UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 29, 2016
ConAgra Foods, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 1-7275 | 47-0248710 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
222 W. Merchandise Mart Plaza, Suite 1300 Chicago, Illinois |
60654 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (312) 549-5000
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On September 29, 2016, ConAgra Foods, Inc. (the Company) issued a press release and posted a question and answer document (Q&A) on its website containing information on the Companys first quarter fiscal 2017 financial results. The press release and Q&A are furnished with this Current Report on Form 8-K as Exhibits 99.1 and 99.2, respectively.
The information in this Item 2.02 is being furnished to the Securities and Exchange Commission and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities thereof and shall not be deemed incorporated by reference into any registration statement or other document filed pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
Exhibit No. |
Description | |
99.1 | Press Release issued September 29, 2016 | |
99.2 | Questions and Answers |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
CONAGRA FOODS, INC. | ||||
By: | /s/ Colleen Batcheler | |||
Name: | Colleen Batcheler | |||
Title: | EVP, General Counsel & Corporate Secretary |
Date: September 29, 2016
Exhibit Index
Exhibit No. |
Description | |
99.1 | Press Release issued September 29, 2016 | |
99.2 | Questions and Answers |
Exhibit 99.1
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News Release
For more information, please contact: MEDIA: Jon Harris 312-549-5356 Jon.Harris@ConAgraFoods.com
ANALYSTS: Johan Nystedt 312-549-5002 IR@ConAgraFoods.com |
CONAGRA FOODS DELIVERS CONTINUED MARGIN EXPANSION PROPELLING FIRST QUARTER EPS AHEAD OF EXPECTATIONS
Conagra Brands and Lamb Weston to Host Investor Days in October
CHICAGO, September 29, 2016 Today ConAgra Foods, Inc. (NYSE: CAG) reported results for the fiscal 2017 first quarter ended August 28, 2016.
Highlights
(all comparisons are against the year ago period, unless otherwise noted)
| GAAP diluted EPS from continuing operations of $0.42 grew 10% from $0.38; adjusted diluted EPS from continuing operations of $0.61, better than anticipated, grew 49%. |
| Adjusted financial measures exclude comparability items and are non-GAAP measures. Please see the end of this release for reconciliations to the most directly comparable GAAP measures. |
| Net sales decreased 5%, largely driven by the Companys decisive actions to build a higher quality revenue base, divestitures, and foreign exchange. Specifically, divestitures and the impact of foreign exchange reduced sales approximately 2 percentage points. |
| Gross profit (net sales less cost of goods sold) as a percent of net sales expanded approximately 200 basis points behind pricing and trade spending discipline, mix improvement, and supply chain efficiencies. |
| Completed sales of Spicetec Flavors & Seasonings and JM Swank businesses during the quarter. |
CEO Perspective
Sean Connolly, president and chief executive officer of ConAgra Foods, commented, We continue to make strong progress as we reshape our portfolio, capabilities, and culture. Our efforts to infuse focus and discipline into our consumer businesses are clearly enabling us to expand our margins as we build a higher quality revenue base, improve efficiency, and deliver stronger, more consistent performance. While we are taking broad-based actions to build a higher quality revenue base, the related volume declines are concentrated in brands where we have historically under-priced and over-promoted.
He added, Im very pleased with the outstanding performance of the Lamb Weston business this quarter. We look forward to sharing more detailed information on Lamb Weston and Conagra Brands at each companys respective investor event next month.
Total Company Results
Net sales decreased 5% as a result of volume declines associated with the Companys actions to build a higher quality revenue base, partially offset by Lamb Westons continued growth and increased price/mix. Divestitures and the impact of foreign exchange reduced sales approximately 2 percentage points.
GAAP gross profit grew 3% to $724 million from $701 million in the year-ago period, and adjusted gross profit grew 3% to $728 million. The increases were driven primarily by increased price/mix, input cost favorability, and supply chain productivity, which more than offset the decline in volume. As a percentage of net sales, both GAAP gross profit and adjusted gross profit were 27% compared with 25% in the prior year.
