UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 ______________________________________________________
FORM 10-Q
 ______________________________________________________
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 27, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
F or the transition period from                 to 
               
Commission File Number: 1-7275
______________________________________________ ________
CONAGRA BRANDS, INC.
(Exact name of registrant as specified in its charter)
______________________________________________________ 
Delaware
 
47-0248710
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
222 Merchandise Mart Plaza, Suite 1300
Chicago, Illinois
 
60654
(Address of principal executive offices)
 
(Zip Code)
(312) 549-5000
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
 ______________________________________________________
I ndicate 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.    Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   x      No   ¨
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. (Check one):
Large accelerated filer   x Accelerated filer   ¨ Non-accelerated filer     ¨   (Do not check if a smaller reporting company)
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   ¨     No   x  
Number of shares outstanding of issuer’s common stock, as of August 27, 2017 , was 408,498,132 .
 


Table of Contents
 
Item 1
 
 
 
 
 
Item 2
Item 3
Item 4
Item 1
Item 1A
Item 2
Item 6
 
 
 
 
 
 
Exhibit 101
 




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 27,
2017
 
August 28,
2016
Net sales
$
1,804.2

 
$
1,895.6

Costs and expenses:
 
 
 
Cost of goods sold
1,285.2

 
1,351.0

Selling, general and administrative expenses
239.0

 
231.7

Interest expense, net
36.4

 
58.2

Income from continuing operations before income taxes and equity method investment earnings
243.6

 
254.7

Income tax expense
120.0

 
169.2

Equity method investment earnings
30.0

 
13.1

Income from continuing operations
153.6

 
98.6

Income (loss) from discontinued operations, net of tax
(0.3
)
 
91.4

Net income
$
153.3

 
$
190.0

Less: Net income attributable to noncontrolling interests
0.8

 
3.8

Net income attributable to Conagra Brands, Inc.
$
152.5

 
$
186.2

Earnings per share — basic
 
 
 
Income from continuing operations attributable to Conagra Brands, Inc. common stockholders
$
0.37

 
$
0.22

Income from discontinued operations attributable to Conagra Brands, Inc. common stockholders
—

 
0.20

Net income attributable to Conagra Brands, Inc. common stockholders
$
0.37

 
$
0.42

Earnings per share — diluted
 
 
 
Income from continuing operations attributable to Conagra Brands, Inc. common stockholders
$
0.36

 
$
0.22

Income from discontinued operations attributable to Conagra Brands, Inc. common stockholders
—

 
0.20

Net income attributable to Conagra Brands, Inc. common stockholders
$
0.36

 
$
0.42

Cash dividends declared per common share
$
0.2125

 
$
0.25

See notes to the condensed consolidated financial statements.


1



Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
 
 
Thirteen weeks ended
 
August 27, 2017
 
August 28, 2016
 
Pre-Tax Amount
Tax (Expense) Benefit
After-Tax Amount
 
Pre-Tax Amount
Tax (Expense) Benefit
After-Tax Amount
Net income
$
273.4

$
(120.1
)
$
153.3

 
$
408.0

$
(218.0
)
$
190.0

Other comprehensive income:



 



Unrealized derivative adjustments
—

—

—

 
(8.0
)
3.1

(4.9
)
Unrealized gains on available-for-sale securities
0.3

(0.1
)
0.2

 
0.2

(0.1
)
0.1

Unrealized currency translation gains (losses)
32.6

(0.1
)
32.5

 
(11.9
)
0.2

(11.7
)
Pension and post-employment benefit obligations:






 






Unrealized pension and post-employment benefit obligations
0.1

—

0.1

 
(2.1
)
0.1

(2.0
)
Reclassification for pension and post-employment benefit obligations included in net income
(0.1
)
—

(0.1
)
 
(0.9
)
0.3

(0.6
)
Comprehensive income
306.3

(120.3
)
186.0

 
385.3

(214.4
)
170.9

Comprehensive income attributable to noncontrolling interests
2.0

(0.2
)
1.8

 
3.8

(0.1
)
3.7

Comprehensive income attributable to Conagra Brands, Inc.
$
304.3

$
(120.1
)
$
184.2

 
$
381.5

$
(214.3
)
$
167.2


See notes to the condensed consolidated financial statements.


2



Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions except share data)
(unaudited)
 
 
August 27,
2017
 
May 28,
2017
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
251.4

 
$
251.4

Receivables, less allowance for doubtful accounts of $3.2 and $3.1
577.1

 
563.4

Inventories
1,068.8

 
934.2

Prepaid expenses and other current assets
188.5

 
228.7

Current assets held for sale
39.2

 
35.5

Total current assets
2,125.0

 
2,013.2

Property, plant and equipment
4,198.2

 
4,261.9

Less accumulated depreciation
(2,550.9
)
 
(2,606.9
)
Property, plant and equipment, net
1,647.3

 
1,655.0

Goodwill
4,301.7

 
4,301.1

Brands, trademarks and other intangibles, net
1,223.6

 
1,229.3

Other assets
827.5

 
790.6

Noncurrent assets held for sale
100.5

 
107.1

 
$
10,225.6

 
$
10,096.3

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities
 
 
 
Notes payable
$
323.5

 
$
28.2

Current installments of long-term debt
198.7

 
199.0

Accounts payable
845.7

 
773.1

Accrued payroll
95.5

 
167.6

Other accrued liabilities
590.2


552.6

Total current liabilities
2,053.6

 
1,720.5

Senior long-term debt, excluding current installments
2,571.1

 
2,573.3

Subordinated debt
195.9

 
195.9

Other noncurrent liabilities
1,522.4


1,528.8

Total liabilities
6,343.0

 
6,018.5

Common stockholders' equity
 
 
 
Common stock of $5 par value, authorized 1,200,000,000 shares; issued 567,907,172
2,839.7

 
2,839.7

Additional paid-in capital
1,159.9

 
1,171.9

Retained earnings
4,312.6

 
4,247.0

Accumulated other comprehensive loss
(181.2
)
 
(212.9
)
Less treasury stock, at cost, 159,409,040 and 151,387,209 common shares
(4,337.2
)
 
(4,054.9
)
Total Conagra Brands, Inc. common stockholders' equity
3,793.8

 
3,990.8

Noncontrolling interests
88.8

 
87.0

Total stockholders' equity
3,882.6

 
4,077.8

 
$
10,225.6

 
$
10,096.3

See notes to the condensed consolidated financial statements.


3



Conagra Brands, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions)
(unaudited)
 
Thirteen Weeks Ended
 
August 27,
2017
 
August 28,
2016
Cash flows from operating activities:
 
 
 
Net income
$
153.3

 
$
190.0

Income (loss) from discontinued operations
(0.3
)
 
91.4

Income from continuing operations
153.6

 
98.6

Adjustments to reconcile income from continuing operations to net cash flows from operating activities:
 
 
 
Depreciation and amortization
64.7

 
67.2

Asset impairment charges
6.0

 
164.1

Gain on divestitures
—

 
(198.2
)
Earnings of affiliates in excess of distributions
(30.0
)
 
(6.9
)
Stock-settled share-based payments expense
8.2

 
7.5

Contributions to pension plans
(3.8
)
 
(3.0
)
Pension benefit
(12.6
)
 
(10.4
)
Other items
5.5

 
11.7

Change in operating assets and liabilities excluding effects of business acquisitions and dispositions:
 
 
 
Receivables
(13.7
)
 
14.8

Inventories
(138.4
)
 
(83.3
)
Deferred income taxes and income taxes payable, net
132.1

 
215.3

Prepaid expenses and other current assets
(6.5
)
 
(4.8
)
Accounts payable
67.8

 
56.5

Accrued payroll
(72.1
)
 
(121.2
)
Other accrued liabilities
(19.3
)
 
0.4

Net cash flows from operating activities — continuing operations
141.5

 
208.3

Net cash flows from operating activities — discontinued operations
(5.5
)
 
117.6

Net cash flows from operating activities
136.0

 
325.9

Cash flows from investing activities:
 
 
 
Additions to property, plant and equipment
(42.6
)
 
(58.1
)
Sale of property, plant and equipment
4.0

 
2.0

Proceeds from divestitures
—

 
486.3

Net cash flows from investing activities — continuing operations
(38.6
)
 
430.2

Net cash flows from investing activities — discontinued operations
—

 
(58.3
)
Net cash flows from investing activities
(38.6
)
 
371.9

Cash flows from financing activities:
 
 
 
Net short-term borrowings
295.3

 
(3.3
)
Repayment of long-term debt
(2.3
)
 
(553.9
)
Payment of intangible asset financing arrangement
(14.4
)
 
(14.9
)
Repurchase of Conagra Brands, Inc. common shares
(300.0
)
 
(85.6
)
Cash dividends paid
(83.3
)
 
(109.5
)
Exercise of stock options and issuance of other stock awards, including tax withholdings
(2.4
)
 
32.6

Net cash flows from financing activities — continuing operations
(107.1
)
 
(734.6
)
Net cash flows from financing activities — discontinued operations
—

 
(3.1
)
Net cash flows from financing activities
(107.1
)
 
(737.7
)
Effect of exchange rate changes on cash and cash equivalents
9.7

 
—

Net change in cash and cash equivalents
—

 
(39.9
)
Add: Cash balance included in assets held for sale and discontinued operations at beginning of period
—

 
36.4

Less: Cash balance included in assets held for sale and discontinued operations at end of period
—

 
72.4

Cash and cash equivalents at beginning of period
251.4

 
798.1

Cash and cash equivalents at end of period
$
251.4

 
$
722.2

See notes to the condensed consolidated financial statements.

4



Conagra Brands, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
For the Thirteen Weeks Ended August 27, 2017 and August 28, 2016
(columnar dollars in millions except per share amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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. The adjustments are of a normal recurring nature, except as otherwise noted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Conagra Brands, Inc. (formerly ConAgra Foods, Inc., the "Company", "we", "us", or "our") Annual Report on Form 10-K for the fiscal year ended May 28, 2017 .
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.
Basis of Consolidation — The condensed consolidated financial statements include the accounts of Conagra Brands, Inc. and all majority-owned subsidiaries. In addition, the accounts of all variable interest entities for which we have been determined to be the primary beneficiary are included in our condensed consolidated financial statements from the date such determination is made. All significant intercompany investments, accounts, and transactions have been eliminated.

On November 9, 2016, the Company completed the spinoff of Lamb Weston Holdings, Inc. ("Lamb Weston") through a distribution of 100% of the Company's interest in Lamb Weston to holders of shares of the Company's common stock as of November 1, 2016 (the "Spinoff"). In accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), the results of operations of the Lamb Weston operations are presented as discontinued operations and, as such, have been excluded from continuing operations and segment results for all periods presented (see Note 3 for additional discussion).
Comprehensive Income — Comprehensive income includes net income, currency translation adjustments, certain derivative-related activity, changes in the value of available-for-sale investments, and changes in prior service cost and net actuarial gains (losses) from pension (for amounts not in excess of the 10% corridor) and post-retirement health care plans. On foreign investments we deem to be essentially permanent in nature, we do not provide for taxes on currency translation adjustments arising from converting an investment denominated in foreign currency to U.S. dollars. When we determine that a foreign investment, as well as undistributed earnings, are no longer permanent in nature, estimated taxes will be provided for the related deferred tax liability (asset), if any, resulting from currency translation adjustments.
The following table details the accumulated balances for each component of other comprehensive income (loss), net of tax:
 
August 27, 2017
 
May 28, 2017
Currency translation losses, net of reclassification adjustments
$
(67.1
)
 
$
(98.6
)
Derivative adjustments, net of reclassification adjustments
(1.1
)
 
(1.1
)
Unrealized losses on available-for-sale securities
(0.1
)
 
(0.3
)
Pension and post-employment benefit obligations, net of reclassification adjustments
(112.9
)
 
(112.9
)
Accumulated other comprehensive loss
$
(181.2
)
 
$
(212.9
)

The following table summarizes the reclassifications from accumulated other comprehensive income (loss) into operations:

 
 
Thirteen weeks ended
 
Affected Line Item in the Condensed Consolidated Statement of Earnings 1
 
 
August 27, 2017
 
August 28, 2016
 
 
Pension and postretirement liabilities:
 

 

 

     Net prior service benefit
 
$
(0.1
)
 
$
(0.9
)
 
Selling, general and administrative expenses
 
 
(0.1
)
 
(0.9
)
 
Total before tax
 
 
—

 
0.3

 
Income tax expense
 
 
$
(0.1
)
 
$
(0.6
)
 
Net of tax
1 Amounts in parentheses indicate income recognized in the Condensed Consolidated Statements of Earnings.

5

Cash and cash equivalents — Cash and all highly liquid investments with an original maturity of three months or less at the date of acquisition, including short-term time deposits and government agency and corporate obligations, are classified as cash and cash equivalents.
Reclassifications and other changes — Certain prior year amounts have been reclassified to conform with current year presentation.
Use of Estimates — Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets, liabilities, revenues, and expenses as reflected in the condensed consolidated financial statements. Actual results could differ from these estimates.
Accounting Changes — In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, Inventory , which requires an entity to measure inventory within the scope at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We adopted this ASU prospectively in fiscal 2018. The adoption of this guidance did not have a material impact to our financial statements.
Recently Issued Accounting Standards — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP. On July 9, 2015, the FASB deferred the effective date of the new revenue recognition standard by one year. Based on the FASB's ASU, we will apply the new revenue standard in our fiscal year 2019. Early adoption in our fiscal year 2018 is permitted. We are in the process of documenting the impact of the guidance on our current accounting policies and practices in order to identify material differences, if any, that would result from applying the new requirements to our revenue contracts. We continue to make progress on our revenue recognition review and are also in the process of evaluating the impact, if any, on changes to our business processes, systems, and controls to support recognition and disclosure requirements under the new guidance. We continue to evaluate the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. The standard permits the use of either the retrospective or cumulative effect transition method.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall: Recognition and Measurement of Financial Assets and Financial Liabilities , which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The effective date for this standard is for fiscal years beginning after December 31, 2017. Early adoption is not permitted except for certain provisions. We do not expect ASU 2016-01 to have a material impact to our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases , Topic 842, which requires lessees to reflect most leases on their balance sheet as assets and obligations. The effective date for the standard is for fiscal years beginning after December 15, 2018. Early adoption is permitted. We are evaluating the effect that this standard will have on our consolidated financial statements and related disclosures. The standard is to be applied under the modified retrospective method, with elective reliefs, which requires application of the new guidance for all periods presented.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments , which clarifies how companies present and classify certain cash receipts and cash payments in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. Early adoption is permitted. We do not expect ASU 2016-15 to have a material impact to our consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows: Restricted Cash , which provides amendments to current guidance to address the classifications and presentation of changes in restricted cash in the statement of cash flows. The effective date for the standard is for fiscal years beginning after December 15, 2017. Early adoption is permitted. We do not expect ASU 2016-18 to have a material impact to our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business , which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The effective date for the standard is for fiscal years beginning after December 15, 2017. Early adoption is permitted. We do not expect ASU 2017-01 to have a material impact to our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost , which requires companies to present the service cost component of net benefit cost in the same line items in which they report compensation cost. Companies will present all other components of net benefit cost outside operating income, if this subtotal is presented. The effective date for the standard is for fiscal years beginning after December 15, 2017. Early adoption is permitted. We do not expect ASU 2017-07 to have a material impact to our financial statements.


6

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities , which improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting guidance in current GAAP. The amendments in this update better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and presentation of hedge results. The effective date for the standard is for fiscal years beginning after December 15, 2018. Early adoption is permitted. We are currently evaluating the impact of our pending adoption of this standard on our consolidated financial statements.

2. ACQUISITIONS
In April 2017, we acquired protein-based snacking businesses Thanasi Foods LLC, maker of Duke's ® meat snacks, and BIGS LLC, maker of BIGS ® seeds, for $217.6 million in cash, net of cash acquired. Approximately $133.4 million has been classified as goodwill of which $70.9 million is deductible for income tax purposes. Approximately $81.2 million of the purchase price has been allocated to other intangible assets. These businesses are included in the Grocery & Snacks segment.
In September 2016, we acquired the operating assets of Frontera Foods, Inc. and Red Fork LLC, including the Frontera ® , Red Fork ® , and Salpica ® brands. These businesses make authentic, gourmet Mexican food products and contemporary American cooking sauces. We acquired the businesses for $108.1 million in cash, net of cash acquired. Approximately $39.5 million has been classified as goodwill and $66.7 million has been classified as other intangible assets. The amount allocated to goodwill is deductible for tax purposes. These businesses are reflected principally within the Grocery & Snacks segment, and to a lesser extent within the Refrigerated & Frozen and International segments.
These acquisitions collectively contributed $31.0 million to net sales during the first quarter of fiscal 2018.
For each of these acquisitions, the amounts allocated to goodwill were primarily attributable to anticipated synergies, product portfolios, and other intangibles that do not qualify for separate recognition.
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.
Subsequent to the end of the first quarter of fiscal 2018, we entered into a definitive agreement to acquire Angie's Artisan Treats, LLC, maker of Angie's ® BOOMCHICKAPOP ® ready-to-eat popcorn, for a cash purchase price of $250 million , net of cash acquired and subject to working capital adjustments. The business will be primarily included in the Grocery & Snacks segment. The transaction is expected to close by the end of the calendar year, subject to customary closing conditions, including the receipt of any applicable regulatory approvals.


7



3. DISCONTINUED OPERATIONS AND OTHER DIVESTITURES
Lamb Weston Spinoff
On November 9, 2016, we completed the Spinoff of our Lamb Weston business. As of such date, we did not beneficially own any equity interest in Lamb Weston and no longer consolidated Lamb Weston into our financial results. The business results were previously reported in the Commercial segment. We reflected the results of this business as discontinued operations for all periods presented.
The summary comparative financial results of the Lamb Weston business through the date of the Spinoff, included within discontinued operations, were as follows:
 
Thirteen Weeks Ended
 
August 27, 2017
 
August 28, 2016
Net sales
$
—

 
$
771.9

Income (loss) from discontinued operations before income taxes and equity method investment earnings
$
(0.3
)
 
$
128.8

Income (loss) before income taxes and equity method investment earnings
(0.3
)
 
128.8

Income tax expense (benefit)
(0.1
)
 
49.5

Equity method investment earnings
—

 
10.6

Income (loss) from discontinued operations, net of tax
(0.2
)
 
89.9

Less: Net income attributable to noncontrolling interests
—

 
3.6

Net income (loss) from discontinued operations attributable to Conagra Brands, Inc.
$
(0.2
)
 
$
86.3

For the first quarter of fiscal 2017 , we incurred $9.8 million of expenses in connection with the Spinoff primarily related to professional fees and contract services associated with preparation of regulatory filings and separation activities. These expenses are reflected in income from discontinued operations.
In connection with the Spinoff, total assets of $2.28 billion and total liabilities of $2.98 billion (including debt of $2.46 billion ) were transferred to Lamb Weston. As part of the consideration for the Spinoff, the Company received a cash payment from Lamb Weston in the amount of $823.5 million . See Note 5 for discussion of the debt-for-debt exchange related to the Spinoff.
We entered into a transition services agreement in connection with the Lamb Weston Spinoff and recognized $1.3 million of income for the performance of services during the first quarter of fiscal 2018 , classified within selling, general and administrative expenses.
Private Brands Operations
On February 1, 2016, pursuant to the Stock Purchase Agreement, dated as of November 1, 2015, we completed the disposition of our Private Brands operations to TreeHouse Foods, Inc. for $2.6 billion in cash on a debt-free basis. Included within discontinued operations for the first quarter of fiscal 2018 was an after-tax loss of $0.1 million ( $0.1 million pre-tax gain) related to the Private Brands operations. The first quarter of fiscal 2017 included after-tax income of $1.5 million ( $0.8 million pre-tax).
We entered into a transition services agreement with TreeHouse Foods, Inc. and recognized $ 1.7 million and $ 6.1 million of income for the performance of services during the first quarter of fiscal 2018 and 2017 , respectively, classified within selling, general and administrative expenses.
Other Divestitures
During the fourth quarter of fiscal 2017, we announced the agreement to sell our Wesson ® oil business, which is part of our Grocery & Snacks segment, to The J.M. Smucker Company ("Smucker"). The transaction is subject to certain customary closing conditions, including the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On August 28, 2017, Smucker and the Company each received a request for additional information under the HSR Act (a "second request") from the U.S. Federal Trade Commission ("FTC") in connection with the FTC's review of the transaction. Issuance of the second request extends the waiting period under the HSR Act until 30 days after both the Company and Smucker have substantially complied with the request, unless the waiting period is terminated earlier by the FTC. The agreement for the sale of the Wesson oil business provides that, unless otherwise agreed upon by the Company and Smucker, if the closing of the transaction has not occurred on or prior to March 31, 2018 because HSR approval has not been received as of such date, then either party may terminate the agreement. The parties are cooperating fully with the FTC as it conducts its review of the transaction. We expect to realize net proceeds of approximately $285 million from the sale. The assets of this business have been reclassified as assets held for sale within our Condensed Consolidated Balance Sheets for all periods presented.

