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Conagra(CAG) - 2024 Q2 - Quarterly Report
CAGConagra(CAG)2024-01-03 16:00
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Financial Performance - Net sales for the thirteen weeks ended November 26, 2023, were 3,208.1million,adecreaseof3.23,208.1 million, a decrease of 3.2% compared to 3,312.9 million in the same period last year[5] - Net income attributable to Conagra Brands, Inc. for the twenty-six weeks ended November 26, 2023, was 605.9million,anincreaseof99.0605.9 million, an increase of 99.0% compared to 304.4 million in the same period last year[5] - Earnings per share (diluted) for the twenty-six weeks ended November 26, 2023, were 1.26,comparedto1.26, compared to 0.63 in the same period last year, reflecting a 100% increase[5] - Comprehensive income attributable to Conagra Brands, Inc. for the twenty-six weeks ended November 26, 2023, was 611.6million,comparedto611.6 million, compared to 291.0 million in the same period last year, reflecting a 110.2% increase[9] - Net income for the twenty-six weeks ended November 26, 2023, was 606.1million,comparedto606.1 million, compared to 304.7 million in the same period last year[17] - Net income attributable to Conagra Brands, Inc. common stockholders for the thirteen weeks ended November 26, 2023 was 286.2million,comparedto286.2 million, compared to 381.9 million for the same period in 2022[62] - Net income attributable to Conagra Brands, Inc. for the twenty-six weeks ended November 26, 2023 was 286.2million[87]−NetincomeattributabletoConagraBrands,Inc.was286.2 million[87] - Net income attributable to Conagra Brands, Inc. was 381.9 million for the period ending November 27, 2022[89] - Net sales for the 13 weeks ended November 26, 2023, were 3,208.1million,adecreasefrom3,208.1 million, a decrease from 3,312.9 million in the same period last year[5] - Net income attributable to Conagra Brands, Inc. for the 13 weeks ended November 26, 2023, was 286.2million,comparedto286.2 million, compared to 381.9 million in the same period last year[5] - Earnings per share (diluted) for the 13 weeks ended November 26, 2023, were 0.60,downfrom0.60, down from 0.79 in the same period last year[5] - Net sales for the 26 weeks ended November 26, 2023, were 6,112.1million,adecreasefrom6,112.1 million, a decrease from 6,217.2 million in the same period last year[5] - Net income attributable to Conagra Brands, Inc. for the 26 weeks ended November 26, 2023, was 605.9million,comparedto605.9 million, compared to 304.4 million in the same period last year[5] - Earnings per share (diluted) for the 26 weeks ended November 26, 2023, were 1.26,upfrom1.26, up from 0.63 in the same period last year[5] Costs and Expenses - Cost of goods sold for the twenty-six weeks ended November 26, 2023, was 4,442.4million,adecreaseof2.94,442.4 million, a decrease of 2.9% compared to 4,574.6 million in the same period last year[5] - Selling, general, and administrative expenses for the twenty-six weeks ended November 26, 2023, were 732.2million,adecreaseof34.3732.2 million, a decrease of 34.3% compared to 1,114.3 million in the same period last year[5] - Cost of goods sold for the 13 weeks ended November 26, 2023, was 2,361.5million,comparedto2,361.5 million, compared to 2,390.6 million in the same period last year[5] - Selling, general and administrative expenses for the 13 weeks ended November 26, 2023, were 398.1million,upfrom398.1 million, up from 372.7 million in the same period last year[5] - Interest expense, net for the 13 weeks ended November 26, 2023, was 113.3million,comparedto113.3 million, compared to 100.3 million in the same period last year[5] - SG&A expenses for Q2 FY2024 increased by 25.4millionto25.4 million to 398.1 million, including