What changed in this filing

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Item 1. Financial Statements

2022-04-07 compared with 2022-01-06 · 168 added, 144 removed, 738 unchanged (30% of the section changed)

5 unchanged sentences

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Costs and expenses:

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Thirteen Weeks Ended

November 28, 2021

November 29, 2020

February 27, 2022

February 28, 2021

Other comprehensive income:

2 unchanged sentences

Reclassification for derivative adjustments included in net income

Unrealized currency translation gains (losses)

Unrealized currency translation gains

Pension and post-employment benefit obligations:

1 unchanged sentence

Comprehensive income

Comprehensive loss attributable to noncontrolling interests

Comprehensive income attributable to noncontrolling interests

Comprehensive income attributable to Conagra Brands, Inc.

Twenty-Six Weeks Ended

November 28, 2021

November 29, 2020

Thirty-Nine Weeks Ended

February 27, 2022

February 28, 2021

Other comprehensive income:

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(in millions)

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Cash flows from operating activities:

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Repayment of short-term borrowings, maturities greater than 90 days

Net issuance (repayment) of other short-term borrowings

Net (repayment) issuance of other short-term borrowings

Issuance of long-term debt

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On foreign investments we deem to be essentially permanent in nature, we do not provide for taxes on currency translation adjustments arising from converting an investment denominated in a foreign currency to U.S.

When we determine that a foreign investment, as well as undistributed earnings, are no longer permanent in nature, estimated taxes will be provided for the related deferred tax liability (asset), if any, resulting from currency translation adjustments.

A deferred tax liability is recorded on currency translation adjustments related to undistributed foreign earnings that are not deemed to be permanently reinvested.

The following table details the accumulated balances for each component of other comprehensive income (loss), net of tax:

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Statement of Earnings 1

November 28, 2021

November 29, 2020

February 27, 2022

February 28, 2021

Net derivative adjustments:

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Cash flow hedges

Selling, general and administrative expenses

Cash flow hedges

Equity method investment earnings

2 unchanged sentences

Pension and postretirement liabilities:

Net prior service cost

Pension and postretirement non-service income

Net actuarial gain

2 unchanged sentences

Income tax expense

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Affected Line Item in the Condensed Consolidated

Statement of Earnings 1

November 28, 2021

November 29, 2020

February 27, 2022

February 28, 2021

Net derivative adjustment, net of tax:

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DIVESTITURES AND ASSETS HELD FOR SALE

During the fourth quarter of fiscal 2021, we completed the sale of our Egg Beaters ® business for net proceeds of $ 50.7 million , including working capital adjustments.

During the fourth quarter of fiscal 2021, we completed the sale of our Egg Beaters ® business for net proceeds of $ 50.7 million .

The business results were previously reported primarily within our Refrigerated & Frozen segment, and to a lesser extent within our International and Foodservice segments .

During the third quarter of fiscal 2021, we completed the sale of our Peter Pan ® peanut butter business for net proceeds of $ 101.5 million , including working capital adjustments .

During the third quarter of fiscal 2021, we completed the sale of our Peter Pan ® peanut butter business for net proceeds of $ 101.5 million .

The business results were previously reported primarily within our Grocery & Snacks segment, and to a lesser extent within our International and Foodservice segments .

We recognized a gain on the sale of $ 49.7 million in the third quarter of fiscal 2021, included within selling, general and administrative ("SG&A") expenses.

During the second quarter of fiscal 2021, we completed the sale of our H.K.

Anderson ® business for net proceeds of $ 8.7 million , including working capital adjustments and recognized a gain on the sale of $ 5.3 million, included within selling, general and administrative ("SG&A") expenses .

Anderson ® business for net proceeds of $ 8.7 million and recognized a gain on the sale of $ 5.3 million, included within SG&A expenses .

The business results were previously reported primarily within our Grocery & Snacks segment, and to a lesser extent within our Foodservice segment .

1 unchanged sentence

During the second quarter of fiscal 2022, we initiated a plan to sell businesses with operating results included within our Grocery & Snacks, Refrigerated & Frozen, and Foodservice segments.

The assets and liabilities have been reclassified as assets and liabilities held for sale within our Condensed Consolidated Balance Sheets for all periods presented and are expected to be sold in the next twelve months.

In connection with this planned divestiture, we recognized an impairment charge of $ 39.2 million within SG&A expenses in the second quarter of fiscal 2022.

In connection with this activity, we recognized an impairment charge of $ 39.2 million within SG&A expenses in the second quarter of fiscal 2022.

During the third quarter of fiscal 2022, we recognized a further impairment charge of $ 30.9 million within SG&A expenses.

In addition, we actively market certain other assets from time to time.

1 unchanged sentence

The assets and liabilities classified as held for sale reflected in our Condensed Consolidated Balance Sheets were as follows:

November 28, 2021

February 27, 2022

Current assets

Noncurrent assets (including goodwill of $23.6 million and $34.6 million, respectively)

Noncurrent assets (including goodwill of $34.6 million at May 30, 2021)

Current liabilities

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In December 2018, our Board of Directors (the "Board") approved a restructuring and integration plan related to the ongoing integration of the operations of Pinnacle Foods, Inc.

(the "Pinnacle Integration Restructuring Plan"), for the purpose of achieving significant cost synergies between the companies, as a result of which we expect to incur material charges for exit and disposal activities under U.S.