8



The assets classified as held for sale reflected in our Condensed Consolidated Balance Sheets related to the Wesson ® oil business were as follows:
 
August 27, 2017
 
May 28, 2017
Current assets
$
39.2

 
$
35.5

Noncurrent assets (including goodwill of $74.5 million)
95.5

 
95.5

During the first quarter of fiscal 2017, we completed the sales of our Spicetec Flavors & Seasonings business ("Spicetec") and our JM Swank business, each of which was part of our Commercial segment, for $327.0 million and $159.3 million , respectively, in cash, net of cash included in the dispositions. We received an additional $2.7 million in the third quarter of fiscal 2017 related to working capital adjustments. We recognized pre-tax gains from the sales of $145.0 million and $53.2 million , respectively, in the first quarter of fiscal 2017.
In addition, we are actively marketing certain other long-lived assets. These assets have been reclassified as assets held for sale within our Condensed Consolidated Balance Sheets for all periods presented. The balance of these noncurrent assets classified as held for sale was $5.0 million and $11.6 million within our Corporate segment at August 27, 2017 and May 28, 2017 , respectively.

4. RESTRUCTURING ACTIVITIES
Supply Chain and Administrative Efficiency Plan
In May 2013, we announced the Supply Chain and Administrative Efficiency Plan (the "SCAE Plan"), our plan to integrate and restructure the operations of our Private Brands business, improve selling, general and administrative ("SG&A") effectiveness and efficiencies, and optimize our supply chain network, manufacturing assets, dry distribution centers, and mixing centers. In the second quarter of fiscal 2016, we announced plans to realize efficiency benefits by reducing SG&A expenses and enhancing trade spend processes and tools, which plans were included as part of the SCAE Plan. Although we divested the Private Brands business, we have continued to implement the SCAE Plan, including by working to optimize our supply chain network, pursue cost reductions through our SG&A functions, enhance trade spend processes and tools, and improve productivity.
Although we remain unable to make good faith estimates relating to the entire SCAE Plan, we are reporting on actions initiated through the end of the first quarter of fiscal 2018 , including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows. As of August 27, 2017 , our Board of Directors has approved the incurrence of up to $900.9 million of expenses in connection with the SCAE Plan, including expenses allocated for the Private Brands and Lamb Weston operations. We have incurred or expect to incur approximately $450.1 million of charges ( $303.3 million of cash charges and $146.8 million of non-cash charges) for actions identified to date under the SCAE Plan related to our continuing operations. In the first quarter of fiscal 2018 and 2017, we recognized charges of $11.4 million and $14.1 million , respectively, in relation to the SCAE Plan related to our continuing operations. We expect to incur costs related to the SCAE Plan over a multi-year period.
We anticipate that we will recognize the following pre-tax expenses in association with the SCAE Plan related to our continuing operations (amounts include charges recognized from plan inception through the first quarter of fiscal 2018 ):
 
Grocery & Snacks
 
Refrigerated & Frozen
 
International
 
Foodservice
 
Corporate
 
Total
Pension costs
$
32.9

 
$
1.5

 
$
—

 
$
—

 
$
—

 
$
34.4

Accelerated depreciation
33.7

 
18.6

 
—

 
—

 
1.2

 
53.5

Other cost of goods sold
9.2

 
2.1

 
—

 
—

 
—

 
11.3

    Total cost of goods sold
75.8

 
22.2

 
—

 
—

 
1.2

 
99.2

Severance and related costs, net
26.9

 
10.3

 
2.5

 
7.9

 
102.1

 
149.7

Fixed asset impairment (net of gains on disposal)
7.4

 
6.9

 
—

 
—

 
11.2

 
25.5

Accelerated depreciation
—

 
—

 
—

 
—

 
4.4

 
4.4

Contract/lease cancellation expenses
0.8

 
0.6

 
0.6

 
—

 
72.6

 
74.6

Consulting/professional fees
0.9

 
0.4

 
0.1

 
—

 
52.7

 
54.1

Other selling, general and administrative expenses
15.0

 
3.2

 
—

 
—

 
24.4

 
42.6

    Total selling, general and administrative expenses
51.0

 
21.4

 
3.2

 
7.9

 
267.4

 
350.9

        Consolidated total
$
126.8

 
$
43.6

 
$
3.2

 
$
7.9

 
$
268.6

 
$
450.1


9



During the first quarter of fiscal 2018 , we recognized the following pre-tax expenses for the SCAE Plan related to our continuing operations:
 
Grocery & Snacks
 
Corporate
 
Total
Accelerated depreciation
$
1.2

 
$
—

 
$
1.2

Other cost of goods sold
1.1

 
—

 
1.1

    Total cost of goods sold
2.3

 
—

 
2.3

Severance and related costs, net
2.0

 
—

 
2.0

Fixed asset impairment (net of gains on disposal)
0.1

 
4.4

 
4.5

Accelerated depreciation
—

 
0.6

 
0.6

Consulting/professional fees
—

 
0.2

 
0.2

Other selling, general and administrative expenses
1.8

 
—

 
1.8

    Total selling, general and administrative expenses
3.9

 
5.2

 
9.1

        Consolidated total
$
6.2

 
$
5.2

 
$
11.4

Included in the above table are $4.8 million of charges that have resulted or will result in cash outflows and $6.6 million in non-cash charges.
We recognized the following cumulative (plan inception to August 27, 2017 ) pre-tax expenses related to the SCAE Plan related to our continuing operations in our Condensed Consolidated Statements of Earnings:
 
Grocery & Snacks
 
Refrigerated & Frozen
 
International
 
Foodservice
 
Corporate
 
Total
Pension costs
$
32.9

 
$
1.5

 
$
—

 
$
—

 
$
—

 
$
34.4

Accelerated depreciation
32.2

 
18.6

 
—

 
—

 
1.2

 
52.0

Other cost of goods sold
6.1

 
2.1

 
—

 
—

 
—

 
8.2

    Total cost of goods sold
71.2

 
22.2

 
—

 
—

 
1.2

 
94.6

Severance and related costs, net
25.9

 
10.3

 
2.5

 
7.9

 
101.5

 
148.1

Fixed asset impairment (net of gains on disposal)
7.4

 
6.9

 
—

 
—

 
11.2

 
25.5

Accelerated depreciation
—

 
—

 
—

 
—

 
3.2

 
3.2

Contract/lease cancellation expenses
0.8

 
0.6

 
0.6

 
—

 
71.3

 
73.3

Consulting/professional fees
0.9

 
0.4

 
0.1

 
—

 
51.4

 
52.8

Other selling, general and administrative expenses
13.0

 
3.2

 
—

 
—

 
20.0

 
36.2

    Total selling, general and administrative expenses
48.0

 
21.4

 
3.2

 
7.9

 
258.6

 
339.1

        Consolidated total
$
119.2

 
$
43.6

 
$
3.2

 
$
7.9

 
$
259.8

 
$
433.7

Included in the above results are $290.3 million of charges that have resulted or will result in cash outflows and $143.4 million in non-cash charges. Not included in the above results are $130.2 million of pre-tax expenses ( $84.5 million of cash charges and $45.7 million of non-cash charges) related to the Private Brands operations, which we sold in the third quarter of fiscal 2016, and $2.1 million of pre-tax expenses (all resulting in cash charges) related to Lamb Weston.

10



Liabilities recorded for the SCAE Plan related to our continuing operations and changes therein for the first quarter of fiscal 2018 were as follows:
 
Balance at May 28, 2017
 
Costs Incurred
and Charged
to Expense
 
Costs Paid
or  Otherwise Settled
 
Changes in Estimates
 
Balance at August 27, 2017
Pension costs
$
31.8

 
$
—

 
$
—

 
$
—

 
$
31.8

Severance and related costs
13.8

 
2.3

 
(4.4
)
 
(0.3
)
 
11.4

Consulting/professional fees
0.6

 
0.2

 
(0.6
)
 
—

 
0.2

Contract/lease cancellation
11.6

 
—

 
(1.7
)
 
—

 
9.9

Other costs
1.9

 
2.7

 
(3.2
)
 
—

 
1.4

Total
$
59.7

 
$
5.2

 
$
(9.9
)
 
$
(0.3
)
 
$
54.7


5. LONG-TERM DEBT AND REVOLVING CREDIT FACILITY

At August 27, 2017 , we had a revolving credit facility (the "Facility") with a syndicate of financial institutions that provides for a maximum aggregate principal amount outstanding at any one time of $1.25 billion (subject to increase to a maximum aggregate principal amount of $1.75 billion with the consent of the lenders). As of August 27, 2017 , we were in compliance with all financial covenants under the Facility.
During the third quarter of fiscal 2017, we repaid the remaining principal balance of $224.8 million of our 5.819% senior notes due 2017 and $248.2 million principal amount of our 7.0% senior notes due 2019, in each case prior to maturity, resulting in a net loss on early retirement of debt of $32.7 million .
In connection with the Spinoff (see Note 3), Lamb Weston issued to us $1.54 billion aggregate principal amount of senior notes (the "Lamb Weston notes"). On November 9, 2016, we exchanged the Lamb Weston notes for $250.2 million aggregate principal amount of our 5.819% senior notes due 2017, $880.4 million aggregate principal amount of our 1.9% senior notes due 2018, $154.9 million aggregate principal amount of our 2.1% senior notes due 2018, $86.9 million aggregate principal amount of our 7.0% senior notes due 2019, and $71.1 million aggregate principal amount of our 4.95% senior notes due 2020 (collectively, the "Conagra notes"), which had been purchased in the open market by certain investment banks prior to the Spinoff. Following the exchange, we cancelled the Conagra notes. These actions resulted in a net loss of $60.6 million as a cost of early retirement of debt.
During the first quarter of fiscal 2017, we repaid the entire principal balance of $550.0 million of our floating rate notes on the maturity date of July 21, 2016.
Net interest expense from continuing operations consists of:
 
Thirteen weeks ended
 
August 27,
2017
 
August 28,
2016
Long-term debt
$
38.1

 
$
60.9

Short-term debt
0.4

 
0.2

Interest income
(0.9
)
 
(0.7
)
Interest capitalized
(1.2
)
 
(2.2
)
 
$
36.4

 
$
58.2


6. VARIABLE INTEREST ENTITIES
Variable Interest Entities Not Consolidated
We have variable interests in certain entities that we have determined to be variable interest entities, but for which we are not the primary beneficiary. We do not consolidate the financial statements of these entities.
We lease certain office buildings from entities that we have determined to be variable interest entities. The lease agreements with these entities include fixed-price purchase options for the assets being leased. The lease agreements also contain contingent put options (the "lease put options") that allow the lessors to require us to purchase the buildings at the greater of original construction cost, or fair

11



market value, without a lease agreement in place (the "put price") in certain limited circumstances. As a result of substantial impairment charges related to our divested Private Brands operations, these lease put options are exercisable now and remain exercisable until generally 30 days after the end of the respective lease agreements. We are amortizing the difference between the put price and the estimated fair value (without a lease agreement in place) of each respective property over the remaining respective lease term within selling, general and administrative expenses. As of August 27, 2017 and May 28, 2017 , the estimated amount by which the put prices exceeded the fair values of the related properties was $51.8 million , of which we had accrued $9.3 million and $8.4 million , respectively. As these buildings are worth considerably more when under lease agreements than when vacant, we may be able to mitigate some, or all, of the financial exposure created by the put options by maintaining active lease agreements and/or by subleasing the buildings to credit worthy tenants. We do not expect to ultimately incur material financial losses as a result of the potential exercise of the lease put options by the lessors. These leases are accounted for as operating leases, and accordingly, there are no material assets or liabilities, other than the accrued portion of the put price, associated with these entities included in the Condensed Consolidated Balance Sheets. We have determined that we do not have the power to direct the activities that most significantly impact the economic performance of these entities. In making this determination, we have considered, among other items, the terms of the lease agreements, the expected remaining useful lives of the assets leased, and the capital structure of the lessor entities.

7. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS
The change in the carrying amount of goodwill for the first quarter of fiscal 2018 was as follows:
 
Grocery & Snacks
 
Refrigerated & Frozen
 
International
 
Foodservice
 
Total
Balance as of May 28, 2017
$
2,439.1

 
$
1,037.3

 
$
253.6

 
$
571.1

 
$
4,301.1

Purchase accounting adjustments
(1.4
)
 
—

 
—

 
—

 
(1.4
)
Currency translation
—

 
0.9

 
1.1

 
—

 
2.0

Balance as of August 27, 2017
$
2,437.7

 
$
1,038.2

 
$
254.7

 
$
571.1

 
$
4,301.7

Other identifiable intangible assets were as follows:
 
August 27, 2017
 
May 28, 2017
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Gross
Carrying
Amount
 
Accumulated
Amortization
Non-amortizing intangible assets
$
835.6

 
$
—

 
$
834.1

 
$
—

Amortizing intangible assets
577.3

 
189.3

 
575.4

 
180.2

 
$
1,412.9

 
$
189.3

 
$
1,409.5

 
$
180.2

In the first quarter of fiscal 2017, in anticipation of the Spinoff, we changed our reporting segments. In accordance with applicable accounting guidance, we were required to determine new reporting units at a lower level (at the operating segment or one level lower, as applicable). When such a determination was made, we were required to perform a goodwill impairment analysis for each of the new reporting units.
We performed an assessment of impairment of goodwill for the new Canadian reporting unit within the new International reporting segment. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding our future plans and future industry and economic conditions. We estimated the future cash flows of the Canadian reporting unit and calculated the net present value of those estimated cash flows using a risk adjusted discount rate, in order to estimate the fair value of each reporting unit from the perspective of a market participant. We used discount rates and terminal growth rates of 7.5% and 2% , respectively, to calculate the present value of estimated future cash flows. We then compared the estimated fair value of the reporting unit to the historical carrying value (including allocated assets and liabilities of certain shared and Corporate functions), and determined that the fair value of the reporting unit was less than the carrying value in the first quarter of fiscal 2017. With the assistance of a third-party valuation specialist, we estimated the fair value of the assets and liabilities of this reporting unit in order to determine the implied fair value of goodwill. We recognized an impairment charge for the difference between the implied fair value of goodwill and the carrying value of goodwill. Accordingly, during the first quarter of fiscal 2017, we recorded charges totaling $139.2 million for the impairment of goodwill.
As part of the assessment of the fair value of each asset and liability within the Canadian reporting unit, with the assistance of the third-party valuation specialist, we estimated the fair value of our Canadian Del Monte ® brand to be less than its carrying value. In accordance with applicable accounting guidance, we recognized an impairment charge of $24.4 million to write-down the intangible asset to its estimated fair value.
Non-amortizing intangible assets are comprised of brands and trademarks.

12



Amortizing intangible assets, carrying a remaining weighted average life of approximately 14 years , are principally composed of customer relationships, licensing arrangements, and acquired intellectual property. Amortization expense was $8.6 million and $8.4 million for the first quarter of fiscal 2018 and 2017, respectively. Based on amortizing assets recognized in our Condensed Consolidated Balance Sheet as of August 27, 2017 , amortization expense is estimated to average $33.4 million for each of the next five years.

8. DERIVATIVE FINANCIAL INSTRUMENTS
Our operations are exposed to market risks from adverse changes in commodity prices affecting the cost of raw materials and energy, foreign currency exchange rates, and interest rates. In the normal course of business, these risks are managed through a variety of strategies, including the use of derivatives.
Commodity and commodity index futures and option contracts are used from time to time to economically hedge commodity input prices on items such as natural gas, vegetable oils, proteins, packaging materials, dairy, grains, and electricity. Generally, we economically hedge a portion of our anticipated consumption of commodity inputs for periods of up to 36 months. We may enter into longer-term economic hedges on particular commodities, if deemed appropriate. As of August 27, 2017 , we had economically hedged certain portions of our anticipated consumption of commodity inputs using derivative instruments with expiration dates through May 2018.
In order to reduce exposures related to changes in foreign currency exchange rates, we enter into forward exchange, option, or swap contracts from time to time for transactions denominated in a currency other than the applicable functional currency. This includes, but is not limited to, hedging against foreign currency risk in purchasing inventory and capital equipment, sales of finished goods, and future settlement of foreign-denominated assets and liabilities. As of August 27, 2017 , we had economically hedged certain portions of our foreign currency risk in anticipated transactions using derivative instruments with expiration dates through May 2018.
From time to time, we may use derivative instruments, including interest rate swaps, to reduce risk related to changes in interest rates. This includes, but is not limited to, hedging against increasing interest rates prior to the issuance of long-term debt and hedging the fair value of our senior long-term debt.
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.
Economic Hedges of Fair Values — Foreign Currency Exchange Rate Risk
We may use options and cross currency swaps to economically hedge the fair value of certain monetary assets and liabilities (including intercompany balances) denominated in a currency other than the functional currency. These derivatives are marked-to-market with gains and losses immediately recognized in selling, general and administrative expenses. These substantially offset the foreign currency transaction gains or losses recognized as values of the monetary assets or liabilities being economically hedged change.
All derivative instruments are recognized on our balance sheets at fair value (refer to Note 16 for additional information related to fair value measurements). The fair value of derivative assets is recognized within prepaid expenses and other current assets, while the fair value of derivative liabilities is recognized within other accrued liabilities. In accordance with U.S. GAAP, we offset certain derivative asset and liability balances, as well as certain amounts representing rights to reclaim cash collateral and obligations to return cash collateral, where master netting agreements provide for legal right of setoff. At May 28, 2017 , $0.9 million representing a right to reclaim cash collateral was included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheet.
Derivative assets and liabilities and amounts representing a right to reclaim cash collateral or an obligation to return cash collateral were reflected in our Condensed Consolidated Balance Sheets as follows:
 
August 27,
2017
 
May 28,
2017
Prepaid expenses and other current assets
$
4.1

 
$
2.3

Other accrued liabilities
6.3

 
1.3


13



The following table presents our derivative assets and liabilities, at August 27, 2017 , on a gross basis, prior to the setoff of $1.3 million to total derivative assets and $1.3 million to total derivative liabilities where legal right of setoff existed:
 
Derivative Assets
 
Derivative Liabilities
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Commodity contracts
Prepaid expenses and other current assets
 
$
5.1

 
Other accrued liabilities
 
$
1.4

Foreign exchange contracts
Prepaid expenses and other current assets
 
0.3

 
Other accrued liabilities
 
6.1

Other
Prepaid expenses and other current assets
 
—

 
Other accrued liabilities
 
0.1

Total derivatives not designated as hedging instruments
 
 
$
5.4

 
 
 
$
7.6

The following table presents our derivative assets and liabilities at May 28, 2017 , on a gross basis, prior to the setoff of $0.5 million to total derivative assets and $1.4 million to total derivative liabilities where legal right of setoff existed:
 
Derivative Assets
 
Derivative Liabilities
 
Balance Sheet
Location
 
Fair Value
 
Balance Sheet
Location
 
Fair Value
Commodity contracts
Prepaid expenses and other current assets
 
$
2.6

 
Other accrued liabilities
 
$
1.4

Foreign exchange contracts
Prepaid expenses and other current assets
 
0.2

 
Other accrued liabilities
 
1.1

Other
Prepaid expenses and other current assets
 
—

 
Other accrued liabilities
 
0.2

Total derivatives not designated as hedging instruments
 
 
$
2.8

 
 
 
$
2.7

The location and amount of gain (loss) from derivatives not designated as hedging instruments in our Condensed Consolidated Statements of Earnings were as follows:
Derivatives Not Designated as Hedging Instruments
 
Location in Condensed Consolidated Statement of Earnings of
Gain (Loss) Recognized on Derivatives
 
Amount of Gain (Loss)
Recognized on Derivatives
in Condensed Consolidated
Statement of Earnings for
the Thirteen Weeks Ended
August 27, 2017
 
August 28, 2016
Commodity contracts
 
Cost of goods sold
 
$
0.6

 
$
(0.4
)
Foreign exchange contracts
 
Cost of goods sold
 
(8.0
)
 
0.1

Foreign exchange contracts
 
Selling, general and administrative expense
 
0.3

 
(1.2
)
Total loss from derivative instruments not designated as hedging instruments
 
 
 
$
(7.1
)
 
$
(1.5
)
As of August 27, 2017 , our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $86.6 million and $66.5 million for purchase and sales contracts, respectively. As of May 28, 2017 , our open commodity contracts had a notional value of $76.8 million and $73.4 million for purchase and sales contracts, respectively. The notional amount of our foreign currency forward contracts as of August 27, 2017 and May 28, 2017 was $79.6 million and $81.9 million , respectively.
We enter into certain commodity, interest rate, and foreign exchange derivatives with a diversified group of counterparties. We continually monitor our positions and the credit ratings of the counterparties involved and limit the amount of credit exposure to any one party. These transactions may expose us to potential losses due to the risk of nonperformance by these counterparties. We have not incurred a material loss due to nonperformance in any period presented and do not expect to incur any such material loss. We also enter into futures and options transactions through various regulated exchanges.
At August 27, 2017 , the maximum amount of loss due to the credit risk of the counterparties, had the counterparties failed to perform according to the terms of the contracts, was $0.3 million .