GAAP diluted EPS from continuing operations for the first quarter of fiscal 2017 was $0.42 compared to $0.38 in the year-ago period, an increase of 10% from year-ago period. Adjusted diluted EPS from continuing operations was $0.61, compared to $0.41 in the year-ago period, an increase of 49%. The growth reflects strong performance in the Commercial segments Lamb Weston business, margin expansion in the Grocery & Snacks segment, lower selling, general, and administrative (SG&A) expenses, and lower interest expense as a result of debt reduction. These benefits were partially offset by volume declines, the previously reported recall in the Refrigerated & Frozen segment, and the impact of foreign exchange.
New Reporting Segments
To align with the recent changes to the organization, the Company now reports results in five reporting segments:
| Grocery & Snacks - Branded, shelf-stable food items sold in retail channels in the United States |
| Refrigerated & Frozen - Branded, refrigerated and frozen food items sold in retail channels in the United States |
| International - Branded food items sold in retail channels outside the United States |
| Foodservice - Food items sold to restaurants, foodservice operators, and commercial customers primarily in the United States |
| Commercial - Lamb Weston, Spicetec Flavors & Seasonings, and JM Swank businesses |
The former Consumer segment consisted primarily of the new Grocery & Snacks, Refrigerated & Frozen, and International segments. The former Commercial segment consisted primarily of the new Foodservice and Commercial segments. The new Commercial segment consists primarily of the Lamb Weston business, which will be spun off later this year. Following the completion of the spin-off, Conagra Brands expects to report the results for the Lamb Weston business as discontinued operations for all periods prior to the spin-off. The Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice segments consist primarily of the businesses that will remain with Conagra Brands following completion of the spin-off.
Unconsolidated joint ventures will continue to be reported as equity method investment earnings in the consolidated Statement of Operations.
Grocery & Snacks Segment
Net sales for the segment decreased 5%. More disciplined pricing and trade promotion practices resulted in price/mix increasing 1% while volume declined 6%.
Operating profit for the Grocery & Snacks segment reflected strong margin expansion in the quarter. Supply chain productivity, favorable input costs, disciplined pricing and trade promotion practices, and continued SG&A discipline more than offset decreased sales and drove a 29% increase in operating profit and a 31% increase in adjusted operating profit.
Refrigerated & Frozen Segment
Net sales for the segment decreased 8% reflecting the Companys decisive actions to build a higher quality revenue base. Price/mix increased 3%, while volume declined 11%, behind the impact from increased pricing in Banquet frozen entrees and reduction of deep trade and promotion discounts.
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Operating profit and adjusted operating profit for the Refrigerated & Frozen Segment grew 14%. Disciplined pricing actions, favorable input costs, and supply chain productivity more than offset decreased sales and the impact of the frozen food product recall.
International Segment
Net sales for the segment decreased 6% to $195 million. The Company estimates that the impact of foreign exchange decreased the segments net sales by approximately 5%, while higher price/mix partially offset a 2% volume decrease in the segment.
The International segment reported an operating loss of $149 million compared with operating profit of $17 million in the year-ago period, reflecting goodwill and intangible impairment charges of approximately $164 million pre-tax. As result of the segment reorganization in the quarter, the Company now evaluates goodwill impairment at a lower business level than in the past. As part of this evaluation, significant foreign exchange movements and weaker sales trends have negatively impacted the value of certain businesses on a U.S. dollar basis. Adjusted segment operating profit decreased 12% to $15 million.
Foodservice Segment
Net sales for the segment decreased 1% to $268 million. Operating profit decreased 17% from $26 million in the year-ago period to $22 million, and adjusted operating profit decreased 10% to $24 million.
The segment was negatively affected by the normalization of egg margins after last years avian influenza outbreak.
Commercial Segment
Lamb Westons 4% growth was more than offset by the impact of the divested businesses, which drove a 2% net sales decrease for the segment.
Operating profit grew 210% to $346 million, which includes $198 million of gains from the sales of the Spicetec Flavors & Seasonings and JM Swank businesses, compared with operating profit of $112 million in the year-ago period. Adjusted operating profit grew 33% to $148 million as Lamb Westons sales growth and favorable input costs more than offset the impact of the divested businesses.
As previously announced, the Company completed the divestitures of its Spicetec Flavors & Seasonings business and its JM Swank business during the quarter. The Commercial segment includes the results of these businesses through the completion of the sales of the businesses on July 25, 2016.
