Conagra Brands Reports Strong 4th Quarter And Full-Year Results.

CHICAGO: Today Conagra Brands, Inc. (NYSE: CAG) reported results for the fourth quarter and full fiscal year 2020, which ended on May 31, 2020. All comparisons are against the prior-year fiscal period, unless otherwise noted. Certain terms used in this release, including "Organic net sales," "EBITDA," "Free cash flow," "Legacy Conagra," and certain "adjusted" results, are defined under the section entitled "Definitions." See page 6 for more information.

Fourth quarter net sales increased 25.8%; organic net sales increased 21.5%, with double-digit growth in each of the Company's three retail segments; this growth was supported by strong e-commerce growth, significant consumer trial and solid repeat sales, and the initial launches of its fiscal 2021 innovation slate.

Fiscal 2020 net sales increased 15.9%, and organic net sales increased 5.6%.

Diluted earnings per share from continuing operations (EPS) for the fourth quarter grew 57.7% to $0.41, and adjusted EPS more than doubled to $0.75.

EPS for fiscal 2020 grew 12.4% to $1.72, and adjusted EPS grew 13.4% to $2.28.

The Company exceeded its free cash flow guidance and reduced its leverage ratio to 4.0x as of the end of the fiscal year; the Company continued progressing against its deleveraging commitments in the fourth quarter by reducing total debt by $271 million and net debt by $725 million.

The Company is providing guidance for first quarter fiscal 2021 of organic net sales growth in the range of 10% to 13%, adjusted operating margin in the range of 17.0% to 17.5%, and adjusted EPS in the range of $0.54 to $0.59.

The Company remains on-track to deliver its fiscal 2022 algorithm and remains committed to achieving its leverage target of 3.5x to 3.6x by the end of fiscal 2021.

CEO Perspective

Sean Connolly, president and chief executive officer of Conagra Brands, commented, "I am very pleased with how our Company has responded to the COVID-19 pandemic. The team's dedication to supporting our customers, consumers, employees, and communities during the fourth quarter is a true reflection of the Conagra Way in action. We have effectively responded to elevated demand, continued to make good progress on improving the overall business, kept our synergy capture on-track, and begun to launch our fiscal 2021 innovation slate. Not only did we invest to support demand during the quarter, we did it while significantly reducing our leverage."

He continued, "Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand. In retail, many consumers tried our modernized products for the first time and then returned for more. While we are optimistic about the long-term implications of recent consumer behavior shifts, given COVID-19 uncertainties, we are only providing guidance for the first quarter of fiscal 2021. We intend to provide an update on our fiscal 2021 outlook next quarter."

Total Company Fourth Quarter Results

In the quarter, net sales increased 25.8% to $3.3 billion. The growth in reported net sales primarily reflects:

a 3.1% net decrease from the divestitures of the Direct Store Delivery (DSD) snacks business, the Gelit business, the Lender's Bagel business, and the Wesson oil business, and the exit of the private label peanut butter business (collectively, the "Sold Businesses");

a 0.7% net decrease due to foreign exchange;

an 8.1% net increase due to the impact of the 53rd week; and

a 21.5% net increase in organic net sales.

The 21.5% increase in organic net sales was driven by a 21.0% increase in volume and a favorable price/mix impact of 0.5%. The significant volume increase was primarily driven by consumers increasing their at-home food consumption as a result of the COVID-19 pandemic, which benefitted the Company's retail businesses and negatively impacted the Foodservice segment. Price/mix was also favorable as both pricing and sales mix were favorable compared to the prior-year period.

Gross profit increased 30.3% to $923 million in the quarter, and adjusted gross profit increased 31.1% to $929 million. The increases were primarily driven by the increased sales volume. Additionally, supply chain realized productivity, the impact of the 53rd week, favorable price/mix, and cost synergies associated with the Pinnacle Foods acquisition were partially offset by higher input costs as well as pandemic-related costs. Pandemic-related costs included investments in employee safety protocols, bonuses paid to supply chain employees, and costs necessary to meet elevated levels of demand. Gross margin...