Note 19 - Business Segments and Related Information

12 Months Ended

May 28, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

19. BUSINESS SEGMENTS AND RELATED INFORMATION

We reflect our results of operations in four reporting segments: Grocery & Snacks, Refrigerated & Frozen, International, and Foodservice.

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.

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

Operating profit for each of the segments is based on net sales less all identifiable operating expenses. General corporate expense, pension and postretirement non-service income, interest expense, net, income taxes, and equity method investment earnings have been excluded from segment operations.

	2023			2022		2021
Net sales
Grocery & Snacks	$	4,981.9		$	4,697.4	$	4,624.7
Refrigerated & Frozen		5,156.2			4,859.3		4,774.6
International		1,002.5			970.8		938.6
Foodservice		1,136.4			1,008.4		846.8
Total net sales	$	12,277.0		$	11,535.9	$	11,184.7
Operating profit
Grocery & Snacks	$	1,002.8		$	859.5	$	1,092.7
Refrigerated & Frozen		255.0			561.1		836.5
International		121.4			106.7		131.8
Foodservice		85.0			60.3		80.0
Total operating profit	$	1,464.2		$	1,587.6	$	2,141.0
Equity method investment earnings		212.0			145.3		84.4
General corporate expenses		388.9			241.6		364.8
Pension and postretirement non-service income		24.2			67.3		54.5
Interest expense, net		409.6			379.9		420.4
Income tax expense		218.7			290.5		193.8
Net income	$	683.2		$	888.2	$	1,300.9
Less: Net income attributable to noncontrolling interests		(0.4	)		—		2.1
Net income attributable to Conagra Brands, Inc.	$	683.6		$	888.2	$	1,298.8

The following table presents further disaggregation of our net sales:

	2023		2022		2021
Frozen	$	4,288.1	$	4,091.1	$	3,948.0
Staples
Other shelf-stable		2,851.9		2,729.5		2,830.2
Refrigerated		868.1		768.2		826.6
Snacks		2,130.0		1,967.9		1,794.5
International		1,002.5		970.8		938.6
Foodservice		1,136.4		1,008.4		846.8
Total net sales	$	12,277.0	$	11,535.9	$	11,184.7

To be consistent with how we present certain disaggregated net sales information to investors, we have categorized certain net sales of our segments as "Staples", which includes all of our U.S. domestic retail refrigerated products and other shelf-stable grocery products. Management continues to regularly review financial results and make decisions about allocating resources based upon the four reporting segments outlined above.

Presentation of Derivative Gains (Losses) from 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:

	2023			2022			2021
Net derivative gains (losses) incurred	$	(17.6	)	$	37.1		$	9.5
Less: Net derivative gains (losses) allocated to reporting segments		19.5			32.7			(6.1	)
Net derivative gains (losses) recognized in general corporate expenses	$	(37.1	)	$	4.4		$	15.6
Net derivative gains (losses) allocated to Grocery & Snacks	$	6.0		$	17.3		$	(2.3	)
Net derivative gains (losses) allocated to Refrigerated & Frozen		9.6			17.4			(1.7	)
Net derivative gains (losses) allocated to International		2.5			(3.6	)		(1.7	)
Net derivative gains (losses) allocated to Foodservice		1.4			1.6			(0.4	)
Net derivative gains (losses) included in segment operating profit	$	19.5		$	32.7		$	(6.1	)

As of May 28, 2023, 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 $21.2 million. This amount reflected net losses of $21.4 million incurred during the fiscal year ended May 28, 2023, as well as net gains of $0.2 million incurred prior to fiscal 2023. Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results net losses of $20.1 million in fiscal 2024 and $1.1 million in fiscal 2025 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 for fiscal 2023, 2022, and 2021 was $313.1 million, $316.1 million, and $328.0 million, 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 fiscal 2023, 2022, and 2021. Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $1.04 billion, $1.00 billion, and $960.5 million in fiscal 2023, 2022, and 2021, 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 28%, 27%, and 26% of consolidated net sales for fiscal 2023, 2022, and 2021, respectively, significantly impacting the Grocery & Snacks and Refrigerated & Frozen segments.

Walmart, Inc. and its affiliates accounted for approximately 29% and 30% of consolidated net receivables as of May 28, 2023 and May 29, 2022, respectively.