Corporate Expenses
GAAP corporate expenses were $49 million in the quarter compared with $79 million in the year-ago period. Adjusted corporate expenses were $38 million in the quarter compared with $66 million in the year-ago period, reflecting planned benefits from our cost savings efforts, along with some benefits related to timing of certain costs.
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 net of these activities resulted in $1 million of net benefit in the current quarter and $2 million of net loss in the year-ago period. The company identifies these amounts as items that impact comparability within the discussion of unallocated Corporate results.
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Other Items
Equity method investment earnings were $24 million for the current quarter and $37 million in the year-ago period. The decrease is primarily attributable to a decrease in Ardent Mills profitability.
Net interest expense was $59 million in the current quarter and $80 million in the year-ago period, driven by significant debt reduction over the past several quarters.
Capital Allocation
The Company repaid approximately $550 million of debt in the quarter.
Dividends paid during the quarter totaled $110 million compared with $107 million in the year-ago period. In addition, the Company repurchased approximately 1.8 million shares for $86 million during the quarter.
Capital expenditures for property, plant and equipment were $117 million in the quarter, and depreciation and amortization was $93 million.
Outlook
The Company expects this to be the last earnings release as ConAgra Foods.
The Company remains on-track to execute the spin-off of the Lamb Weston business this fall. The spin-off will result in two independent, publicly-traded, pure play companies, Conagra Brands and Lamb Weston.
Conagra Brands and Lamb Weston have announced their intention to host investor events on October 18, 2016 and October 13, 2016, respectively. Each company expects to share more details, including fiscal year 2017 and longer-term outlooks, growth initiatives, efficiency programs, and capital allocation priorities, at these events.
Major Items Impacting First-Quarter Fiscal 2017 EPS Comparability
Included in the $0.42 diluted EPS from continuing operations for the first quarter of fiscal 2017 (EPS amounts rounded and after tax):
| Approximately $0.34 per diluted share of net expense, or $164 million pretax ($150 million after tax), related to an impairment charge in the Canadian business. (all SG&A) |
| Approximately $0.02 per diluted share of net expense, or $14 million pretax ($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 $10 million pretax ($10 million after tax), related to the planned spin-off of Lamb Weston. (all SG&A) |
| Approximately $0.17 per diluted share of net gain, or $198 million pretax ($75 million after tax), related to the gain on the sales of the Spicetec Flavors & Seasonings and JM Swank businesses. (all SG&A) |
| Approximately $0.02 per diluted share of net gain from favorable adjustments to state tax assets related to net operating and capital losses. |
Included in the $0.38 diluted EPS from continuing operations for the first quarter of fiscal 2016 (EPS amounts rounded and after tax):
| Approximately $0.02 per diluted share of net expense, or $17 million pretax ($11 million after tax), related to restructuring charges. ($4 million in cost of goods sold, and $13 million in SG&A) |
| Approximately $0.01 from the impact of rounding |
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Discussion of Results
ConAgra Foods will host a conference call at 9:30 a.m. EDT today to discuss the results. Following the companys 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 1-888-855-5837 and 1-719-325-2237 and providing the conference ID of 1480143. No confirmation or pass code is needed. This conference call also can be accessed live on the Internet at http://investor.conagrafoods.com.
A rebroadcast of the conference call will be available after 1 p.m. EDT 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 1480143. A rebroadcast also will be available on the companys website. In addition, the company has posted a question-and-answer supplement relating to this release at http://investor.conagrafoods.com. To view recent company news, please visit http://media.conagrafoods.com.
About ConAgra Foods
ConAgra Foods, Inc. (NYSE: CAG) is one of North Americas leading packaged food companies with recognized brands such as Marie Callenders®, Healthy Choice®, Slim Jim®, Hebrew National®, Orville Redenbachers®, Peter Pan®, Reddi-wip®, PAM®, Snack Pack®, Banquet®, Chef Boyardee®, Egg Beaters®, Hunts® and many other ConAgra Foods brands found in grocery, convenience, mass merchandise and club stores. ConAgra Foods also has a strong business-to-business presence, supplying frozen potato and sweet potato products as well as other vegetable products to a variety of well-known restaurants, foodservice operators and commercial customers. For more information, please visit us at www.conagrafoods.com.