("Pinnacle") (such plan the "Pinnacle Integration Restructuring Plan"), for the purpose of achieving significant cost synergies between the companies, as a result of which we expect to incur material charges for exit and disposal activities under U.S.

We expect to incur approximately $ 341.0 million of charges ($ 277.7 million of cash charges and $ 63.3 million of non-cash charges) for actions identified to date under the Pinnacle Integration Restructuring Plan.

The Board and/or our senior management have authorized incurrence of these charges.

In the second quarter and first half of fiscal 2022, we recognized charges of $ 5.8 million and $ 13.1 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

In the second quarter and first half of fiscal 2021, we recognized charges of $ 10.2 million and $ 18.8 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

In the third quarter and first three quarters of fiscal 2022, we recognized charges of $ 0.2 million and $ 13.3 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

In the third quarter and first three quarters of fiscal 2021, we recognized charges of $ 5.4 million and $ 24.2 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

We expect to incur costs related to the Pinnacle Integration Restructuring Plan over a multi-year period.

We anticipate that we will recognize the following pre-tax expenses in association with the Pinnacle Integration Restructuring Plan (amounts include charges recognized from plan inception through the second quarter of fiscal 2022):

Grocery & Snacks

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Consolidated total

During the second quarter of fiscal 2022, we recognized the following pre-tax expenses for the Pinnacle Integration Restructuring Plan:

Grocery & Snacks

During the third quarter of fiscal 2022, we recognized the following pre-tax expenses for the Pinnacle Integration Restructuring Plan:

Refrigerated & Frozen

2 unchanged sentences

Severance and related costs

Asset impairment (net of gains on disposal)

Asset gains on disposal (net of impairment)

Contract/lease termination

Consulting/professional fees

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Consolidated total

Included in the above results are $ 4.6 million of charges that have resulted or will result in cash outflows and $ 1.2 million in non-cash charges.

During the first half of fiscal 2022, we recognized the following pre-tax expenses for the Pinnacle Integration Restructuring Plan:

Included in the above results are $ 5.3 million of charges that have resulted or will result in cash outflows and a non-cash net benefit of $ 5.1 million.

During the first three quarters of fiscal 2022, we recognized the following pre-tax expenses for the Pinnacle Integration Restructuring Plan:

Grocery & Snacks

3 unchanged sentences

Severance and related costs

Asset impairment (net of gains on disposal)

Asset gains on disposal (net of impairment)

Contract/lease termination

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Consolidated total

Included in the above results are $ 11.9 million of charges that have resulted or will result in cash outflows and $ 1.2 million in non-cash charges.

We recognized the following cumulative (plan inception to November 28, 2021) pre-tax expenses for the Pinnacle Integration Restructuring Plan in our Condensed Consolidated Statement of Earnings:

Included in the above results are $ 17.2 million of charges that have resulted or will result in cash outflows and a net non-cash benefit of $ 3.9 million.

We recognized the following cumulative (plan inception to February 27, 2022) pre-tax expenses for the Pinnacle Integration Restructuring Plan in our Condensed Consolidated Statement of Earnings:

Grocery & Snacks

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Included in the above results are $ 258.1 million of charges that have resulted or will result in cash outflows and $ 28.9 million in non-cash charges.

Liabilities recorded for the Pinnacle Integration Restructuring Plan and changes therein for the first half of fiscal 2022 were as follows:

Liabilities recorded for the Pinnacle Integration Restructuring Plan and changes therein for the first three quarters of fiscal 2022 were as follows:

Costs Incurred

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In fiscal 2019, senior management initiated a restructuring plan for costs incurred in connection with actions taken to improve SG&A expense effectiveness and efficiencies and to optimize our supply chain network (the "Conagra Restructuring Plan").

Although we remain unable to make good faith estimates relating to the entire Conagra Restructuring Plan, we are reporting on actions initiated through the end of the second quarter of fiscal 2022, including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows.

As of November 28, 2021, we have approved the incurrence of $ 172.6 million ($ 45.8 million of cash charges and $ 126.8 million of non-cash charges) for several projects associated with the Conagra Restructuring Plan.

As of November 28, 2021, we have incurred or expect to incur $ 143.4 million of charges ($ 40.2 million of cash charges and $ 103.2 million of non-cash charges) for actions identified to date under the Conagra Restructuring Plan.

In the second quarter and first half of fiscal 2022, we recognized charges of $ 6.6 million and $ 15.1 million, respectively, in connection with the Conagra Restructuring Plan.

In the second quarter and first half of fiscal 2021, we recognized charges of $ 10.5 million and $ 27.8 million, respectively, in connection with the Conagra Restructuring Plan.

Although we remain unable to make good faith estimates relating to the entire Conagra Restructuring Plan, we are reporting on actions initiated through the end of the third quarter of fiscal 2022, including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows.

As of February 27, 2022, we have approved the incurrence of $ 175.6 million ($ 48.8 million of cash charges and $ 126.8 million of non-cash charges) for several projects associated with the Conagra Restructuring Plan.

As of February 27, 2022, we have incurred or expect to incur $ 148.4 million of charges ($ 44.6 million of cash charges and $ 103.8 million of non-cash charges) for actions identified to date under the Conagra Restructuring Plan.

In the third quarter and first three quarters of fiscal 2022, we recognized charges of $ 10.5 million and $ 25.6 million, respectively, in connection with the Conagra Restructuring Plan.

