Note 18 - Fair Value Measurements

12 Months Ended

May 29, 2022

Notes to Financial Statements

Fair Value Disclosures [Text Block]

18. FAIR VALUE MEASUREMENTS

Financial Accounting Standards Board guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities,

Level 2 — Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, and

Level 3 — Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.

The fair values of our Level 2 derivative instruments were determined using valuation models that use market observable inputs including both forward and spot prices for currencies and commodities. Derivative assets and liabilities included in Level 2 primarily represent commodity and foreign currency option and forward contracts.

Our Level 3 available-for-sale debt securities consist of a convertible note receivable acquired in the second quarter of fiscal 2022.  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 assets and liabilities 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 May 29, 2022:

	Level 1		Level 2		Level 3		Total
Assets:
Derivative assets	$	5.7	$	1.3	$	—	$	7.0
Marketable securities		—		—		—		—
Deferred compensation assets		7.5		—		—		7.5
Available-for-sale debt securities		—		—		7.6		7.6
Total assets	$	13.2	$	1.3	$	7.6	$	22.1
Liabilities:
Derivative liabilities	$	—	$	2.2	$	—	$	2.2
Deferred compensation liabilities		72.6		—		—		72.6
Total liabilities	$	72.6	$	2.2	$	—	$	74.8

The following table presents our financial assets and liabilities measured at fair value on a recurring basis based upon the level within the fair value hierarchy in which the fair value measurements fall, as of May 30, 2021:

	Level 1		Level 2		Level 3		Total
Assets:
Derivative assets	$	13.0	$	2.5	$	—	$	15.5
Marketable securities		6.6		—		—		6.6
Deferred compensation assets		8.8		—		—		8.8
Total assets	$	28.4	$	2.5	$	—	$	30.9
Liabilities:
Derivative liabilities	$	—	$	6.9	$	—	$	6.9
Deferred compensation liabilities		81.0		—		—		81.0
Total liabilities	$	81.0	$	6.9	$	—	$	87.9

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.

During 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.

We recognized charges for the impairment of certain indefinite-lived brands. The fair values of these brands were estimated using the "relief from royalty" method (see Note 7). Impairments in our Grocery & Snacks segment totaled $90.7 million, $13.0 million, and $46.4 million for fiscal 2022, 2021, and 2020, respectively. Impairments in our Refrigerated & Frozen segment totaled $103.9 million, $76.9 million, and $110.8 million for fiscal 2022, 2021, and 2020, respectively. Impairments in our International segment totaled $14.4 million, $1.0 million, and $8.3 million for fiscal 2022, 2021, and 2020, respectively.

During 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 5).

During fiscal 2020, we recognized impairment charges totaling $54.4 million in our Grocery & Snacks segment and $27.6 million in our Refrigerated & Frozen segment. The impairments were measured based upon the estimated sales price of the disposal group (see Note 5).

We recognized charges for the impairment of certain long-lived assets measured based upon the estimated sales price of the assets. Impairments totaled $3.0 million in our Grocery & Snacks segment in fiscal 2021 and $3.8 million in our Refrigerated & Frozen segment in fiscal 2020.

During fiscal 2020, we recognized charges of $2.9 million in general corporate expenses related to the impairments of ROU assets. The impairments were measured based upon a discounted cash flow approach.

The carrying amount of long-term debt (including current installments) was $8.80 billion as of May 29, 2022 and $8.30 billion as of May 30, 2021. Based on current market rates, the fair value of this debt (level 2 liabilities) at  May 29, 2022 and May 30, 2021 was estimated at $8.85 billion and $9.76 billion, respectively.