DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

6 Months Ended

Nov. 27, 2016

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

DISCONTINUED OPERATIONS AND OTHER DIVESTITURES

Lamb Weston Spinoff

On November 9, 2016, the Company completed the previously announced Spinoff of its Lamb Weston business. As of such date, the Company did not beneficially own any equity interest in Lamb Weston and no longer consolidates Lamb Weston into its financial results. We reflected the results of this business as discontinued operations for all periods presented. The assets and liabilities of the Lamb Weston business have been reclassified as assets and liabilities of discontinued operations within our Condensed Consolidated Balance Sheets for the period presented prior to the Spinoff.

The summary comparative financial results of the Lamb Weston business through the date of the Spinoff, included within discontinued operations, were as follows:

	Thirteen weeks ended				Twenty-six weeks ended
	November 27, 2016		November 29, 2015		November 27, 2016		November 29, 2015
Net sales	$	636.0	$	735.2	$	1,407.9	$	1,477.1
Income from discontinued operations before income taxes and equity method investment earnings	$	46.3	$	118.4	$	175.1	$	215.5
Income before income taxes and equity method investment earnings	46.3		118.4		175.1		215.5
Income tax expense	39.1		40.3		88.6		76.0
Equity method investment earnings	5.3		7.8		15.9		20.2
Income from discontinued operations, net of tax	12.5		85.9		102.4		159.7
Less: Net income attributable to noncontrolling interests	3.2		3.7		6.8		5.2
Net income from discontinued operations attributable to CAG	$	9.3	$	82.2	$	95.6	$	154.5

For the second quarter and first half of fiscal 2017, we incurred $62.2 million and $72.0 million, respectively, of expenses in connection with the Spinoff primarily related to professional fees and contract services associated with preparation of regulatory filings and separation activities. These expenses are reflected in income from discontinued operations.

The assets and liabilities classified as assets and liabilities of discontinued operations reflected in our Condensed Consolidated Balance Sheets related to the Lamb Weston business were as follows:

	May 29, 2016
Cash and cash equivalents	$	36.4
Receivables, less allowance for doubtful accounts of $0.5	186.5
Inventories	498.9
Prepaid expenses and other current assets	57.9
Total current assets of discontinued operations	$	779.7
Property, plant and equipment, net	$	1,004.1
Goodwill	133.9
Brands, trademarks and other intangibles, net	39.6
Other assets	161.7
Total noncurrent assets of discontinued operations	$	1,339.3
Notes payable	$	24.9
Current installments of long-term debt	12.0
Accounts payable	238.7
Accrued payroll	50.3
Other accrued liabilities	83.3
Total current liabilities of discontinued operations	$	409.2
Senior long-term debt, excluding current installments	$	36.4
Other noncurrent liabilities	268.4
Total noncurrent liabilities of discontinued operations	$	304.8

In connection with the Spinoff, total assets of $2.28 billion (net of cash assumed of $23.4 million) and total liabilities of $2.98 billion (including debt of $2.46 billion) were transferred to Lamb Weston. As part of the consideration for the Spinoff, the Company received a cash payment from Lamb Weston in the amount of $823.5 million. See Note 5 for discussion of the related debt-for-debt exchange.

Private Brands Operations

On February 1, 2016, pursuant to the Stock Purchase Agreement, dated as of November 1, 2015, we completed the disposition of our Private Brands operations to TreeHouse Foods, Inc. for $2.6 billion in cash on a debt-free basis, subject to working capital and other adjustments.

As a result of the disposition, we recognized a pre-tax charge of $86.3 million ($79.0 million after-tax) and $1.90 billion ($1.42 billion after-tax) in the second quarter and first half of fiscal 2016, respectively, to write-down the goodwill and long-lived assets to the estimated sales price, less costs to sell. We reflected the results of this business as discontinued operations for all periods presented.

The summary comparative financial results of the Private Brands business, included within discontinued operations, were as follows:

	Thirteen weeks ended						Twenty-six weeks ended
	November 27, 2016			November 29, 2015			November 27, 2016			November 29, 2015
Net sales	$	(0.9	)	$	958.9		$	(0.9	)	$	1,850.7
Gain (loss) on sale of businesses	$	(0.5	)	$	—		$	1.0		$	—
Goodwill and long-lived asset impairment charges	—			(86.3		)	—			(1,898.6		)
Income (loss) from operations of discontinued operations before income taxes and equity method investment earnings	(0.6		)	85.3			(1.3		)	105.7
Loss before income taxes	(1.1		)	(1.0		)	(0.3		)	(1,792.9		)
Income tax expense (benefit)	(0.2		)	5.7			(0.9		)	(466.4		)
Income (loss) from discontinued operations, net of tax	$	(0.9	)	$	(6.7	)	$	0.6		$	(1,326.5	)

Other Divestitures

During the first quarter of fiscal 2017, we completed the sales of our Spicetec Flavors & Seasonings business ("Spicetec") and our JM Swank business, each of which was part of our Commercial segment, for $327.0 million and $159.3 million, respectively, in cash, net of cash included in the dispositions. We recognized pre-tax gains from the sales of $144.8 million and $52.9 million, respectively. The assets and liabilities of these businesses have been reclassified as assets and liabilities held for sale within our Condensed Consolidated Balance Sheets for the period presented prior to the divestiture.

The assets and liabilities classified as held for sale reflected in our Condensed Consolidated Balance Sheets related to the Spicetec and JM Swank businesses were as follows:

	May 29, 2016
Spicetec:
Current assets	$	43.3
Noncurrent assets (including goodwill of $104.7 million)	148.3
Current liabilities	10.3
Noncurrent liabilities	1.2
JM Swank:
Current assets	$	73.7
Noncurrent assets (including goodwill of $53.8 million)	74.3
Current liabilities	44.3
Noncurrent liabilities	0.4

In addition, we are actively marketing certain other long-lived assets. These assets have been reclassified as assets held for sale within our condensed consolidated balance sheets for all periods presented. The balance of these noncurrent assets classified as held for sale was $1.7 million in our Corporate segment at November 27, 2016 and $6.8 million and $4.7 million in our Corporate and Grocery & Snacks segments at May 29, 2016, respectively.