Share-Based Payments

12 Months Ended

May 29, 2011

Share-Based Payments [Abstract]

SHARE-BASED PAYMENTS

15.  SHARE-BASED PAYMENTS

In accordance with stockholder-approved plans, we issue share-based payments under various stock-based compensation arrangements, including stock options, restricted stock units, performance shares, and other share-based awards.

On September 25, 2009, the stockholders approved the ConAgra Foods 2009 Stock Plan, which authorized the issuance of up to 29.5 million shares of ConAgra Foods common stock. At May 29, 2011, approximately 27.5 million shares were reserved for granting additional options, restricted stock units, performance shares, or other share-based awards.

Stock Option Plan

We have a stockholder-approved stock option plan that provides for granting of options to employees for the purchase of common stock at prices equal to the fair value at the date of grant. Options become exercisable under various vesting schedules (typically three to five years) and generally expire seven to ten years after the date of grant.

The fair value of each option is estimated on the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted:

	2011		2010		2009
Expected volatility (%)		22.83		22.94		18.16
Dividend yield (%)		3.51		3.77		3.30
Risk-free interest rates (%)		1.72		2.31		3.31
Expected life of stock option (years)		4.82		4.75		4.67

The expected volatility is based on the historical market volatility of our stock over the expected life of the stock options granted. The expected life represents the period of time that the awards are expected to be outstanding and is based on the contractual term of each instrument, taking into account employees’ historical exercise and termination behavior.

A summary of the option activity as of May 29, 2011 and changes during the fifty-two weeks then ended is presented below:

						Average
				Weighted		Remaining		Aggregate
	Number			Average		Contractual		Intrinsic
	of Options			Exercise		Term		Value (in
Options	(in Millions)			Price		(Years)		Millions)
Outstanding at May 30, 2010		34.5		$	22.49
Granted		6.2		$	23.80
Exercised		(3.4	)	$	20.97			$	9.3
Forfeited		(1.1	)	$	21.03
Expired		(1.1	)	$	25.72
Outstanding at May 29, 2011		35.1		$	22.81		4.08	$	90.4
Exercisable at May 29, 2011		23.4		$	23.33		3.38	$	52.2

We recognize compensation expense using the straight-line method over the requisite service period. During fiscal 2011, 2010, and 2009, the Company granted 6.2 million options, 7.9 million options, and 7.7 million options, respectively, with a weighted average grant date value of $3.31, $2.73, and $2.84, respectively. The total intrinsic value of options exercised was $9.3 million, $8.4 million, and $0.3 million for fiscal 2011, 2010, and 2009, respectively. The closing market price of our common stock on the last trading day of fiscal 2011 was $25.04 per share.

Compensation expense for stock option awards totaled $19.9 million, $22.0 million, and $23.8 million for fiscal 2011, 2010, and 2009, respectively. The tax benefit related to the stock option expense for fiscal 2011, 2010, and 2009 was $7.4 million, $8.2 million, and $9.1 million, respectively.

At May 29, 2011, we had $16.6 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock options that will be recognized over a weighted average period of 1.3 years.

Cash received from option exercises for the fiscal years ended May 29, 2011, May 30, 2010, and May 31, 2009 was $71.6 million, $70.3 million, and $6.1 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $3.4 million, $3.1 million, and $0.1 million for fiscal 2011, 2010, and 2009, respectively.

Share Unit Plans

In accordance with stockholder-approved plans, we issue stock under various stock-based compensation arrangements, including restricted stock units and other share-based awards (“share units”). These awards generally have requisite service periods of three to five years. Under each arrangement, stock is issued without direct cost to the employee. We estimate the fair value of the share units based upon the market price of our stock at the date of grant. Certain share unit grants do not provide for the payment of dividend equivalents to the participant during the requisite service period (vesting period). For those grants, the value of the grants is reduced by the net present value of the foregone dividend equivalent payments. We recognize compensation expense for share unit awards on a straight-line basis over the requisite service period. The compensation expense for our share unit awards totaled $21.2 million, $19.6 million, and $17.8 million for fiscal 2011, 2010, and 2009, respectively. The tax benefit related to the compensation expense for fiscal 2011, 2010, and 2009 was $7.9 million, $7.3 million, and $6.8 million, respectively.

The following table summarizes the nonvested share units as of May 29, 2011, and changes during the fifty-two weeks then ended:

				Weighted
				Average
	Share Units			Grant-Date
Share Units	(in millions)			Fair Value
Nonvested share units at May 30, 2010		2.58		$	20.81
Granted		1.57		$	21.55
Vested/Issued		(0.59	)	$	20.99
Forfeited		(0.31	)	$	19.25
Nonvested share units at May 29, 2011		3.25		$	19.56

During fiscal 2011, 2010, and 2009, we granted 1.6 million share units, 1.1 million share units, and 1.0 million share units, respectively, with a weighted average grant date value of $21.55, $19.41, and $21.00, respectively.

The total intrinsic value of share units vested was $14.5 million, $18.7 million, and $18.7 million during fiscal 2011, 2010, and 2009, respectively.

At May 29, 2011, we had $25.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to share unit awards that will be recognized over a weighted average period of 2.0 years.

Performance-Based Share Plan

Performance shares are granted to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goals are based upon our earnings before interest and taxes and our return on average invested capital measured over a defined performance period. The awards actually earned will range from zero to three hundred percent of the targeted number of performance shares for performance periods ending in fiscal 2011 and fiscal 2012 and will range from zero to two hundred percent of the targeted number of performance shares for the performance period ending in fiscal 2013. Awards, if earned, will be paid in shares of common stock. Subject to limited exceptions set forth in the performance share plan, any shares earned will be distributed at the end of the performance period. The value of the performance shares granted in fiscal 2009, 2010, and 2011 was adjusted based upon the market price of our stock at the end of each reporting period and amortized as compensation expense over the vesting period.

A summary of the activity for performance share awards as of May 29, 2011 and changes during the fifty-two weeks then ended is presented below:

				Weighted
				Average
	Shares			Grant-Date
Performance Shares	(in Millions)			Fair Value
Nonvested performance shares at May 30, 2010		1.39		$	21.85
Granted		0.51		$	21.43
Adjustments for performance results attained		(0.09	)	$	26.59
Vested/Issued		(0.31	)	$	26.60
Forfeited		(0.13	)	$	20.93
Nonvested performance shares at May 29, 2011		1.37		$	20.42

The compensation expense for our performance share awards totaled $4.0 million, $14.7 million, and $5.6 million for fiscal 2011, 2010, and 2009, respectively. The tax benefit related to the compensation expense for fiscal 2011, 2010, and 2009 was $1.5 million, $5.4 million, and $2.1 million, respectively.

The total intrinsic value of share units vested (including shares paid in lieu of dividends) during fiscal 2011, 2010, and 2009 was $7.4 million, $24.8 million, and $11.7 million, respectively.

Based on estimates at May 29, 2011, the Company had $7.4 million of total unrecognized compensation expense, net of estimated forfeitures, related to performance shares that will be recognized over a weighted average period of 2.0 years.

Accounting guidance requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow in our statements of cash flows. Because the tax deductions in fiscal 2010 and 2009 were less than the recognized compensation expenses, our net operating cash flows increased and our net financing cash flows decreased by approximately $1.5 million and $0.7 million for fiscal 2010 and 2009, respectively. There was no impact on our statement of cash flows for fiscal 2011.