Note 12 - Share-based Payments

12 Months Ended

May 28, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

12. SHARE-BASED PAYMENTS

In accordance with stockholder-approved equity incentive plans, we grant stock-based compensation awards, including restricted stock units, performance shares, performance-based restricted stock units, and stock options. The shares delivered upon vesting or lapse of restriction under any such arrangement may consist, in whole or part, of treasury stock or authorized but unissued stock, not reserved for any other purpose.

On September 19, 2014, our stockholders approved the Conagra Brands, Inc. 2014 Stock Plan (as amended effective December 11, 2017, the "Plan"). The Plan authorizes the issuance of up to 40.3 million shares of Conagra Brands common stock. In addition to the shares under the 2014 Stock Plan, certain shares of Conagra Brands common stock subject to outstanding awards under predecessor stock plans that expire, lapse, are cancelled, terminated, forfeited, otherwise become unexercisable, or are settled for cash are available for issuance. At May 28, 2023, approximately 37.4 million shares were reserved for granting new share-based awards.

Share Unit Awards

In accordance with stockholder-approved equity incentive plans, we grant awards of restricted stock units ("share units") to employees and directors. These awards generally have requisite service periods of three years. Under each such award, 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 (the "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, accounting for forfeitures as they occur. The compensation expense for our stock-settled share unit awards totaled $34.2 million, $25.8 million, and $28.1 million for fiscal 2023, 2022, and 2021, respectively. The tax benefit related to the stock-settled share unit award compensation expense for fiscal 2023, 2022, and 2021 was $6.2 million, $5.3 million, and $6.1 million, respectively. 

The following table summarizes the nonvested share units as of May 28, 2023 and changes during the fiscal year then ended:

	Stock-Settled
Share Units	Share Units (in Millions)			Weighted Average Grant-Date Fair Value
Nonvested share units at May 29, 2022		2.50		$	32.94
Granted		1.56		$	33.28
Vested/Issued		(1.02	)	$	29.61
Forfeited		(0.21	)	$	34.23
Nonvested share units at May 28, 2023		2.83		$	34.23

During fiscal 2023, 2022, and 2021, we granted 1.6 million, 1.1 million, and 0.9 million stock-settled share units, respectively, with a weighted average grant date fair value of $33.28, $34.26, and $36.72 per share unit, respectively. 

The total intrinsic value of stock-settled share units vested was $34.7 million, $26.9 million, and $24.6 million during fiscal 2023, 2022, and 2021, respectively. The total intrinsic value of cash-settled share units vested was $4.3 million during fiscal 2021.

At May 28, 2023, we had $32.0 million of total unrecognized compensation expense that will be recognized over a weighted average period of 1.7 years related to stock-settled share unit awards.

Performance Share Awards

Performance shares are granted to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goal for one-third of the target number of performance shares for the three-year performance period ended in fiscal 2023 (the "2023 performance period") was based on our fiscal 2021 diluted earnings per share ("EPS") compound annual growth rate ("CAGR"), subject to certain adjustments. The performance goal for the final two-thirds of the target number of performance shares granted for the 2023 performance period was based on our diluted EPS CAGR, subject to certain adjustments, measured over the two-year period ended in fiscal 2023. The performance goal for the three-year performance period ending in fiscal 2024 (the "2024 performance period") is based on our diluted EPS CAGR, subject to certain adjustments, measured over the defined performance period. The performance goals for the three-year performance period ending in fiscal 2025 (the "2025 performance period") are based on our net sales and diluted EPS growth, subject to certain adjustments, measured over the defined performance period, with each year of the performance period weighted one-third. For each of the 2023 performance period, 2024 performance period, and 2025 performance period, the awards actually earned will range from zero to two hundred percent of the targeted number of performance shares for such performance period. Dividend equivalents are paid on the portion of performance shares actually earned at our regular dividend rate in additional shares of common stock.

Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in our performance share plan, any shares earned will be distributed after the end of the performance period, and generally only if the participant continues to be employed with the Company through the date of distribution. For awards where performance against the performance target has not been certified, the value of the performance shares is adjusted based upon the market price of our common stock and current forecasted performance against the performance targets at the end of each reporting period and amortized as compensation expense over the vesting period. Forfeitures are accounted for as they occur.

A summary of the activity for performance share awards as of May 28, 2023 and changes during the fiscal year then ended is presented below:

Performance Shares	Share Units (in Millions)			Weighted Average Grant-Date Fair Value
Nonvested performance shares at May 29, 2022		1.44		$	32.80
Granted		0.74		$	33.13
Adjustments for performance results attained and dividend equivalents		(0.54	)	$	28.45
Forfeited		(0.07	)	$	34.18
Nonvested performance shares at May 28, 2023		1.57		$	34.39

We recognized expense of $45.0 million, a benefit of $1.4 million, and expense of $34.9 million for our performance share awards in fiscal 2023, 2022, and 2021, respectively. The tax expense related to the compensation benefit for fiscal 2022 was $0.7 million. The tax benefit related to the compensation expense for fiscal 2023 and 2021 was $1.7 million and $3.6 million, respectively.

The total intrinsic value of performance shares vested (including shares paid in lieu of dividends) during fiscal 2022 and 2021 was $27.0 million and $33.9 million, respectively. Performance targets for the three-year performance period ending in fiscal 2022 were not met, resulting in no vesting during fiscal 2023.

Based on estimates at May 28, 2023, we had $17.0 million of total unrecognized compensation expense related to performance shares that will be recognized over a weighted average period of 1.7 years.

Performance-Based Restricted Stock Unit Awards

On April 15, 2019 (the "grant date"), we made grants of performance-based restricted stock unit ("PBRSU") awards to the Company's named executive officers and a limited group of other senior officers of the Company. The compensation expense for our PBRSU awards totaled $1.7 million and $2.4 million for fiscal 2022 and 2021, respectively. The tax expense (benefit) related to our PBRSU awards for fiscal 2022 and 2021was $0.4 million and $(0.2) million, respectively. As of May 27, 2022, the end of the PBRSU performance period, the awards did not achieve the absolute TSR goals and resulted in a 0% payout.

Stock Option Awards

In accordance with stockholder-approved equity incentive plans, we granted stock options to employees and directors for the purchase of common stock at prices equal to its fair value at the date of grant. Stock options become exercisable under various vesting schedules (typically three years) and generally expire seven to ten years after the date of grant. No stock options were granted in fiscal 2023, 2022, or 2021.

A summary of the option activity as of May 28, 2023 and changes during the fiscal year then ended is presented below:

Options	Number of Options (in Millions)			Weighted Average Exercise Price		Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in Millions)
Outstanding at May 29, 2022		2.7		$	30.87
Exercised		(0.3	)	$	29.95			$	2.9
Expired		(0.1	)	$	35.81
Outstanding at May 28, 2023		2.3		$	30.86		2.31	$	9.8
Exercisable at May 28, 2023		2.3		$	30.86		2.31	$	9.8

We recognized compensation expense using the straight-line method over the requisite service period, accounting for forfeitures as they occurred. The total intrinsic value of stock options exercised was $2.9 million, $2.0 million, and $7.0 million for fiscal 2023, 2022, and 2021, respectively. The closing market price of our common stock on the last trading day of fiscal 2023 was $34.84 per share.

At May 28, 2023, we had no unrecognized compensation expense related to stock options.

Cash received from stock option exercises for fiscal 2023, 2022, and 2021 was $10.7 million, $7.8 million, and $20.5 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $0.7 million, $0.5 million, and $1.7 million for fiscal 2023, 2022, and 2021, respectively.