In the third quarter and first three quarters of fiscal 2021, we recognized charges of $ 10.0 million and $ 37.8 million, respectively, in connection with the Conagra Restructuring Plan.

We expect to incur costs related to the Conagra Restructuring Plan over a multi-year period.

We anticipate that we will recognize the following pre-tax expenses in association with the Conagra Restructuring Plan (amounts include charges recognized from plan inception through the second quarter of fiscal 2022):

Grocery & Snacks

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Consolidated total

During the second quarter of fiscal 2022, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

During the third quarter of fiscal 2022, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

Grocery & Snacks

Refrigerated & Frozen

International

Accelerated depreciation

3 unchanged sentences

Asset impairment (net of gains on disposal)

Contract/lease termination

Other selling, general and administrative expenses

1 unchanged sentence

Included in the above results are $ 6.8 million in charges that have resulted or will result in cash outflows and $ 3.7 million in non-cash charges.

During the first half of fiscal 2022, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

During the first three quarters of fiscal 2022, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

Grocery & Snacks

Refrigerated & Frozen

International

Accelerated depreciation

7 unchanged sentences

Included in the above results are $ 11.4 million in charges that have resulted or will result in cash outflows and $ 14.2 million in non-cash charges.

We recognized the following cumulative (plan inception to November 28, 2021) pre-tax expenses for the Conagra Restructuring Plan in our Condensed Consolidated Statement of Earnings:

We recognized the following cumulative (plan inception to February 27, 2022) pre-tax expenses for the Conagra Restructuring Plan in our Condensed Consolidated Statement of Earnings:

Grocery & Snacks

12 unchanged sentences

Included in the above results are $ 35.5 million of charges that have resulted or will result in cash outflows and $ 102.9 million in non-cash charges.

Liabilities recorded for the Conagra Restructuring Plan and changes therein for the first half of fiscal 2022 were as follows:

Liabilities recorded for the Conagra Restructuring Plan and changes therein for the first three quarters of fiscal 2022 were as follows:

Costs Incurred

4 unchanged sentences

During the fourth quarter of fiscal 2021, we repaid the remaining outstanding $ 195.9 million aggregate principal amount of our 9.75 % subordinated notes on their maturity date of March 1, 2021.

During the third quarter of fiscal 2021, we redeemed $ 400.0 million aggregate principal amount of our 3.20 % senior notes prior to their maturity date of January 25, 2023.

During the third quarter of fiscal 2021, we redeemed $ 400.0 million aggregate principal amount of our 3.20 % senior notes due January 25, 2023, prior to maturity, resulting in a loss of $ 24.4 million within SG&A expenses as a cost of early extinguishment of debt.

During the second quarter of fiscal 2021, we issued $ 1.0 billion aggregate principal amount of 1.375 % senior notes due November 1, 2027 (the "2027 Senior Notes").

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During the first quarter of fiscal 2021, we repaid the remaining outstanding $ 126.6 million aggregate principal amount of our 4.95 % senior notes on their maturity date of August 15, 2020.

At November 28, 2021, 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 $ 1.6 billion (subject to increase to a maximum aggregate principal amount of $ 2.1 billion with the consent of the lenders).

At February 27, 2022, 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 $ 1.6 billion (subject to increase to a maximum aggregate principal amount of $ 2.1 billion with the consent of the lenders).

The Revolving Credit Facility matures on July 11, 2024 and is unsecured.

The term of the Revolving Credit Facility may be extended for additional one-year or two-year periods from the then-applicable maturity date on an annual basis.

As of November 28, 2021, there were no outstanding borrowings under the Revolving Credit Facility.

As of February 27, 2022, there were no outstanding borrowings under the Revolving Credit Facility.

In the first quarter of fiscal 2022, we entered into an amendment to the Revolving Credit Facility (the "Amended Revolving Credit Facility").

The Amended Revolving Credit Facility generally requires our ratio of earnings before interest, taxes, depreciation and amortization ("EBITDA") to interest expense not to be less than 3.0 to 1.0 and our ratio of funded debt to EBITDA not to exceed 4.5 to 1.0, with each ratio to be calculated on a rolling four-quarter basis.

As of November 28, 2021, we were in compliance with all financial covenants under the Amended Revolving Credit Facility.

As of February 27, 2022, we were in compliance with all financial covenants under the Amended Revolving Credit Facility.

Net interest expense consists of:

Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Long-term debt

3 unchanged sentences

GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The change in the carrying amount of goodwill for the first half of fiscal 2022, excluding amounts classified as held for sale (see Note 2), was as follows:

The change in the carrying amount of goodwill for the first three quarters of fiscal 2022, excluding amounts classified as held for sale (see Note 2), was as follows:

International

1 unchanged sentence

Currency translation

Balance as of November 28, 2021

Balance as of February 27, 2022

Other identifiable intangible assets, excluding amounts classified as held for sale, were as follows:

November 28, 2021

February 27, 2022

Non-amortizing intangible assets

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Amortizing intangible assets carry a remaining weighted average life of approximately 19 years.

Amortization expense was $ 14.8 million and $ 29.7 million for the second quarter and first half of fiscal 2022, respectively, and $ 15.0 million and $ 29.9 million for the second quarter and first half of fiscal 2021, respectively.

Based on amortizing assets recognized in our Condensed Consolidated Balance Sheet as of November 28, 2021, amortization expense is estimated to average $ 51.8 million for each of the next five years.