14




9. SHARE-BASED PAYMENTS
For the first quarter of fiscal 2018 and 2017 , we recognized total stock-based compensation expense (including stock options, restricted stock units, cash-settled restricted stock units, and performance shares) of $6.4 million and $14.8 million , respectively. These amounts are inclusive of discontinued operations. Included in the total stock-based compensation expense for the first quarter of fiscal 2018 and 2017 was expense of $0.3 million and income of $0.1 million , respectively, related to stock options granted by a subsidiary in the subsidiary's shares to the subsidiary's employees. For the first quarter of fiscal 2018 , we granted 0.8 million restricted stock units at a weighted average grant date price of $34.10 and 0.5 million performance shares at a weighted average grant date price of $33.82 .
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 performance period ending in fiscal 2018 (the "2018 performance period") is based upon an overarching earnings per share goal (for certain participants) and, for all participants, our fiscal 2016 earnings before interest, taxes, depreciation, and amortization ("EBITDA") return on capital. Another one-third of the target number of performance shares granted for the 2018 performance period is based on an overarching earnings per share goal (for certain participants) and our fiscal 2017 EBITDA return on capital. The fiscal 2017 EBITDA return on capital target, when set, excluded the results of Lamb Weston. The performance goal for the last one-third of the target number of performance shares granted for the 2018 performance period is based upon our fiscal 2018 diluted earnings per share ("EPS") compound annual growth rate ("CAGR").
The performance goal for one-third of the target number of performance shares for the performance period ending in fiscal 2019 (the "2019 performance period") is based upon an overarching earnings per share goal (for certain participants) and our fiscal 2017 EBITDA return on capital. The fiscal 2017 EBITDA return on capital target, when set, excluded the results of Lamb Weston. The performance goal for the final two-thirds of the target number of performance shares granted for the 2019 performance period is based upon our diluted EPS CAGR, measured over the two -year period ending in fiscal 2019.
The performance goal for the performance period ending in fiscal 2020 is based upon our diluted EPS CAGR, measured over the defined performance period.
Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in the performance share plan, any shares earned will be distributed after the end of the performance period, and 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.

10. EARNINGS PER SHARE
Basic earnings per share is calculated on the basis of weighted average outstanding common shares. Diluted earnings per share is computed on the basis of basic weighted average outstanding common shares 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 27,
2017
 
August 28,
2016
Net income available to Conagra Brands, Inc. common stockholders:
 
 
 
Income from continuing operations attributable to Conagra Brands, Inc. common stockholders
$
152.8

 
$
98.4

Income (loss) from discontinued operations, net of tax, attributable to Conagra Brands, Inc. common stockholders
(0.3
)
 
87.8

Net income attributable to Conagra Brands, Inc. common stockholders
$
152.5

 
$
186.2

Less: Increase in redemption value of noncontrolling interests in excess of earnings allocated
—

 
0.5

Net income available to Conagra Brands, Inc. common stockholders
$
152.5

 
$
185.7

Weighted average shares outstanding:
 
 
 
Basic weighted average shares outstanding
415.1

 
439.0

Add: Dilutive effect of stock options, restricted stock unit awards, and other dilutive securities
4.1

 
3.7

Diluted weighted average shares outstanding
419.2

 
442.7


15



For the first quarter of fiscal 2018 and 2017, there were 1.3 million and 0.7 million stock options outstanding, respectively, that were excluded from the computation of diluted weighted average shares because the effect was antidilutive.

11. INVENTORIES
The major classes of inventories were as follows:  
 
August 27,
2017
 
May 28,
2017
Raw materials and packaging
$
203.8

 
$
182.1

Work in process
96.1

 
91.9

Finished goods
721.2

 
612.9

Supplies and other
47.7

 
47.3

Total
$
1,068.8

 
$
934.2



12. INCOME TAXES
Income tax expense from continuing operations for the first quarter of fiscal 2018 and 2017 was $ 120.0 million and $ 169.2 million , respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income from continuing operations, inclusive of equity method investment earnings) from continuing operations was 43.9%  and  63.2%  for the  first quarter  of fiscal  2018 and 2017, respectively.  
The effective tax rate in the first quarter of fiscal 2018 reflects additional tax expense related to the planned repatriation of cash from foreign subsidiaries and the tax expense related to undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made.
The effective tax rate in the first quarter of fiscal 2017 reflects the following:
•
an income tax benefit allowed upon the vesting/exercise of employee stock compensation awards by our employees, beyond that which is attributable to the original fair value of the awards upon the date of grant,
•
additional tax expense in the first quarter of fiscal 2017 associated with non-deductible goodwill sold in connection with the dispositions of the Spicetec and JM Swank businesses, and
•
additional tax expense in the first quarter of fiscal 2017 associated with non-deductible goodwill, for which an impairment charge was recognized.
The amount of gross unrecognized tax benefits for uncertain tax positions, including positions impacting only the timing of tax benefits, was $37.7 million as of August 27, 2017 and $39.3 million as of May 28, 2017 . There were no balances included as of either August 27, 2017 or May 28, 2017 , for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The gross unrecognized tax benefits excluded related liabilities for gross interest and penalties of $5.8 million and $6.0 million as of August 27, 2017 and May 28, 2017 , respectively.
The net amount of unrecognized tax benefits at August 27, 2017 and May 28, 2017 that, if recognized, would impact the Company's effective tax rate was $30.7 million and $31.6 million , respectively. Recognition of these tax benefits would have a favorable impact on the Company's effective tax rate.
We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $16.7 million over the next twelve months due to various federal, state, and foreign audit settlements and the expiration of statutes of limitations.
As of August 27, 2017 and May 28, 2017 , we had a deferred tax asset of $1.09 billion and $1.08 billion , respectively, that was generated from the capital loss realized on the sale of the Private Brands operations with corresponding valuation allowances of $994.3 million and $990.9 million , respectively, to reflect the uncertainty regarding the ultimate realization of the tax asset. During the first quarter of fiscal 2018, the balance of the deferred tax asset was adjusted for the impact of state law changes, realization of certain tax attributes, and the settlement of certain tax indemnity claims under the contract terms of the Private Brands sale.
Historically, we have not provided U.S. deferred taxes on the cumulative undistributed earnings of our foreign subsidiaries. During the first quarter of fiscal 2018, we decided to repatriate certain cash balances currently held in Italy, Canada, Mexico, the Netherlands, and Luxembourg due to the timing of cash flows in connection with certain business acquisition and divestiture activity, as well as forecasted levels of short-term borrowings. We expect to repatriate approximately $154.8 million during the second quarter of fiscal

16

2018. The planned cash repatriation will result in the repatriation of approximately $115.0 million in previously undistributed earnings of our foreign subsidiaries. As a result of this decision, we have recognized $12.2 million of income tax expense in the first quarter of fiscal 2018.
In conjunction with this planned repatriation, we have determined that additional previously undistributed earnings of foreign subsidiaries no longer meets the requirements for indefinite reinvestment under applicable accounting guidance and, therefore, recognized an additional $11.3 million of income tax expense in the first quarter of fiscal 2018.
An additional $4.3 million of income tax expense was recognized in the first quarter of fiscal 2018, primarily related to a valuation allowance on foreign tax credits generated in prior periods.
We continue to believe the remaining undistributed earnings of our foreign subsidiaries, after taking into account the above transactions, are indefinitely reinvested and therefore have not provided any additional U.S. deferred taxes.

13. CONTINGENCIES
    
In fiscal 1991, we acquired Beatrice Company ("Beatrice"). As a result of the acquisition of Beatrice and the significant pre-acquisition contingencies of the Beatrice businesses and its former subsidiaries, our condensed consolidated post-acquisition financial statements reflect liabilities associated with the estimated resolution of these contingencies. Such liabilities include various litigation and environmental proceedings related to businesses divested by Beatrice prior to our acquisition of Beatrice. The litigation proceedings include suits against a number of lead paint and pigment manufacturers, including ConAgra Grocery Products Company, LLC, a wholly owned subsidiary of the Company ("ConAgra Grocery Products"), and the Company as alleged successors to W. P. Fuller Co., a lead paint and pigment manufacturer owned and operated by Beatrice until 1967. Although decisions favorable to us have been rendered in Rhode Island, New Jersey, Wisconsin, and Ohio, we remain a defendant in active suits in Illinois and California. The Illinois suit seeks class-wide relief for reimbursement of costs associated with the testing of lead levels in blood. In California, a number of cities and counties joined in a consolidated action seeking abatement of the alleged public nuisance. On September 23, 2013, a trial of the California case concluded in the Superior Court of California for the County of Santa Clara, and on January 27, 2014, the court entered a judgment (the "Judgment") against ConAgra Grocery Products and two other defendants ordering the creation of a California abatement fund in the amount of $1.15 billion . Liability is joint and several. The Company believes ConAgra Grocery Products did not inherit any liabilities of W. P. Fuller Co. The Company will continue to vigorously defend itself in this case and has appealed the Judgment to the Court of Appeal of the State of California Sixth Appellate District. The Company expects the appeals process to last several years. The absence of any linkage between ConAgra Grocery Products and W. P. Fuller Co. is a critical issue (among others) that the Company will continue to advance throughout the appeals process. It is not possible to estimate exposure in this case or the remaining case in Illinois, which is based on different legal theories. If ultimately necessary, the Company will look to its insurance policies for coverage; its carriers are on notice. However, the extent of insurance coverage is uncertain, and the Company cannot absolutely assure that the final resolution of these matters will not have a material adverse effect on its financial condition, results of operations, or liquidity.
The current environmental proceedings associated with Beatrice include litigation and administrative proceedings involving Beatrice's possible status as a potentially responsible party at approximately 40 Superfund, proposed Superfund, or state-equivalent sites (the "Beatrice sites"). These sites involve locations previously owned or operated by predecessors of Beatrice that used or produced petroleum, pesticides, fertilizers, dyes, inks, solvents, PCBs, acids, lead, sulfur, tannery wastes, and/or other contaminants. In the past five years, Beatrice has paid or is in the process of paying its liability share at 31 of these sites. 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 $53.1 million as of August 27, 2017 , a majority of which relates to the Superfund and state-equivalent sites referenced above. During the third quarter of fiscal 2017, a final Remedial Investigation/Feasibility Study was submitted for the Wells G&H-Southwest Properties Superfund site, which is one of the Beatrice sites. The U.S. Environmental Protection Agency (the "EPA") has issued a proposed plan for remediation that is currently open for public comment, will issue a Record of Decision for this site shortly, and will subsequently enter into negotiations with potentially responsible parties to determine a final Remedial Design/Remedial Action plan for the site. The accrual for Wells G&H-Southwest Properties Superfund site totaled $1.1 million as of August 27, 2017, which was included in the total accrual for Beatrice-related environmental matters referenced above.
In June 2009, an accidental explosion occurred at our manufacturing facility in Garner, North Carolina. This facility was the primary production facility for our Slim Jim ® branded meat snacks. In June 2009, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives announced its determination that the explosion was the result of an accidental natural gas release and not a deliberate act. During the fourth quarter of fiscal 2011, we settled our property and business interruption claims related to the Garner accident with our insurance providers. During the fourth quarter of fiscal 2011, Jacobs Engineering Group Inc. ("Jacobs"), our engineer and project manager at the site, filed a declaratory judgment action against us seeking indemnity for personal injury claims brought against it as a result of the accident. During the first quarter of fiscal 2012, our motion for summary judgment was granted and the suit was dismissed without

17



prejudice on the basis that the suit was filed prematurely. In the third quarter of fiscal 2014, Jacobs refiled its action seeking indemnity. On March 25, 2016, a Douglas County jury in Nebraska rendered a verdict in favor of Jacobs and against us in the amount of $108.9 million plus post-judgment interest. We filed our Notice of Appeal in September 2016. The appeal will be decided directly by the Nebraska Supreme Court. Although our insurance carriers have provided customary notices of reservation of their rights under the policies of insurance, we expect any ultimate exposure in this case to be limited to the applicable insurance deductible.
We are party to a number of putative class action lawsuits challenging various product claims made in the Company's product labeling. These matters include Briseno v. ConAgra Foods, Inc., in which it is alleged that the labeling for Wesson ® oils as 100% natural is false and misleading because the oils contain genetically modified plants and organisms. In February 2015, the U.S. District Court for the Central District of California granted class certification to permit plaintiffs to pursue state law claims. The Company appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed class certification in January 2017. The Company has sought further review by the United States Supreme Court. While we cannot predict with certainty the results of this or any other legal proceeding, we do not expect this matter to have a material adverse effect on our financial condition, results of operations, or business.
In certain limited situations, we guarantee obligations of the Lamb Weston business pursuant to guarantee arrangements that existed prior to the Spinoff and remained in place following completion of the Spinoff until such guarantee obligations are substituted for guarantees issued by Lamb Weston. Such guarantee arrangements are described below. Pursuant to the Separation and Distribution Agreement, dated as of November 8, 2016 (the "Separation Agreement"), between us and Lamb Weston, these guarantee arrangements are deemed liabilities of Lamb Weston that were transferred to Lamb Weston as part of the Spinoff. Accordingly, in the event that we are required to make any payments as a result of these guarantee arrangements, Lamb Weston is obligated to indemnify us for any such liability, reduced by any insurance proceeds received by us, in accordance with the terms of the indemnification provisions under the Separation Agreement.
Lamb Weston is a party to a warehouse services agreement with a third-party warehouse provider through July 2035. Under this agreement, Lamb Weston is required to make payments for warehouse services based on the quantity of goods stored and other service factors. We have guaranteed the warehouse provider that we will make the payments required under the agreement in the event that Lamb Weston fails to perform. Minimum payments of $1.5 million per month are required under this agreement. It is not possible to determine the maximum amount of the payment obligations under this agreement. Upon completion of the Spinoff, we recognized a liability for the estimated fair value of this guarantee. As of August 27, 2017 , the amount of this guarantee, recorded in other noncurrent liabilities, was $29.3 million .
Lamb Weston is a party to an agricultural sublease agreement with a third party for certain farmland through 2020 (subject, at Lamb Weston's option, to extension for two additional five -year periods). Under the terms of the sublease agreement, Lamb Weston is required to make certain rental payments to the sublessor. We have guaranteed the sublessor Lamb Weston's performance and the payment of all amounts (including indemnification obligations) owed by Lamb Weston under the sublease agreement, up to a maximum of $75.0 million . We believe the farmland associated with this sublease agreement is readily marketable for lease to other area farming operators. As such, we believe that any financial exposure to the company, in the event that we were required to perform under the guaranty, would be largely mitigated.
We lease certain office buildings from entities that we have determined to be variable interest entities. The lease agreements contain put options exercisable now and remain exercisable until generally 30 days after the end of the respective lease agreements, that allow the lessors to require us to purchase the buildings at the greater of original construction cost, or fair market value, without a lease in place. We have financial exposure with respect to these entities in the event we are required to purchase the leased buildings for a price in excess of the then current fair value under the applicable lease purchase options. We are amortizing the difference between the put price and the estimated fair value (without a lease agreement in place) of each respective property over the remaining respective lease term within selling, general and administrative expenses. As of August 27, 2017 and May 28, 2017 , the estimated amount by which the put prices exceeded the fair values of the related properties was $51.8 million , of which we had accrued $9.3 million and $8.4 million , respectively. As these buildings are worth considerably more when under lease agreements than when vacant, we may be able to mitigate some, or all, of the related financial exposure created by the put options by maintaining active lease agreements and/or by subleasing the buildings to credit worthy tenants. We do not expect to ultimately incur material financial losses as a result of the potential exercise of the lease put options by the lessors.
We are party to a number of matters challenging the Company's wage and hour practices. These matters include a number of putative class actions consolidated under the caption Negrete v. ConAgra Foods, Inc., et al, pending in the U.S. District Court for the Central District of California, in which the plaintiffs allege a pattern of violations of California and/or federal law at several current and former Company manufacturing facilities across the State of California. While we cannot predict with certainty the results of this or any other legal proceeding, we do not expect this matter to have a material adverse effect on our financial condition, results of operations, or business.
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. It is reasonably possible

18



that a change of the estimates of any of the foregoing matters may occur in the future and, as noted, while unlikely, the lead paint matter could result in a material final judgment. Costs of legal services associated with the foregoing matters are recognized in earnings as services are provided.

14. PENSION AND POSTRETIREMENT BENEFITS
We have defined benefit retirement plans ("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 ("other postretirement benefits") to qualifying U.S. employees.
Components of pension benefit and other postretirement benefit costs are (includes amounts related to discontinued operations):
 
Pension Benefits
 
Thirteen Weeks Ended
 
August 27,
2017
 
August 28,
2016
Service cost
$
12.7

 
$
16.7

Interest cost
28.2

 
30.0

Expected return on plan assets
(54.2
)
 
(53.8
)
Amortization of prior service cost
0.7

 
0.6

Benefit cost (benefit) — Company plans
(12.6
)
 
(6.5
)
Pension benefit cost — multi-employer plans
1.5

 
2.3

Total benefit cost (benefit)
$
(11.1
)
 
$
(4.2
)
 
Postretirement Benefits
 
Thirteen Weeks Ended
 
August 27,
2017
 
August 28,
2016
Service cost
$
—

 
$
—

Interest cost
0.9

 
1.1

Amortization of prior service benefit
(0.8
)
 
(1.7
)
Recognized net actuarial loss
—

 
0.1

Total cost (benefit)
$
0.1

 
$
(0.5
)
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 benefit cost in fiscal 2018 were 4.19% and 3.26% , respectively.
During the first quarter of fiscal 2018 , we contributed $3.8 million to our pension plans and contributed $3.9 million to our other postretirement plans. Based upon the current funded status of the plans and the current interest rate environment, we anticipate making further contributions of approximately $9.1 million to our pension plans for the remainder of fiscal 2018 . We anticipate making further contributions of $14.8 million to our other postretirement plans during the remainder of fiscal 2018 . These estimates are based on ERISA guidelines, current tax laws, plan asset performance, and liability assumptions, which are subject to change.