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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 managements 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 successfully complete the spin-off of our Lamb Weston business on a tax-free basis, within the expected time frame or at all, and achieve the intended benefits of the spin-off; 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 managements 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.
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Q1 FY17 & Q1 FY16 Diluted EPS from Continuing Operations
Q1 FY17 | Q1 FY16 | % Change | ||||||||||
Diluted EPS from continuing operations |
$ | 0.42 | $ | 0.38 | 10.5 | % | ||||||
Net expense related to restructuring plans |
0.02 | 0.02 | ||||||||||
Net expense related to Lamb Weston spin preparation |
0.02 | | ||||||||||
Net benefit related to gain on Spicetec sale |
(0.13 | ) | | |||||||||
Net benefit related to gain on JM Swank sale |
(0.04 | ) | | |||||||||
Net expense related to goodwill and intangible impairment charges |
0.34 | | ||||||||||
Net benefit related to unusual tax items |
(0.02 | ) | | |||||||||
Rounding |
| 0.01 | ||||||||||
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Diluted EPS from continuing operations, adjusted for items impacting comparability |
$ | 0.61 | $ | 0.41 | 48.8 | % | ||||||
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Grocery & Snacks Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Grocery & Snacks Segment Operating Profit |
$ | 180.5 | $ | 139.5 | 29.4 | % | ||||||
Net expense related to restructuring plans |
4.9 | 2.4 | ||||||||||
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Grocery & Snacks Segment Adjusted Operating Profit |
$ | 185.4 | $ | 141.9 | 30.7 | % | ||||||
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Refrigerated & Frozen Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Refrigerated & Frozen Segment Operating Profit |
$ | 92.2 | $ | 81.1 | 13.7 | % | ||||||
Net expense related to restructuring plans |
5.0 | 4.1 | ||||||||||
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Refrigerated & Frozen Segment Adjusted Operating Profit |
$ | 97.2 | $ | 85.2 | 14.1 | % | ||||||
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International Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
International Segment Operating Profit (loss) |
$ | (149.2 | ) | $ | 16.5 | N/A | ||||||
Net expense related to restructuring plans |
0.2 | 0.1 | ||||||||||
Net expense related to goodwill and intangible impairment charges |
163.6 | | ||||||||||
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International Segment Adjusted Operating Profit |
$ | 14.6 | $ | 16.6 | (12.0 | )% | ||||||
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Foodservice Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Foodservice Segment Operating Profit |
$ | 21.7 | $ | 26.1 | (16.9 | )% | ||||||
Net expense related to restructuring plans |
1.8 | 0.1 | ||||||||||
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Foodservice Segment Adjusted Operating Profit |
$ | 23.5 | $ | 26.2 | (10.3 | )% | ||||||
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Commercial Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Commercial Segment Operating Profit |
$ | 346.4 | $ | 111.8 | 209.8 | % | ||||||
Net benefit related to gain on Spicetec sale |
(145.0 | ) | | |||||||||
Net benefit related to gain on JM Swank sale |
(53.2 | ) | | |||||||||
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Commercial Segment Adjusted Operating Profit |
$ | 148.2 | $ | 111.8 | 32.6 | % | ||||||
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Total Segment Operating Profit Reconciliation
(Dollars in millions) | Q1 FY17 |
Q1 FY16 |
% Change | |||||||||
Total Segment Operating Profit (from above) |
$ | 491.6 | $ | 375.0 | 31.1 | % | ||||||
Total Adjustments Within Segments (from above) |
(22.7 | ) | 6.7 | |||||||||
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Total Adjusted Segment Operating Profit |
$ | 468.9 | $ | 381.7 | 22.8 | % | ||||||
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Corporate Expense Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Selling, general and administrative expenses |
$ | 281.5 | $ | 405.4 | (30.6 | )% | ||||||
Less: selling, general and administrative expenses from reporting segments |
231.5 | 328.3 | ||||||||||
Plus: Corporate cost of goods sold |
(1.0 | ) | 2.2 | |||||||||
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Corporate expenses |
$ | 49.0 | $ | 79.3 | ||||||||
Net expense related to restructuring plans |
(2.2 | ) | (10.7 | ) | ||||||||
Net expense related to Lamb Weston spin preparation |
(9.7 | ) | | |||||||||
Net income (expense) related to hedging |
1.0 | (2.2 | ) | |||||||||
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Corporate adjusted expenses |
$ | 38.1 | $ | 66.4 | (42.6 | )% | ||||||
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Gross Margin Reconciliation
Gross Margin: Gross Profit as a % of Net sales
Q1 FY17 | Q1 FY16 | |||||||
Net sales |
$ | 2,667.5 | $ | 2,794.9 | ||||
Cost of goods sold |
1,943.4 | 2,093.8 | ||||||
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Gross Profit |
$ | 724.1 | $ | 701.1 | ||||
Net expense related to restructuring plans included in cost of goods sold |
5.2 | 3.7 | ||||||
Net expense (income) related to hedging |
(1.0 | ) | 2.2 | |||||
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Gross Profit adjusted for items impacting comparability |
$ | 728.3 | $ | 707.0 | ||||
Adjusted Gross Margin |
27.3 | % | 25.3 | % |
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ConAgra Foods, Inc.
