BUSINESS SEGMENTS AND RELATED INFORMATION

As a result of the Pinnacle acquisition, we currently reflect our results of operations in five reporting segments: Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Pinnacle Foods.

The Grocery & Snacks reporting segment principally includes branded, shelf-stable food products sold in various retail channels in the United States.

The Refrigerated & Frozen reporting segment includes branded, temperature-controlled food products sold in various retail channels in the United States.

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.

The Foodservice reporting segment includes branded and customized food products, including meals, entrees, sauces and a variety of custom-manufactured culinary products packaged for sale to restaurants and other foodservice establishments primarily in the United States.

The Pinnacle Foods reporting segment includes branded and private-label food products, in various temperature states, sold in various retail and foodservice channels in the United States and Canada. Results of the Pinnacle Foods segment reflect activity beginning on October 26, 2018, the date of the acquisition of Pinnacle.

We do not aggregate operating segments when determining our reporting segments.

Intersegment sales have been recorded at amounts approximating market. Operating profit for each of the segments is based on net sales less all identifiable operating expenses. General corporate expense, net interest expense, and income taxes have been excluded from segment operations.



	Thirteen weeks ended						Thirty-nine weeks ended
	February 24, 2019			February 25, 2018			February 24, 2019			February 25, 2018
Net sales
Grocery & Snacks	$	862.6		$	838.3		$	2,533.4		$	2,484.5
Refrigerated & Frozen	711.2			688.5			2,117.3			2,062.3
International	198.0			223.4			600.1			634.6
Foodservice	223.0			244.3			703.3			790.7
Pinnacle Foods	712.3			—			971.1			—
Total net sales	$	2,707.1		$	1,994.5		$	6,925.2		$	5,972.1
Operating profit
Grocery & Snacks	$	193.5		$	175.6		$	581.2		$	551.6
Refrigerated & Frozen	131.4			126.1			365.0			356.5
International	25.1			29.5			87.2			68.6
Foodservice	29.2			24.0			89.4			94.6
Pinnacle Foods	101.6			—			130.3			—
Total operating profit	$	480.8		$	355.2		$	1,253.1		$	1,071.3
Equity method investment earnings	12.7			29.0			66.6			79.6
General corporate expense	62.6			108.5			386.8			231.7
Pension and postretirement non-service income	(9.8		)	(21.9		)	(29.7		)	(60.0		)
Interest expense, net	130.9			39.8			260.5			114.2
Income tax expense (benefit)	67.2			(91.4		)	147.0			138.1
Income from continuing operations	$	242.6		$	349.2		$	555.1		$	726.9
Less: Net income attributable to noncontrolling interests	0.6			0.9			1.4			2.7
Income from continuing operations attributable to Conagra Brands, Inc.	$	242.0		$	348.3		$	553.7		$	724.2

The following table presents further disaggregation of our net sales:



	Thirteen weeks ended				Thirty-nine weeks ended
	February 24, 2019		February 25, 2018		February 24, 2019		February 25, 2018
Snacks	$	354.8	$	303.7	$	1,011.6	$	889.2
Other shelf-stable	780.7		534.6		1,890.5		1,595.3
Frozen	901.8		514.5		2,070.8		1,499.5
Refrigerated	199.9		174.0		580.5		562.8
International	219.4		223.4		630.1		634.6
Foodservice	250.5		244.3		741.7		790.7
Total net sales	$	2,707.1	$	1,994.5	$	6,925.2	$	5,972.1

Presentation of Derivative Gains (Losses) for Economic Hedges of Forecasted Cash Flows in Segment Results

Derivatives used to manage commodity price risk and foreign currency risk are not designated for hedge accounting treatment. We believe these derivatives provide economic hedges of certain forecasted transactions. 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. 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.

The following table presents the net derivative gains (losses) from economic hedges of forecasted commodity consumption and the foreign currency risk of certain forecasted transactions, under this methodology:



	Thirteen weeks ended						Thirty-nine weeks ended
	February 24, 2019			February 25, 2018			February 24, 2019			February 25, 2018
Gross derivative gains (losses) incurred	$	0.8		$	(0.5	)	$	(3.4	)	$	(4.9	)
Less: Net derivative gains (losses) allocated to reporting segments	1.0			(1.3		)	0.4			(6.8		)
Net derivative gains (losses) recognized in general corporate expenses	$	(0.2	)	$	0.8		$	(3.8	)	$	1.9
Net derivative gains (losses) allocated to Grocery & Snacks	$	—		$	0.5		$	(1.0	)	$	(0.5	)
Net derivative losses allocated to Refrigerated & Frozen	(0.2		)	(0.3		)	(0.7		)	(0.2		)
Net derivative gains (losses) allocated to International	1.3			(1.5		)	2.4			(5.9		)
Net derivative losses allocated to Foodservice	(0.1		)	—			(0.3		)	(0.2		)
Net derivative gains (losses) included in segment operating profit	$	1.0		$	(1.3	)	$	0.4		$	(6.8	)

As of February 24, 2019, the cumulative amount of net derivative losses from economic hedges that had been recognized in general corporate expenses and not yet allocated to reporting segments was $0.6 million. This amount reflected net losses of $1.3 million incurred during the thirty-nine weeks ended February 24, 2019 and net gains of $0.7 million incurred prior to fiscal 2019. Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results losses of $2.2 million in fiscal 2019 and gains of $1.6 million in fiscal 2020 and thereafter.

Assets by Segment

The majority of our manufacturing assets are shared across multiple reporting segments. Output from these facilities used by each reporting segment can change over time. Also, working capital balances are not tracked by reporting segment. Therefore, it is impracticable to allocate those assets to the reporting segments, as well as disclose total assets by segment. Total depreciation expense was $77.4 million and $198.6 million for the third quarter and first three quarters of fiscal 2019, respectively, and $55.5 million and $167.2 million for the third quarter and first three quarters of fiscal 2018, 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 third quarter and first three quarters of fiscal 2019 and 2018. Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $237.5 million and $241.7 million in the third quarter of fiscal 2019 and 2018, respectively. Our foreign net sales during the first three quarters of fiscal 2019 and 2018 were approximately $683.1 million and $688.5 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 third quarter and first three quarters of fiscal 2019, respectively, and 24% of consolidated net sales in the third quarter and first three quarters of fiscal 2018, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.

Walmart, Inc. and its affiliates accounted for approximately 32% and 25% of consolidated net receivables as of February 24, 2019 and May 27, 2018, respectively.

We offer certain suppliers access to a third-party service that allows them to view our scheduled payments online. The third-party service also allows suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third party, or any financial institutions concerning this service. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of February 24, 2019, $166.3 million of our total accounts payable is payable to suppliers who utilize this third-party service.