19



15. STOCKHOLDERS' EQUITY
The following table presents a reconciliation of our stockholders' equity accounts for the thirteen weeks ended August 27, 2017 :
 
Conagra Brands, Inc. Stockholders' Equity
 
 
 
 
 
Common
Shares
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Treasury
Stock
 
Noncontrolling
Interests
 
Total
Equity
Balance at May 28, 2017
567.9

 
$
2,839.7

 
$
1,171.9

 
$
4,247.0

 
$
(212.9
)
 
$
(4,054.9
)
 
$
87.0

 
$
4,077.8

Stock option and incentive plans
 
 
 
 
(12.0
)
 
0.4

 
 
 
17.7

 
 
 
6.1

Spinoff of Lamb Weston
 
 
 
 
 
 
1.0

 
 
 
 
 
 
 
1.0

Currency translation adjustment, net
 
 
 
 
 
 
 
 
31.5

 
 
 
1.0

 
32.5

Repurchase of common shares
 
 
 
 
 
 
 
 
 
 
(300.0
)
 
 
 
(300.0
)
Unrealized gain on securities
 
 
 
 
 
 
 
 
0.2

 
 
 
 
 
0.2

Activities of noncontrolling interests
 
 
 
 
 
 
 
 
 
 
 
 
0.8

 
0.8

Dividends declared on common stock; $0.2125 per share
 
 
 
 
 
 
(88.3
)
 
 
 
 
 
 
 
(88.3
)
Net income attributable to Conagra Brands, Inc.
 
 
 
 
 
 
152.5

 
 
 
 
 
 
 
152.5

Balance at August 27, 2017
567.9

 
$
2,839.7

 
$
1,159.9

 
$
4,312.6

 
$
(181.2
)
 
$
(4,337.2
)
 
$
88.8

 
$
3,882.6


16. FAIR VALUE MEASUREMENTS
FASB guidance establishes a three-level fair value hierarchy based upon the assumptions (inputs) used to price assets or liabilities. The three levels of inputs used to measure fair value are as follows:
Level 1  — Unadjusted quoted prices in active markets for identical assets or liabilities,
Level 2  — Observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets, and
Level 3  — Unobservable inputs reflecting our own assumptions and best estimate of what inputs market participants would use in pricing the asset or liability.
The fair values of our Level 2 derivative instruments were determined using valuation models that use market observable inputs including interest rate curves and both forward and spot prices for currencies and commodities. Derivative assets and liabilities included in Level 2 primarily represent commodity and foreign currency option and forward contracts.
The following table presents our financial assets and liabilities measured at fair value on a recurring basis, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of August 27, 2017 :
 
Level 1
 
Level 2
 
Level 3
 
Net Value
Assets:
 
 
 
 
 
 
 
Derivative assets
$
3.8

 
$
0.3

 
$
—

 
$
4.1

Available-for-sale securities
3.8

 
—

 
—

 
3.8

Total assets
$
7.6

 
$
0.3

 
$
—

 
$
7.9

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$
—

 
$
6.3

 
$
—

 
$
6.3

Deferred compensation liabilities
50.5

 
—

 
—

 
50.5

Total liabilities
$
50.5

 
$
6.3

 
$
—

 
$
56.8


20



The following table presents our financial assets and liabilities measured at fair value on a recurring basis, based upon the level within the fair value hierarchy in which the fair value measurements fall, as of May 28, 2017 :  
 
Level 1
 
Level 2
 
Level 3
 
Net Value
Assets:
 
 
 
 
 
 
 
Derivative assets
$
2.0

 
$
0.3

 
$
—

 
$
2.3

Available-for-sale securities
3.5

 
—

 
—

 
3.5

Total assets
$
5.5

 
$
0.3

 
$
—

 
$
5.8

Liabilities:
 
 
 
 
 
 
 
Derivative liabilities
$
—

 
$
1.3

 
$
—

 
$
1.3

Deferred compensation liabilities
47.2

 
—

 
—

 
47.2

Total liabilities
$
47.2

 
$
1.3

 
$
—

 
$
48.5

Certain assets and liabilities, including long-lived assets, goodwill, asset retirement obligations, and cost and equity investments, are measured at fair value on a nonrecurring basis.
During the first quarter of fiscal 2018, a charge of $4.7 million was recognized in the Corporate segment for the impairment of certain long-lived assets. The impairment was measured based upon the estimated sales price of the assets.
In the first quarter of fiscal 2017, we recognized a goodwill impairment charge of $139.2 million in the International segment. See Note 7 for discussion of the methodology employed to measure this impairment. We also recognized an impairment of an indefinite-lived brand totaling $24.4 million in the International segment during the first quarter of fiscal 2017. The fair value of the brand was estimated using the "Relief From Royalty" method.
The carrying amount of long-term debt (including current installments) was $2.97 billion as of August 27, 2017 and May 28, 2017 . Based on current market rates, the fair value of this debt (level 2 liabilities) at August 27, 2017 and May 28, 2017 , was estimated at $3.34 billion and $3.32 billion , respectively.

17. BUSINESS SEGMENTS AND RELATED INFORMATION
We reflect our results of operations in five reporting segments: Grocery & Snacks, Refrigerated & Frozen, International, Foodservice, and Commercial.
In the second quarter of fiscal 2017, we completed the Spinoff of Lamb Weston. The Lamb Weston business had previously been included in the Commercial segment. The results of operations of the Lamb Weston business have been classified as discontinued operations for all periods presented.
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 in the United States.
The Commercial reporting segment included commercially branded and private label food and ingredients, which were sold primarily to commercial, restaurant, foodservice, food manufacturing, and industrial customers. The segment's primary food items included a variety of vegetable, spice, and frozen bakery goods, which were sold under brands such as Spicetec Flavors & Seasonings ® . The Spicetec and JM Swank businesses were sold in the first quarter of fiscal 2017.
We do not aggregate operating segments when determining our reporting segments.

21



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.
 
Thirteen Weeks Ended
 
August 27,
2017
 
August 28,
2016
Net sales
 
 
 
Grocery & Snacks
$
745.8

 
$
757.2

Refrigerated & Frozen
615.7

 
604.6

International
190.9

 
194.7

Foodservice
251.8

 
268.0

Commercial
—

 
71.1

Total net sales
$
1,804.2

 
$
1,895.6

Operating profit
 
 
 
Grocery & Snacks
$
176.2

 
$
180.5

Refrigerated & Frozen
101.9

 
92.2

International
18.9

 
(149.2
)
Foodservice
23.2

 
21.7

Commercial
—

 
203.3

Total operating profit
$
320.2

 
$
348.5

Equity method investment earnings
30.0

 
13.1

General corporate expense
40.2

 
35.6

Interest expense, net
36.4

 
58.2

Income tax expense
120.0

 
169.2

Income from continuing operations
$
153.6

 
$
98.6

Less: Net income attributable to noncontrolling interests of continuing operations
0.8

 
0.2

Income from continuing operations attributable to Conagra Brands, Inc.
$
152.8

 
$
98.4

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.

22



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 27,
2017
 
August 28,
2016
Net derivative losses incurred
$
(7.4
)
 
$
(0.3
)
Less: Net derivative losses allocated to reporting segments
(1.4
)
 
(1.0
)
Net derivative gains (losses) recognized in general corporate expenses
$
(6.0
)
 
$
0.7

Net derivative losses allocated to Grocery & Snacks
$
(0.6
)
 
$
(0.4
)
Net derivative losses allocated to Refrigerated & Frozen
—

 
(0.2
)
Net derivative losses allocated to International
(0.7
)
 
—

Net derivative losses allocated to Foodservice
(0.1
)
 
(0.3
)
Net derivative losses allocated to Commercial
—

 
(0.1
)
Net derivative losses included in segment operating profit
$
(1.4
)
 
$
(1.0
)
As of August 27, 2017 , 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 $9.0 million . This amount reflected net losses of $6.8 million incurred during the thirteen weeks ended August 27, 2017 , as well as net losses of $2.2 million incurred prior to fiscal 2018 . Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results losses of $8.4 million in fiscal 2018 and losses of $0.6 million in fiscal 2019 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 $56.1 million and $58.8 million for the first quarter of fiscal 2018 and 2017 , respectively.
Other Information
Our largest customer, Wal-Mart Stores, Inc. and its affiliates, accounted for approximately 24% and 23% of consolidated net sales in the first quarter of fiscal 2018 and 2017 , respectively, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.
Wal-Mart Stores, Inc. and its affiliates accounted for approximately 24% and 26% of consolidated net receivables as of August 27, 2017 and May 28, 2017 , respectively, primarily in the Grocery & Snacks and Refrigerated & Frozen segments.
We offer certain suppliers access to a third-party service that allows them to view our scheduled payments online. The third party service also allows suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third-party, or any financial institutions concerning this service. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of August 27, 2017 , $58.8 million of our total accounts payable is payable to suppliers who utilize this third-party service.



23



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information contained in this report includes forward-looking statements within the meaning of the federal securities laws. Examples of forward-looking statements include statements regarding our expected future financial performance or position, results of operations, business strategy, plans and objectives of management for future operations, and other statements that are not historical facts. You can identify forward-looking statements by their use of forward-looking words, such as "may", "will", "anticipate", "expect", "believe", "estimate", "intend", "plan", "should", "seek", or comparable terms.
Readers of this report should understand that these forward-looking statements are not guarantees of performance or results. Forward-looking statements provide our current expectations and beliefs concerning future events and are subject to risks, uncertainties, and factors relating to our business and operations, all of which are difficult to predict and could cause our actual results to differ materially the expectations expressed in or implied by such forward-looking statements. Such risks, uncertainties, and factors include, among other things: the timing to complete a potential acquisition of Angie’s Artisan Treats, LLC; the ability and timing to obtain required regulatory approvals and satisfy other closing conditions for the Angie's ® and Wesson ® transactions; our ability to achieve the intended benefits of acquisitions and divestitures, including the recent Spinoff (as defined below) of our Lamb Weston business and the proposed divestiture of the Wesson ® oil business, and the proposed acquisition of Angie's Artisan Treats, LLC; general economic and industry conditions; our ability to successfully execute our long-term value creation strategy; our ability to access capital; our ability to execute our operating and restructuring plans and achieve our targeted operating efficiencies from cost-saving initiatives and to benefit from trade optimization programs; the effectiveness of our hedging activities and our ability to respond to volatility in commodities; the competitive environment and related market conditions; our ability to respond to changing consumer preferences and the success of our innovation and marketing investments; the ultimate impact of any product recalls and litigation, including litigation related to the lead paint and pigment matters; actions of governments and regulatory factors affecting our businesses; the availability and prices of raw materials, including any negative effects caused by inflation or weather conditions; risks and uncertainties associated with intangible assets, including any future goodwill or intangible assets impairment charges; the costs, disruption, and diversion of management's attention associated with campaigns commenced by activist investors; and other risks described in our Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission (the "SEC"). We caution readers not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no responsibility to update these statements.
The discussion that follows should be read together with the unaudited condensed consolidated financial statements and related notes contained in this report and with the financial statements, related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended May 28, 2017 and subsequent filings with the SEC. Results for the first quarter of fiscal 2018 are not necessarily indicative of results that may be attained in the future.
Fiscal 2018 First Quarter Executive Overview
Conagra Brands, Inc. (the "Company", "we", "us", or "our"), headquartered in Chicago, is one of North America's leading branded food companies. Guided by an entrepreneurial spirit, the Company combines a rich heritage of making great food with a sharpened focus on innovation. The Company's portfolio is evolving to satisfy people's changing food preferences. Its iconic brands such as Marie Callender's ® , Reddi-wip ® , Hunt's ® , Healthy Choice ® , Slim Jim ® , and Orville Redenbacher's ® , as well as emerging brands, including Alexia ® , Blake's ® , Duke's ® , and Frontera ® , offer choices for every occasion.
On November 9, 2016, we completed the spinoff of Lamb Weston Holdings, Inc. ("Lamb Weston") through a distribution of 100% of our interest in Lamb Weston to holders, as of November 1, 2016, of outstanding shares of our common stock (the "Spinoff"). The transaction effecting this change was structured as a tax-free spinoff.
The results of operations for the Lamb Weston business have been reclassified to results of discontinued operations for all periods prior to the Spinoff.
In the first quarter of fiscal 2017, we completed the sales of our Spicetec Flavors & Seasonings business ("Spicetec") and our JM Swank business for combined proceeds of $486.3 million. The results of operations of Spicetec and JM Swank are included in the Commercial segment.
In the first quarter of fiscal 2018 , earnings reflected the impact of lower sales volumes and gross margin primarily in the Grocery & Snacks and Foodservice segments, more than offset by the impact of higher operating margins in the Refrigerated & Frozen and International segments. The improved operating performance also reflected an increase in equity method investment earnings and lower interest expense, in each case compared to the first quarter of fiscal 2017 .

24



Diluted earnings per share in the first quarter of fiscal 2018 were $0.36 . Diluted earnings per share in the first quarter of fiscal 2017 were $0.42 , including earnings of $0.22 per diluted share from continuing operations and $0.20 per diluted share from discontinued operations. Several significant items affect the comparability of year-over-year results of continuing operations (see "Items Impacting Comparability" below).
Items Impacting Comparability
Segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions is discussed in the segment review below.
Items of note impacting comparability for the first quarter of fiscal 2018 included the following:
•
charges totaling $11.4 million ($7.3 million after-tax) in connection with the "SCAE Plan" (as defined below) and
•
an income tax charge of $27.8 million associated with the planned repatriation of cash from foreign subsidiaries and the tax expense related to the earnings of foreign subsidiaries previously deemed to be permanently invested.
Items of note impacting comparability for the first quarter of fiscal 2017 included the following:
•
gains totaling $198.2 million ($75.3 million after-tax) from the sales of the Spicetec and JM Swank businesses,
•
charges totaling $163.6 million ($149.5 million after-tax) related to the impairment of goodwill and other intangible assets in our International segment,
•
charges totaling $14.1 million ($9.1 million after-tax) in connection with the SCAE Plan, and
•
an income tax benefit of $7.5 million associated with a tax planning strategy that allowed us to utilize certain state tax attributes.
Acquisitions
Subsequent to the end of the first quarter of fiscal 2018, we entered into a definitive agreement to acquire Angie's Artisan Treats, LLC, maker of Angie's ® BOOMCHICKAPOP ® ready-to-eat popcorn, for a cash purchase price of $250 million , net of cash acquired and subject to working capital adjustments. The business will be primarily included in the Grocery & Snacks segment. The transaction is expected to close by the end of the calendar year, subject to customary closing conditions, including the receipt of any applicable regulatory approvals.
In April 2017, we acquired protein-based snacking businesses Thanasi Foods LLC, maker of Duke's ® meat snacks, and BIGS LLC, maker of BIGS ® seeds, for $217.6 million in cash, net of cash acquired. These businesses are included in the Grocery & Snacks segment.
In September 2016, we acquired the operating assets of Frontera Foods, Inc. and Red Fork LLC, including the Frontera ® , Red Fork ® , and Salpica ® brands. These businesses make authentic, gourmet Mexican food products and contemporary American cooking sauces. We acquired the businesses for $108.1 million in cash, net of cash acquired. These businesses are included principally in the Grocery & Snacks segment, and to a lesser extent within the Refrigerated & Frozen and International segments.
Divestitures
During the fourth quarter of fiscal 2017, we announced the agreement to sell our Wesson ® oil business, which is part of our Grocery & Snacks segment, to The J.M. Smucker Company ("Smucker"). The transaction is subject to certain customary closing conditions, including the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). On August 28, 2017, Smucker and the Company each received a request for additional information under the HSR Act (a "second request") from the U.S. Federal Trade Commission ("FTC") in connection with the FTC's review of the transaction. Issuance of the second request extends the waiting period under the HSR Act until 30 days after both the Company and Smucker have substantially complied with the request, unless the waiting period is terminated earlier by the FTC. The agreement for the sale of the Wesson oil business provides that, unless otherwise agreed upon by the Company and Smucker, if the closing of the transaction has not occurred on or prior to March 31, 2018 because HSR approval has not been received as of such date, then either party may terminate the agreement. The parties are cooperating fully with the FTC as it conducts its review of the transaction.
On November 9, 2016, we completed the Spinoff of Lamb Weston. The results of operations of the Lamb Weston business have been reclassified to discontinued operations for all periods presented.
In the first quarter of fiscal 2017, we completed the sales of our Spicetec and Flavors & Seasonings business ("Spicetec") and JM Swank business for combined proceeds of $486.3 million. The results of operations of Spicetec and JM Swank are included in the Commercial segment.

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Restructuring Plans
In May 2013, we announced the Supply Chain and Administrative Efficiency Plan (the "SCAE Plan"), our plan to integrate and restructure the operations of our Private Brands business, improve selling, general and administrative ("SG&A") effectiveness and efficiencies, and optimize our supply chain network, manufacturing assets, dry distribution centers, and mixing centers. In the second quarter of fiscal 2016, we announced plans to realize efficiency benefits by reducing SG&A expenses and enhancing trade spend processes and tools, which plans were included as part of the SCAE Plan. Although we divested the Private Brands business, we have continued to implement the SCAE Plan, including by working to optimize our supply chain network, pursue cost reductions through our SG&A functions, enhance trade spend processes and tools, and improve productivity.
Although we remain unable to make good faith estimates relating to the entire SCAE Plan, we are reporting on actions initiated through the end of the first quarter of fiscal 2018 , including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows. As of August 27, 2017, the Board of Directors of the Company has approved the incurrence of up to $900.9 million of expenses in connection with the SCAE Plan, including expenses allocated for the Private Brands and Lamb Weston operations. We have incurred or expect to incur approximately $450.1 million of charges ( $303.3 million of cash charges and $146.8 million of non-cash charges) for actions identified to date under the SCAE Plan. In the first quarter of fiscal 2018 , we recognized charges of $11.4 million in relation to the SCAE Plan. In the first quarter of fiscal 2017, we recognized charges of $14.1 million in relation to the SCAE Plan. We expect to incur costs related to the SCAE Plan over a multi-year period.

SEGMENT REVIEW

We reflect our results of operations in five reporting segments: Grocery & Snacks, Refrigerated & Frozen, Foodservice, International, and Commercial.
In the second quarter of fiscal 2017, we completed the Spinoff of the Lamb Weston business, which was previously included in the Commercial Foods segment. The results of operations of the Lamb Weston business have been classified as discontinued operations for all periods presented.
Grocery & Snacks
The Grocery & Snacks reporting segment principally includes branded, shelf stable food products sold in various retail channels in the United States.
Refrigerated & Frozen
The Refrigerated & Frozen reporting segment principally includes branded, temperature controlled food products sold in various retail channels in the United States.
International
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.
Foodservice
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 in the United States. 
Commercial
The Commercial reporting segment included commercially branded and private label food and ingredients, which were sold primarily to commercial, restaurant, foodservice, food manufacturing, and industrial customers. The segment's primary food items included a variety of vegetable, spice, and frozen bakery goods, which were sold under brands such as Spicetec Flavors & Seasonings ® . The Spicetec and JM Swank businesses were sold in the first quarter of fiscal 2017.
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

26



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
($ in millions)
August 27,
2017
 
August 28,
2016
Net derivative losses incurred
$
(7.4
)
 
$
(0.3
)
Less: Net derivative losses allocated to reporting segments
(1.4
)
 
(1.0
)
Net derivative gains (losses) recognized in general corporate expenses
$
(6.0
)
 
$
0.7

Net derivative losses allocated to Grocery & Snacks
$
(0.6
)
 
$
(0.4
)
Net derivative losses allocated to Refrigerated & Frozen
—

 
(0.2
)
Net derivative losses allocated to International
(0.7
)
 
—

Net derivative losses allocated to Foodservice
(0.1
)
 
(0.3
)
Net derivative losses allocated to Commercial
—

 
(0.1
)
Net derivative losses included in segment operating profit
$
(1.4
)
 
$
(1.0
)
As of August 27, 2017 , 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 $9.0 million . This amount reflected net losses of $ 6.8 million incurred during the thirteen weeks ended August 27, 2017 , as well as net losses of $ 2.2 million incurred prior to fiscal 2018 . Based on our forecasts of the timing of recognition of the underlying hedged items, we expect to reclassify to segment operating results losses of $ 8.4 million in fiscal 2018 and losses of $ 0.6 million in fiscal 2019 and thereafter.
Net Sales
 
Net Sales
($ in millions)
Thirteen weeks ended
Reporting Segment
August 27,
2017
 
August 28,
2016
 
% Inc
(Dec)
Grocery & Snacks
$
745.8

 
$
757.2

 
(2
)%
Refrigerated & Frozen
615.7

 
604.6

 
2
 %
International
190.9

 
194.7

 
(2
)%
Foodservice
251.8

 
268.0

 
(6
)%
Commercial
—

 
71.1

 
(100
)%
Total
$
1,804.2

 
$
1,895.6

 
(5
)%
Net sales for the first quarter of fiscal 2018 were $1.80 billion , a decrease of $ 91.4 million , or 5% , from the first quarter of fiscal 2017 .
Grocery & Snacks net sales for the first quarter of fiscal 2018 were $745.8 million , a decrease of $11.4 million , or 2% , compared to the first quarter of fiscal 2017 . Results for the first quarter of fiscal 2018 reflected a 6% decrease in volumes, excluding the impact of acquisitions. The decrease in sales volumes was the result of a reduction in promotional intensity and the planned discontinuation of certain lower-performing products. Price/mix increased by 1% as the impacts of increased slotting fees were more than offset by continued progress in pricing and trade productivity. The acquisitions of Thanasi Foods LLC, BIGS LLC, Frontera Foods, Inc., and Red Fork LLC contributed $27.6 million to Grocery & Snacks net sales for the first quarter of fiscal 2018 .
Refrigerated & Frozen net sales for the first quarter of fiscal 2018 were $615.7 million , an increase of $11.1 million , or 2% , compared to the first quarter of fiscal 2017 . Results for the first quarter of fiscal 2018 reflected a 1% increase in volumes, excluding the impact of acquisitions, and a flat price/mix, in each case compared to the prior-year period. The increase in sales volumes was a result of pipeline fills for innovation launches. The acquisition of Frontera Foods, Inc. and Red Fork LLC contributed $3.4 million to Refrigerated & Frozen net sales for the first quarter of fiscal 2018 .

27



International net sales for the first quarter of fiscal 2018 were $190.9 million , a decrease of $3.8 million , or 2% , compared to the first quarter of fiscal 2017 . Results for the first quarter of fiscal 2018 reflected an 8% decrease in volume, a 4% increase in price/mix, and a 2% increase from foreign exchange rates, in each case compared to the prior-year period. The volume decrease in the first quarter of fiscal 2018 reflected strategic decisions to eliminate lower margin products and a reduction in promotional intensity. The increase in price/mix for the first quarter of fiscal 2018 was driven by improvements in pricing and trade productivity.
Foodservice net sales for the first quarter of fiscal 2018 were $251.8 million , a decrease of $16.2 million , or 6% , compared to the first quarter of fiscal 2017 . Results for the first quarter of fiscal 2018 reflected an 18% decrease in volume and a 12% increase in price/mix, in each case compared to the prior-year period. The decrease in volumes primarily reflected the impact of exiting a non-core business. The increase in price/mix reflected the execution of the segment's value over volume strategy.
Our Spicetec and JM Swank businesses were sold in the first quarter of fiscal 2017. These businesses comprise the entire Commercial segment following the presentation of Lamb Weston as discontinued operations. Accordingly, there were no net sales in the Commercial segment after the first quarter of fiscal 2017. These businesses had net sales of $71.1 million for the first quarter of fiscal 2017, prior to the completion of the divestitures.
SG&A Expenses (Includes general corporate expenses)
SG&A expenses totaled $ 239.0 million for the first quarter of fiscal 2018 , an increase of $7.3 million , as compared to the first quarter of fiscal 2017 . SG&A expenses impacting the comparability of earnings for the first quarter of fiscal 2018 included $9.1 million in connection with our SCAE Plan. Other changes in expenses compared to the first quarter of fiscal 2017 included:
• a decrease in advertising and promotion spending of $9.8 million,
• a decrease in our stock-based compensation expense of $5.4 million, and
• a decrease in salary expenses of $3.1 million.
SG&A expenses for the first quarter of fiscal 2017 included the following items impacting the comparability of earnings:
• gains totaling $198.2 million from the divestiture of the Spicetec and JM Swank businesses,
•
charges totaling $163.6 million related to the impairment of goodwill and other intangible assets within our International segment, and
• expenses of $8.9 million in connection with our restructuring plans.
Operating Profit (Earnings before general corporate expenses, interest expense, net, income taxes, and equity method investment earnings)
 
Operating Profit
($ in millions)
Thirteen weeks ended
Reporting Segment
August 27,
2017
 
August 28,
2016
 
% Inc
(Dec)
Grocery & Snacks
$
176.2

 
$
180.5

 
(2
)%
Refrigerated & Frozen
101.9

 
92.2

 
11
 %
International
18.9

 
(149.2
)
 
N/A

Foodservice
23.2

 
21.7

 
7
 %
Commercial
—

 
203.3

 
(100
)%
Grocery & Snacks operating profit for the first quarter of fiscal 2018 was $ 176.2 million , a decrease of $ 4.3 million , or 2% , compared to the first quarter of fiscal 2017 . Gross profits were $ 5.3 million lower in the first quarter of fiscal 2018 than in the first quarter of fiscal 2017 . The lower gross profit was driven by a decrease in volumes, discussed above, and inflation, offset by improved plant productivity. Operating profit of the Grocery & Snacks segment was impacted by charges of $6.2 million and $4.9 million in connection with our restructuring plans in the first quarter of fiscal 2018 and 2017 , respectively.
Refrigerated & Frozen operating profit for the first quarter of fiscal 2018 was $ 101.9 million , an increase of $ 9.7 million , or 11% , compared to the first quarter of fiscal 2017 . Gross profits were $ 1.5 million lower in the first quarter of fiscal 2018 than in the first quarter of fiscal 2017 , driven by inflation and absorption, partially offset by increased sales volumes. SG&A expenses for the first quarter of fiscal 2018 decreased by $11.2 million compared to the first quarter of fiscal 2017 , primarily due to cost reductions achieved through our

28



restructuring plans as well as a decrease in advertising and promotion expenses of $5.1 million. Operating profit of the Refrigerated & Frozen segment was impacted by charges of $5.0 million in connection with our restructuring plans in the first quarter of fiscal 2017 .
International operating profit for the first quarter of fiscal 2018 was $ 18.9 million , compared to an operating loss of $149.2 million in the first quarter of fiscal 2017 . The operating loss in the first quarter of fiscal 2017 included charges totaling $163.6 million for the impairment of goodwill and an intangible brand asset in our Canadian operations.
Foodservice operating profit for the first quarter of fiscal 2018 was $ 23.2 million , an increase of $1.5 million , or 7% , compared to the first quarter of fiscal 2017 . Gross profits were $ 2.0 million lower in the first quarter of fiscal 2018 than in the first quarter of fiscal 2017 . The lower gross profit primarily reflected the impact of exiting a non-core business.
Commercial operating profit for the first quarter of fiscal 2017 was $203.3 million . The company sold the Spicetec and JM Swank businesses in the first quarter of fiscal 2017, recognizing pre-tax gains totaling $198.2 million. These businesses comprise the entire Commercial segment following the presentation of Lamb Weston as discontinued operations. There are no further operations in the Commercial segment.
Interest Expense, Net
Net interest expense was $ 36.4 million and $ 58.2 million for the first quarter of fiscal 2018 and 2017 , respectively. The decrease reflects the repayment of $550 million of debt in the first quarter of fiscal 2017 and $473 million of debt in the third quarter of fiscal 2017, as well as the exchange of $1.4 billion of debt in connection with the Spinoff of Lamb Weston during the second quarter of 2017.
Income Taxes
In the first quarter of fiscal 2018 and 2017 , our income tax expense from continuing operations was $ 120.0 million and $ 169.2 million , respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income from continuing operations, inclusive of equity method investment earnings) was approximately 44% and 63% for the first quarter of fiscal 2018 and 2017 , respectively.
The effective tax rate in the first quarter of fiscal 2018 reflected additional tax expense related to the planned repatriation of cash from foreign subsidiaries and the tax expense related to undistributed foreign earnings for which the indefinite reinvestment assertion is no longer made.
The effective tax rate in the first quarter of fiscal 2017 reflected the following:
•
an income tax benefit allowed upon the vesting/exercise of employee stock compensation awards by our employees, beyond that which is attributable to the original fair value of the awards upon the date of grant,
•
additional tax expense in the first quarter of fiscal 2017 associated with non-deductible goodwill sold in connection with the dispositions of the Spicetec and JM Swank businesses, and
•
additional tax expense in the first quarter of fiscal 2017 associated with non-deductible goodwill, for which an impairment charge was recognized.
We expect our effective tax rate for the remainder of fiscal 2018 to be approximately 32.5% - 33.5%.
Equity Method Investment Earnings
Equity method investment earnings were $ 30.0 million and $ 13.1 million for the first quarter of fiscal 2018 and 2017 , respectively. Ardent Mills earnings were higher than the prior year quarter due to more favorable market conditions and continued improvement in operating efficiencies.
Results of Discontinued Operations
Our discontinued operations generated an after-tax loss of $ 0.3 million for the first quarter of fiscal 2018 and an after-tax gain of $ 91.4 million for the first quarter of fiscal 2017 . Prior year results reflected the operations of Lamb Weston. We incurred significant costs associated with effecting the Spinoff of Lamb Weston. These costs are included in results of discontinued operations.
Earnings Per Share
Diluted earnings per share in the first quarter of fiscal 2018 were $ 0.36 . Diluted earnings per share in the first quarter of fiscal 2017 was $0.42 , including earnings of $0.22 per diluted share from continuing operations and $0.20 per diluted share from discontinued operations.


29



LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity and Capital
Our primary financing objective is to maintain a prudent capital structure that provides us flexibility to pursue our growth objectives. If necessary, we use short-term debt principally to finance ongoing operations, including our seasonal requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities), and a combination of equity and long-term debt to finance both our base working capital needs and our non-current assets. We are committed to maintaining an investment grade credit rating.
At August 27, 2017 , we had a revolving credit facility (the "Facility") with a syndicate of financial institutions that provides for a maximum aggregate principal amount outstanding at any one time of $1.25 billion (subject to increase to a maximum aggregate principal amount of $1.75 billion with the consent of the lenders). We have historically used a credit facility principally as a back-up for our commercial paper program. As of August 27, 2017 , there were no outstanding borrowings under the Facility. The Facility contains customary affirmative and negative covenants for unsecured investment grade credit facilities of this type. It generally requires our ratio of EBITDA (earnings before interest, taxes, depreciation and amortization) to interest expense to be not less than 3.0 to 1.0 and our ratio of funded debt to EBITDA to be not greater than 3.75 to 1.0 (provided that such ratio may be increased at the option of the Company in connection with a material transaction), with each ratio to be calculated on a rolling four-quarter basis. As of August 27, 2017 , we were in compliance with all financial covenants in the Facility.
As of August 27, 2017 , we had $323.2 million outstanding under our commercial paper program. The highest level of borrowings during the first quarter 2018 was $345.0 million . A s of May 28, 2017 , we had $26.2 million outstanding under our commercial paper program.
As of the end of the first quarter 2018 , our senior long-term debt ratings were all investment grade. A significant downgrade in our credit ratings would not affect our ability to borrow amounts under the revolving credit facility, although borrowing costs would increase. A downgrade of our short-term credit ratings would impact our ability to borrow under our commercial paper program by negatively impacting borrowing costs and causing shorter durations, as well as making access to commercial paper more difficult.
We repurchase shares of our common stock from time to time after considering market conditions and in accordance with repurchase limits authorized by our Board of Directors. Under the share repurchase authorization, we may repurchase our shares periodically over several years, depending on market conditions and other factors, and may do so in open market purchases or privately negotiated transactions. The share repurchase authorization has no expiration date. During the first quarter of fiscal 2018 , we repurchased 8.7 million shares of our common stock under this authorization for an aggregate of $300.0 million . The Company's total remaining share repurchase authorization as of August 27, 2017 was $1.08 billion.
During the first quarter of fiscal 2018, the Board of Directors authorized a quarterly dividend payment of $0.2125 per share, which was paid on August 31, 2017 to stockholders of record as of the close of business on July 31, 2017.
We have access to the $1.25 billion revolving credit facility, our commercial paper program, and the capital markets. We believe we also have access to additional bank loan facilities, if needed.
During the fourth quarter of fiscal 2017, we announced the agreement to sell our Wesson ® oil business to Smucker. The transaction is subject to certain customary closing conditions, including the termination or expiration of the waiting period under the HSR Act. On August 28, 2017, Smucker and the Company each received a second request from the FTC in connection with the FTC's review of the transaction. Issuance of the second request extends the waiting period under the HSR Act until 30 days after both the Company and Smucker have substantially complied with the request, unless the waiting period is terminated earlier by the FTC. The agreement for the sale of the Wesson oil business provides that, unless otherwise agreed upon by the Company and Smucker, if the closing of the transaction has not occurred on or prior to March 31, 2018 because HSR approval has not been received as of such date, then either party may terminate the agreement. The parties are cooperating fully with the FTC as it conducts its review of the transaction. We expect to realize net proceeds of approximately $285 million from the sale.
Subsequent to the end of the first quarter of fiscal 2018, we entered into a definitive agreement to acquire Angie's Artisan Treats, LLC, maker of Angie's ® BOOMCHICKAPOP ® ready-to-eat popcorn, for a cash purchase price of $250 million, net of cash acquired and subject to working capital adjustments. The business will be included in the Grocery & Snacks segment. The transaction is expected to close by the end of the calendar year, subject to customary closing conditions, including the receipt of any applicable regulatory approvals.
Management believes that the Company's sources of liquidity will be adequate to meet required debt repayments, planned capital expenditures, acquisitions, working capital needs, and payment of anticipated quarterly dividends for the foreseeable future.

30



We expect to maintain or have access to sufficient liquidity to either retire or refinance senior debt upon maturity, as market conditions warrant, from operating cash flows, our commercial paper program, proceeds from any divestitures and other disposition transactions, access to capital markets, and our revolving credit facility.
Cash Flows
During the first quarter of fiscal 2018 , we generated $ 136.0 million of cash and cash equivalents from operating activities, used $ 38.6 million in investing activities, used $ 107.1 million in financing activities, and had an increase of $9.7 million due to the effects of changes in foreign currency exchange rates.
Cash generated from operating activities of continuing operations totaled $ 141.5 million in the first quarter of fiscal 2018 , as compared to $ 208.3 million generated in the first quarter of fiscal 2017 . The decrease was the result of changes in working capital, lower equity method investment dividends, and the timing of income tax payments attributable to continuing operations. This was partially offset by decreases in interest payments, due to significant debt repayments during fiscal 2017, and lower incentive compensation payments.
The operating activities of discontinued operations used $5.5 million for the first quarter of fiscal 2018 and generated $117.6 million in the first quarter of fiscal 2017 . This reflects the activities of the Lamb Weston business that was spun off on November 9, 2016 and other divested businesses.
Cash used in investing activities of continuing operations totaled $ 38.6 million in the first quarter of fiscal 2018 , compared to cash provided of $ 430.2 million in the first quarter of fiscal 2017 . Investing activities of continuing operations in the first quarter of fiscal 2018 consisted primarily of capital expenditures totaling $ 42.6 million . Investing activities of continuing operations in the first quarter of fiscal 2017 included proceeds from the sales of the Spicetec and JM Swank businesses totaling $486.3 million , partially offset by capital expenditures of $58.1 million . Cash used in investing activities of discontinued operations in the first quarter of fiscal 2017 resulted mainly from capital expenditures.
Cash used in financing activities of continuing operations totaled $107.1 million in the first quarter of fiscal 2018 and $734.6 million in the first quarter of fiscal 2017 . Financing activities of continuing operations in the first quarter of fiscal 2018 consisted principally of net short-term borrowings of $295.3 million mainly under our commercial paper program, cash dividends paid of $ 83.3 million , and common stock repurchases totaling $300.0 million . Cash used in financing activities of continuing operations in the first quarter of fiscal 2017 reflected long-term debt repayments of $553.9 million , dividends paid of $ 109.5 million , and common stock repurchases totaling $85.6 million .
The Company had cash and cash equivalents of $251.4 million at August 27, 2017 and May 28, 2017 , of which $244.5 million at August 27, 2017 and $244.9 million at May 28, 2017 was held in foreign countries. During the first quarter of fiscal 2018, the Company decided to repatriate in fiscal 2018 a portion of this cash related to earnings of foreign subsidiaries previously deemed to be permanently reinvested outside the U.S. Refer to Note 12 to the Condensed Consolidated Financial Statements contained in this report for more information related to this repatriation of cash and related adjustments to deferred tax liability. Any future decision to repatriate additional foreign cash could result in further adjustments to the deferred tax liability after considering available foreign tax credits and other tax attributes. It is not practicable to determine the amount of any such further adjustments to the deferred tax liability at this time.
Our estimate of capital expenditures for fiscal 2018 is approximately $280 million. For the first quarter of fiscal 2018 , we have funded $42.6 million of capital expenditures.
Management believes that existing cash balances, cash flows from operations, existing credit facilities, and access to capital markets will provide sufficient liquidity to meet our repayment of debt, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, planned share repurchases, and payment of anticipated quarterly dividends for at least the next twelve months.

OFF-BALANCE SHEET ARRANGEMENTS
We use off-balance sheet arrangements (e.g., leases accounted for as operating leases) where sound business principles warrant their use. We also periodically enter into guarantees and other similar arrangements as part of transactions in the ordinary course of business. These are described further in "Obligations and Commitments" below.
Variable Interest Entities Not Consolidated
We have variable interests in certain entities that we have determined to be variable interest entities, but for which we are not the primary beneficiary. We do not consolidate the financial statements of these entities.
We lease certain office buildings from entities that we have determined to be variable interest entities. The lease agreements with these entities include fixed-price purchase options for the assets being leased. The lease agreements also contain contingent put options

31



(the "lease put options") that allow the lessors to require us to purchase the buildings at the greater of original construction cost, or fair market value, without a lease agreement in place (the "put price") in certain limited circumstances. As a result of substantial impairment charges related to our divested Private Brands operations, these lease put options are exercisable now and remain exercisable until generally 30 days after the end of the respective lease agreements. We are amortizing the difference between the put price and the estimated fair value (without a lease agreement in place) of each respective property over the remaining respective lease term within selling, general and administrative expenses. As of August 27, 2017 and May 28, 2017 , the estimated amount by which the put prices exceeded the fair values of the related properties was $51.8 million , of which we had accrued $9.3 million and $8.4 million , respectively. As these buildings are worth considerably more when under lease agreements than when vacant, we may be able to mitigate some, or all, of the financial exposure created by the put options by maintaining active lease agreements and/or by subleasing the buildings to credit worthy tenants. We do not expect to ultimately incur material financial losses as a result of the potential exercise of the lease put options by the lessors. These leases are accounted for as operating leases, and accordingly, there are no material assets or liabilities, other than the accrued portion of the put price, associated with these entities included in the Condensed Consolidated Balance Sheets contained in this report. We have determined that we do not have the power to direct the activities that most significantly impact the economic performance of these entities. In making this determination, we have considered, among other items, the terms of the lease agreements, the expected remaining useful lives of the assets leased, and the capital structure of the lessor entities.

OBLIGATIONS AND COMMITMENTS
As part of our ongoing operations, we enter into arrangements that obligate us to make future payments under contracts such as lease agreements, debt agreements, and unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices, such as "take-or-pay" contracts). The unconditional purchase obligation arrangements are entered into in our normal course of business in order to ensure adequate levels of sourced product are available. Of these items, debt, notes payable, and capital lease obligations, which totaled $3.3 billion as of August 27, 2017 , were recognized as liabilities in the Condensed Consolidated Balance Sheets contained in this report. Operating lease obligations and unconditional purchase obligations, which totaled $1.4 billion as of August 27, 2017 , were not recognized as liabilities in the Condensed Consolidated Balance Sheets contained in this report, in accordance with generally accepted accounting principles.
A summary of our contractual obligations as of August 27, 2017 was as follows:
 
Payments Due by Period
(in millions)
Contractual Obligations
Total
 
Less than
1 Year
 
1-3 Years
 
3-5 Years
 
After 5
Years
Long-term debt
$
2,821.3

 
$
189.7

 
$
126.7

 
$
195.9

 
$
2,309.0

Capital lease obligations
128.9

 
9.1

 
16.8

 
17.4

 
85.6

Operating lease obligations
225.1

 
41.4

 
51.5

 
35.0

 
97.2

Purchase obligations 1 and other contracts
1,210.2

 
1,023.1

 
113.3

 
70.0

 
3.8

Notes payable
323.5

 
323.5

 
—

 
—

 
—

Total
$
4,709.0

 
$
1,586.8

 
$
308.3

 
$
318.3

 
$
2,495.6

1 Amount includes open purchase orders and agreements, some of which are not legally binding and/or may be cancellable. Such agreements are generally settleable in the ordinary course of business in less than one year.
We are also contractually obligated to pay interest on our long-term debt and capital lease obligations. The weighted average coupon interest rate of the long-term debt obligations outstanding as of August 27, 2017 , was approximately 5.3%.
The operating lease obligations noted in the table above have not been reduced by non-cancellable sublease rentals of $1.3 million.
As of May 28, 2017 , we had aggregate unfunded pension obligations totaling $565.1 million. This amount is not included in the table above, and we do not expect to be required to make payments to fund these amounts in the foreseeable future. Based on current statutory requirements, we are not obligated to fund any amount to our qualified pension plans during the next twelve months. We estimate that we will make payments of approximately $12.9 million over the next twelve months to fund our pension plans. See Note 14, Pension and Postretirement Benefits, to the Condensed Consolidated Financial Statements contained in this report and the Company’s Annual Report on Form 10-K for the year ended May 28, 2017, Critical Accounting Estimates - Employment Related Benefits, for further discussion of our pension obligations and factors that could affect estimates of this liability.

32



As part of our ongoing operations, we also enter into arrangements that obligate us to make future cash payments only upon the occurrence of a future event (e.g., guarantees of debt or lease payments of a third party should the third party be unable to perform). In accordance with generally accepted accounting principles, the following commercial commitments are not recognized as liabilities in the Condensed Consolidated Balance Sheets contained in this report. A summary of our commitments, including commitments associated with equity method investments, as of August 27, 2017 was as follows:
 
Amount of Commitment Expiration Per Period
(in millions)
Other Commercial Commitments
Total
 
Less than
1 Year
 
1-3 Years
 
3-5 Years
 
After 5
Years
Standby repurchase obligations
$
1.8

 
$
0.5

 
$
0.5

 
$
0.5

 
$
0.3

Other commitments
3.6

 
2.3

 
1.3

 
—

 
—

Total
$
5.4

 
$
2.8

 
$
1.8

 
$
0.5

 
$
0.3

In certain limited situations, we will guarantee an obligation of an unconsolidated entity. We guarantee certain leases resulting from the divestiture of the JM Swank business completed in the first quarter of fiscal 2017. As of August 27, 2017 , the remaining terms of these arrangements do not exceed six years and the maximum amount of future payments we have guaranteed was $3.8 million.
In certain limited situations, we also guarantee obligations of the Lamb Weston business pursuant to guarantee arrangements that existed prior to the Spinoff and remained in place following completion of the Spinoff until such guarantee obligations are substituted for guarantees issued by Lamb Weston. Such guarantee arrangements are described below. Pursuant to the Separation and Distribution Agreement, dated as of November 8, 2016 (the "Separation Agreement"), between us and Lamb Weston, these guarantee arrangements are deemed liabilities of Lamb Weston that were transferred to Lamb Weston as part of the Spinoff. Accordingly, in the event that we are required to make any payments as a result of these guarantee arrangements, Lamb Weston is obligated to indemnify us for any such liability, reduced by any insurance proceeds received by us, in accordance with the terms of the indemnification provisions under the Separation Agreement.
Lamb Weston is a party to a warehouse services agreement with a third-party warehouse provider through July 2035. Under this agreement, Lamb Weston is required to make payments for warehouse services based on the quantity of goods stored and other service factors. We have guaranteed the warehouse provider that we will make the payments required under the agreement in the event that Lamb Weston fails to perform. Minimum payments of $1.5 million per month are required under this agreement. It is not possible to determine the maximum amount of the payment obligations under this agreement. Upon completion of the Spinoff, we recognized a liability for the estimated fair value of this guarantee. As of August 27, 2017 , the amount of this guarantee, recorded in other noncurrent liabilities, was $29.3 million .
Lamb Weston is a party to an agricultural sublease agreement with a third party for certain farmland through 2020 (subject, at Lamb Weston’s option, to extension for two additional five-year periods). Under the terms of the sublease agreement, Lamb Weston is required to make certain rental payments to the sublessor. We have guaranteed the sublessor Lamb Weston’s performance and the payment of all amounts (including indemnification obligations) owed by Lamb Weston under the sublease agreement, up to a maximum of $75.0 million . We believe the farmland associated with this sublease agreement is readily marketable for lease to other area farming operators. As such, we believe that any financial exposure to the company, in the event that we were required to perform under the guaranty, would be largely mitigated.
The obligations and commitments tables above do not include any reserves for uncertainties in income taxes, as we are unable to reasonably estimate the ultimate amount or timing of settlement of our reserves for income taxes. The liability for gross unrecognized tax benefits at August 27, 2017 was $37.7 million . The net amount of unrecognized tax benefits at August 27, 2017 , that, if recognized, would impact our effective tax rate was $30.7 million . Recognition of these tax benefits would have a favorable impact on our effective tax rate.

CRITICAL ACCOUNTING ESTIMATES
A discussion of our critical accounting estimates can be found in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section in Part I, Item 7, of our Annual Report on Form 10-K for the fiscal year ended May 28, 2017 .



33



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The principal market risks affecting us are exposures to price fluctuations of commodity and energy inputs, interest rates, and foreign currencies.
Other than the changes noted below, there have been no material changes in our market risk during the thirteen weeks ended August 27, 2017 . For additional information, refer to the "Quantitative and Qualitative Disclosures about Market Risk" in Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 28, 2017 .
Commodity Market Risk
We purchase commodity inputs such as wheat, corn, oats, soybean meal, soybean oil, meat, dairy products, nuts, sugar, natural gas, electricity, and packaging materials to be used in our operations. These commodities are subject to price fluctuations that may create price risk. We enter into commodity hedges to manage this price risk using physical forward contracts or derivative instruments. We have policies governing the hedging instruments our businesses may use. These policies include limiting the dollar risk exposure for each of our businesses. We also monitor the amount of associated counter-party credit risk for all non-exchange-traded transactions.
Interest Rate Risk
We may use interest rate swaps to manage the effect of interest rate changes on the fair value of our existing debt as well as the forecasted interest payments for the anticipated issuance of debt.
The carrying amount of long-term debt (including current installments) was $2.97 billion as of August 27, 2017 . Based on current market rates, the fair value of this debt at August 27, 2017 was estimated at $3.34 billion. As of August 27, 2017 , a 1% increase in the interest rates would decrease the fair value of our fixed rate debt by approximately $195.6 million, while a 1% decrease in interest rates would increase the fair value of our fixed rate debt by approximately $217.0 million.
Foreign Currency Risk
In order to reduce exposures for our processing activities related to changes in foreign currency exchange rates, we may enter into forward exchange or option contracts for transactions denominated in a currency other than the functional currency for certain of our operations. This activity primarily relates to economically hedging against foreign currency risk in purchasing inventory and capital equipment, sales of finished goods, and future settlement of foreign denominated assets and liabilities.
Value-at-Risk (VaR)
We employ various tools to monitor our derivative risk, including value-at-risk ("VaR") models. We perform simulations using historical data to estimate potential losses in the fair value of current derivative positions. We use price and volatility information for the prior 90 days in the calculation of VaR that is used to monitor our daily risk. The purpose of this measurement is to provide a single view of the potential risk of loss associated with derivative positions at a given point in time based on recent changes in market prices. Our model uses a 95% confidence level. Accordingly, in any given one day time period, losses greater than the amounts included in the table below are expected to occur only 5% of the time. We include commodity swaps, futures, and options and foreign exchange forwards, swaps, and options in this calculation. The following table provides an overview of our average daily VaR for our energy, agriculture, and foreign exchange positions (including discontinued operations) during the thirteen weeks ended August 27, 2017 and August 28, 2016 .
 
Fair Value Impact
In Millions
Average
During Thirteen Weeks
Ended August 27, 2017
 
Average
During Thirteen Weeks
Ended August 28, 2016
Energy commodities
$
0.4

 
$
0.4

Agriculture commodities
0.5

 
0.8

Foreign exchange
0.7

 
0.3



34



ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company's management carried out an evaluation, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, as of August 27, 2017 . Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective.
Internal Control Over Financial Reporting
The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, evaluated any change in the Company's internal control over financial reporting that occurred during the quarter covered by this report and determined that there was no change in our internal control over financial reporting during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

35



Part II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
The current environmental proceedings associated with Beatrice include litigation and administrative proceedings involving Beatrice's possible status as a potentially responsible party at approximately 40 Superfund, proposed Superfund, or state-equivalent sites (the "Beatrice sites"). These sites involve locations previously owned or operated by predecessors of Beatrice that used or produced petroleum, pesticides, fertilizers, dyes, inks, solvents, PCBs, acids, lead, sulfur, tannery wastes, and/or other contaminants. In the past five years, Beatrice has paid or is in the process of paying its liability share at 31 of these sites. 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 $53.1 million as of August 27, 2017 , a majority of which relates to the Superfund and state-equivalent sites referenced above. During the third quarter of fiscal 2017, a final Remedial Investigation/Feasibility Study was submitted for the Wells G&H-Southwest Properties Superfund site, which is one of the Beatrice sites. The U.S. Environmental Protection Agency (the "EPA") has issued a proposed plan for remediation that is currently open for public comment, will issue a Record of Decision for this site shortly, and will subsequently enter into negotiations with potentially responsible parties to determine a final Remedial Design/Remedial Action plan for the site. The accrual for Wells G&H-Southwest Properties Superfund site totaled $1.1 million as of August 27, 2017, which was included in the total accrual for Beatrice-related environmental matters referenced above.
We are party to a number of putative class action lawsuits challenging various product claims made in the Company's product labeling. These matters include Briseno v. ConAgra Foods, Inc., in which it is alleged that the labeling for Wesson ® oils as 100% natural is false and misleading because the oils contain genetically modified plants and organisms. In February 2015, the U.S. District Court for the Central District of California granted class certification to permit plaintiffs to pursue state law claims. The Company appealed to the United States Court of Appeals for the Ninth Circuit which affirmed class certification in January 2017. The Company has sought further review by the United States Supreme Court. While we cannot predict with certainty the results of this or any other legal proceeding, we do not expect this matter to have a material adverse effect on our financial condition, results of operations, or business.
For additional information on legal proceedings, please refer to Note 13 to the Condensed Consolidated Financial Statements contained in this report, Part I, Item 3 "Legal Proceedings" in our Annual Report on Form 10-K for the year ended May 28, 2017 , and Note 17 "Contingencies" to the consolidated financial statements contained therein, and Part II, Item 1 "Legal Proceedings" in each of our subsequent Quarterly Reports on Form 10-Q.

ITEM 1A. RISK FACTORS
Our Annual Report on Form 10-K for the year ended May 28, 2017 includes a detailed discussion of certain material risk factors we face. The information presented below restates the risk factor set forth under the heading "We are increasingly dependent on information technology, and potential disruption, cyber attacks, security problems, and expanding social media vehicles present new risks." in Part I, Item 1A of our Annual Report on Form 10-K for the year ended May 28, 2017 and provides two additional risk factors. You should consider these risk factors together with the other risk factors and other matters described in our Annual Report on Form 10-K for the year ended May 28, 2017, in this Quarterly Report on Form 10-Q, and in our other filings with the SEC.
We are increasingly dependent on information technology, and potential disruption, cyber attacks, security problems, and expanding social media vehicles present new risks.
We rely on information technology networks and systems, including the Internet, to process, transmit, and store electronic and financial information, to manage and support a variety of business processes and activities, and to comply with regulatory, legal, and tax requirements. Our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to damage, interruption, or shutdown due to any number of causes outside of our control such as catastrophic events, natural disasters, fires, power outages, systems failures, telecommunications failures, security breaches, computer viruses, hackers, employee error or malfeasance, and other causes. Increased cybersecurity threats pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure and to maintain and protect the related automated and manual control processes, we could be subject to billing and collection errors, business disruptions, or damage resulting from security breaches. If any of our significant information technology systems suffer severe damage, disruption, or shutdown, and our business continuity plans do not effectively resolve the issues in a timely manner, our product sales, financial condition, and results of operations may be materially and adversely affected, and we could experience delays in reporting our financial results. In addition, there is a risk of business interruption, violation of data privacy laws and regulations, litigation, and reputational damage from leakage of confidential information. Any interruption of our information technology systems could have operational, reputational, legal, and financial impacts that may have a material adverse effect on our business.

36



In addition, the inappropriate use of certain media vehicles could cause brand damage or information leakage. Negative posts or comments about the Company on any social networking web site could seriously damage its reputation. In addition, the disclosure of non-public company sensitive information through external media channels could lead to information loss. Identifying new points of entry as social media continues to expand presents new challenges. Any business interruptions or damage to our reputation could negatively impact our financial condition, results of operations, and the market price of our common stock.
As we outsource certain functions, we become more dependent on the third parties performing those functions.
As part of a concerted effort to achieve cost savings and efficiencies, we have entered into agreements with third-party service providers under which we have outsourced certain information systems, sales, finance, accounting, and other functions, and we may enter into managed services agreements with respect to other functions in the future. If any of these third-party service providers do not perform according to the terms of the agreements, or if we fail to adequately monitor their performance, we may not be able to achieve the expected cost savings or we may have to incur additional costs to correct errors made by such service providers, and our reputation could be harmed. Depending on the function involved, such errors may also lead to business interruption, damage or disruption of information technology systems, processing inefficiencies, the loss of or damage to intellectual property or non-public company sensitive information through security breaches or otherwise, effects on financial reporting, litigation or remediation costs, or damage to our reputation, any of which could have a material adverse effect on our business. In addition, if we transition functions to one or more new, or among existing, external service providers, we may experience challenges that could have a material adverse effect on our results of operations or financial condition.
Our intellectual property rights are valuable, and any inability to protect them could have an adverse impact on our business, financial condition, and results of operations.
Our intellectual property rights, including our trademarks, licensing agreements, trade secrets, patents, and copyrights, are a significant and valuable aspect of our business. We attempt to protect our intellectual property rights by pursuing remedies available to us under trademark, copyright, trade secret, and patent laws, as well as entering into licensing, third-party nondisclosure and assignment agreements and policing of third-party misuses of our intellectual property. If we fail to adequately protect the intellectual property rights we have now or may acquire in the future, or if there occurs any change in law or otherwise that serves to reduce or remove the current legal protections of our intellectual property, then our financial results could be materially and adversely affected.
Certain of our intellectual property rights, including the P.F. Chang's, Bertolli, Del Monte, and Libby's trademarks, are owned by third parties and licensed to us, and others, such as Alexia, are owned by us and licensed to third parties. While many of these licensing arrangements are perpetual in nature, others must be periodically renegotiated or renewed pursuant to the terms of such licensing arrangement. If in the future we are unable to renew such a licensing arrangement pursuant to its terms and conditions, or if we fail to renegotiate such a licensing arrangement, then our financial results could be materially and adversely affected.
There is also a risk that other parties may have intellectual property rights covering some of our brands, products, or technology. If any third parties bring a claim of intellectual property infringement against us, we may be subject to costly and time-consuming litigation, diverting the attention of management and our employees. If we are unsuccessful in defending against such claims, we may be subject to, among other things, significant damages, injunctions against development and sale of certain products, or we may be required to enter into costly licensing agreements, any of which could have an adverse impact on our business, financial condition, and results of operations.
 
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table presents the total number of shares of common stock purchased during the first quarter of fiscal 2018 , the average price paid per share, the number of shares that were purchased as part of a publicly announced repurchase program, and the approximate dollar value of the maximum number of shares that may yet be purchased under the share repurchase program:
Period
Total Number
of Shares (or
units)
Purchased
 
Average
Price Paid
per Share
(or unit)
 
Total Number of
Shares
Purchased as Part of
Publicly Announced
Plans or Programs
(1)
 
Approximate Dollar
Value of Maximum
Number of Shares that
may yet be Purchased
under the Program (1)
May 29 through June 25, 2017
—

 
$
—

 
—

 
$
1,381,967,000

June 26 through July 23, 2017
—

 
$
—

 
—

 
$
1,381,967,000

July 24 through August 27, 2017
8,744,441

 
$
34.31

 
8,744,441

 
$
1,081,967,000

Total Fiscal 2018 First Quarter Activity
8,744,441

 
$
34.31

 
8,744,441

 
$
1,081,967,000

 ________________
(1)
Pursuant to publicly announced share repurchase programs from December 2003, we have repurchased approximately 201.9 million shares at a cost of $5.5 billion through August 27, 2017 . On October 11, 2016, we announced that our Board of

37



Directors approved an increase of $1.25 billion to the share repurchase program. On June 29, 2017, we announced that in the fourth quarter of fiscal 2017, our Board of Directors approved a further increase of $1.0 billion to the share repurchase program. The share repurchase program is effective and has no expiration date.

ITEM 6. EXHIBITS
 
All documents referenced below were filed pursuant to the Securities Exchange Act of 1934 by Conagra Brands, Inc. (file number 001-07275), unless otherwise noted.

EXHIBIT
 
DESCRIPTION
 
 
 
3.1
 

 
 
 
3.2
 

 
 
 
*10.4.7
 
 
 
 
*10.7.6
 
 
 
 
*10.10.1
 
 
 
 
12
 
 
 
 
31.1
 
 
 
 
31.2
 
 
 
 
32.1
 
 
 
 
101
 
The following materials from Conagra Brands' Quarterly Report on Form 10-Q for the quarter ended August 27, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income (Loss), (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Common Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements, and (vii) document and entity information.
 
 
 
* Management contract or compensatory plan.
 
Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to long-term debt of Conagra Brands, Inc. are not filed with this Quarterly Report on Form 10-Q. The Company will furnish a copy of any such long-term debt agreement to the SEC upon request.







38



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CONAGRA BRANDS, INC.
 
 
 
 
By:
/s/ DAVID S. MARBERGER

 
 
David S. Marberger
 
 
Executive Vice President and Chief Financial Officer
 
 
 
 
By:
/s/ ROBERT G. WISE

 
 
Robert G. Wise
 
 
Senior Vice President and Corporate Controller
Dated this 3rd day of October, 2017.

39
Exhibit 10.4.7

CONAGRA BRANDS, INC.
VOLUNTARY DEFERRED COMPENSATION PLAN
(Effective January 1, 2017)
The Conagra Brands, Inc. Voluntary Deferred Compensation Plan (the “Plan”) was adopted effective January 1, 2005, and was amended and restated effective January 1, 2009. The Plan is further amended and restated herein, effective January 1, 2017.
The Plan was established and is maintained by Conagra Brands, Inc. (the “Company”) for the purpose of permitting certain key employees of the Company and of corporations that are related to the Company to defer the receipt of a portion of their income and/or participate in any appreciation in the value of Company Stock. Accordingly, the Company hereby adopts the Plan pursuant to the terms and provisions set forth below:
PART I
NON-GRANDFATHERED AMOUNTS
The provisions of this Part I shall apply to amounts due pursuant to the Plan that are not “Grandfathered Amounts,” as that term is defined in Part II.
ARTICLE I
DEFINITIONS
1.1     409A Account . The term “409A Account” means the bookkeeping account established by the Company to which post‑2004 Compensation Deferral Contributions, Employer Matching Contributions, Employer Non-elective Contributions, and earnings and losses thereon, are credited for any Participant. 409A Account shall not include the “Grandfathered Amount” described in Part II.

1.2     Change of Control Event . A “Change of Control” shall occur upon any of the following dates:

(a) The date individuals who constitute the Board (the “Incumbent Board”) cease for any reason during any 12 month period to constitute at least 50% of the members of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of the Plan, considered as though such person were a member of the Incumbent Board; or
(b) The date of consummation of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own 50% or more of the combined voting power of the reorganized, merged or consolidated company’s then outstanding voting securities; or
(c) The date that any one person, or more than one person acting as a group who is not related to the Company within the meaning of Treasury Regulation Section 1.409A-3(i)((vii)(B), acquires (or has acquired


during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 80% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For this purpose, gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this Section, “more than one person acting as a group” is determined under Treasury Regulation Section 1.409A-3(i)(5)(v)(B). If a person owns stock in both entities that enter into a merger, consolidation, purchase or acquisition of stock, such shareholder is considered to be acting as a group with other shareholders in a corporation only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. In no event shall a change of control occur under circumstances that would not constitute a “change in the ownership of a corporation,” a “change in effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets,” as those terms are defined in regulations and other applicable guidance issued under Code Section 409A.
1.3
Compensation Deferral Agreement . The term “Compensation Deferral Agreement” means the written compensation deferral agreement entered into by a Participant with the Company pursuant to the Plan.

1.4
Compensation Deferral Contribution . “Compensation Deferral Contribution” means a contribution made to the Plan by a Participant pursuant to Section 3.1.

1.5
Disability . A Participant has a “Disability” or shall be considered “Disabled” if the Participant is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under the Company’s long-term disability plan.
1.6
Distribution Sub-Account . The term “Distribution Sub-Account” shall refer to each sub-account elected by the Participant pursuant to Section 5.1 for the purpose of applying a specific election concerning time and form of payment to only such sub-account.

1.7
Employer Matching Contribution . The term “Employer Matching Contribution” means a contribution made to the Plan by the Employer pursuant to Section 3.2.

1.8
Employer Non-elective Contribution . The term “Employer Non-elective Contribution” means a contribution made to the Plan by the Employer pursuant to Section 3.3.

1.9
Related Company . The term “Related Company” means: (i) any corporation that is a member of a controlled group of corporations (as defined in Code Section 414(b)) that includes the Company); and (ii) any trade or business (whether or not incorporated) that is under common control (as defined in Code Section 414(c)) with the Company. For purposes of applying Code Sections 414(b) and (c), 25% is substituted for the 80% ownership level.

1.10
Separation from Service . The term “Separation from Service” means the date that the Participant separates from service within the meaning of Code Section 409A. Generally, a Participant separates from service if the Participant dies, retires, or otherwise has a termination of employment with the Company, determined in accordance with the following:
(a)      Leaves of Absence . The employment relationship is treated as continuing intact while the


Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as the Participant retains a right to reemployment with the Company under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Company. If the period of leave exceeds six months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 29-month period of absence shall be substituted for such six-month period.
(b)      Dual Status . Generally, if a Participant performs services both as an employee and an independent contractor, such Participant must separate from service both as an employee and as an independent contractor, pursuant to standards set forth in Treasury Regulations, to be treated as having a separation from service. However, if a Participant provides services to the Company as an employee and as a member of the Board, and if any plan in which such person participates as a Board member is not aggregated with the Plan pursuant to Treasury Regulation Section 1.409A-1(c)(2)(ii), then the services provided as a director are not taken into account in determining whether the Participant has a separation from service as an employee for purposes of the Plan.
(c)      Termination of Employment . Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor), except as provided in subsection (b) of this section, would permanently decrease to no more than 20% of the average level of bona fide services performed (whether as an employee or an independent contractor), except as provided in subsection (b) of this section over the immediately preceding 36-month period (or the full period of services to the Company if the Participant has been providing services to the Company less than 36 months). For periods during which a Participant is on a paid bona fide leave of absence and has not otherwise terminated employment as described above, for purposes of this subsection (c), the Participant is treated as providing bona fide services at a level equal to the level of services that the Participant would have been required to perform to receive the compensation paid with respect to such leave of absence. Periods during which a Participant is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this subsection (c) (including for purposes of determining the applicable 36-month (or shorter) period).
(d)      Service with Related Companies . For purposes of determining whether a separation from service has occurred under the above provisions, the “Company” shall include the Company and all Related Companies.
ARTICLE II
ELIGIBLE EMPLOYEES
Compensation Deferral Contributions may be made by those employees of the Employer who either have been selected by, and at the sole and absolute discretion of, the Human Resources Committee, or who are both categorized by the Company or a Related Company as a grade level 23 or higher, and who have an annual base salary that equals or exceeds $125,000.00. Any Participant who has a balance in the Plan shall be a Participant with respect to such balance and any earnings or losses thereon. The Committee may increase


from time to time the required grade level and/or base salary amount, and the Committee may amend the Plan accordingly, all without the approval of the Human Resources Committee or the Board.
The Committee shall have sole and absolute discretion to determine whether an individual’s base salary equals or exceeds the required dollar amount. Notwithstanding any provision in the Plan to the contrary, the Plan is intended to be a nonqualified deferred compensation plan for a select group of management or highly compensated employees (as that expression is used in ERISA) and participation shall be limited to such employees. Each Participant shall continue to be a participant in the Plan until all payments due under the Plan have been paid. The Human Resources Committee may determine at any time that a Participant shall no longer be eligible to make Compensation Deferral Contributions.
Notwithstanding any provision apparently to the contrary in the Plan or in any written communications, summary, resolution, oral communication or other document, in the event it is determined that a Participant will no longer be eligible to make Compensation Deferral Contributions, then the election for Compensation Deferral Contributions made by that individual in accordance with the provisions of the Plan will continue for the remainder of the calendar year during which such determination is made. However, no additional amounts shall be deferred and credited to the Participant’s 409A Account under the Plan for any future calendar year until such time as the individual is again determined to be eligible to make Compensation Deferral Contributions and makes a new election under the provisions of the Plan. Amounts credited to the 409A Account of such individual shall continue to be adjusted pursuant to the other provisions of the Plan until fully distributed.
Employer Matching Contributions and Employer Non-elective Contributions may be made by the Employer to those employees of the Employer who either have been selected by, and at the sole and absolute discretion of, the Committee, or who have annual total cash compensation in excess of the Code Section 401(1)(17) limitation.
ARTICLE III
DEFERRALS
3.1      Employee Deferrals . During one or more window periods each Plan Year determined by the Company, a Participant may elect to have a portion of his or her pay for the following Plan Year deposited in the Plan (“Compensation Deferral Contribution”). Unless the Committee specifies otherwise, any Compensation Deferral Contribution election will continue from year-to-year until timely changed by the Participant (and such change will be effective for the Plan Year following the Plan Year during which such change election is received by the Company) or until specified otherwise by the Committee to the extent permitted without resulting in any Adverse 409A Consequence. The minimum deposit shall be 5% of the Participant’s base salary or short-term incentive. The maximum deposit (which may be set forth in the Compensation Deferral Agreement) shall be determined and changed by the Committee from time to time and, in the absence of any such determination, shall be (i) 50% of the Participant’s normal salary, (ii) 90% of the Participant’s short‑term incentive, and (iii) 90% of the sum of the Participant’s normal salary plus short‑term incentive in excess of the Code Section 401(1)(17) limitation in effect for such Plan Year. The Participant’s election shall be made in accordance with the rules and regulations of the Committee and in accordance with a Compensation Deferral Agreement. The elected deferral percentage shall not apply to compensation that is not eligible for deferral under the terms of the Company’s 401(k) plan (ignoring for this purpose the limitations imposed by Code Sections 401(a)(17), 401(k)(3) and 415). The Compensation Deferral Contribution shall be credited to the Participant’s 409A Account as soon as reasonably practicable following the date the Participant would have otherwise been entitled to receive cash compensation absent an election to defer under this Section 3.1. A Compensation Deferral Contribution election shall be irrevocable


as of the earlier of (1) the deadline specified by the Company and (2) the last day of a Plan Year, with respect to Compensation Deferral Contributions to be made during the following Plan Year (or six months before the end of the performance period with respect to performance‑based compensation), except for a cancellation permitted by Treasury Regulation Section 1.409A-3(j)(4).
3.2      Employer Matching Contributions . The Employer will credit, at the end of each Plan Year, an eligible Participant’s 409A Account with Employer Matching Contributions equal to a dollar for dollar match, limited to 6% of compensation earned by the Participant and paid by the Employer in excess of the Code Section 401(1)(17) limitation. The amount of each Employer Matching Contribution shall be automatically reduced by any applicable Federal Insurance Contributions Act tax (or other applicable tax) at the time such contribution is made. Examples: (1) If a Participant receives total cash compensation of $320,000 in 2017 (the Code Section 401(a)(17) limitation for 2017 is $270,000), and she defers $20,000 to the Plan for 2017, she would receive an Employer Matching Contribution of $3,000 (6% of $50,000); (2) If the Participant, in the first example, only deferred $2,000 to the Plan for 2017, she would receive an Employer Matching Contribution of $2,000 (4% of $50,000).
Compensation, for purposes of calculating Employer Matching Contributions, shall be defined in the same manner as the term “Pay” is defined in the ConAgra Brands, Inc. Pension Plan for Salaried Employees (#009). Notwithstanding the preceding sentence, effective January 1, 2018, Compensation, for purposes of calculating Employer Matching Contributions, shall be “Compensation” as defined under the Conagra Brands Retirement Income Savings Plan.
Notwithstanding the foregoing, the Human Resources Committee may, in its sole discretion, amend or modify any future Employer Matching Contributions by amending the Plan.
3.3      Employer Non-elective Contributions . The Employer will credit, at the end of each Plan Year, each actively employed Participant’s 409A Account with an Employer Non‑elective Contributions equal to 3% of an eligible Participant’s normal compensation and short term incentive in excess of the Code Section 401(a)(17) limitation in effect for such Plan Year. If a Participant is not permitted to make Compensation Deferral Contributions in the first year of hire, an Employer Non-elective Contribution equal to 9% of such Participant’s normal compensation and short term incentive in excess of the applicable Code Section 401(a)(17) limitation will be made for such Participant in his or her first Plan Year of participation, and such amount will be credited to the Participant’s 409A Account as of the end of such first Plan Year.
The amount of each Employer Non-elective Contribution shall be automatically reduced by any applicable Federal Insurance Contributions Act tax (or other applicable tax) at the time such contribution is made. Compensation, for purposes of calculating Employer Non-elective Contributions, shall be defined in the same manner as under Section 3.2.
Notwithstanding the foregoing, the Human Resources Committee may, in its sole discretion, amend or modify any future Employer Non-elective Contributions by amending the Plan.
ARTICLE IV
VESTING
4.1     Compensation Deferral Contributions . Each Participant shall have a fully 100% vested and nonforfeitable interest in his or her Compensation Deferral Contributions at all times.

4.2     Employer Contributions . Unless the Employer determines otherwise with respect to a Participant,


each Participant shall have a fully 100% vested and nonforfeitable interest in his or her Employer Matching Contributions and Employer Non-elective Contributions when such contributions are credited to the Participant’s 409A Account.
ARTICLE V
DISTRIBUTIONS
5.1     Time and Form of Payment .
(a)      Distribution Sub-Accounts . Each Participant may elect, pursuant to Section 5.2, that such Participant’s 409A Account shall be divided into Distribution Sub-Accounts for the purpose of the Participant making separate elections in accordance with this Article V concerning time and form of payment with respect to each Distribution Sub-Account. The maximum number of Distribution Sub-Accounts will be specified by the Committee or its delegate from time to time. If an election under this Section 5.1(a) is not timely received from a Participant, then such Participant’s 409A Account shall be deemed to be a single Distribution Sub-Account for purposes of the Plan.
(b)      Time of Payment . This Section 5.1(b) shall apply, except to the extent another subsection of this Section 5.1 or Section 5.3 is applicable. Each Participant may elect, pursuant to Section 5.2, that any of such Participant’s Distribution Sub-Accounts shall instead be paid (or installments shall commence), as follows:
(i) in the January of the calendar year specified by the Participant (which calendar year may not be later than the year during which the Participant attains age 70); or
(ii) on the earlier of the normal payment date under (c) below or the January of the calendar year specified by the Participant (which calendar year may not be later than the year during which the Participant attains age 70).
The Committee shall determine the payment date within the parameters required by the Plan. A payment that is made after the earliest date payment could have been made, but by the later of the last day of the Participant’s taxable year that includes the earliest date payment could have been made, or by the fifteenth day of the third calendar month following the earliest date payment could have been made, shall be treated as having been made on the earliest date payment could have been made.
Any Participant election that specifies a date that does not comply with the Plan will be deemed to be an election of the nearest permitted date. For example, if a Participant were to elect to receive a lump sum at the later of the January after Separation from Service or January 2020 and such Participant attains age 70 in 2019, such election will be reformed to be a lump sum at the later of the January following Separation from Service or January  2019.
(c)      Normal Form of Payment . This Section 5.1(c) shall apply, except to the extent another subsection of this Section 5.1 or Section 5.3 is applicable. The normal form of payment of a Participant’s Distribution Sub-Accounts shall be a single lump sum payment (the default form of payment) equal to the value of each of the Participant’s Distribution Sub‑Accounts as of the most recent Valuation Date that precedes the payment date. However, a Participant may elect, pursuant to Section 5.2, that payment of any Distribution Sub-Account shall be made in annual installments over a period elected by the Participant that is not less than one nor more than 10 years. Installments will commence following Separation from Service only if the Participant is at least age 50 and the balance of all Distribution Sub-Accounts is at least $100,000.00, both determined as of the Separation from Service. If a Participant does not satisfy, as of such Participant’s Separation from Service, the applicable age and Distribution Sub-Account balance requirement to commence


installments, all of the balance of the Distribution Sub‑Accounts from which installments had not commenced prior to Separation from Service will be paid in a lump sum at the time provided herein. If installments commenced prior to Separation from Service from a Distribution Sub‑Account, then such installments shall continue after Separation from Service regardless of age or balance. Each installment payment shall equal the quotient resulting from dividing the value of the Participant’s applicable Distribution Sub-Account as of the most recent Valuation Date that precedes the date the installment is to be paid by the sum of one plus the number of installments to be paid after the current installment. Any installments shall be paid annually during January of each year an installment is due.
(d)      Death . Upon the death of the Participant before distribution of the Participant’s entire 409A Account (whether employed or not at the time of death), the Participant’s 409A Account shall be paid to the Participant’s Beneficiary as soon as reasonably practical following the Participant’s death, but not later than the 90th day following the Participant’s death, in a single lump sum equal to the value of the Participant’s 409A Account as of the most recent Valuation Date preceding the payment.
(e)      Disability . If a Participant becomes Disabled prior to or coincident with Separation from Service and prior to the time payment of all of the Participant’s Distribution Sub‑Accounts is to be made or commenced pursuant to Section 5.1(b), the Participant’s Distribution Sub-Accounts with respect to which distribution has not commenced shall be paid in the same manner as in Section 5.1(c), except that the age requirement for installment distributions shall not apply, and distribution shall be made or commenced as soon as reasonably practical following the determination of Disability, but no later than 90 days following such determination. Payment of any Distribution Sub-Account with respect to which distribution had commenced prior to the time the Participant became Disabled shall continue as scheduled.
(f)      Change of Control Event . Each Participant may elect, within the time period specified by Section 5.2(a), that any Distribution Sub-Account shall be paid in a single lump sum as soon as reasonably practical following, but no later than 90 days following, the earlier of (i) Separation from Service and (ii) either (1) the occurrence of a Change of Control Event or (2) 18 months following the occurrence of a Change of Control Event. Such payment shall equal the value of the Participant’s 409A Account as of the most recent Valuation Date preceding the payment. If an election is not made under this Section 5.1(f), then payment shall be made in accordance with the other Plan provisions.
(g)      Committee Discretion . The Committee, in its sole and absolute discretion, may revise, remove or add any restriction on time or form of payment, including limits on elections with respect to any Distribution Sub-Account, prior to the deadline for the initial election under Section 5.2(a) to be received from the Participant. Such Committee action must be in writing and may be set forth in distribution election form materials approved by the Committee. Any such Committee action shall be deemed to be a permitted amendment to the Plan.
5.2     Elections Regarding Time and Form of Payment . A Participant’s elections regarding the time and form of payment of each Distribution Sub-Account shall be made in accordance with the provisions of this Section 5.2.

(a)      Initial Elections . Except as otherwise provided in the Plan, the Participant’s election of the time and form of payment, pursuant to Sections 5.1(b), (c), (e) and (f), must be received by the Committee no later than the deadline set by the Committee, which may not be later than the end of the Plan Year prior to the year in which the compensation subject to such Compensation Deferral Contribution is earned (or six months before the end of the performance period with respect to performance‑based compensation). If a time and form of payment election is not timely received by the Committee, payment shall be made as if no election has been made. An election of time and form of payment shall become irrevocable as of the time


determined by the Committee, which shall not be later than the deadline for making such election, except as set forth in Section 5.2(b).
(b)      Change in Elections . A Participant may elect to change the time or form of payment only in accordance with this Section 5.2(b). Any election under this Section 5.2(b) must comply with Code Section 409A and the guidance issued by the Department of the Treasury with respect to the application of Code Section 409A. Except as permitted by Section 5.3, a Participant may not elect to accelerate the date payment is to be made or commenced. A Participant may elect to delay the time payment is to be made or commenced and may change the form of payment from lump sum to installments, or vice versa, only if the following conditions are met:
(i) the election is received by the Committee not less than 12 months before the date payment would have otherwise been made or commenced without regard to this election;
(ii) the election shall not take effect until at least twelve 12 months after the date on which the election is received by the Committee; and
(iii) except in the case of elections relating to payment on account of death or Disability, payment pursuant to the election shall not be made or commenced sooner than five years from the date payment would have otherwise been made or commenced without regard to this election.
For purposes of application of Code Section 409A to this provision, installments shall be treated as a single payment.
5.3     Unforeseeable Emergency . A Participant may request that the Committee accelerate payment due to the occurrence of an “unforeseeable emergency” as defined by, and to the extent permitted by, Treasury Regulation 1.409A-3(i)(3).