a 34.2millionchargeforimpairmentofabusinessheldforsale[134]−Netinterestexpenseincreasedto34.2 million charge for impairment of a business held for sale[134] - Net interest expense increased to 113.3 million in Q2 FY2024 from 100.3millioninQ2FY2023,duetoahigherweightedaverageinterestrateonoutstandingdebt[147]−Incometaxexpensedecreasedto100.3 million in Q2 FY2023, due to a higher weighted average interest rate on outstanding debt[147] - Income tax expense decreased to 102.9 million in Q2 FY2024 from 122.5millioninQ2FY2023,withaneffectivetaxrateof26.5122.5 million in Q2 FY2023, with an effective tax rate of 26.5% in Q2 FY2024 compared to 24.3% in Q2 FY2023[148] Cash Flow and Liquidity - Cash and cash equivalents decreased from 93.3 million to 61.5million[13]−Netcashflowsfromoperatingactivitieswere61.5 million[13] - Net cash flows from operating activities were 854.6 million, compared to 297.8millioninthesameperiodlastyear[17]−Additionstoproperty,plant,andequipmentwere297.8 million in the same period last year[17] - Additions to property, plant, and equipment were 214.0 million, compared to 188.4millioninthesameperiodlastyear[17]−Repaymentoflong−termdebtwas188.4 million in the same period last year[17] - Repayment of long-term debt was 760.6 million, compared to 265.8millioninthesameperiodlastyear[17]−Cashdividendspaidwere265.8 million in the same period last year[17] - Cash dividends paid were 324.7 million, compared to 308.6millioninthesameperiodlastyear[17]−Netcashflowsfromoperatingactivitiesincreasedto308.6 million in the same period last year[17] - Net cash flows from operating activities increased to 854.6 million, up from 297.8millioninthepreviousyear[17]−Cashgeneratedfromoperatingactivitiestotaled297.8 million in the previous year[17] - Cash generated from operating activities totaled 854.6 million in the first half of FY2024, up from 297.8millioninthefirsthalfofFY2023,drivenbychangesininventorybalancesandtimingofaccountspayablepayments[164]−Cashusedinfinancingactivitiestotaled297.8 million in the first half of FY2023, driven by changes in inventory balances and timing of accounts payable payments[164] - Cash used in financing activities totaled 683.4 million in the first half of FY2024, primarily due to repayments of long-term debt of 760.6millionandcashdividendspaidof760.6 million and cash dividends paid of 324.7 million[166] - The company had 55.2millionincashheldbyinternationalsubsidiariesasofNovember26,2023,withadeferredtaxliabilityprovidedforcertainundistributedforeignearnings[167]AssetsandLiabilities−Totalcurrentassetsincreasedfrom55.2 million in cash held by international subsidiaries as of November 26, 2023, with a deferred tax liability provided for certain undistributed foreign earnings[167] Assets and Liabilities - Total current assets increased from 3,385.0 million to 3,469.1million[13]−Property,plant,andequipment,netincreasedfrom3,469.1 million[13] - Property, plant, and equipment, net increased from 2,736.4 million to 2,876.5million[13]−Totalliabilitiesdecreasedfrom2,876.5 million[13] - Total liabilities decreased from 13,245.3 million to 13,045.8million[13]−Assetsheldforsaleincludecurrentassetsof13,045.8 million[13] - Assets held for sale include current assets of 30.2 million and noncurrent assets of 89.5million[26]−TotalinventoriesasofNovember26,2023were89.5 million[26] - Total inventories as of November 26, 2023 were 2,277.6 million, up from 2,212.2millionasofMay28,2023[63]−TotalequityasofNovember26,2023was2,212.2 million as of May 28, 2023[63] - Total equity as of November 26, 2023 was 9,074.2 million[87] - Total equity decreased from 8,862.2millionatMay29,2022,to8,862.2 million at May 29, 2022, to 8,737.7 million at November 27, 2022, primarily due to net loss and share