Amortization expense was $ 14.8 million and $ 44.5 million for the third quarter and first three quarters of fiscal 2022, respectively, and $ 14.9 million and $ 44.8 million for the third quarter and first three quarters of fiscal 2021, respectively.

Based on amortizing assets recognized in our Condensed Consolidated Balance Sheet as of February 27, 2022, amortization expense is estimated to average $ 51.0 million for each of the next five years.

DERIVATIVE FINANCIAL INSTRUMENTS

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We may enter into longer-term economic hedges on particular commodities, if deemed appropriate.

As of November 28, 2021, we had economically hedged certain portions of our anticipated consumption of commodity inputs using derivative instruments with expiration dates through October 2022.

As of February 27, 2022, we had economically hedged certain portions of our anticipated consumption of commodity inputs using derivative instruments with expiration dates through November 2022.

In order to reduce exposures related to changes in foreign currency exchange rates, we enter into forward exchange, option, or swap contracts from time to time for transactions denominated in a currency other than the applicable functional currency.

This includes, but is not limited to, hedging against foreign currency risk in purchasing inventory and capital equipment, sales of finished goods, and future settlement of foreign-denominated assets and liabilities.

As of November 28, 2021, we had economically hedged certain portions of our foreign currency risk in anticipated transactions using derivative instruments with expiration dates through August 2022.

As of February 27, 2022, we had economically hedged certain portions of our foreign currency risk in anticipated transactions using derivative instruments with expiration dates through November 2022.

From time to time, we may use derivative instruments, including interest rate swaps, to reduce risk related to changes in interest rates.

3 unchanged sentences

We settled these contracts during the second quarter of fiscal 2019 and deferred a $ 47.5 million gain in accumulated other comprehensive income that is being amortized as a reduction of interest expense over the lives of the related debt instruments.

The unamortized amount at November 28, 2021, was $ 36.6 million.

The unamortized amount at February 27, 2022, was $ 35.8 million.

Economic Hedges of Forecasted Cash Flows

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GAAP, we offset certain derivative asset and liability balances, as well as certain amounts representing rights to reclaim cash collateral and obligations to return cash collateral, where master netting agreements provide for legal right of setoff.

At November 28, 2021 and May 30, 2021, amounts representing an obligation to return cash collateral of $ 2.8 million and $ 2.0 million, respectively, were included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

At February 27, 2022 and May 30, 2021, amounts representing an obligation to return cash collateral of $ 1.7 million and $ 2.0 million, respectively, were included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

Derivative assets and liabilities and amounts representing a right to reclaim cash collateral or an obligation to return cash collateral were reflected in our Condensed Consolidated Balance Sheets as follows:

1 unchanged sentence

Other accrued liabilities

The following table presents our derivative assets and liabilities, at November 28, 2021, on a gross basis, prior to the setoff of $ 6.0 million to total derivative assets and $ 3.2 million to total derivative liabilities where legal right of setoff existed:

The following table presents our derivative assets and liabilities, at February 27, 2022, on a gross basis, prior to the setoff of $ 11.7 million to total derivative assets and $ 10.0 million to total derivative liabilities where legal right of setoff existed:

Derivative Assets

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Gains (Losses) Recognized on Derivatives in Condensed Consolidated Statements of Earnings for the

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

Derivatives Not Designated as Hedging Instruments

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Cost of goods sold

Total gains (losses) from derivative instruments not designated as hedging instruments

As of November 28, 2021, our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $ 90.4 million and $ 100.0 million for purchase and sales contracts, respectively.

Total gains from derivative instruments not designated as hedging instruments

As of February 27, 2022, our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $ 123.3 million and $ 154.5 million for purchase and sales contracts, respectively.

As of May 30, 2021, our open commodity contracts had a notional value of $ 148.8 million and $ 159.4 million for purchase and sales contracts, respectively.

The notional amount of our foreign currency forward contracts as of November 28, 2021 and May 30, 2021 was $ 89.1 million and $ 111.4 million, respectively.

The notional amount of our foreign currency forward contracts as of February 27, 2022 and May 30, 2021 was $ 88.2 million and $ 111.4 million, respectively.

We enter into certain commodity, interest rate, and foreign exchange derivatives with a diversified group of counterparties.

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We also enter into futures and options transactions through various regulated exchanges.

At November 28, 2021, the maximum amount of loss due to the credit risk of the counterparties, had the counterparties failed to perform according to the terms of the contract, was $ 3.2 million.

At February 27, 2022, the maximum amount of loss due to the credit risk of the counterparties, had the counterparties failed to perform according to the terms of the contract, was $ 0.7 million.

SHARE-BASED PAYMENTS

For the second quarter and first half of fiscal 2022, we recognized total stock-based compensation expense (including restricted stock units, performance shares, and performance-based restricted stock units) of $ 11.7 million and $ 14.3 million, respectively.

For the second quarter and first half of fiscal 2021, we recognized total stock-based compensation expense of $ 14.6 million and $ 32.0 million, respectively.

In the first half of fiscal 2022, we granted 1.0 million restricted stock units at a weighted average grant date price of $ 34.33 and 0.5 million performance shares at a weighted average grant date price of $ 34.13 .

For the third quarter and first three quarters of fiscal 2022, we recognized total stock-based compensation expense (including restricted stock units, performance shares, and performance-based restricted stock units) of $ 12.5 million and $ 26.8 million, respectively.