Segment Operating Results
(in millions)
(unaudited)
FIRST QUARTER | ||||||||||||
Thirteen weeks ended | Thirteen weeks ended | |||||||||||
August 28, 2016 | August 30, 2015 | Percent Change | ||||||||||
SALES |
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Grocery & Snacks |
$ | 757.2 | $ | 800.5 | (5.4 | )% | ||||||
Refrigerated & Frozen |
604.6 | 657.6 | (8.1 | )% | ||||||||
International |
194.7 | 206.4 | (5.7 | )% | ||||||||
Foodservice |
268.0 | 270.6 | (1.0 | )% | ||||||||
Commercial |
843.0 | 859.8 | (2.0 | )% | ||||||||
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Total |
2,667.5 | 2,794.9 | (4.6 | )% | ||||||||
OPERATING PROFIT |
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Grocery & Snacks |
$ | 180.5 | $ | 139.5 | 29.4 | % | ||||||
Refrigerated & Frozen |
92.2 | 81.1 | 13.7 | % | ||||||||
International |
(149.2 | ) | 16.5 | N/A | ||||||||
Foodservice |
21.7 | 26.1 | (16.9 | )% | ||||||||
Commercial |
346.4 | 111.8 | 209.8 | % | ||||||||
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Total operating profit for segments |
491.6 | 375.0 | 31.1 | % | ||||||||
Reconciliation of total operating profit to income from continuing operations before income taxes and equity method investment earnings |
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Items excluded from segment operating profit: |
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General corporate expense |
(49.0 | ) | (79.3 | ) | (38.2 | )% | ||||||
Interest expense, net |
(59.0 | ) | (80.3 | ) | (26.5 | )% | ||||||
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Income from continuing operations before income taxes and equity method investment earnings |
$ | 383.6 | $ | 215.4 | 78.1 | % | ||||||
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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.
This press release includes certain non-GAAP financial measures, including diluted earnings per share from continuing operations adjusted for items impacting comparability, adjusted operating profit for each of the Grocery & Snacks segment, the Refrigerated & Frozen segment, the International segment, the Foodservice segment and the Consumer Foods segment and adjusted unallocated corporate expense. Management considers GAAP financial measures as well as such non-GAAP financial information in its evaluation of the companys financial statements and believes these non-GAAP measures provide useful supplemental information to assess the companys operating performance and financial position. These measures should be viewed in addition to, and not in lieu of, the companys diluted earnings per share, operating performance and financial measures as calculated in accordance with GAAP.
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ConAgra Foods, Inc.
