Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information contained in this report includes forward-looking statements within the meaning of the federal securities laws. Examples of forward-looking statements include statements regarding our expected future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, legal matters, costs and cost savings, impairments, and dividends, as well as other statements that are not historical facts. You can identify forward-looking statements by their use of forward-looking words, such as “may”, “will”, “anticipate”, “expect”, “believe”, “estimate”, “intend”, “plan”, “should”, “seek”, or comparable terms.
Readers of this report should understand that these forward-looking statements are not guarantees of performance or results. Forward-looking statements provide our current expectations and beliefs concerning future events and are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and could cause our actual results to differ materially from the expectations expressed in or implied by such forward-looking statements. These risks, uncertainties, and factors include: risks associated with general economic and industry conditions, including inflation, oil, energy and fuel costs, reduced consumer confidence and spending, increased tariffs and taxes, actual or threatened hostilities or war and/or other geopolitical conflicts, declining benefits or changing eligibility requirements under government food assistance programs for consumers, rising unemployment, recessions, supply chain challenges, labor cost increases or shortages, interest rate and currency rate fluctuations; risks related to the availability and prices of commodities and other supply chain resources, including raw materials, packaging, energy, and transportation, weather conditions, pandemics, epidemics, and disease, in humans, plants, and animals; disruptions or inefficiencies in our supply chain and/or operations; risks related to the effectiveness of our hedging activities and ability to respond to volatility in commodities; risks related to the ultimate impact of, including reputational harm caused by, any product recalls and product liability or labeling litigation; risks related to our ability to execute operating and value creation plans and achieve returns on our investments and targeted operating efficiencies from cost-saving initiatives, and to benefit from trade optimization programs; risks related to our ability to deleverage on currently anticipated timelines, and to continue to access capital on acceptable terms or at all; risks related to the Company’s competitive environment, cost structure, and related market conditions; risks related to our ability to respond to changing consumer preferences, including health and wellness perceptions and the success of our innovation and marketing investments; risks associated with actions by our customers, including changes in distribution and purchasing terms; risks related to the seasonality of our business; risks associated with our contract manufacturing arrangements and other third-party service provider dependencies; risks associated with actions of governments and regulatory bodies that affect our businesses, including regulations or interpretations designed to address climate change; risks related to the Company’s ability to execute on its strategies or achieve expectations related to environmental, social, and governance matters, including as a result of evolving legal, regulatory, and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon pricing or carbon taxes; risks related to a material failure in or breach of our or our vendors’ information technology systems and other cybersecurity incidents; risks related to our ability to identify, attract, hire, train, retain and develop qualified personnel; risk of increased pension, labor or people-related expenses; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; risks relating to our ability to protect our intellectual property rights; risks relating to acquisition, divestiture, joint venture or investment activities; the amount and timing of future dividends, which remain subject to Board approval and depend on market and other conditions; the amount and timing of future stock repurchases; and other risks described in our reports filed from time to time with the U.S. Securities and Exchange Commission (the “SEC”). We caution readers not to place undue reliance on any forward-looking statements included in this report, which speak only as of the date of this report. We undertake no responsibility to update these statements, except as required by law.
The discussion that follows should be read together with the unaudited Condensed Consolidated Financial Statements and related notes contained in this report and with the financial statements, related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended May 31, 2026 and subsequent filings with the SEC. Results for the first quarter of fiscal 2027 are not necessarily indicative of results that may be attained in the future.
EXECUTIVE OVERVIEW
Conagra Brands, Inc. (the “Company”, “Conagra Brands”, “we”, “us”, or “our”), headquartered in Chicago, is one of North America’s leading branded food companies. We combine a 100-year history of making quality food with agility and a relentless focus on collaboration and innovation. The Company’s portfolio is continuously evolving to satisfy consumers’ ever-changing food preferences. Conagra’s brands include Birds Eye ® , Duncan Hines ® , Healthy Choice ® , Marie Callender’s ® , Reddi-wip ® , Slim Jim ® , Angie’s ® BOOMCHICKAPOP ® , and many more.
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Trends Impacting Our Business
Our industry continues to be impacted by weak consumer sentiment, inflation, commodity cost fluctuations, supply chain pressures, trade and regulatory uncertainty, and other global macroeconomic challenges. In the first quarter of fiscal 2027, we experienced increased oil prices and higher logistics and fuel costs, which were partially offset by certain commodity price decreases and tariff refunds, our on-going productivity initiatives, and targeted pricing actions.