For the third quarter and first three quarters of fiscal 2021, we recognized total stock-based compensation expense of $ 10.4 million and $ 42.4 million, respectively.

In the first three quarters of fiscal 2022, we granted 1.0 million restricted stock units at a weighted average grant date price of $ 34.27 and 0.5 million performance shares at a weighted average grant date price of $ 34.13 .

Performance shares are granted to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Net income attributable to Conagra Brands, Inc.

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Diluted weighted average shares outstanding

For the second quarter and first half of fiscal 2022, there were 1.0 million and 0.7 million stock options outstanding, respectively, that were excluded from the computation of diluted weighted average shares because the effect was antidilutive.

For the second quarter of fiscal 2021, there were no stock options outstanding with an antidilutive effect.

For the first half of fiscal 2021, there were 0.6 million stock options outstanding that were excluded from the calculation.

For the third quarter and first three quarters of fiscal 2022, there were 1.0 million and 0.8 million stock options outstanding, respectively, that were excluded from the computation of diluted weighted average shares because the effect was antidilutive.

For the third quarter and first three quarters of fiscal 2021, there were 0.5 million and 0.7 million stock options outstanding, respectively, that were excluded from the calculation.

The major classes of inventories were as follows:

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Supplies and other

In the second quarter of fiscal 2022 and 2021, we recognized income tax expense of $ 84.2 million and $ 80.7 million, respectively.

In the first half of fiscal 2022 and 2021, we recognized income tax expense of $ 153.9 million and $ 167.4 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 23.4 % and 17.6 % for the second quarter of fiscal 2022 and 2021, respectively.

The effective tax rate for the first half of fiscal 2022 and 2021 was 23.1 % and 19.1 %, respectively.

The effective tax rate in the second quarter of fiscal 2022 reflected additional tax expense associated with non-deductible goodwill related to assets held for sale for which an impairment charge was recognized, a tax benefit resulting from state law changes, and a benefit from statute lapses on state tax issues that were previously reserved.

The effective tax rate in the first half of fiscal 2022 reflected the above-cited items, as well as a benefit of $ 3.6 million from the settlement of tax issues that were previously reserved.

The effective tax rate for the second quarter of fiscal 2021 reflected a benefit of $ 25.3 million resulting from the release of valuation allowance associated with the expected capital gains from the planned divestiture of the Peter Pan ® peanut butter business and a benefit from statute lapses on tax issues that were previously reserved.

The effective tax rate for the first half of fiscal 2021 reflected the above-cited items, as well as a benefit of $ 7.6 million resulting from the regulations issued by the U.S.

In the third quarter of fiscal 2022 and 2021, we recognized income tax expense of $ 109.9 million and $ 101.6 million, respectively.

In the first three quarters of fiscal 2022 and 2021, we recognized income tax expense of $ 263.8 million and $ 269.0 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 33.4 % and 26.5 % for the third quarter of fiscal 2022 and 2021, respectively.

The effective tax rate for the first three quarters of fiscal 2022 and 2021 was 26.5 % and 21.3 %, respectively.

The effective tax rate in the third quarter of fiscal 2022 reflected additional tax expense of $ 25.0 million related to tax elections made in connection with filing our fiscal 2021 federal tax return.

These elections are still under review with the Internal Revenue Service.

These elections may result in increases to the tax basis in those assets and if successful would result in tax benefits being realized in future periods.

The effective tax rate also reflected additional tax expense associated with non-deductible goodwill related to assets held for sale for which an impairment charge was recognized.

The effective tax rate in the first three quarters of fiscal 2022 reflected the above-cited items, as well as a tax benefit resulting from state law changes, a benefit from statute lapses on state tax issues that were previously reserved, and a benefit from the settlement of tax issues that were previously reserved.

The effective tax rate for the third quarter of fiscal 2021 reflected additional tax expense associated with non-deductible goodwill related to the divestiture of the Peter Pan ® peanut butter business.

The effective tax rate for the first three quarters of fiscal 2021 reflected the above-cited item, as well as release of valuation allowance associated with the capital gains from the divestiture of the Peter Pan ® peanut butter business, a benefit from statute lapses on state tax issues that were previously reserved, and a benefit resulting from the regulations issued by the U.S.

Treasury and Internal Revenue Service on certain provisions of the 2017 Tax Cuts and Jobs Act.

The amount of gross unrecognized tax benefits for uncertain tax positions was $ 25.3 million as of November 28, 2021 and $ 33.0 million as of May 30, 2021.

The amount of gross unrecognized tax benefits for uncertain tax positions was $ 54.8 million as of February 27, 2022 and $ 33.0 million as of May 30, 2021.

Included in these amounts were $ 0.2 million and $ 0.8 million, respectively, for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The gross unrecognized tax benefits excluded related liabilities for gross interest and penalties of $ 7.3 million and $ 8.8 million as of November 28, 2021 and May 30, 2021, respectively.

The net amount of unrecognized tax benefits at November 28, 2021 and May 30, 2021 that, if recognized, would favorably impact the Company's effective tax rate was $ 21.0 million and $ 28.2 million, respectively.

The amount as of February 27, 2022 includes the issue noted above that is still under review with the IRS.

The gross unrecognized tax benefits excluded related liabilities for gross interest and penalties of $ 7.6 million and $ 8.8 million as of February 27, 2022 and May 30, 2021, respectively.

