BUSINESS SEGMENTS AND RELATED INFORMATION

We report our operations in four reporting segments: Consumer Foods, Commercial Foods, Ralcorp Food Group, and Ralcorp Frozen Bakery Products. The Consumer Foods reporting segment includes branded, private brand, 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^®. The Ralcorp Food Group reporting segment principally includes private brand food products that are sold in various retail and foodservice channels, primarily in North America. The products include a variety of categories including cereal products; snacks, sauces, and spreads; and pasta. The Ralcorp Frozen Bakery Products reporting segment principally includes private brand frozen bakery products that are sold in various retail and foodservice channels, primarily in North America. The segment's primary products include: frozen griddle products, including pancakes, waffles, and French toast; frozen biscuits and other frozen pre-baked products such as breads and rolls; and frozen and refrigerated dough products. 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 2013, we revised the manner in which sales of grain within our Commercial Foods segment are recognized. As a result, net sales and cost of goods sold for fiscal 2012 and 2011 have each been increased by $105.3 million and $83.0 million, respectively.



	2013		2012		2011
Net sales
Consumer Foods	$	9,069.9	$	8,376.8	$	8,002.0
Commercial Foods	5,167.4		4,991.1		4,384.1
Ralcorp Food Group	924.2		—		—
Ralcorp Frozen Bakery Products	329.9		—		—
Total net sales	$	15,491.4	$	13,367.9	$	12,386.1
Operating profit
Consumer Foods	$	1,096.5	$	1,053.3	$	1,126.4
Commercial Foods	631.4		546.3		509.5
Ralcorp Food Group	85.4		—		—
Ralcorp Frozen Bakery Products	27.4		—		—
Total operating profit	$	1,840.7	$	1,599.6	$	1,635.9
Equity method investment earnings
Consumer Foods	$	1.8	$	4.9	$	5.7
Commercial Foods	35.7		40.0		20.7
Total equity method investment earnings	$	37.5	$	44.9	$	26.4
Operating profit plus equity method investment earnings
Consumer Foods	$	1,098.3	$	1,058.2	$	1,132.1
Commercial Foods	667.1		586.3		530.2
Ralcorp Food Group	85.4		—		—
Ralcorp Frozen Bakery Products	27.4		—		—
Total operating profit plus equity method investment earnings	$	1,878.2	$	1,644.5	$	1,662.3
General corporate expenses	$	416.3	$	770.4	$	232.3
Interest expense, net	275.6		204.0		177.5
Income tax expense	400.2		195.8		421.6
Income from continuing operations	$	786.1	$	474.3	$	830.9
Less: Net income attributable to noncontrolling interests	12.2		6.5		1.8
Income from continuing operations attributable to ConAgra Foods, Inc.	$	773.9	$	467.8	$	829.1
Identifiable assets
Consumer Foods	$	8,483.9	$	8,220.9	$	7,277.3
Commercial Foods	2,600.1		2,384.9		2,466.8
Ralcorp Food Group	5,736.0		—		—
Ralcorp Frozen Bakery Products	2,446.7		—		—
Corporate	1,138.6		836.1		1,664.6
Total identifiable assets	$	20,405.3	$	11,441.9	$	11,408.7
Additions to property, plant and equipment
Consumer Foods	$	212.2	$	169.3	$	208.7
Commercial Foods	144.2		97.4		187.0
Ralcorp Food Group	34.3		—		—
Ralcorp Frozen Bakery Products	8.0		—		—



Corporate	60.0		70.0		70.5
Total additions to property, plant and equipment	$	458.7	$	336.7	$	466.2
Depreciation and amortization
Consumer Foods	$	205.5	$	193.6	$	180.3
Commercial Foods	99.6		94.6		87.6
Ralcorp Food Group	47.1		—		—
Ralcorp Frozen Bakery Products	19.5		—		—
Corporate	73.5		83.6		93.0
Total depreciation and amortization	$	445.2	$	371.8	$	360.9

Net sales by product type within each segment were:



	2013		2012		2011
Net sales
Consumer Foods:
Grocery	$	3,367.0	$	3,358.0	$	3,258.7
Frozen	2,383.8		1,990.6		1,965.2
Snacks	1,243.8		1,237.6		1,209.8
International	1,059.4		841.5		714.2
Store Brands	697.3		631.9		528.8
Other Brands	318.6		317.2		325.3
Total Consumer Foods	$	9,069.9	$	8,376.8	$	8,002.0
Commercial Foods:
Specialty Potatoes	$	2,753.1	$	2,631.0	$	2,375.3
Milled Products	1,957.3		1,910.2		1,603.5
Seasonings, Blends, and Flavors	457.0		449.9		405.3
Total Commercial Foods	$	5,167.4	$	4,991.1	$	4,384.1
Ralcorp Food Group:
Snacks, Sauces & Spreads	$	516.6	$	—	$	—
Cereal Products	209.0		—		—
Pasta	198.6		—		—
Total Ralcorp Food Group	$	924.2	$	—	$	—
Ralcorp Frozen Bakery Products	$	329.9	$	—	$	—
Total net sales	$	15,491.4	$	13,367.9	$	12,386.1

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 19 to our 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:



	2013			2012			2011
Net derivative gains (losses) incurred	$	74.8		$	(66.8	)	$	35.1
Less: Net derivative gains allocated to reporting segments	25.0			24.4			0.6
Net derivative gains (losses) recognized in general corporate expenses	$	49.8		$	(91.2	)	$	34.5
Net derivative gains allocated to Consumer Foods	$	30.9		$	24.9		$	3.6
Net derivative losses allocated to Commercial Foods	(5.3		)	(0.5		)	(3.0		)
Net derivative losses allocated to Ralcorp Food Group	(0.3		)	—			—
Net derivative losses allocated to Ralcorp Frozen Bakery Products	(0.3		)	—			—
Net derivative gains included in segment operating profit	$	25.0		$	24.4		$	0.6

As of May 26, 2013, the cumulative amount of net derivative losses from economic hedges that had been recognized in Corporate and not yet allocated to reporting segments was $9.1 million. This amount reflected net gains of $74.8 million incurred during the fiscal year ended May 26, 2013, as well as net losses of $58.9 million incurred prior to fiscal 2013. Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify losses of $5.6 million and $3.5 million to segment operating results in fiscal 2014 and 2015 and thereafter, respectively.

Other Information

At May 26, 2013, ConAgra Foods and its subsidiaries had approximately 34,840 employees, primarily in the United States. Approximately 40% of our employees are parties to collective bargaining agreements. Of the employees subject to collective bargaining agreements, approximately 31% are parties to collective bargaining agreements that are scheduled to expire during fiscal 2014.

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 2013, 2012, and 2011. Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $1.9 billion, $1.6 billion, and $1.4 billion in fiscal 2013, 2012, and 2011, respectively. Our long-lived assets located outside of the United States are not significant.

Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 17%, 17%, and 18% of consolidated net sales for fiscal 2013, 2012, and 2011, respectively, significantly impacting the Consumer Foods, Ralcorp Food Group, and Ralcorp Frozen Bakery Products segments.

Wal-Mart Stores, Inc. and its affiliates accounted for approximately 15% of consolidated net receivables as of both May 26, 2013 and May 27, 2012, significantly impacting the Consumer Foods, Ralcorp Food Group, and Ralcorp Frozen Bakery Products segments.

On March 4, 2013, we entered into an agreement with Cargill, Incorporated ("Cargill"), CHS Inc. ("CHS"), and HM Luxembourg, a Luxembourg Société à responsabilité limitée, pursuant to which ConAgra Foods, Cargill, and CHS (collectively, the “Owners”) agreed to form a joint venture (the "Joint Venture"). The Joint Venture (which at closing will be known as "Ardent Mills") will combine the North American flour milling operations and related businesses operated through our ConAgra Mills division and the Horizon Milling joint venture of Cargill and CHS. Immediately following the closing of the transaction, Ardent Mills will be operated by an independent management team. ConAgra Foods and Cargill will each own 44% of Ardent Mills, and CHS will own 12%. Ardent Mills will be required to make cash distributions to the Owners on at least a semi-annual basis in proportion to each owner's ownership interest. The amount of these cash distributions will, in general, be at least equal to 50% of the cash generated by Ardent Mills and available for distribution, as reasonably determined by the boards of Ardent Mills and its operating subsidiaries, and taking into account working capital and other similar needs. The transaction is expected to close late in calendar year 2013, subject to the receipt of regulatory approval and the satisfaction of other closing conditions. Until the closing, the Owners will continue to operate their respective milling businesses as independent businesses.