We expect to have implemented additional targeted price increases to help offset input cost inflation by the end of the first half of fiscal 2027. Throughout fiscal 2027, continued consumer sensitivity to price increases may negatively impact our volumes. We continue to evaluate the evolving macroeconomic environment and take action to mitigate negative impacts on our business, consolidated results of operations, and financial condition. For example, we have increased advertising and promotion investment to drive category and brand awareness.
Fiscal 2027 First Quarter Results
The first quarter of fiscal 2027 compared to fiscal 2026 reflected lower net sales. On an organic basis, which excludes the impact of divestitures and foreign exchange, net sales increases in our Foodservice and International segments were more than offset by decreases in our Grocery & Snacks and Refrigerated & Frozen segments. Gross profit decreased primarily due to lower net sales, input cost inflation, and unfavorable operating leverage, partially offset by productivity.
Segment operating profit decreased in our Grocery & Snacks, Refrigerated & Frozen, and International segments, slightly offset by an increase in our Foodservice segment. Selling, general and administrative (“SG&A”) expenses increased due to items impacting comparability, partially offset by lower incentive compensation expense. Compared to the first quarter of fiscal 2026, we recognized lower interest expense, higher equity method investment earnings, and lower income tax expense. Excluding items impacting comparability, our effective tax rate was slightly lower than the first quarter of fiscal 2026.
Diluted earnings per share were $0.36 and $0.34 in the first quarter of fiscal 2027 and 2026, respectively. The increase in diluted earnings per share reflected higher net income.
See “Items Impacting Comparability” below as several items affected the comparability of year-over-year results.
Items Impacting Comparability
Segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and foreign currency exchange rate risks of anticipated transactions is discussed in further detail in Note 7, “Derivative Financial Instruments” , to the Condensed Consolidated Financial Statements contained in this report. We had $5.2 million and $2.2 million of derivative losses in the first quarter of fiscal 2027 and 2026, respectively, which were included in general corporate expenses and reflected as items impacting comparability.
Other items of note impacting comparability for the first quarter of fiscal 2027 included the following:
● charges totaling $9.7 million ($7.4 million after-tax) in connection with our restructuring activities,
● net charges of $8.1 million ($6.1 million after-tax) related to legacy legal matters,
● charges totaling $3.5 million ($3.3 million after-tax) related to executive transitions, and
● charges totaling $3.0 million ($2.3 million after-tax) related to environmental matters.
Items of note impacting comparability for the first quarter of fiscal 2026 included the following:
● net gain of $42.4 million ($20.4 million after-tax loss) associated with the divestiture of our Chef Boyardee ® and frozen fish businesses and
● charges totaling $4.4 million ($3.3 million after-tax) in connection with our restructuring plans.
SEGMENT REVIEW
We reflect our results of operations in four reporting segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice.
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Grocery & Snacks
The Grocery & Snacks reporting segment principally includes branded, shelf-stable food products sold in various retail channels in the United States.
Refrigerated & Frozen
The Refrigerated & Frozen reporting segment principally includes branded, temperature-controlled food products sold in various retail channels in the United States.
International
The International reporting segment principally includes branded food products, in various temperature states, sold in various retail and foodservice channels outside of the United States.
Foodservice
The Foodservice reporting segment includes branded and customized food products, including meals, entrees, sauces, and a variety of custom-manufactured culinary products that are packaged for sale to restaurants and other foodservice establishments primarily in the United States.
Net Sales
Net Sales
($ in millions)
Thirteen Weeks Ended
Reporting Segment
August 30, 2026
August 24, 2025
% Inc (Dec)
Grocery & Snacks
$
1,051.1
$
1,079.6
(2.6)%
Refrigerated & Frozen
1,053.8
1,076.2
(2.1)%
International
218.1
212.3
2.7%
Foodservice
272.9
264.5
3.2%
Total
$
2,595.9
$
2,632.6
(1.4)%
Net sales for the first quarter of fiscal 2027 in our Grocery & Snacks segment included a decrease in organic volume of 5.4% and an increase in price/mix of 3.4%, primarily due to inflation-driven pricing and corresponding elasticity impacts. The first quarter of fiscal 2026 included $7.0 million of net sales related to our Chef Boyardee ® business, which was sold in the first quarter of fiscal 2026.
