Business Segments and Related Information

9 Months Ended

Feb. 26, 2012

Business Segments and Related Information [Abstract]

BUSINESS SEGMENTS AND RELATED INFORMATION

18. BUSINESS SEGMENTS AND RELATED INFORMATION

We report our operations in two reporting segments: Consumer Foods and Commercial Foods. The Consumer Foods reporting segment includes branded, private label, and customized food products, which are sold in various retail and foodservice channels, principally in North America. The products include a variety of categories (meals, entrees, condiments, sides, snacks, and desserts) across frozen, refrigerated, and shelf-stable temperature classes. The Commercial Foods reporting segment includes commercially branded foods and ingredients, which are sold principally to foodservice, food manufacturing, and industrial customers. The Commercial Foods segment’s primary products include: specialty potato products, milled grain ingredients, a variety of vegetable products, seasonings, blends, and flavors which are sold under brands such as Lamb Weston^®, ConAgra Mills ^®, and Spicetec Flavors & Seasonings ^TM. 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. In the first quarter of fiscal 2012, we changed the manner in which the expenses associated with certain administrative functions are recognized in segment results. Accordingly, segment results of the prior periods have been reclassified to reflect these changes.

	Thirteen weeks ended				Thirty-nine weeks ended
	February 26, 2012		February 27, 2011		February 26, 2012		February 27, 2011
Net sales
Consumer Foods	$	2,157.2	$	2,072.2	$	6,227.1	$	5,975.1
Commercial Foods		1,215.9		1,069.1		3,621.9		3,118.0
Total net sales	$	3,373.1	$	3,141.3	$	9,849.0	$	9,093.1
Operating profit
Consumer Foods	$	331.3	$	276.0	$	783.8	$	762.2
Commercial Foods		150.0		140.6		408.3		381.1
Total operating profit	$	481.3	$	416.6	$	1,192.1	$	1,143.3
Equity method investment earnings
Consumer Foods	$	1.1	$	1.6	$	4.0	$	4.0
Commercial Foods		11.5		5.0		26.3		13.4
Total equity method investment earnings	$	12.6	$	6.6	$	30.3	$	17.4
Operating profit plus equity method investment earnings
Consumer Foods	$	332.4	$	277.6	$	787.8	$	766.2
Commercial Foods		161.5		145.6		434.6		394.5
Total operating profit plus equity method investment earnings	$	493.9	$	423.2	$	1,222.4	$	1,160.7
General corporate expenses	$	65.0	$	23.4	$	298.5	$	177.1
Interest expense, net		49.7		51.6		153.2		122.6
Income tax expense		107.0		122.5		238.3		290.8
Income from continuing operations		272.2		225.7		532.4		570.2
Less: Net income attributable to noncontrolling interests		0.6		0.3		3.8		1.1
Income from continuing operations attributable to ConAgra Foods, Inc.	$	271.6	$	225.4	$	528.6	$	569.1

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 (except those related to our milling operations, see Note 7 to our condensed consolidated financial statements) 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 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 26, 2012			February 27, 2011			February 26, 2012			February 27, 2011
Net derivative gains (losses) incurred	$	22.9		$	25.1		$	(9.7	)	$	23.9
Less: Net derivative gains (losses) allocated to reporting segments		0.9			1.3			29.0			(3.2	)
Net derivative gains (losses) recognized in general corporate expenses	$	22.0		$	23.8		$	(38.7	)	$	27.1
Net derivative gains (losses) allocated to Consumer Foods	$	2.7		$	2.6		$	27.5		$	(1.1	)
Net derivative gains (losses) allocated to Commercial Foods		(1.8	)		(1.3	)		1.5			(2.1	)
Net derivative gains (losses) included in segment operating profit	$	0.9		$	1.3		$	29.0		$	(3.2	)

Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify losses of $5.7 million and $0.7 million to segment operating results in fiscal 2012 and 2013 and thereafter, respectively. Amounts allocated, or to be allocated, to segment operating results during fiscal 2012 and thereafter include $32.3 million of gains recognized prior to fiscal 2012, which had not been allocated to segment operating results.

Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 17% and 18% of consolidated net sales in the third quarter and first three quarters of fiscal 2012, respectively, and 18% of consolidated net sales in both the third quarter and first three quarters of fiscal 2011, primarily in the Consumer Foods segment.

Wal-Mart Stores, Inc. and its affiliates accounted for approximately 16% and 15% of consolidated net receivables as of February 26, 2012 and May 29, 2011, respectively, primarily in the Consumer Foods segment.