repurchases[89] - Accumulated other comprehensive loss improved from (44.4)millionatMay28,2023,to(44.4) million at May 28, 2023, to (38.7) million at November 26, 2023, driven by derivative adjustments and pension benefits[90] - Derivative assets decreased from 10.0millionatMay28,2023,to10.0 million at May 28, 2023, to 4.2 million at November 26, 2023, reflecting changes in market conditions[97][98] - Long-term debt carrying amount decreased from 8.60billionatMay28,2023,to8.60 billion at May 28, 2023, to 8.51 billion at November 26, 2023, with fair value estimated at 8.11billion[102]−Deferredcompensationliabilitiesincreasedfrom8.11 billion[102] - Deferred compensation liabilities increased from 67.0 million at May 28, 2023, to 71.7millionatNovember26,2023[97][98]RestructuringandImpairment−Conagra′srestructuringplanincurredcumulativechargesof71.7 million at November 26, 2023[97][98] Restructuring and Impairment - Conagra's restructuring plan incurred cumulative charges of 180.3 million since inception through November 26, 2023, with 228.8millionapprovedforvariousprojects,including228.8 million approved for various projects, including 69.5 million in cash charges and 159.3millioninnon−cashcharges[28]−Inthefirsthalfoffiscal2024,Conagrarecognized159.3 million in non-cash charges[28] - In the first half of fiscal 2024, Conagra recognized 27.4 million in restructuring charges, including 5.7millionincashoutflowsand5.7 million in cash outflows and 21.7 million in non-cash charges[30] - The company recognized an impairment charge of 34.2millionrelatedtoassetsheldforsaleinthesecondquarteroffiscal2024[24]−TotalchargesrelatedtotheConagraRestructuringPlanamountedto34.2 million related to assets held for sale in the second quarter of fiscal 2024[24] - Total charges related to the Conagra Restructuring Plan amounted to 27.4 million in the first half of fiscal 2024, with 5.7millionresultingincashoutflowsand5.7 million resulting in cash outflows and 21.7 million in non-cash charges[29][30] - Impairment charges totaled 34.2millionintheInternationalsegmentduringthesecondquarteroffiscal2024[100]−Goodwillimpairmentchargesof34.2 million in the International segment during the second quarter of fiscal 2024[100] - Goodwill impairment charges of 141.7 million were recognized in the Refrigerated & Frozen segment during the first quarter of fiscal 2023[101] - The company experienced a charge of 34.2millionrelatedtotheimpairmentofabusinessheldforsaleinQ22024[121]DebtandFinancing−Conagrarepaid34.2 million related to the impairment of a business held for sale in Q2 2024[121] Debt and Financing - Conagra repaid 500.0 million of 0.50% senior notes in fiscal 2024 and issued 500.0millionof5.30500.0 million of 5.30% senior notes due October 1, 2026[34] - Conagra prepaid 250.0 million of its 500.0milliontermloaninfiscal2024,withtheremainingbalancematuringonAugust26,2025[35]−Conagra′srevolvingcreditfacilityprovidesforamaximumprincipalamountof500.0 million term loan in fiscal 2024, with the remaining balance maturing on August 26, 2025[35] - Conagra's revolving credit facility provides for a maximum principal amount of 2.0 billion, with no outstanding borrowings as of November 26, 2023[36] - The company repaid 500.0millionofseniornotesinthefirstquarteroffiscal2024andissuednewseniornotesofthesameamountwitha5.30500.0 million of senior notes in the first quarter of fiscal 2024 and issued new senior notes of the same amount with a 5.30% interest rate due October 1, 2026[34] - The revolving credit facility provides for a maximum aggregate principal amount of 2.0 billion, with no outstanding borrowings as of November 26, 2023[36] - The company has a revolving credit facility of 2.0 billion, with no outstanding borrowings as of November 26, 2023[153] Segment