UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
|
|
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ☐ | Non-accelerated filer ☐ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Number of shares outstanding of issuer’s common stock as of August 25, 2024 was
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions except per share amounts)
(unaudited)
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Net sales | $ | | $ | | ||
Costs and expenses: | ||||||
Cost of goods sold | | | ||||
Selling, general and administrative expenses | | | ||||
Pension and postretirement non-service income (expense) | | ( | ||||
Interest expense, net | | | ||||
Equity method investment earnings | | | ||||
Income before income taxes | | | ||||
Income tax expense (benefit) | ( | | ||||
Net income | $ | | $ | | ||
Less: Net income attributable to noncontrolling interests | | | ||||
Net income attributable to Conagra Brands, Inc. | $ | | $ | | ||
Earnings per share — basic | ||||||
Net income attributable to Conagra Brands, Inc. common stockholders | $ | | $ | | ||
Earnings per share — diluted | ||||||
Net income attributable to Conagra Brands, Inc. common stockholders | $ | | $ | |
See Notes to the Unaudited Condensed Consolidated Financial Statements.
1
Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
Thirteen Weeks Ended | ||||||||||||||||||
August 25, 2024 | August 27, 2023 | |||||||||||||||||
Tax | Tax | |||||||||||||||||
Pre-Tax | (Expense) | After- Tax | Pre-Tax | (Expense) | After- Tax | |||||||||||||
| Amount |
| Benefit |
| Amount |
| Amount |
| Benefit |
| Amount | |||||||
Net income | $ | | $ | | $ | | $ | | $ | ( | $ | | ||||||
Other comprehensive income: | ||||||||||||||||||
Derivative adjustments: | ||||||||||||||||||
Unrealized derivative adjustments | ( | | ( | | ( | | ||||||||||||
Reclassification for derivative adjustments included in net income | ( | | ( | ( | | ( | ||||||||||||
Currency translation adjustments: | ||||||||||||||||||
Unrealized currency translation gains (losses) | ( | — | ( | | — | | ||||||||||||
Reclassification for currency translation losses in connection with the sale of Agro Tech Foods Limited (see Note 3) | | — | | — | — | — | ||||||||||||
Pension and postretirement benefit obligations: | ||||||||||||||||||
Unrealized pension and postretirement benefit obligations | | ( | | | ( | | ||||||||||||
Reclassification for pension and postretirement benefit obligations included in net income | ( | | ( | ( | | ( | ||||||||||||
Comprehensive income | | | | | ( | | ||||||||||||
Comprehensive income attributable to noncontrolling interests (see Note 3) | | — | | | — | | ||||||||||||
Comprehensive income attributable to Conagra Brands, Inc. | $ | | $ | | $ | | $ | | $ | ( | $ | |
See Notes to the Unaudited Condensed Consolidated Financial Statements.
2
Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions except share data)
(unaudited)
| August 25, 2024 |
| May 26, 2024 | |||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | | $ | | ||
Receivables, less allowance for doubtful accounts of $ | | | ||||
Inventories | | | ||||
Prepaid expenses and other current assets | | | ||||
Current assets held for sale | — | | ||||
Total current assets | | | ||||
Property, plant and equipment | | | ||||
Less accumulated depreciation | ( | ( | ||||
Property, plant and equipment, net | | | ||||
Goodwill | | | ||||
Brands, trademarks and other intangibles, net | | | ||||
Other assets | | | ||||
Noncurrent assets held for sale | | | ||||
| $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities | ||||||
Notes payable | $ | | $ | | ||
Current installments of long-term debt | | | ||||
Accounts and other payables | | | ||||
Accrued payroll | | | ||||
Other accrued liabilities | | | ||||
Current liabilities held for sale | — | | ||||
Total current liabilities | | | ||||
Senior long-term debt, excluding current installments | | | ||||
Other noncurrent liabilities | | | ||||
Noncurrent liabilities held for sale | — | | ||||
Total liabilities | | | ||||
Common stockholders' equity | ||||||
Common stock of $ | | | ||||
Additional paid-in capital | | | ||||
Retained earnings | | | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Less treasury stock, at cost, | ( | ( | ||||
Total Conagra Brands, Inc. common stockholders' equity | | | ||||
Noncontrolling interests | — | | ||||
Total stockholders' equity | | | ||||
| $ | | $ | |
See Notes to the Unaudited Condensed Consolidated Financial Statements.
3
Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Cash flows from operating activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||
Depreciation and amortization | | | ||||
Asset impairment charges | | | ||||
Equity method investment earnings in excess of distributions | ( | ( | ||||
Stock-settled share-based payments expense (benefit) | | ( | ||||
Contributions to pension plans | ( | ( | ||||
Pension expense (benefit) | ( | | ||||
Other items | | | ||||
Change in operating assets and liabilities excluding effects of business acquisitions and dispositions: | ||||||
Receivables | ( | ( | ||||
Inventories | ( | ( | ||||
Deferred income taxes and income taxes payable, net | ( | | ||||
Prepaid expenses and other current assets | ( | ( | ||||
Accounts and other payables | | | ||||
Accrued payroll | ( | ( | ||||
Other accrued liabilities | | | ||||
Litigation accruals | ( | | ||||
Net cash flows from operating activities | | | ||||
Cash flows from investing activities: | ||||||
Additions to property, plant and equipment | ( | ( | ||||
Sale of property, plant and equipment | | | ||||
Purchase of marketable securities | — | ( | ||||
Sale of marketable securities | — | | ||||
Purchase of business, net of cash acquired | ( | — | ||||
Proceeds from divestitures, net of cash divested | | — | ||||
Other items | — | | ||||
Net cash flows from investing activities | ( | ( | ||||
Cash flows from financing activities: | ||||||
Issuance of short-term borrowings, maturities greater than 90 days | | | ||||
Repayment of short-term borrowings, maturities greater than 90 days | ( | ( | ||||
Net issuance (repayment) of other short-term borrowings, maturities less than or equal to 90 days | | ( | ||||
Issuance of long-term debt | — | | ||||
Repayment of long-term debt | ( | ( | ||||
Debt issuance costs | — | ( | ||||
Repurchase of Conagra Brands, Inc. common shares | ( | — | ||||
Cash dividends paid | ( | ( | ||||
Exercise of stock options and issuance of other stock awards, including tax withholdings | ( | ( | ||||
Other items | ( | ( | ||||
Net cash flows from financing activities | | ( | ||||
Effect of exchange rate changes on cash and cash equivalents | ( | | ||||
Net change in cash and cash equivalents, including cash balances classified as assets held for sale | | ( | ||||
Less: Net change in cash balances classified as assets held for sale | ( | | ||||
Net change in cash and cash equivalents | | ( | ||||
Cash and cash equivalents at beginning of period | | | ||||
Cash and cash equivalents at end of period | $ | | $ | |
See Notes to the Unaudited Condensed Consolidated Financial Statements.
4
Conagra Brands, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(columnar dollars in millions except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying Condensed Consolidated Financial Statements of Conagra Brands, Inc. (the “Company”, “Conagra Brands”, “we”, “us”, or “our”) have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. The unaudited financial information reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented. During the first quarter of fiscal 2025, we determined that certain assets were held for sale. We have reclassified these assets within our Condensed Consolidated Balance Sheets for all periods presented (see Note 3). All other adjustments are of a normal recurring nature. The results of operations for any quarter or a partial fiscal year period are not necessarily indicative of the results to be expected for other periods or the full fiscal year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024. There were no significant changes to our accounting policies from those disclosed in Note 1, “Summary of Significant Accounting Policies”, to the Consolidated Financial Statements in that Form 10-K.
Recently Issued Accounting Pronouncements and Disclosure Rules
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The disclosure requirements must be applied retrospectively to all prior periods presented in the financial statements. The effective date for the standard is for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are in the process of analyzing the impact of the ASU on our related disclosures. We will adopt this guidance in the fourth quarter of fiscal 2025, when it becomes effective.
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, to provide more detailed income tax disclosure requirements. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as information on income taxes paid. The disclosure requirements will be applied on a prospective basis, with the option to apply it retrospectively. The effective date for the standard is for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are in the process of analyzing the impact of the ASU on our related disclosures.
In March 2024, the Securities and Exchange Commission (“SEC”) issued final climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. In April 2024, the SEC stayed its implementation of this rule pending the outcome of legal challenges. However, we continue to monitor developments and analyze the potential impact of the new rules on our related disclosures.
2. ACQUISITIONS
In July 2024, we acquired the manufacturing operations of an existing co-manufacturer of our cooking spray products, for a cash purchase price of $
In August 2024, we acquired the outstanding equity of Sweetwood Smoke & Co., maker of FATTY® smoked meat sticks, for a cash purchase price of $
For each of these acquisitions, the amounts allocated to goodwill were primarily attributable to anticipated synergies, future growth opportunities, and other intangibles that do not qualify for separate recognition such as an assembled workforce. The results of each of these acquisitions, subsequent to the acquisitions closings, are primarily included in the Grocery & Snacks segment and through August 25, 2024, were not material to our Condensed Consolidated Statements of Earnings.
5
Under the acquisition method of accounting, the assets acquired and liabilities assumed in these acquisitions were recorded at their respective estimated fair values at the date of acquisition.
3. DIVESTITURES AND ASSETS HELD FOR SALE
Divestitures
During the first quarter of fiscal 2025, we completed the sale of our
The assets and liabilities related to ATFL have been reclassified as assets and liabilities held for sale within our Condensed Consolidated Balance Sheet for the period presented prior to the divestiture. The assets and liabilities classified as held for sale reflected in our Condensed Consolidated Balance Sheet were as follows:
| May 26, 2024 | ||
Current assets | $ | | |
Noncurrent assets (including goodwill of $ | | ||
Current liabilities | | ||
Noncurrent liabilities | |
Other Assets Held for Sale
As a result of management’s decision to exit a certain manufacturing facility and related warehouse in our Refrigerated & Frozen segment in fiscal 2024, we began to actively market these assets during the first quarter of fiscal 2025. We anticipate entering into a definitive agreement to sell these assets in the next twelve months. Accordingly, these assets have been reclassified as assets held for sale within our Condensed Consolidated Balance Sheets for all periods presented.
In addition, we actively market certain other assets from time to time. These assets have also been reclassified as assets held for sale within our Condensed Consolidated Balance Sheets for periods prior to the disposal of the individual asset groups.
The related assets classified as held for sale reflected in our Condensed Consolidated Balance Sheets were $
4. RESTRUCTURING ACTIVITIES
See our Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024 for additional information on our restructuring activities.
Conagra Restructuring Plan
From fiscal 2019 through August 25, 2024, we have approved $
6
During the first quarter of fiscal 2025, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:
Grocery & | Refrigerated | ||||||||||||||
| Snacks |
| & Frozen |
| International |
| Corporate |
| Total | ||||||
Accelerated depreciation | $ | | $ | — | $ | — | $ | — | $ | | |||||
Other cost of goods sold | | ( | ( | — | | ||||||||||
Total cost of goods sold | | ( | ( | — | | ||||||||||
Severance and related costs | — | ( | ( | — | ( | ||||||||||
Contract/lease termination | | — | | — | | ||||||||||
Other SG&A | | | | | | ||||||||||
Total SG&A | | | | | | ||||||||||
Total | $ | | $ | | $ | ( | $ | | $ | |
Included in the above results are $
Liabilities recorded for the Conagra Restructuring Plan and changes therein for the first quarter of fiscal 2025 were as follows:
|
| Costs |
|
|
| ||||||||||
Incurred and | |||||||||||||||
Balance at | Charged to | Costs Paid or | Changes in | Balance at | |||||||||||
May 26, 2024 | Expense | Otherwise Settled | Estimates | August 25, 2024 | |||||||||||
Severance and related costs | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Contract/lease termination | — | | ( | — | — | ||||||||||
Other costs | | | ( | — | | ||||||||||
Total | $ | | $ | | $ | ( | $ | ( | $ | |
5. DEBT AND REVOLVING CREDIT FACILITY
Senior Notes
During the fourth quarter of fiscal 2024, we repaid the entire outstanding $
During the first quarter of fiscal 2024, we repaid the entire outstanding $
Term Loans
During the fourth quarter of fiscal 2024, we entered into an unsecured Term Loan Agreement with a financial institution and borrowed the full principal amount, $
During the second quarter of fiscal 2023, we borrowed the full $
Revolving Credit Facility
At August 25, 2024, we had a revolving credit facility (the “Revolving Credit Facility”) with a syndicate of financial institutions providing for a maximum aggregate principal amount outstanding at any one time of $
7
Debt Covenants
The Revolving Credit Facility generally requires our ratio of earnings before interest, taxes, depreciation and amortization (“EBITDA”) to interest expense to be not less than
Commercial Paper
As of August 25, 2024 and May 26, 2024, we had $
Interest Expense
Net interest expense consisted of:
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Long-term debt | $ | | $ | | ||
Short-term debt | | | ||||
Interest income | ( | ( | ||||
Interest capitalized | ( | ( | ||||
| $ | | $ | |
6. FINANCING ARRANGEMENTS
Supplier Financing Arrangements
In order to manage our cash flow and related liquidity, we work with our suppliers to optimize our terms and conditions, which include the extension of payment terms. A number of factors may impact our future payment terms, including our relative creditworthiness, overall market liquidity, and changes in interest rates and other general economic conditions. Certain suppliers have access to third-party services that allow them to view our scheduled payments online and finance advances on our scheduled payments at the sole discretion of the supplier and the third-party. Our current payment terms with these suppliers, which we deem to be commercially reasonable, range up to
We have also concluded that certain obligations to our suppliers, including amounts due and scheduled payment terms, are impacted by these third-party service programs and these arrangements are classified as notes payable within our Condensed Consolidated Balance Sheets. The proceeds and payments associated with short-term borrowings are reflected as financing activities within our Condensed Consolidated Statements of Cash Flows. As of August 25, 2024 and May 26, 2024, we had approximately $
7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
The change in the carrying amount of goodwill for the first quarter of fiscal 2025 was as follows:
Grocery & | Refrigerated | ||||||||||||||
| Snacks |
| & Frozen |
| International |
| Foodservice |
| Total | ||||||
Balance as of May 26, 2024 | $ | | $ | | $ | | $ | | $ | | |||||
Acquisitions | | — | — | — | | ||||||||||
Currency translation | — | — | | — | | ||||||||||
Balance as of August 25, 2024 | $ | | $ | | $ | | $ | | $ | |
8
Other identifiable intangible assets were as follows:
August 25, 2024 | May 26, 2024 | |||||||||||
Gross | Gross | |||||||||||
Carrying | Accumulated | Carrying | Accumulated | |||||||||
| Amount |
| Amortization |
| Amount |
| Amortization | |||||
Non-amortizing intangible assets | ||||||||||||
Brands and trademarks | $ | | $ | — | $ | | $ | — | ||||
Amortizing intangible assets | ||||||||||||
Customer relationships and intellectual property | | | | | ||||||||
| $ | | $ | | $ | | $ | |
Amortizing intangible assets carry a remaining weighted average life of approximately
8. DERIVATIVE FINANCIAL INSTRUMENTS
See our Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024, for additional information on our derivative activities.
Derivatives Designated as Cash Flow Hedges
During the first quarter of fiscal 2019, we entered into deal-contingent forward starting interest rate swap contracts to hedge a portion of the interest rate risk related to our issuance of long-term debt to help finance the acquisition of Pinnacle Foods, Inc. We settled these contracts during the second quarter of fiscal 2019 and deferred a $
Economic Hedges of Forecasted Cash Flows
Many of our derivatives do not qualify for, and we do not currently designate certain commodity or foreign currency derivatives to achieve, hedge accounting treatment. We reflect realized and unrealized gains and losses from derivatives used to economically hedge anticipated commodity consumption and to mitigate foreign currency cash flow risk in earnings immediately within general corporate expense (within cost of goods sold). The gains and losses are reclassified to segment operating results in the period in which the underlying item being economically hedged is recognized in cost of goods sold. 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 | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
$ | ( | $ | | |||
Less: Net derivative losses allocated to reporting segments | ( | ( | ||||
Net derivative gains (losses) recognized in general corporate expenses | $ | ( | $ | | ||
Net derivative losses allocated to Grocery & Snacks | $ | ( | $ | ( | ||
Net derivative losses allocated to Refrigerated & Frozen | ( | ( | ||||
Net derivative losses allocated to International | — | ( | ||||
Net derivative losses allocated to Foodservice | ( | ( | ||||
Net derivative losses included in segment operating profit | $ | ( | $ | ( |
The fair values of our derivative positions were not material as of August 25, 2024 and were Level 1 or Level 2 assets or liabilities in the fair value hierarchy (see Note 16 for further information). We have not significantly changed our valuation techniques from prior periods.
9
The location and amount of gains (losses) from derivatives not designated as hedging instruments in our Condensed Consolidated Statements of Earnings were as follows:
Gains (Losses) Recognized on | ||||||||
Derivatives in Condensed Consolidated | ||||||||
Location in Condensed Consolidated | Statements of Earnings for the | |||||||
Statements of Earnings of Gains (Losses) | Thirteen Weeks Ended | |||||||
Derivatives Not Designated as Hedging Instruments |
| Recognized on Derivatives |
| August 25, 2024 |
| August 27, 2023 | ||
Commodity contracts | Cost of goods sold | $ | ( | $ | | |||
Foreign exchange contracts | Cost of goods sold | | ( | |||||
Total gains (losses) from derivative instruments not designated as hedging instruments | $ | ( | $ | |
As of August 25, 2024, our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $
9. SHARE-BASED PAYMENTS
For the first quarter of fiscal 2025 and 2024, we recognized total stock-based compensation expense (including restricted stock units and performance shares) of $
Performance shares are granted to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goals for the
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.
10. EARNINGS PER SHARE
Basic earnings per share is calculated on the basis of weighted average outstanding shares of common stock. Diluted earnings per share is computed on the basis of basic weighted average outstanding shares of common stock adjusted for the dilutive effect of stock options, restricted stock unit awards, and other dilutive securities.
The following table reconciles the income and average share amounts used to compute both basic and diluted earnings per share:
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Net income attributable to Conagra Brands, Inc. common stockholders: | $ | | $ | | ||
Weighted average shares outstanding: | ||||||
Basic weighted average shares outstanding | | | ||||
Add: Dilutive effect of stock options, restricted stock unit awards, and other dilutive securities | | | ||||
Diluted weighted average shares outstanding | | |
10
For the first quarter of fiscal 2025 and 2024, there were
11. INVENTORIES
The major classes of inventories were as follows:
| August 25, 2024 |
| May 26, 2024 | |||
Raw materials and packaging | $ | | $ | | ||
Work in process | | | ||||
Finished goods | | | ||||
Supplies and other | | | ||||
Total | $ | | $ | |
12. INCOME TAXES
In the first quarter of fiscal 2025 and 2024, we recognized an income tax benefit of $
The effective tax rate in the first quarter of fiscal 2025 reflected a $
The effective tax rate in the first quarter of fiscal 2024 was in line with our expected effective tax rate of approximately
We have previously made the assessment that the current earnings of certain foreign subsidiaries were not indefinitely reinvested or that we could not remit to the U.S. parent in a tax-neutral transaction. Accordingly, we have recorded a deferred tax liability of $
13. CONTINGENCIES
Litigation Matters
We are a party to certain litigation matters as a result of our acquisition of Beatrice Company (“Beatrice”) in fiscal 1991, including litigation proceedings related to lead-based pigment businesses divested by Beatrice prior to our acquisition. These lawsuits have generally sought damages for personal injury, property damage, economic loss, and governmental expenditures allegedly caused by the use of lead-based paint. We have denied liability, both on the merits of the claims and on the basis that we do not believe we are the successor to any such liability. In one such action, we agreed to pay $
We are party to a number of matters asserting product liability claims against the Company related to certain Pam® and other cooking spray products. For example, during fiscal 2024, a jury entered a verdict against the Company for $
11
We are party to various other lawsuits such as putative class action lawsuits challenging various product claims made in the Company’s product labeling and matters challenging the Company’s wage and hour practices. While we cannot predict with certainty the results of these or any other legal proceedings, we do not expect these matters to have a material adverse effect on our financial condition, results of operations, or business.
Our accrual for all litigation matters, including those matters described above that are probable and estimable, was $
Environmental Matters
Securities and Exchange Commission (the “SEC”) regulations require us to disclose certain information about environmental proceedings if a governmental authority is a party to such proceedings and such proceedings involve potential monetary sanctions that we reasonably believe will exceed a stated threshold. Pursuant to the SEC regulations, the Company uses a threshold of $
We are a party to certain environmental proceedings relating to businesses divested by Beatrice prior to our acquisition in fiscal 1991, including litigation and administrative proceedings involving Beatrice’s possible status as a potentially responsible party at approximately 35 Superfund, proposed Superfund, or state-equivalent sites (the “Beatrice sites”). The Beatrice sites consist of locations previously owned or operated by predecessors of Beatrice that used or produced petroleum, pesticides, fertilizers, dyes, inks, solvents, polychlorinated biphenyls, acids, lead, sulfur, tannery wastes, and/or other contaminants. Reserves for these Beatrice environmental proceedings have been established based on our best estimate of the undiscounted remediation liabilities, which estimates include evaluation of investigatory studies, extent of required clean-up, the known volumetric contribution of Beatrice and other potentially responsible parties, and its experience in remediating sites. The accrual for Beatrice-related environmental matters totaled $
General
After taking into account liabilities recognized for all of the foregoing matters, management believes the ultimate resolution of such matters should not have a material adverse effect on our financial condition, results of operations, or liquidity; however, it is reasonably possible that a change of the estimates of any of the foregoing matters may occur in the future that could have a material adverse effect on our financial condition, results of operations, or liquidity.
Costs of legal services associated with the foregoing matters are recognized within SG&A expenses as services are provided.
14. PENSION AND POSTRETIREMENT BENEFITS
We have defined benefit retirement plans (“pension plans”) for eligible salaried and hourly employees. Benefits are based on years of credited service and average compensation or stated amounts for each year of service. We also sponsor postretirement plans which provide certain medical and dental benefits to qualifying U.S. employees.
Components of pension and postretirement plan costs (benefits) are:
Pension Plans | ||||||
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Service cost | $ | | $ | | ||
Interest cost | | | ||||
Expected return on plan assets | ( | ( | ||||
Amortization of prior service cost | | | ||||
Pension cost (benefit) — Company plans | ( | | ||||
Pension cost (benefit) — multi-employer plans | | | ||||
Total pension cost (benefit) | $ | | $ | |
12
Postretirement Plans | ||||||
Thirteen Weeks Ended | ||||||
| August 25, 2024 |
| August 27, 2023 | |||
Interest cost | $ | | $ | | ||
Amortization of prior service cost (benefit) | ( | ( | ||||
Recognized net actuarial gain | ( | ( | ||||
Total postretirement cost (benefit) | $ | ( | $ | ( |
The Company uses a split discount rate (spot-rate approach) for the U.S. plans and certain foreign plans. The spot-rate approach applies separate discount rates for each projected benefit payment in the calculation of pension service and interest cost.
The weighted-average discount rates for service and interest costs under the spot-rate approach used for pension cost in fiscal 2025 were
During the first quarter of fiscal 2025, we contributed $
15. STOCKHOLDERS’ EQUITY
The following table presents a reconciliation of our stockholders’ equity accounts for the thirteen weeks ended August 25, 2024:
Conagra Brands, Inc. Stockholders' Equity | |||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||
Additional | Other | ||||||||||||||||||||||
Common | Common | Paid-in | Retained | Comprehensive | Treasury | Noncontrolling | Total | ||||||||||||||||
| Shares |
| Stock |
| Capital |
| Earnings |
| Loss |
| Stock |
| Interests |
| Equity | ||||||||
Balance at May 26, 2024 | | $ | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | ||||||||
Stock option and incentive plans | ( | ( | | | |||||||||||||||||||
Currency translation adjustments | | | | ||||||||||||||||||||
Repurchase of common shares | ( | ( | |||||||||||||||||||||
Derivative adjustments | ( | ( | |||||||||||||||||||||