Consolidated Statements of Operations
(in millions)
(unaudited)
FIRST QUARTER | ||||||||||||
Thirteen weeks ended |
Thirteen weeks ended |
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August 28, 2016 | August 30, 2015 | Percent Change | ||||||||||
Net sales |
$ | 2,667.5 | $ | 2,794.9 | (4.6 | )% | ||||||
Costs and expenses: |
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Cost of goods sold |
1,943.4 | 2,093.8 | (7.2 | )% | ||||||||
Selling, general and administrative expenses |
281.5 | 405.4 | (30.6 | )% | ||||||||
Interest expense, net |
59.0 | 80.3 | (26.5 | )% | ||||||||
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Income from continuing operations before income taxes and equity method investment earnings |
383.6 | 215.4 | 78.1 | % | ||||||||
Income tax expense |
218.7 | 85.0 | 157.3 | % | ||||||||
Equity method investment earnings |
23.6 | 37.0 | (36.2 | )% | ||||||||
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Income from continuing operations |
188.5 | 167.4 | 12.6 | % | ||||||||
Income (loss) from discontinued operations, net of tax |
1.5 | (1,319.8 | ) | N/A | ||||||||
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Net income (loss) |
$ | 190.0 | $ | (1,152.4 | ) | N/A | ||||||
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Less: Net income attributable to noncontrolling interests |
3.8 | 1.7 | 123.5 | % | ||||||||
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Net income (loss) attributable to ConAgra Foods, Inc. |
$ | 186.2 | $ | (1,154.1 | ) | N/A | ||||||
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Earnings (loss) per share - basic |
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Income from continuing operations |
$ | 0.42 | $ | 0.38 | 10.5 | % | ||||||
Income (loss) from discontinued operations |
| (3.06 | ) | (100.0 | )% | |||||||
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Net income (loss) attributable to ConAgra Foods, Inc. |
$ | 0.42 | $ | (2.68 | ) | N/A | ||||||
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Weighted average shares outstanding |
439.0 | 430.7 | 1.9 | % | ||||||||
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Earnings (loss) per share - diluted |
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Income from continuing operations |
$ | 0.42 | $ | 0.38 | 10.5 | % | ||||||
Income (loss) from discontinued operations |
| (3.03 | ) | (100.0 | )% | |||||||
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Net income (loss) attributable to ConAgra Foods, Inc. |
$ | 0.42 | $ | (2.65 | ) | N/A | ||||||
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Weighted average share and share equivalents outstanding |
442.7 | 435.7 | 1.6 | % | ||||||||
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ConAgra Foods, Inc.
Consolidated Balance Sheet
(in millions)
(unaudited)
August 28, 2016 | May 29, 2016 | |||||||
ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | 794.6 | $ | 834.5 | ||||
Receivables, less allowance for doubtful accounts of $4.8 and $3.7 |
847.0 | 836.6 | ||||||
Inventories |
1,637.9 | 1,582.1 | ||||||
Prepaid expenses and other current assets |
127.6 | 206.5 | ||||||
Current assets held for sale |
| 117.0 | ||||||
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Total current assets |
3,407.1 | 3,576.7 | ||||||
Property, plant and equipment, net |
2,736.8 | 2,710.3 | ||||||
Goodwill |
4,390.6 | 4,530.1 | ||||||
Brands, trademarks and other intangibles, net |
1,243.5 | 1,276.8 | ||||||
Other assets |
1,052.1 | 1,067.2 | ||||||
Noncurrent assets held for sale |
5.8 | 229.5 | ||||||
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$ | 12,835.9 | $ | 13,390.6 | |||||
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities |
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Notes payable |
$ | 35.1 | $ | 38.8 | ||||
Current installments of long-term debt |
487.6 | 571.4 | ||||||
Accounts payable |
992.9 | 945.4 | ||||||
Accrued payroll |
124.9 | 271.1 | ||||||
Other accrued liabilities |
724.3 | 651.0 | ||||||
Current liabilities held for sale |
| 54.7 | ||||||
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Total current liabilities |
2,364.8 | 2,532.4 | ||||||
Senior long-term debt, excluding current installments |
4,255.5 | 4,721.9 | ||||||
Subordinated debt |
195.9 | 195.9 | ||||||
Other noncurrent liabilities |
2,220.1 | 2,144.1 | ||||||
Noncurrent liabilities held for sale |
| 1.5 | ||||||
Total stockholders equity |
3,799.6 | 3,794.8 | ||||||