The net amount of unrecognized tax benefits at February 27, 2022 and May 30, 2021 that, if recognized, would favorably impact the Company's effective tax rate was $ 49.9 million and $ 28.2 million, respectively.

We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $ 4.4 million over the next twelve months due to various state audit settlements and the expiration of statutes of limitations.

In fiscal 2021, we completed a restructuring of our ownership interest in the Ardent Mills joint venture, a milling business, that utilized a portion of our capital loss carryforward prior to its expiration.

Also in fiscal 2021, we completed several other transactions related to retained assets in conjunction with the divestitures of the Peter Pan ® peanut butter and Egg Beaters ® businesses that we believe will utilize a portion of the remaining capital loss carryforward.

These transactions are subject to certain elections and are currently under review by the Internal Revenue Service.

We believe they may result in increases to the tax basis in those assets and if successful would result in tax benefits being realized in future periods.

We have not provided any deferred taxes on undistributed earnings of our foreign subsidiaries.

Deferred taxes will be provided for earnings of non-U.S.

affiliates and associated companies when we determine that such earnings are no longer indefinitely reinvested and will result in a tax liability upon distribution.

In the third quarter of fiscal 2022, it was determined that the current earnings of certain foreign subsidiaries were not indefinitely reinvested or that we could not remit to the U.S.

parent in a tax-neutral transaction.

Accordingly, we recorded a deferred tax liability of $ 1.2 million on approximately $ 23.6 million of earnings at February 27, 2022.

The deferred tax liability relates to local withholding taxes that will be owed when this cash is distributed.

The undistributed historic earnings in our foreign subsidiaries through May 30, 2021 are considered to be indefinitely reinvested or can be remitted in a tax-neutral transaction.

Accordingly, we have not recorded a deferred tax liability related to these undistributed historic earnings.

CONTINGENCIES

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As part of the settlement, ConAgra Grocery Products has provided a guarantee of up to $ 15.0 million in the event co-defendant, NL Industries, Inc., defaults on its payment obligations.

We have accrued $ 11.2 million and $ 40.7 million, within other accrued liabilities and other noncurrent liabilities, respectively, for this matter as of November 28, 2021.

We have accrued $ 11.4 million and $ 40.6 million, within other accrued liabilities and other noncurrent liabilities, respectively, for this matter as of February 27, 2022.

The extent of insurance coverage is uncertain and the Company's carriers are on notice;

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On June 1, 2021, the appellate court rejected the settlement and remanded to the trial court for further proceedings.

On December 22, 2021, the trial court denied plaintiffs’ motion for final approval of the settlement.

While we cannot predict with certainty the results of this or any other legal proceeding challenging our product claims, we do not expect these matters to have a material adverse effect on our financial condition, results of operations, or business.

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District Court for the Central District of California, in which the plaintiffs allege a pattern of violations of California and/or federal law at several current and former Company manufacturing facilities across the State of California.

On June 21, 2021, the trial court granted preliminary approval of a settlement in this matter.

If final approval is obtained, the settlement will require a payment by the Company of $ 9.0 million, which we have

accrued within other accrued liabilities.

While we cannot predict with certainty the results of this or any other legal proceeding, we do not expect this matter to have a material adverse effect on our financial condition, results of operations, or business.

On June 21, 2021, the trial court granted preliminary approval of a settlement in

F inal approval of t he settlement w as granted on February 7, 2022 and the case was dismissed with prejudice.

The Company fulfilled its settlement obligations by contributing a total of $ 9.4 million to the settlement fund as of February 18, 2022.

We are party to a number of matters asserting product liability claims against the Company related to certain Pam ® and other cooking spray products.

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As a result of the monitoring data findings, the MPCA has alleged violations of Minnesota Ambient Air Quality Standards based on our hydrogen sulfide emissions during calendar years 2020 and 2021.

The MPCA proposed a penalty of $ 2.2 million for 2020, and we are awaiting a proposed additional penalty for 2021 until after the monitoring season is complete.

We are currently in settlement negotiations with the MPCA related to these allegations.

The MPCA ' s current proposed penalty is $ 1.8 million for 2020 and $ 4.3 million for 2021, however, we are still in settlement negotiations with the MPCA to reduce the amount allegedly owed.

To that end, Conagra is taking additional actions to improve wastewater treatment at the Waseca facility, which may be used to offset portions of the penalties ultimately agreed upon by the parties.

We are a party to certain environmental proceedings relating to our acquisition of Beatrice in fiscal 1991.

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Reserves for these Beatrice environmental proceedings have been established based on our best estimate of the undiscounted remediation liabilities, which estimates include evaluation of investigatory studies, extent of required clean-up, the known volumetric contribution of Beatrice and other potentially responsible parties, and its experience in remediating sites.

The accrual for Beatrice-related environmental matters totaled $ 54.5 million ($ 2.4 million within other accrued liabilities and $ 52.1 million within other noncurrent liabilities) as of November 28, 2021, a majority of which relates to the Superfund and state-equivalent sites referenced above.

During the third quarter of fiscal 2017, a final Remedial Investigation/Feasibility Study was submitted for the Southwest Properties portion ("Operating Unit 4") of the Wells G&H Superfund site, which is one of the Beatrice sites.

The accrual for Beatrice-related environmental matters totaled $ 51.9 million ($ 2.4 million within other accrued liabilities and $ 49.5 million within other noncurrent liabilities) as of February 27, 2022, a majority of which relates to the Superfund and state-equivalent sites referenced above.