Net sales for the first quarter of fiscal 2027 in our Refrigerated & Frozen segment reflected a decrease in price/mix of 1.5% and a decrease in organic volume of 0.1% when compared to the first quarter of fiscal 2026. The decrease in price/mix was driven by unfavorable product mix. The first quarter of fiscal 2026 included $4.9 million of net sales related to our frozen fish business, which was sold in the first quarter of fiscal 2026.
Net sales for the first quarter of fiscal 2027 in our International segment reflected a 2.4% increase due to favorable foreign exchange rates, a 1.6% increase in organic price/mix, and a 0.7% decrease in organic volume, in each case compared to the first quarter of fiscal 2026. The increase in price/mix and decrease in volume was primarily due to inflation-driven pricing and corresponding elasticity impacts. The favorable foreign exchange rates were primarily due to the strength of the US dollar relative to the Mexican Peso in comparison to the first quarter of fiscal 2026.
Net sales for the first quarter of fiscal 2027 in our Foodservice segment reflected an increase in organic volume of 2.5%, when compared to the first quarter of fiscal 2026, primarily due to timing of customer orders. Organic price/mix increased by 0.8% compared to the first quarter of fiscal 2026.
SG&A Expenses (includes general corporate expenses)
SG&A expenses totaled $350.3 million for the first quarter of fiscal 2027, an increase of $14.7 million, as compared to the first quarter of fiscal 2026. SG&A expenses for the first quarter of fiscal 2027 reflected the following:
Items impacting comparability of earnings
● net charges of $16.3 million related to legacy legal matters,
● net charges of $6.8 million in connection with our restructuring activities,
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● charges of $3.5 million related to executive transitions, and
● charges totaling $3.0 million related to environmental matters.
Other changes in expenses compared to the first quarter of fiscal 2026
● an increase in advertising and promotion expense of $8.0 million,
● a decrease in share-based payment expense of $7.3 million,
● a decrease in short-term incentive expense of $7.1 million,
● a decrease in salary, wage, and fringe benefit expense of $4.9 million, and
● a decrease in deferred compensation expense of $4.2 million primarily due to market volatility between periods.
SG&A expenses for the first quarter of fiscal 2026 included the following items impacting comparability of earnings:
● net charges of $3.7 million in connection with our restructuring plans and
● net benefit of $2.4 million related to legacy legal matters.
Segment Operating Profit
Segment Operating Profit 1
($ in millions)
Thirteen Weeks Ended
Reporting Segment
August 30, 2026
August 24, 2025
% Inc (Dec)
Grocery & Snacks
$
204.9
$
220.8
(7.2)%
Refrigerated & Frozen
99.6
114.4
(13.0)%
International
34.4
37.7
(8.6)%
Foodservice
30.9
27.7
11.4%
1 Segment operating profit is defined as operating profit excluding the effect of items impacting comparability. See Note 16, “ Business Segments and Related Information ”, to the Condensed Consolidated Financial Statements contained in this report for further discussion.
Segment operating profit in our Grocery & Snacks segment for the first quarter of fiscal 2027 reflected a decrease in gross profits of $13.1 million compared to the first quarter of fiscal 2026. The decrease in gross profits was driven by lower organic net sales, the negative impacts of input cost inflation, and unfavorable operating leverage, partially offset by productivity. The decrease in operating profit for the first quarter of fiscal 2027 included an increase of $2.1 million in advertising and promotion expenses.
Segment operating profit in our Refrigerated & Frozen segment for the first quarter of fiscal 2027 reflected a decrease in gross profits of $15.5 million compared to the first quarter of fiscal 2026. The decrease was driven by lower organic net sales, the negative impacts of input cost inflation, and unfavorable operating leverage, partially offset by productivity. The decrease in operating profit for the first quarter of fiscal 2027 included an increase of $2.8 million in advertising and promotion expenses.
Segment operating profit in our International segment for the first quarter of fiscal 2027 reflected a decrease in gross profits of $0.7 million when compared to the first quarter of fiscal 2026. The slight decrease was driven by the negative impacts of input cost inflation, partially offset by an increase in organic net sales, and productivity. The decrease in operating profit for the first quarter of fiscal 2027 included an increase of $1.6 million in advertising and promotion expenses and the impact of unfavorable foreign exchange rates.
Segment operating profit in our Foodservice segment for the first quarter of fiscal 2027 reflected an increase in gross profits of $4.4 million when compared to the first quarter of fiscal 2026. The increase in gross profit was driven by the increase in organic net sales and productivity, partially offset by the negative impacts of input cost inflation.
Pension and Postretirement Non-service Income
In the first quarter of fiscal 2027 and 2026, pension and postretirement non-service income was $5.9 million and $6.1 million, respectively.