Performance - Net sales for Grocery & Snacks decreased to 1,295.1 million in Q2 2024 from 1,349.9millioninQ22023,adeclineof4.11,349.9 million in Q2 2023, a decline of 4.1%[106] - Refrigerated & Frozen segment net sales dropped to 1,338.5 million in Q2 2024 from 1,421.5millioninQ22023,adecreaseof5.81,421.5 million in Q2 2023, a decrease of 5.8%[106] - International segment net sales increased to 279.6 million in Q2 2024 from 258.7millioninQ22023,agrowthof8.1258.7 million in Q2 2023, a growth of 8.1%[106] - Total net sales for the company decreased to 3,208.1 million in Q2 2024 from 3,312.9millioninQ22023,adeclineof3.23,312.9 million in Q2 2023, a decline of 3.2%[106] - Operating profit for Grocery & Snacks fell to 279.2 million in Q2 2024 from 340.4millioninQ22023,adecreaseof18.0340.4 million in Q2 2023, a decrease of 18.0%[106] - Total operating profit decreased to 543.3 million in Q2 2024 from 656.1millioninQ22023,adeclineof17.2656.1 million in Q2 2023, a decline of 17.2%[106] - Net income attributable to Conagra Brands dropped to 286.2 million in Q2 2024 from 381.9millioninQ22023,adecreaseof25.1381.9 million in Q2 2023, a decrease of 25.1%[106] - Net sales for the Grocery & Snacks segment decreased by 4.1% to 1,295.1 million in Q2 FY2024 compared to 1,349.9millioninQ2FY2023,withavolumedeclineof3.71,349.9 million in Q2 FY2023, with a volume decline of 3.7%[128] - Refrigerated & Frozen segment net sales decreased by 5.8% to 1,338.5 million in Q2 FY2024, with a volume decline of 3.3%[129] - International segment net sales increased by 8.1% to 279.6millioninQ2FY2024,drivenbya3.3279.6 million in Q2 FY2024, driven by a 3.3% volume increase and favorable foreign exchange rates[130] - Foodservice segment net sales increased by 4.3% to 294.9 million in Q2 FY2024, with price/mix up 6.8% but volumes down 2.5%[133] - Operating profit for the Grocery & Snacks segment decreased by 18.0% to 279.2 million in Q2 FY2024, driven by lower gross profits and higher advertising expenses[138] - Refrigerated & Frozen segment operating profit decreased by 12.0% to 220.2 million in Q2 FY2024, impacted by lower gross profits and input cost inflation[140] - International segment operating profit decreased by 84.0% to 5.9millioninQ2FY2024,includinga5.9 million in Q2 FY2024, including a 34.2 million impairment charge[142] - Foodservice segment operating profit increased by 33.2% to 38.0millioninQ2FY2024,drivenbyhighergrossprofitsanda38.0 million in Q2 FY2024, driven by higher gross profits and a 2.6 million insurance benefit[144] - Total net sales for the company decreased by 3.2% to 3,208.1 million in Q2 FY2024, with declines in Grocery & Snacks and Refrigerated & Frozen segments partially offset by growth in International and Foodservice[128] Derivatives and Hedging - Unrealized derivative adjustments for the twenty-six weeks ended November 26, 2023, resulted in a gain of 5.5 million, compared to a gain of 5.6millioninthesameperiodlastyear[9]−GrossderivativelossesincurredforthethirteenweeksendedNovember26,2023were5.6 million in the same period last year[9] - Gross derivative losses incurred for the thirteen weeks ended November 26, 2023 were 10.0 million, compared to gains of 5.2millionforthesameperiodin2022[54]−Netderivativelossesrecognizedingeneralcorporateexpenseswere5.2 million for the same period in 2022[54] - Net derivative losses recognized in general corporate expenses were 11.2 million for the thirteen weeks ended November 26, 2023, compared to 2.4millionforthesameperiodin2022[54]−Totalgainsfromderivativeinstrumentsnotdesignatedashedginginstrumentswere2.4 million for the same period in 2022[54] - Total gains from derivative instruments not designated as hedging instruments were 9.5 million for the twenty-six weeks ended November 