During the third quarter of fiscal 2017, a final Remedial Investigation/Feasibility Study was submitted for the Southwest Properties portion ("Operating Unit

4") of the Wells G&H Superfund site, which is one of the Beatrice sites.

Environmental Protection Agency ("EPA") issued a Record of Decision ("ROD") for the Southwest Properties portion of the site on September 29, 2017 and entered into negotiations with potentially responsible parties to determine final responsibility for implementing the ROD.

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We also guarantee a lease resulting from an exited facility.

As of November 28, 2021, the remaining term of this arrangement did not exceed five years and the maximum amount of future payments we have guaranteed was $ 12.6 million.

As of February 27, 2022, the remaining term of this arrangement did not exceed five years and the maximum amount of future payments we have guaranteed was $ 11.9 million.

After taking into account liabilities recognized for all of the foregoing matters, management believes the ultimate resolution of such matters should not have a material adverse effect on our financial condition, results of operations, or liquidity;

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Interest cost

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

Thirty-Nine Weeks Ended

Interest cost

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The weighted-average discount rates for service and interest costs under the spot-rate approach used for pension cost in fiscal 2022 were 3.50 % and 2.29 %, respectively.

During the second quarter and first half of fiscal 2022, we contributed $ 2.0 million and $ 4.9 million, respectively, to our pension plans and contributed $ 1.7 million and $ 3.8 million, respectively, to our postretirement plans.

During the third quarter and first three quarters of fiscal 2022, we contributed $ 3.7 million and $ 8.6 million, respectively, to our pension plans and contributed $ 1.7 million and $ 5.5 million, respectively, to our postretirement plans.

Based upon the current funded status of the plans and the current interest rate environment, we anticipate making further contributions of approximately $ 3.7 million to our pension plans during the remainder of fiscal 2022.

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STOCKHOLDERS' EQUITY

The following table presents a reconciliation of our stockholders' equity accounts for the twenty-six weeks ended November 28, 2021:

The following table presents a reconciliation of our stockholders' equity accounts for the thirty-nine weeks ended February 27, 2022:

Conagra Brands, Inc.

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Balance at November 28, 2021

The following table presents a reconciliation of our stockholders' equity accounts for the twenty-six weeks ended November 29, 2020:

Stock option and incentive plans

Currency translation adjustments

Derivative adjustments

Activities of noncontrolling interests

Pension and postretirement healthcare benefits

Dividends declared on common stock;

$ 0.3125 per share

Net income attributable to Conagra Brands, Inc.

Balance at February 27, 2022

The following table presents a reconciliation of our stockholders' equity accounts for the thirty-nine weeks ended February 28, 2021:

Conagra Brands, Inc.

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Balance at November 29, 2020

Stock option and incentive plans

Currency translation adjustments

Repurchase of common shares

Derivative adjustments

Activities of noncontrolling interests

Pension and postretirement healthcare benefits

Dividends declared on common stock;

$ 0.275 per share

Net income attributable to Conagra Brands, Inc.

Balance at February 28, 2021

FAIR VALUE MEASUREMENTS

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The convertible note receivable is not traded in active markets and the fair value was determined using a discounted cash flow valuation model.

The following table presents our financial instruments measured at fair value on a recurring basis for which, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of November 28, 2021:

Derivative assets

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Available-for-sale debt securities

Derivative liabilities

Deferred compensation liabilities

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Certain assets and liabilities, including long-lived assets, goodwill, asset retirement obligations, and equity investments are measured at fair value on a nonrecurring basis using Level 3 inputs.

In the second quarter of fiscal 2022, we recognized impairment charges totaling $ 22.4 million in our Grocery & Snacks segment, $ 12.0 million in our Refrigerated & Frozen segment, and $ 4.8 million in our Foodservice segment.

In the first three quarters of fiscal 2022, we recognized impairment charges totaling $ 26.3 million in our Grocery & Snacks segment, $ 28.9 million in our Refrigerated & Frozen segment, and $ 14.9 million in our Foodservice segment.

The impairments were measured based upon the estimated sales price of the disposal group (see Note 2).

In the third quarter of fiscal 2021, we updated our cost estimates associated with certain asset retirement obligations at several manufacturing facilities largely due to recent experience of physically closing a wastewater lagoon.

This change in estimate resulted in a non-cash increase to our long-lived assets in the amount of $ 27.4 million and will result in additional depreciation in future periods generally ranging from 15- 25 years.

The fair value of our asset retirement obligations was measured using cost estimates to settle our future obligations (including an estimate of inflation) and discounted to present value using a credit-adjusted risk-free rate.

In the first quarter of fiscal 2021, we recognized charges totaling $ 3.0 million in our Grocery & Snacks segment for the impairment of certain long-lived assets.

The impairment was measured based upon the estimated sales price of the assets and has been included in restructuring activities.

The carrying amount of long-term debt (including current installments) was $ 8.80 billion and $ 8.30 billion as of November 28, 2021 and May 30, 2021, respectively.

Based on current market rates, the fair value of this debt (level 2 liabilities) at November 28, 2021 and May 30, 2021, was estimated at $ 10.19 billion and $ 9.76 billion, respectively.

The carrying amount of long-term debt (including current installments) was $ 8.80 billion and $ 8.30 billion as of February 27, 2022 and May 30, 2021, respectively.