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Interest Expense, Net
Net interest expense was $91.8 million and $93.8 million for the first quarter of fiscal 2027 and 2026, respectively. The decrease was driven by an overall reduction of our debt balances. See Note 4, “Debt and Revolving Credit Facility” , to the Condensed Consolidated Financial Statements contained in this report for further discussion.
Equity Method Investment Earnings
Equity method investment earnings were $50.4 million and $29.4 million for the first quarter of fiscal 2027 and 2026, respectively. Ardent Mills earnings for the first quarter of fiscal 2027 reflected favorable market conditions and the joint venture’s effective management through the recent volatility in the wheat markets.
Income Taxes
In the first quarter of fiscal 2027 and 2026, we recognized income tax expense of $58.6 million and $124.6 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 25.2% and 43.1% for the first quarter of fiscal 2027 and 2026, respectively. See Note 11, “Income Taxes” , to the Condensed Consolidated Financial Statements contained in this report for a discussion on the change in effective tax rates.
Earnings Per Share
Diluted earnings per share in the first quarter of fiscal 2027 and 2026 were $0.36 and $0.34, respectively. The increase in the first quarter of fiscal 2027 reflected higher net income. See “Items Impacting Comparability” above as several items affected the comparability of year-over-year results of operations.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital
The primary objective of our financing strategy is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives. We use a combination of equity and short- and long-term debt. We use short-term debt principally to finance ongoing operations, including our seasonal requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts and other payables, accrued payroll, and other accrued liabilities). We strive to maintain solid investment grade credit ratings.
Management believes that existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program, and access to capital markets will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, other contractual obligations, and payment of anticipated quarterly dividends for at least the next twelve months and the foreseeable future thereafter.
Borrowing Facilities and Long-Term Debt
At August 30, 2026, we had a revolving credit facility (the “Revolving Credit Facility”) with a syndicate of financial institutions providing for a maximum aggregate principal amount outstanding at any one time of $2.0 billion (subject to increase to a maximum aggregate principal amount of $2.5 billion with the consent of the lenders). The Revolving Credit Facility terminated and replaced our prior revolving credit facility in the first quarter of fiscal 2026. The Revolving Credit Facility matures on June 27, 2030 and is unsecured. The Company may request the term of the Revolving Credit Facility be extended for additional one-year or two-year periods from the then-applicable maturity date on an annual basis. We have historically used a credit facility principally as a back-up for our commercial paper program. As of August 30, 2026, there were no outstanding borrowings under the Revolving Credit Facility.
As of August 30, 2026 and May 31, 2026, we had no outstanding borrowings under our commercial paper program. The highest level of borrowings outstanding during the first quarter of fiscal 2027 was $306.0 million.
During the first quarter of fiscal 2027, we issued $500.0 million aggregate principal amount of 5.40% senior unsecured notes due August 1, 2031. Pending the application of the net proceeds toward the repayment of the outstanding senior unsecured notes maturing in October 2026, the net proceeds were used to reduce borrowings under our commercial paper program and invest in U.S. government securities, term deposits, money market mutual funds, marketable securities, short-term interest-bearing accounts or similar investments.
For additional information on our debt transactions, refer to Note 4, “Debt and Revolving Credit Facility” , to the Condensed Consolidated Financial Statements contained in this report and Note 4, “Long-Term Debt” , and Note 5, “Credit Facilities and Borrowings” , to the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year
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ended May 31, 2026. The weighted average coupon interest rate of long-term debt obligations outstanding as of August 30, 2026 was approximately 5.0%.
We expect to maintain or have access to sufficient liquidity to retire or refinance long-term debt at maturity or otherwise, from operating cash flows, our commercial paper program, access to the capital markets, and our Revolving Credit Facility. We continuously evaluate opportunities to refinance our debt; however, any refinancing is subject to market conditions and other factors, including financing options that may be available to us from time to time, and there can be no assurance that we will be able to successfully refinance any debt on commercially acceptable terms at all. We have $500.0 million aggregate principal amount of 5.3% senior unsecured notes and $262.5 million aggregate principal amount of 7.125% senior unsecured notes maturing in October 2026 that we expect to pay using commercial paper and cash on hand.