26, 2023, compared to 14.8millionforthesameperiodin2022[57]−ThenotionalvalueofopencommoditycontractsasofNovember26,2023was14.8 million for the same period in 2022[57] - The notional value of open commodity contracts as of November 26, 2023 was 83.6 million, down from 134.6millionasofMay28,2023[57]−DerivativelossesinQ22024were134.6 million as of May 28, 2023[57] - Derivative losses in Q2 2024 were 11.2 million, compared to 2.4millioninQ22023[121]PensionandPost−EmploymentBenefits−Pensionandpost−employmentbenefitobligationsforthetwenty−sixweeksendedNovember26,2023,resultedinanetlossof2.4 million in Q2 2023[121] Pension and Post-Employment Benefits - Pension and post-employment benefit obligations for the twenty-six weeks ended November 26, 2023, resulted in a net loss of 1.8 million, compared to a net loss of 1.6millioninthesameperiodlastyear[9]−Totalpensioncostforthetwenty−sixweeksendedNovember26,2023was1.6 million in the same period last year[9] - Total pension cost for the twenty-six weeks ended November 26, 2023 was 10.3 million[80] - Total postretirement cost for the twenty-six weeks ended November 26, 2023 was (1.8)million[81]−Weighted−averagediscountratesforpensioncostinfiscal2024were5.64(1.8) million[81] - Weighted-average discount rates for pension cost in fiscal 2024 were 5.64% for service cost and 5.44% for interest cost[82] - The company distributed approximately 135 million from pension plan assets in connection with a voluntary lump-sum settlement offer[84] - Pension and postretirement non-service expense was 0.4millioninQ2FY2024,comparedtoincomeof0.4 million in Q2 FY2024, compared to income of 6.1 million in Q2 FY2023, driven by higher interest costs[146] Litigation and Guarantees - The company has accrued 28.8millionasofNovember26,2023forlitigationmattersrelatedtolead−basedpaint,downfrom28.8 million as of November 26, 2023 for litigation matters related to lead-based paint, down from 40.7 million as of May 28, 2023[69] - Litigation accrual totaled 54.5millionasofNovember26,2023,with54.5 million as of November 26, 2023, with 26.1 million in other accrued liabilities and 28.4millioninothernoncurrentliabilities[73]−Beatrice−relatedenvironmentalmattersaccrualwas28.4 million in other noncurrent liabilities[73] - Beatrice-related environmental matters accrual was 38.8 million as of November 26, 2023, with 1.5millioninotheraccruedliabilitiesand1.5 million in other accrued liabilities and 37.3 million in other noncurrent liabilities[75] - The company guarantees a maximum of 75.0millionforLambWeston′ssubleaseagreementobligations[76]−Guaranteedfuturepaymentsforanexitedfacilityleasearrangementtotaled75.0 million for Lamb Weston's sublease agreement obligations[76] - Guaranteed future payments for an exited facility lease arrangement totaled 7.4 million as of November 26, 2023[77] Other Financial Metrics - Stock-based compensation expense for the second quarter of fiscal 2024 was 6.2million,comparedto6.2 million, compared to 36.0 million for the same period in 2023[58] - Total depreciation expense increased to 86.0millioninQ22024from86.0 million in Q2 2024 from 77.8 million in Q2 2023, a rise of 10.5%[109] - The amount of gross unrecognized tax benefits for uncertain tax positions was 25.2millionasofNovember26,2023,upfrom25.2 million as of November 26, 2023, up from 23.7 million as of May 28, 2023[66] - Equity method investment earnings were 54.3millioninQ2FY2024,upfrom54.3 million in Q2 FY2024, up from 49.3 million in Q2 FY2023, driven by improved product margins despite lower volume trends[149] - Diluted earnings per share decreased to 0.60inQ2FY2024from0.60 in Q2 FY2024 from 0.79 in Q2 FY2023, reflecting lower net income[150] - Capital expenditures for FY2024 are estimated at approximately $450 million[162]