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$ | 12,835.9 | $ | 13,390.6 | |||||
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ConAgra Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Thirteen weeks ended | ||||||||
August 28, 2016 |
August 30, 2015 |
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Cash flows from operating activities: |
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Net income (loss) |
$ | 190.0 | $ | (1,152.4 | ) | |||
Income (loss) from discontinued operations |
1.5 | (1,319.8 | ) | |||||
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Income from continuing operations |
188.5 | 167.4 | ||||||
Adjustments to reconcile income from continuing operations to net cash flows from operating activities: |
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Depreciation and amortization |
92.7 | 91.7 | ||||||
Asset impairment charges |
164.1 | 0.6 | ||||||
Gain on divestitures |
(198.2 | ) | | |||||
Earnings of affiliates in excess of distributions |
(9.1 | ) | (33.9 | ) | ||||
Share-based payments expense |
8.6 | 9.2 | ||||||
Contributions to pension plans |
(3.0 | ) | (2.7 | ) | ||||
Pension benefit |
(6.5 | ) | | |||||
Other items |
9.0 | (2.1 | ) | |||||
Change in operating assets and liabilities excluding effects of business acquisitions and dispositions: |
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Accounts receivable |
(9.2 | ) | (63.9 | ) | ||||
Inventory |
(58.7 | ) | (113.1 | ) | ||||
Deferred income taxes and income taxes payable, net |
220.0 | 4.1 | ||||||
Prepaid expenses and other current assets |
15.9 | 11.0 | ||||||
Accounts payable |
72.1 | 51.8 | ||||||
Accrued payroll |
(146.0 | ) | (55.3 | ) | ||||
Other accrued liabilities |
(3.3 | ) | (0.9 | ) | ||||
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Net cash flows from operating activities continuing operations |
336.9 | 63.9 | ||||||
Net cash flows from operating activities discontinued operations |
(11.0 | ) | 29.2 | |||||
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Net cash flows from operating activities |
325.9 | 93.1 | ||||||
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Cash flows from investing activities: |
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Additions to property, plant and equipment |
(117.4 | ) | (101.6 | ) | ||||
Sale of property, plant and equipment |
3.0 | 12.9 | ||||||
Proceeds from divestitures |
486.3 | | ||||||
Purchase of intangible assets |
| (10.4 | ) | |||||
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Net cash flows from investing activities continuing operations |
371.9 | (99.1 | ) | |||||
Net cash flows from investing activities discontinued operations |
| (26.4 | ) | |||||
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Net cash flows from investing activities |
371.9 | (125.5 | ) | |||||
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Cash flows from financing activities: |
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Net short-term borrowings |
(3.7 | ) | 5.2 | |||||
Repayment of long-term debt |
(554.2 | ) | (2.5 | ) | ||||
Payment of intangible asset financing arrangement |
(14.9 | ) | | |||||
Repurchase of ConAgra Foods, Inc. common shares |
(85.6 | ) | | |||||
Cash dividends paid |
(109.5 | ) | (107.1 | ) | ||||
Exercise of stock options and issuance of other stock awards |
32.6 | 93.6 | ||||||
Other items |
(2.4 | ) | (1.4 | ) | ||||
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Net cash flows from financing activities continuing operations |
(737.7 | ) | (12.2 | ) | ||||
Net cash flows from financing activities discontinued operations |
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Net cash flows from financing activities |
(737.7 | ) | (12.2 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents |
| (1.6 | ) | |||||
Net change in cash and cash equivalents |
(39.9 | ) | (46.2 | ) | ||||
Discontinued operations cash activity included above: |
||||||||
Add: Cash balance included in assets held for sale at beginning of period |
| 18.4 | ||||||
Less: Cash balance included in assets held for sale at end of period |
| 22.6 | ||||||
Cash and cash equivalents at beginning of period |
834.5 | 164.7 | ||||||
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Cash and cash equivalents at end of period |
$ | 794.6 | $ | 114.3 | ||||
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See notes to the condensed consolidated financial statements.
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Exhibit 99.2
Q1 FY17 Question & Answer
September 29, 2016
1. | What were some examples of brands posting comparable sales growth for the quarter? |
- Act II | - Guldens | - Reddi Wip | ||||||||
- Andy Capp | - Healthy Choice | - Ro*Tel | ||||||||
- Crunch N Munch | - Jiffy Pop | - Slim Jim | ||||||||
- DAVID | - Manwich |
2. | What were some examples of brands posting comparable sales declines for the quarter? |
- Banquet | - Fiddle Faddle | - Libbys | - Peter Pan | - Wesson | ||||||
- Bertolli | - Hunts | - Marie Callenders | - PF Changs | - Wolf Chili | ||||||
- Blakes | - Hebrew National | - Odoms Tennessee Pride | - Poppycock | |||||||
- Chef Boyardee | - Kid Cuisine | - Orville Redenbachers | - Snack Pack | |||||||
- Egg Beaters | - La Choy | - Pam | - Swiss Miss |
3. | What are the major brands included in the Grocery & Snacks segment? |
Examples of large brands in the Grocery & Snacks segment are Chef Boyardee, Hunts, Orville Redenbachers, Slim Jim, and Snack Pack
4. | What are the major brands included in the Refrigerated & Frozen segment? |
Examples of large brands in the Refrigerated & Frozen segment are Banquet, Healthy Choice, Hebrew National, Marie Callenders, and Reddi Wip
5. | How much were capital expenditures from continuing operations for the quarter? |
Approximately $117 million in Q1 FY17 (versus approximately $102 million in Q1 FY16).
6. | How much was total depreciation and amortization from continuing operations for the quarter? |
Approximately $93 million in Q1 FY17 (versus approximately $92 million in Q1 FY16).
1
7. | What was the net interest expense for the quarter? |
Approximately $59 million in Q1 FY17 (versus approximately $80 million in Q1 FY16).
8. | What was Corporate expense for the quarter? |
GAAP corporate expenses were $49 million in the quarter compared with $79 million in the year-ago period. Adjusted corporate expenses were $38 million in the quarter compared with $66 million in the year-ago period, reflecting planned benefits from our cost savings efforts, along with some benefits related to timing of certain costs.
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 net of these activities resulted in $1 million of net benefit in the current quarter and $2 million of net loss in the year-ago period. The company identifies these amounts as items that impact comparability within the discussion of unallocated Corporate results.
Corporate Expense Reconciliation
(Dollars in millions) | Q1 FY17 | Q1 FY16 | % Change | |||||||||
Selling, general and administrative expenses |
$ | 281.5 | $ | 405.4 | (30.6 | )% | ||||||
Less: selling, general and administrative expenses from reporting segments |
231.5 | 328.3 | ||||||||||
Plus: Corporate cost of goods sold |
(1.0 | ) | 2.2 | |||||||||
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Corporate expenses |
$ | 49.0 | $ | 79.3 | ||||||||
Net expense related to restructuring plans |
(2.2 | ) | (10.7 | ) | ||||||||
Net expense related to Lamb Weston spin preparation |
(9.7 | ) | | |||||||||
Net income (expense) related to hedging |
1.0 | (2.2 | ) | |||||||||
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Corporate adjusted expenses |
$ | 38.1 | $ | 66.4 | (42.6 | )% | ||||||
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9. | How much did the company pay in dividends during the quarter? |
Approximately $110 million in Q1 FY17 (versus approximately $107 million in Q1 FY16).
10. | What was the weighted average number of diluted shares outstanding for the quarter (rounded)? |
Approximately 443 million shares for the quarter.
11. | Did the company repurchase any shares during the quarter? |
The Company repurchased approximately 1.8 million shares in Q1FY17 (versus 0 in Q1FY16).
2
12. | What is included in the companys net debt at the end of the quarter (rounded, in millions)? |
Q1 FY17 | ||||
Total debt* |
$ | 4,974 | ||
Less: Cash on hand |
$ | 795 | ||
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Net debt |
$ | 4,179 |
* | Total debt = notes payable, short-term debt, long-term debt, and subordinated debt. |
The Company believes that given the significant cash, cash equivalents and other investments on its balance sheet, net debt is a meaningful measure.
13. | What is the net-debt-to-total-capital ratio at quarter end? |
The net-debt-to-total-capital ratio for the quarter was 52%.
This ratio is defined as net debt divided by the sum of net debt plus shareholders equity. See question No. 12 for the components of net debt.
3
Note on Forward-looking Statements
This communication contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are based on managements current expectations and are subject to uncertainty and changes in circumstances. We undertake no responsibility for updating these statements. Readers of this communication 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 communication. These risks and uncertainties include, among other things: our ability to successfully complete the spin-off of our Lamb Weston business on a tax-free basis, within the expected time frame or at all, and achieve the intended benefits of the spin-off; 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 managements 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 communication.
4