As of the end of the first quarter of fiscal 2027, our senior long-term debt ratings were all investment grade. A significant downgrade in our credit ratings would not affect our ability to borrow amounts under the Revolving Credit Facility, although borrowing costs would increase. A downgrade of our short-term credit ratings would impact our ability to borrow under our commercial paper program by negatively impacting borrowing costs and causing shorter durations, as well as making access to commercial paper more difficult, or impossible.
Our most restrictive debt agreement (the Revolving Credit Facility) generally requires our ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to interest expense not be less than 3.0 to 1.0 and our ratio of funded net debt to EBITDA not to exceed 4.5 to 1.0. Each ratio is to be calculated on a rolling four-quarter basis. As of August 30, 2026, we were in compliance with these financial covenants.
Equity and Dividends
We repurchase shares of our common stock from time to time after considering market conditions and in accordance with repurchase limits authorized by our Board. Under our current share repurchase authorization, we may repurchase our shares periodically over several years, depending on market conditions and other factors, and may do so in open market purchases or privately negotiated transactions. The share repurchase authorization has no expiration date. During the first quarter of fiscal 2027, we repurchased 2.7 million shares of our common stock under this authorization for an aggregate of $44.0 million. The Company’s total remaining share repurchase authorization as of August 30, 2026 was $793.6 million.
On September 2, 2026, the Company paid a quarterly cash dividend on shares of its common stock of $0.175 per share to stockholders of record as of close of business on July 30, 2026. On September 24, 2026, we announced that our Board had authorized a quarterly dividend of $0.175 per share to be paid on December 3, 2026 to stockholders of record as of the close of business on November 5, 2026.
Contractual Obligations
As part of our ongoing operations, we enter into contractual arrangements that obligate us to make future cash payments. These obligations impact our liquidity and capital resource needs. In addition to principal and interest payments on our outstanding long-term debt and notes payable balances, discussed above, our contractual obligations primarily consist of lease payments, income taxes, pension and postretirement benefits, and unconditional purchase obligations. There were no material changes to our contractual obligations from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended May 31, 2026.
Capital Expenditures
We continue to make investments in our business and operating facilities. Our estimate of capital expenditures for fiscal 2027 is approximately $550 million.
Cash Flows
During the first quarter of fiscal 2027, we generated $153.6 million of cash, which was the net result of $4.2 million used in operating activities, $109.7 million used in investing activities, $267.3 million generated from financing activities, and an increase of $0.2 million due to the effects of changes in foreign currency exchange rates.
Cash used in operating activities totaled $4.2 million in the first quarter of fiscal 2027 compared to cash generated from operating activities of $120.6 million in the first quarter of fiscal 2026. The decrease in operating cash flows for the first quarter of fiscal 2027 compared to the first quarter of fiscal 2026 was primarily driven by higher litigation payments, net of recoveries, primarily related to cooking spray matters, and lower operating profits.
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Cash used in investing activities totaled $109.7 million in the first quarter of fiscal 2027 compared to cash generated from investing activities of $502.0 million in the first quarter of fiscal 2026. Investing activities in the first quarter of fiscal 2027 consisted primarily of capital expenditures totaling $123.7 million. Investing activities in the first quarter of fiscal 2026 consisted primarily of proceeds totaling $643.6 million from the sale of our Chef Boyardee ® and frozen fish businesses, which were partially offset by capital expenditures totaling $146.8 million.
Cash generated from financing activities totaled $267.3 million and $7.2 million in the first quarter of fiscal 2027 and 2026, respectively. Financing activities in the first quarter of fiscal 2027 principally reflected the issuance of long-term debt totaling $500.0 million, cash dividends paid of $167.5 million, and common stock repurchases of $44.0 million. Financing activities in the first quarter of fiscal 2026 principally reflected the issuance of long-term debt totaling $1.0 billion, net short-term borrowing repayments of $763.2 million, cash dividends paid of $167.1 million, and common stock repurchases of $15.0 million.
Cash Held by International Subsidiaries
The Company had cash and cash equivalents of $371.6 million at August 30, 2026 and $218.0 million at May 31, 2026, of which $66.2 million at August 30, 2026 and $73.7 million at May 31, 2026 was held in foreign countries. A deferred tax liability is provided for certain undistributed foreign earnings that are not considered to be indefinitely reinvested or cannot be remitted in a tax-neutral transaction. Other undistributed foreign earnings are invested indefinitely and therefore we have not provided deferred taxes on those earnings.
CRITICAL ACCOUNTING ESTIMATES
For further discussion of our critical accounting estimates, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in Part II, Item 7, of our Annual Report on Form 10-K for the fiscal year ended May 31, 2026.