Based on current market rates, the fair value of this debt (level 2 liabilities) at February 27, 2022 and May 30, 2021, was estimated at $ 9.54 billion and $ 9.76 billion, respectively.

BUSINESS SEGMENTS AND RELATED INFORMATION

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

November 28, 2021

November 29, 2020

November 28, 2021

November 29, 2020

Thirty-Nine Weeks Ended

February 27, 2022

February 28, 2021

February 27, 2022

February 28, 2021

Grocery & Snacks

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Twenty-Six Weeks Ended

November 28, 2021

November 29, 2020

November 28, 2021

November 29, 2020

Thirty-Nine Weeks Ended

February 27, 2022

February 28, 2021

February 27, 2022

February 28, 2021

Other shelf-stable

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As such, these derivatives are recognized at fair market value with realized and unrealized gains and losses recognized in general corporate expenses.

The gains and losses are

subsequently recognized in the operating results of the reporting segments in the period in which the underlying transaction being economically hedged is included in earnings.

The gains and losses are subsequently recognized in the operating results of the reporting segments in the period in which the underlying transaction being economically hedged is included in earnings.

In the event that management determines a particular derivative entered into as an economic hedge of a forecasted commodity purchase has ceased to function as an economic hedge, we cease recognizing further gains and losses on such derivatives in corporate expense and begin recognizing such gains and losses within segment operating results, immediately.

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Thirteen Weeks Ended

Twenty-Six Weeks Ended

November 28, 2021

November 29, 2020

November 28, 2021

November 29, 2020

Gross derivative gains (losses) incurred

Thirty-Nine Weeks Ended

February 27, 2022

February 28, 2021

February 27, 2022

February 28, 2021

Gross derivative gains incurred

Net derivative gains (losses) allocated to reporting segments

Net derivative gains (losses) recognized in general corporate expenses

Net derivative gains recognized in general corporate expenses

Net derivative gains (losses) allocated to Grocery & Snacks

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Net derivative gains (losses) included in segment operating profit

As of November 28, 2021, the cumulative amount of net derivative gains from economic hedges that had been recognized in general corporate expenses and not yet allocated to reporting segments was $ 14.9 million.

This amount reflected net gains of $ 14.0 million incurred during the twenty-six weeks ended November 28, 2021 and net gains of $ 0.9 million incurred prior to fiscal 2022.

As of February 27, 2022, the cumulative amount of net derivative gains from economic hedges that had been recognized in general corporate expenses and not yet allocated to reporting segments was $ 16.8 million.

This amount reflected net gains of $ 17.7 million incurred during the thirty-nine weeks ended February 27, 2022 and net losses of $ 0.9 million incurred prior to fiscal 2022.

Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results gains of $ 7.2 million in fiscal 2022 and gains of $ 9.6 million in fiscal 2023 and thereafter.

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Therefore, it is impracticable to allocate those assets to the reporting segments, as well as disclose total assets by segment.

Total depreciation expense was $ 82.2 million and $ 163.8 million for the second quarter and first half of fiscal 2022, respectively.

Total depreciation expense was $ 82.8 million and $ 163.1 million for the second quarter and first half of fiscal 2021, respectively.

Total depreciation expense was $ 77.3 million and $ 241.1 million for the third quarter and first three quarters of fiscal 2022, respectively.

Total depreciation expense was $ 81.7 million and $ 244.8 million for the third quarter and first three quarters of fiscal 2021, respectively.

Other Information

Our operations are principally in the United States.

With respect to operations outside of the United States, no single foreign country or geographic region was significant with respect to consolidated operations for the second quarter and first half of fiscal 2022 and 2021.

Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $ 263.1 million and $ 506.4 million in the second quarter and first half of fiscal 2022, respectively.

Our foreign net sales during the second quarter and first half of fiscal 2021 were approximately $ 252.6 million and $ 477.3 million, respectively.

With respect to operations outside of the United States, no single foreign country or geographic region was significant with respect to consolidated operations for the third quarter and first three quarters of fiscal 2022 and 2021.

Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $ 248.9 million and $ 755.3 million in the third quarter and first three quarters of fiscal 2022, respectively.

Our foreign net sales during the third quarter and first three quarters of fiscal 2021 were approximately $ 246.8 million and $ 724.1 million, respectively.

Our long-lived assets located outside of the United States are not significant.

Our largest customer, Walmart, Inc.

and its affiliates, accounted for approximately 27 % and 26 % of consolidated net sales in the second quarter and first half of fiscal 2022, respectively, and 25 % in both the second quarter and first half of 2021, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.

and its affiliates, accounted for approximately 27 % of consolidated net sales in both the third quarter and first three quarters of fiscal 2022, and 27 % and 26 % in the third quarter and first three quarters of 2021, respectively, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.

Walmart, Inc.

and its affiliates accounted for approximately 31 % of consolidated net receivables as of both November 28, 2021 and May 30, 2021.

and its affiliates accounted for approximately 30 % and 31 % of consolidated net receivables as of February 27, 2022 and May 30, 2021, respectively.

The Kroger Co.

and its affiliates accounted for approximately 13 % and 11 % of consolidated net receivables as of November 28, 2021 and May 30, 2021, respectively.

and its affiliates accounted for approximately 10 % and 11 % of consolidated net receivables as of February 27, 2022 and May 30, 2021, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements