(4.8)
|
|
|
(555.8)
|
|
Payment of intangible
asset financing arrangement
|
(14.4)
|
|
|
(14.9)
|
|
Repurchase of Conagra
Brands, Inc. common shares
|
(580.0)
|
|
|
(170.1)
|
|
Cash dividends
paid
|
(171.6)
|
|
|
(219.4)
|
|
Exercise of stock
options and issuance of other stock awards, including tax
withholdings
|
4.0
|
|
|
47.4
|
|
Net cash flows from
financing activities — continuing operations
|
(230.5)
|
|
|
(920.0)
|
|
Net cash flows from
financing activities — discontinued operations
|
—
|
|
|
839.1
|
|
Net cash flows from
financing activities
|
(230.5)
|
|
|
(80.9)
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
8.5
|
|
|
(3.5)
|
|
Net change in cash
and cash equivalents
|
(167.4)
|
|
|
608.0
|
|
Add: Cash balance
included in assets held for sale and discontinued operations at
beginning of period
|
—
|
|
|
36.4
|
|
Less: Cash balance
included in assets held for sale and discontinued operations at end
of period
|
—
|
|
|
—
|
|
Cash and cash
equivalents at beginning of period
|
251.4
|
|
|
798.1
|
|
Cash and cash
equivalents at end of period
|
$
|
84.0
|
|
|
$
|
1,442.5
|
|
Q2 FY18 & Q2
FY17 Diluted EPS from Continuing Operations
|
|
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Diluted EPS from
continuing operations
|
$
|
0.54
|
|
|
$
|
0.26
|
|
|
107.7
|
%
|
Net expense related
to restructuring plans
|
0.01
|
|
|
0.03
|
|
|
|
Adjustment to the
gain on sale of Spicetec and JM Swank businesses
|
—
|
|
|
0.02
|
|
|
|
Net expense related
to acquisitions and planned divestitures
|
0.01
|
|
|
—
|
|
|
|
Net expense related
to goodwill and intangible impairment charges
|
—
|
|
|
0.09
|
|
|
|
Net expense related
to pension remeasurement
|
0.01
|
|
|
—
|
|
|
|
Net expense related
to extinguishment of debt
|
—
|
|
|
0.09
|
|
|
|
Corporate hedging
derivative gains
|
(0.01)
|
|
|
—
|
|
|
|
Net benefit related
to unusual tax items
|
(0.01)
|
|
|
—
|
|
|
|
Adjusted diluted
EPS from continuing operations
|
$
|
0.55
|
|
|
$
|
0.49
|
|
|
12.2
|
%
|
Grocery &
Snacks Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Grocery &
Snacks Segment Operating Profit
|
$
|
199.8
|
|
|
$
|
220.2
|
|
|
(9.2)
|
%
|
Net expense related
to restructuring plans
|
4.0
|
|
|
1.4
|
|
|
|
Net expense related
to acquisitions and planned divestitures
|
7.8
|
|
|
—
|
|
|
|
Grocery &
Snacks Segment Adjusted Operating Profit
|
$
|
211.6
|
|
|
$
|
221.6
|
|
|
(4.5)
|
%
|
Refrigerated &
Frozen Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Refrigerated &
Frozen Segment Operating Profit
|
$
|
128.5
|
|
|
$
|
118.0
|
|
|
8.9
|
%
|
Net expense related
to restructuring plans
|
—
|
|
|
2.2
|
|
|
|
Refrigerated &
Frozen Segment Adjusted Operating Profit
|
$
|
128.5
|
|
|
$
|
120.2
|
|
|
6.9
|
%
|
International
Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
International
Segment Operating Profit (Loss)
|
$
|
20.2
|
|
|
$
|
(26.7)
|
|
|
N/A
|
|
Net expense related
to restructuring plans
|
0.9
|
|
|
0.4
|
|
|
|
Net expense related
to goodwill and intangible impairment charges
|
—
|
|
|
43.9
|
|
|
|
International
Segment Adjusted Operating Profit
|
$
|
21.1
|
|
|
$
|
17.6
|
|
|
19.9
|
%
|
Foodservice
Segment Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Foodservice
Segment Operating Profit
|
$
|
47.4
|
|
|
$
|
31.9
|
|
|
48.4
|
%
|
Net expense related
to restructuring plans
|
—
|
|
|
—
|
|
|
|
Foodservice
Segment Adjusted Operating Profit
|
$
|
47.4
|
|
|
$
|
31.9
|
|
|
48.4
|
%
|
Commercial Segment
Operating Profit Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Commercial Segment
Operating Loss
|
$
|
—
|
|
|
$
|
(0.5)
|
|
|
(100.0)
|
%
|
Adjustment to the
gain on sale of Spicetec and JM Swank businesses
|
—
|
|
|
0.5
|
|
|
|
Commercial Segment
Adjusted Operating Profit
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
Corporate Expense
Reconciliation
|
|
(Dollars in
millions)
|
Q2
FY18
|
|
Q2
FY17
|
|
%
Change
|
Selling, general
and administrative expenses
|
$
|
307.3
|
|
|
$
|
417.9
|
|
|
|
|
Less: selling,
general and administrative expenses from reporting
segments
|
255.3
|
|
|
305.4
|
|
|
|
Plus: Corporate cost
of goods sold
|
(7.1)
|
|
|
0.8
|
|
|
|
Corporate
expenses
|
$
|
44.9
|
|
|
$
|
113.3
|
|
|
(60.4)
|
%
|
Net expense related
to restructuring plans
|
(2.2)
|
|
|
(15.8)
|
|
|
|
Net expense related
to early extinguishment of debt
|
—
|
|
|
(60.6)
|
|
|
|
Net expense related
to pension remeasurement
|
(4.1)
|
|
|
—
|
|
|
|
Net income (expense)
related to hedging
|
7.1
|
|
|
(0.8)
|
|
|
|
Adjusted corporate
expenses
|
$
|
45.7
|
|
|
$
|
36.1
|
|
|
26.7
|
%
|
Net Sales
Reconciliation
|
|
Q2 FY18
(Dollars in millions)
|
Grocery &
Snacks
|
|
Refrigerated &
Frozen
|
|
International
|
|
Foodservice
|
|
Total
Conagra
Brands
|
Net
Sales
|
$
|
900.4
|
|
|
$
|
758.1
|
|
|
$
|
220.3
|
|
|
$
|
294.6
|
|
|
$
|
2,173.4
|
|
Impact of foreign
exchange
|
—
|
|
|
—
|
|
|
(8.5)
|
|
|
—
|
|
|
(8.5)
|
|
Net sales from
acquired businesses
|
(28.4)
|
|
|
(1.1)
|
|
|
—
|
|
|
—
|
|
|
(29.5)
|
|
Organic Net
Sales
|
$
|
872.0
|
|
|
$
|
757.0
|
|
|
$
|
211.8
|
|
|
$
|
294.6
|
|
|
$
|
2,135.4
|
|
|
|
|
|
|
|
|
|
|
|
Q2 FY17
(Dollars in millions)
|
Grocery &
Snacks
|
|
Refrigerated &
Frozen
|
|
International
|
|
Foodservice
|
|
Total
Conagra
Brands
|
Net
Sales
|
$
|
853.2
|
|
|
$
|
740.7
|
|
|
$
|
211.4
|
|
|
$
|
283.1
|
|
|
$
|
2,088.4
|
|
Net sales from
divested businesses
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Organic Net
Sales
|
$
|
853.2
|
|
|
$
|
740.7
|
|
|
$
|
211.4
|
|
|
$
|
283.1
|
|
|
$
|
2,088.4
|
|
|
|
|
|
|
|
|
|
|
|
%
Change
|
Grocery &
Snacks
|
|
Refrigerated &
Frozen
|
|
International
|
|
Foodservice
|
|
Total
Conagra
Brands
|
Net
Sales
|
5.5
|
%
|
|
2.3
|
%
|
|
4.2
|
%
|
|
4.1
|
%
|
|
4.1
|
%
|
Impact of foreign
exchange (pp)
|
—
|
|
|
—
|
|
|
(4.0)
|
|
|
—
|
|
|
(0.4)
|
|
Net sales from
acquired businesses (pp)
|
(3.3)
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
(1.4)
|
|
Organic Net
Sales
|
2.2
|
%
|
|
2.2
|
%
|
|
0.2
|
%
|
|
4.1
|
%
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Volume
(Organic)
|
3.4
|
%
|
|
3.9
|
%
|
|
(2.1)
|
%
|
|
(7.1)
|
%
|
|
1.7
|
%
|
Price/Mix
|
(1.2)
|
%
|
|
(1.7)
|
%
|
|
2.3
|
%
|
|
11.2
|
%
|
|
0.6
|
%
|
Gross Margin
Reconciliation
|
|
Gross Margin: Gross
Profit as a % of Net sales
|
|
|
|
|
Q2
FY18
|
|
Q2
FY17
|
Net sales
|
$
|
2,173.4
|
|
|
$
|
2,088.4
|
|
Cost of goods
sold
|
1,515.1
|
|
|
1,440.9
|
|
Gross
Profit
|
$
|
658.3
|
|
|
$
|
647.5
|
|
|
|
|
|
Net expense related
to restructuring plans included in cost of goods sold
|
3.4
|
|
|
1.8
|
|
Net expense (income)
related to hedging
|
(7.1)
|
|
|
0.8
|
|
Adjusted Gross
Profit
|
$
|
654.6
|
|
|
$
|
650.1
|
|
Adjusted Gross
Margin
|
30.1
|
%
|
|
31.1
|
%
|
SG&A
Reconciliation
|
|
|
Q2
FY18
|
|
Q2
FY17
|
Selling, general,
and administrative (SG&A) expenses
|
$
|
307.3
|
|
|
$
|
417.9
|
|
Gain on sale of
Spicetec and JM Swank businesses
|
—
|
|
|
0.5
|
|
Advertising and
promotion expenses
|
86.0
|
|
|
97.4
|
|
Net expense related
to restructuring plans
|
3.7
|
|
|
18.0
|
|
Net expense related
to goodwill and intangible impairment charges
|
—
|
|
|
43.9
|
|
Net expense related
to early extinguishment of debt
|
—
|
|
|
60.6
|
|
Net expense related
to pension remeasurement
|
4.1
|
|
|
—
|
|
Net expense related
to acquisitions and planned divestitures
|
7.8
|
|
|
—
|
|
Adjusted SG&A
expenses
|
$
|
205.7
|
|
|
$
|
197.5
|
|
__________________
1 Organic net sales excludes the impact of foreign
exchange and divested businesses, as well as acquisitions (until
the anniversary date of the acquisitions). All references to
changes in volume and price/mix are based on organic net sales.
2 "Adjusted" financial measures, including organic
net sales, are non-GAAP financial measures. Please see the end of
this release for reconciliations to the most directly comparable
GAAP financial measures.
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SOURCE Conagra Brands, Inc.