BUSINESS SEGMENTS AND RELATED INFORMATION

9 Months Ended

Feb. 28, 2021

Segment Reporting [Abstract]

BUSINESS SEGMENTS AND RELATED INFORMATION

15. 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.

	Thirteen weeks ended						Thirty-nine weeks ended
	February 28, 2021			February 23, 2020			February 28, 2021			February 23, 2020
Net sales
Grocery & Snacks	$	1,133.1		$	1,022.9		$	3,552.6		$	3,143.0
Refrigerated & Frozen		1,203.1			1,076.8			3,581.7			3,204.2
International		240.9			220.9			709.7			659.6
Foodservice		194.0			234.4			601.2			759.7
Total net sales	$	2,771.1		$	2,555.0		$	8,445.2		$	7,766.5
Operating profit
Grocery & Snacks	$	290.2		$	199.4		$	890.2		$	614.8
Refrigerated & Frozen		214.6			190.7			719.0			533.7
International		27.8			22.3			105.8			73.5
Foodservice		12.8			27.2			60.0			96.6
Total operating profit	$	545.4		$	439.6		$	1,775.0		$	1,318.6
Equity method investment earnings		21.5			10.4			51.0			50.3
General corporate expense		96.7			75.1			285.2			262.3
Pension and postretirement non-service income		(13.7	)		(16.4	)		(41.2	)		(37.2	)
Interest expense, net		100.6			117.7			322.0			361.8
Income tax expense		101.6			68.9			269.0			141.5
Net income	$	281.7		$	204.7		$	991.0		$	640.5
Less: Net income attributable to noncontrolling interests		0.3			0.3			1.7			1.8
Net income attributable to Conagra Brands, Inc.	$	281.4		$	204.4		$	989.3		$	638.7

The following table presents further disaggregation of our net sales:

	Thirteen weeks ended				Thirty-nine weeks ended
	February 28, 2021		February 23, 2020		February 28, 2021		February 23, 2020
Frozen	$	1,013.2	$	907.4	$	2,951.9	$	2,635.6
Other shelf-stable		698.7		639.1		2,207.9		1,921.0
Snacks		434.4		383.8		1,344.7		1,222.0
Foodservice		194.0		234.4		601.2		759.7
International		240.9		220.9		709.7		659.6
Refrigerated		189.9		169.4		629.8		568.6
Total net sales	$	2,771.1	$	2,555.0	$	8,445.2	$	7,766.5

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 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:

	Thirteen weeks ended						Thirty-nine weeks ended
	February 28, 2021			February 23, 2020			February 28, 2021			February 23, 2020
Gross derivative gains (losses) incurred	$	5.3		$	(5.7	)	$	1.4		$	(12.5	)
Less: Net derivative losses allocated to reporting segments		(1.1	)		(1.9	)		(5.8	)		(3.3	)
Net derivative gains (losses) recognized in general corporate expenses	$	6.4		$	(3.8	)	$	7.2		$	(9.2	)
Net derivative gains (losses) allocated to Grocery & Snacks	$	0.3		$	(0.9	)	$	(4.1	)	$	(1.5	)
Net derivative losses allocated to Refrigerated & Frozen		(0.1	)		—			(2.1	)		(0.7	)
Net derivative gains (losses) allocated to International		(1.3	)		(0.8	)		1.1			(1.1	)
Net derivative losses allocated to Foodservice		—			(0.2	)		(0.7	)		—
Net derivative losses included in segment operating profit	$	(1.1	)	$	(1.9	)	$	(5.8	)	$	(3.3	)

As of February 28, 2021, the cumulative amount of net derivative gains from economic hedges that had been recognized in general corporate expenses and not yet allocated to reporting segments was $3.1 million. This amount reflected net gains of $5.7 million incurred during the thirty-nine weeks ended February 28, 2021 and net losses of $2.6 million incurred prior to fiscal 2021. Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results gains of $0.8 million in fiscal 2021 and gains of $2.3 million in fiscal 2022 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 was $81.7 million and $244.8 million for the third quarter and first three quarters of fiscal 2021, respectively, and $84.2 million and $247.6 million for the third quarter and first three quarters of fiscal 2020, 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 the third quarter and first three quarters of fiscal 2021 and 2020. Foreign net sales, including sales by domestic segments to customers located outside of the United States, were approximately $246.8 million and $724.1 million in the third quarter and first three quarters of fiscal 2021, respectively. Our foreign

net sales during the third quarter and first three quarters of 2020 were approximately $228.0 million and $675.9 million, 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 27% of consolidated net sales in the third quarter of both fiscal 2021 and 2020 and approximately 26% in the first three quarters of both fiscal 2021 and 2020, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.

Walmart, Inc. and its affiliates accounted for approximately 34% and 30% of consolidated net receivables as of February 28, 2021 and May 31, 2020, respectively. The Kroger Co. and its affiliates accounted for approximately 11% and 10% of consolidated net receivables as of February 28, 2021 and May 31, 2020, respectively.