5.4     Withholding . The Company may determine, withhold and report the amount of any foreign, federal, state, or local taxes as the Company determines may be required to cover any taxes for which the Company may be liable with respect to any payment under the Plan. The Company shall have the authority, duty and power to reduce any benefit payable pursuant to the Plan by the amount of any foreign, federal, state or local taxes required by law to be withheld by the Company under applicable law with respect to such payment of benefits and, if required by law, the Participant’s share of Federal Insurance Contributions Act taxes and any other employment taxes. The Company may in accordance with and to the extent it is able under the laws of the jurisdiction with respect to which a tax is owed, deduct the relevant amount from other earnings payable to the Participant or Beneficiary. The Company shall be entitled to withhold and deduct from future wages of a Participant (or from other amounts that may be due and owing to a Participant from the Company), including all payments under the Plan, or make other arrangements for the collection of all legally required amounts necessary to satisfy any and all foreign, federal, state, or local tax withholding and employment-related tax requirements.

5.5     Distributions to Specified Employees . Notwithstanding any provision of the Plan to the contrary, if a Participant is a “Specified Employee” as of the date of Separation from Service, no portion of his or her 409A Account shall be distributed on account of a Separation from Service before the earlier of (a) the date that is six months after the date of Separation from Service and (b) the date of death of the Participant. A “Specified Employee” is a key employee, as defined under Code Section 416(i), without regard to paragraph (5) thereof (and any successor or comparable Code sections). Amounts that would have been paid during the delay will be adjusted for earnings and losses and paid on the first business day following the end of the six‑month delay.


PART II
GRANDFATHERED AMOUNTS
For amounts deferred under the Plan prior to January 1, 2005 that were fully vested on or before December 31, 2004, together with the earnings thereon (“Grandfathered Amounts”), the provisions of this Part II shall apply.
ARTICLE VI
DISTRIBUTION OF GRANDFATHERED AMOUNTS
6.1     Definition of Change of Control . The term “Change of Control” means:

(a) The acquisition (other than from the Company) by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the “Exchange Act”), (excluding, for this purpose, the Company or its subsidiaries, or any employee benefit plan of the Company or its subsidiaries that acquires beneficial ownership of voting securities of the Company) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors; or
(b) Individuals who, as of the date hereof, constitute the Board (as of the date hereof the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be, for purposes of the Plan, considered as though such person were a member of the Incumbent Board; or
(c) Consummation of a reorganization, merger, consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated company’s then outstanding voting securities, or liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company.
6.2     Definition of Disability . The term “Disability” means total and permanent disability as determined pursuant to the Company’s long-term disability plan.

6.3     Definition of Retirement .

(a)      Early Retirement . The term “Early Retirement” means termination of employment with the Employer by a Participant who has at least 10 years of service with the Employer and who is at least age 55.
(b)      Normal Retirement . The term “Normal Retirement” means termination of employment with the Employer by a Participant who is at least age 65.
6.4     Distribution Upon Disability or Retirement . Upon termination of employment because of Disability or Early or Normal Retirement, a Participant’s Grandfathered Amount shall be paid over a 10‑year period. The first payment shall be made as soon as reasonably practicable following the date of the Participant’s termination of employment with annual payments over the next nine years. A Participant’s


Grandfathered Amount shall share in earnings and losses during the payout period. Notwithstanding the preceding, a Participant who is receiving his or her distribution in installments, or who expects to receive his or her distribution in installments, may request that the Committee distribute the Grandfathered Amounts in a single lump sum payment. The Participant shall provide the Committee information regarding the reasons for requesting a lump sum distribution, supporting facts and documents and any other information requested by the Committee. The Committee, in its sole and absolute discretion, may grant the lump sum distribution if the facts and circumstances warrant such a distribution. Examples of when the Committee should determine that a lump sum distribution is warranted are financial hardships beyond the reasonable control of the Participant.
6.5      Distribution Upon Termination of Employment . Upon termination of employment for reasons other than death, Disability, or Early or Normal Retirement, the Participant's Account shall be paid in a single lump sum payment. The payment shall be made as soon as reasonably practicable following the date of the Participant's termination of employment.
6.6      Distribution Upon Death . Upon the death of the Participant before distribution of the Participant's entire Grandfathered Amounts (whether employed or not at the time of death), the Participant's Grandfathered Amounts shall be paid to the Participant's Beneficiary as soon as reasonably practicable following the death of the Participant.
6.7      Distribution Upon Change of Control . Upon a Change of Control, the Grandfathered Amounts shall be paid to the Participant in a single lump sum payment within 30 days of the Change of Control.
6.8      Distribution Upon Elective Withdrawal By Participant . A Participant may elect to withdraw all of the Grandfathered Amounts. In the event of such elective withdrawal of Grandfathered Amounts, the Participant shall receive a distribution of 90% of the Grandfathered Amounts and forfeit the remaining 10%.
6.9     Distribution Upon Termination by Corporate Successor . The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidated only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate and the Grandfathered Amounts shall be distributed to the Participant in a single lump sum payment within 30 days of such termination.
6.10     Distributions to Specified Employees . Distributions of Grandfathered Amounts may be distributed, as permitted by the Plan, to Specified Employees (as defined in Section 5.5) prior to the date that is six months after the date of Separation from Service, or if earlier, the date of death of the Participant.
PART III
PROVISIONS APPLICABLE TO
409A ACCOUNTS AND GRANDFATHERED AMOUNTS
This Part III applies for all purposes of the Plan, including with respect to 409A Accounts and Grandfathered Amounts.


ARTICLE VII
INVESTMENTS AND PARTICIPANT ACCOUNTS
7.1     Investments . The Company’s Employee Benefits Investment Committee (the “Investment Committee”) shall select the deemed investments available with respect to the Participant’s interests in the Plan. Each Participant shall select, in accordance with the rules and procedures established by the Investment Committee, the method of hypothetically investing the Participant’s 409A Account and Grandfathered Amount. The Investment Committee may permit Participants to designate different deemed investments for each Distribution Sub‑Account. Transfers among deemed investments and changes in investment elections may be made only in accordance with the rules, procedures and limitations established by the Investment Committee.
7.2     Company Stock . Notwithstanding Section 7.1, phantom shares of Company common stock (“Company Stock”) shall be an investment available for selection by Participants. Notwithstanding the preceding sentence, effective June 1, 2017, Company Stock shall not be an investment available to executive officers who are required to file reports pursuant to Section 16 of the Securities Exchange Act.
If Company Stock is selected by a Participant, then the number of shares of Company Stock that equals the phantom shares credited under the Plan may be deposited in the trust described in Section 7.4 below. The Company Stock may be acquired by the trust through the ConAgra Foods, Inc. 2014 Stock Plan, or any subsequent stock plan adopted by the Company that allows for such. An account under the Plan (“Participant’s Company Stock Account’) shall be established for the Participant for the number of shares of phantom Company Stock to be credited to the Participant. The Participant’s Company Stock Account shall be credited with dividends paid on the shares of Company Stock credited to the Participant’s Company Stock Account. Such dividends shall be reinvested in the Company Stock Account in a manner similar to Compensation Deferral Contributions. Upon distribution to a Participant, amounts credited to a Participant’s Company Stock Account shall be paid in Company Stock. If installment payments are made, each distribution shall include Company Stock in proportion to the Company Stock credited to the Participant’s 409A Account and Grandfathered Amounts.
7.3     Accounting . Separate accounting shall be maintained for each Participant’s 409A Account and Grandfathered Amounts. Each Participant’s 409A Account and Grandfathered Amount shall be adjusted for Compensation Deferral Contributions, Employer Matching Contributions, Employer Non-elective Contributions and earnings and losses, to the extent applicable.
7.4     Funding . The Company, by action of the Human Resources Committee, may establish one or more “rabbi” trusts to hold Company Stock acquired pursuant to Section 7.2 above. Notwithstanding any other provisions of the Plan, the existence of any trust, or any authority granted by the Company to a Participant to change the investment of any rabbi trust or Company assets, the Plan shall be unfunded and the Participants in the Plan shall be no more than general, unsecured creditors of the Employer with regard to benefits payable pursuant to the Plan. Any such trust(s) shall be subject to all the provisions of the Plan, shall be property of the Company until distributed, and shall be subject to the Company’s general, unsecured creditors and judgment creditors. Any such trust(s) shall not be deemed to be collateral security for fulfilling any obligation of the Employer to the Participants. Except to the extent otherwise determined or directed by the Board or Human Resources Committee, the Company’s policy related to deposits and withdrawals from any trust(s), and the terms of any trust(s), shall be determined by the Investment Committee.


ARTICLE VIII
ADMINISTRATION
8.1     Plan Administrator . The operation of the Plan shall be under the exclusive supervision of the Committee. It shall be a principal duty of the Committee to see that the Plan is carried out in accordance with its terms, and for the exclusive benefit of persons entitled to participate in the Plan without discrimination. The Committee shall have full and exclusive power to administer and interpret the Plan in all of its details; subject, however, to the requirements of ERISA and all pertinent provisions of the Code. For this purpose, the Committee’s powers will include, but will not be limited to, the following authority, in addition to all other powers provided by the Plan:
(a) to make and enforce such rules and regulations as the Committee deems necessary or proper for the efficient administration of the Plan;
(b) to interpret the Plan, the Committee’s interpretations thereof in good faith to be final, conclusive and binding on all persons claiming benefits under the Plan;
(c) to decide all questions concerning the Plan and the eligibility of any person to participate in the Plan and to receive benefits provided under the Plan;
(d) to approve and authorize the payment of benefits;
(e) to appoint such agents, counsel, accountants and consultants as may be required to assist in administering the Plan; and
(f) to allocate and delegate the Committee’s fiduciary responsibilities under the Plan and to designate another person to carry out any of the Committee’s fiduciary responsibilities under the Plan, provide that any such allocation, delegation or designation shall, to the extent applicable, be in accordance with ERISA Section 405.
No Committee member shall be involved in a decision that only affects that member’s benefit under the Plan, if any. The Committee may delegate any of its powers to any number of other persons. Committee determinations (or those of the Committee’s delegate or agent) may be memorialized and reflected in communications and forms provided to Participants in lieu of Committee meeting minutes.
8.2     Claims . It is the intent of the Company that benefits payable under the Plan shall be payable without the Participant having to complete or submit any claim forms. However, a Participant who believes he or she is entitled to a payment under the Plan may submit a claim for payments in writing to the Company. A claim for benefits under the Plan shall be made in writing by the Participant, or, if applicable, the Participant’s executor or administrator or authorized representative, (collectively, the “Claimant”) to the Committee.
8.3     Claim Denials; Claim Appeals . If a claim for benefits under the Plan is denied, the Claimant shall be notified, in writing, within 90 days (45 days in the case of a claim due to Participant’s Disability) after the claim is filed, unless special circumstances require an extension of time for processing, in which event a decision should be rendered as soon as possible, but in no event later than 180 days (or within 90 days in the case of a claim due to Participant’s Disability) after the claim is filed. The notice shall be written in a manner calculated to be understood by the Claimant and shall set forth: (i) the specific reason(s) for the denial; (ii) specific references to the pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation as to why such information is necessary; and (iv) an explanation of the Plan’s appeal procedure.


Within 60 days (or within 180 days in the case of a claim due to Participant’s Disability) after receipt of the above material, the Claimant shall have a reasonable opportunity to appeal the claim denial to the Committee for a full and fair review. The Claimant may: (i) request a review upon written notice to the Committee; (ii) review pertinent documents; and (iii) submit issues and comments in writing.
A decision by the Committee shall be made not later than 60 days (45 days in the case of a claim due to Participant’s Disability) after receipt of a request for review, unless special circumstances require an extension of time for processing, in which event a decision should be rendered as soon as possible, but in no event later than 120 days (or within 90 days in the case of a claim due to Participant’s Disability) after such receipt. The decision of the Committee shall be written in a manner calculated to be understood by the Claimant and shall set forth: (i) the specific reason(s) for the decision; and (ii) specific references to the pertinent Plan provision on which the decision is based.
8.4     Claims Limitations and Exhaustion . No claim shall be considered under these procedures unless it is filed with the Committee within one year after the claimant knew (or reasonably should have known) of the principal facts on which the claims is based. Every untimely claim shall be denied by the Committee without regard to the merits of the claim. No legal action (whether arising under ERISA Section 502 or ERISA Section 510 or under any other statute or non-statutory law) may be brought by any claimant on any matter pertaining to the Plan unless the legal action is commenced in the proper forum before the earlier of: (i) two years after the claimant knew (or reasonably should have known) of the principal facts on which the claim is based; or (ii) 90 days after the claimant has exhausted the procedures outlined in Section 8.3. Knowledge of all facts that a Participant knew (or reasonably should have known) shall be imputed to each claimant who is or claims to be a Beneficiary of the Participant (or otherwise claims to derive an entitlement by reference to a Participant) for the purpose of applying the one‑year and two‑year periods. The exhaustion of the procedures outlined in Section 8.3 is mandatory for resolving every claim and dispute arising under the Plan. No claimant shall be permitted to commence any legal action relating to any such claim or dispute unless a timely claim has been filed under the procedures outline in Section 8.3 and those procedures have been exhausted and in any legal action all explicit and implicit determinations by the Committee shall be afforded the maximum deference permitted by law.
ARTICLE IX
AMENDMENT OR TERMINATION
9.1      Amendment or Termination . The Human Resources Committee reserves the right to amend or terminate the Plan at its sole and absolute discretion. Any such amendment or termination shall be made pursuant to a resolution of the Human Resources Committee and shall be effective as of the date of such resolution unless the resolution specifies a different effective date.
9.2      Effect of Amendment or Termination . No amendment or termination of the Plan shall directly or indirectly reduce the balance of any 409A Account or Grandfathered Amounts held hereunder as of the later of the adoption or effective date of such amendment or termination, or make any material modification related to any Grandfathered Amounts. The Participant’s 409A Account and Grandfathered Amounts will continue to share in earnings and losses until complete distribution of the 409A Account and Grandfathered Amounts. Upon and following the occurrence of a Change of Control Event, no amendment or termination of the Plan may reduce any Participant’s rights with respect to his or her 409A Account and Grandfathered Amounts as of the later of the adoption or effective date of such amendment or termination without such Participant’s consent. Upon termination of the Plan, distribution of amounts credited to the 409A Accounts shall be made to Participants and their Beneficiaries in one of the following manners elected by the Company:


(a)      In the manner and at the time otherwise provided under the Plan; or
(b)      In a lump sum payable at a time permitted by Code Section 409A, provided that all conditions of Code Section 409A are and will be satisfied.
ARTICLE X
409A COMPLIANCE
The Plan is intended to comply with the provisions of Code Section 409A and the final regulations promulgated thereunder, except as otherwise provided herein (Code Section 409A and the regulations and other guidance issued with respect thereto, may be referred to as “409A”). With respect to amounts other than Grandfathered Amounts, the Plan shall be interpreted, operated and applied to comply with 409A so as not to subject any Participant to the additional tax, interest or penalties that may be imposed under 409A and not to cause inclusion in any Participant’s income of a Participant’s 409A Account (and any related penalty and interest) until such amount or amounts are actually distributed to such Participant (which additional tax, interest, penalties or income inclusion shall individually and in the aggregate be referred to as “Adverse 409A Consequence” or “Adverse 409A Consequences”). With respect to Grandfathered Amounts, the Plan shall be interpreted and administered to prevent 409A from applying to Grandfathered Amounts; this shall include, but not be limited to, avoiding a material modification of the terms that were applicable to the Grandfathered Amounts on October 3, 2004. However, it is understood that 409A is ambiguous in certain respects. The Committee and Company will attempt in good faith not to take any action, and will attempt in good faith to refrain from taking any action, that would result in the imposition of tax, interest and/or penalties upon any Participant under 409A. To the extent the Committee and Company have acted or refrained from acting in good faith as required by this Section, neither they, their employees, contractors and agents, the Board, each member of the Board nor any Plan fiduciary (the “Released Parties”) shall in any way be liable for, and by participating in the Plan, each Participant automatically releases the Released Parties from any liability due to, any failure to follow the requirements of 409A. No Participant shall be entitled to any damages related to any such failure even though the Plan requires certain actions to be taken in conformance with 409A. The Company may delay any payment to the extent the delay would not result in any Adverse 409A Consequence.
ARTICLE XI
GENERAL PROVISIONS
11.1 Beneficiary . The term “Beneficiary” means one or more persons or other entities designated by the Participant to receive the benefits payable by reason of the Participant’s death as provided under the Plan. The designation shall be in writing on a form approved by the Committee, signed by the Participant and delivered to the Committee to be valid. If the Participant makes no valid designation, or if the designated primary and secondary Beneficiaries fail to survive the Participant or otherwise fail to elect to receive such benefits, Participant’s Beneficiary shall then be the first of the following persons who survives the Participant: (i) the Participant’s spouse (that is, the person to whom the Participant is legally married at the time of the Participant’s death), (ii) the Participant’s surviving issue, per stirpes, or (iii) the personal representative(s) of the Participant’s estate, to be administered and distributed as part of such estate. The Participant may change his or her designated Beneficiary by delivering a new written designation of beneficiary form to the Committee on a form approved by the Committee.
11.2 Board . The term “Board” means the Board of Directors of Conagra Brands, Inc.
11.3 Code . The term “Code” means the Internal Revenue Code of 1986, as amended from time to



time.
11.4 Committee . The term “Committee” means the Company’s Employee Benefits Administrative Committee.
11.5 Company . The term “Company” means Conagra Brands, Inc., a Delaware corporation, or any successor corporation or other entity resulting from a merger or consolidated into or with the Company or a transfer or sale of substantially all of the assets of the Company.
11.6 Effective Date . The Plan is adopted effective January 1, 2017, except to the extent otherwise provided herein.
11.7 Employer . The term “Employer” means the Company and any Related Company that the Company has authorized to participate in the Plan as to its employees.
11.8 ERISA . The Employee Retirement Income Security Act of 1974, as amended from time to time.
11.9 Human Resources Committee . The term “Human Resources Committee” means the Human Resources Committee of the Board.
11.10 Participant . The term “Participant” means any eligible employee covered by the Plan in accordance with the provisions of Article II.
11.11 Plan . The term “Plan” means the Conagra Brands, Inc. Voluntary Deferred Compensation Plan as set forth herein, and as may be amended from time to time.
11.12 Plan Year . The term “Plan Year” means the calendar year.

11.13 Valuation Date . The term “Valuation Date” means the last business day of each Plan Year and any other dates designated by the Committee in its discretion.
11.14 No Guarantee of Benefits . Nothing contained in the Plan shall constitute a guarantee by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefit hereunder.
11.15 No Enlargement of Employee Rights . No Participant shall have any right to receive a distribution of contributions made under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to be retained in the service of the Employer.
11.16 Spendthrift Provision . No interest of any person or entity in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person or entity, including claims for alimony, support, separate maintenance and claims in bankruptcy proceedings, other than by will or the laws of descent.
11.17 Incapacity of Recipient . If any person entitled to a distribution under the Plan is deemed by the Company to be incapable of personally receiving or giving a valid receipt for such payment, then, unless and until claim therefore shall have been made by a duly appointed guardian or other legal representative of

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such person, the Company may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment of the account of such person and a complete discharge of any liability of the Company and the Plan therefore.
11.18 Corporate Successors . The Plan shall not be automatically terminated by a transfer or sale of assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger or consolidated only if and to the extent that the transferee, purchaser or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser or successor entity, then the Plan shall terminate and the termination provision of Section 9.2 shall apply.
11.19 Governing Law . The Plan shall be construed and administered under the laws of the State of Illinois to the extent federal law is not applicable.
11.20 Offsets . When any payment from a Participant’s Grandfathered Amount becomes due hereunder, the Company, without notice, demand or any other action, may withhold payment and use the funds to offset any amounts owed by the Participant to the Company or any of its affiliates. In addition, the Company also may offset a Participant’s 409A Account in any Plan Year by an amount not to exceed $5,000 to satisfy a debt of the Participant owed to the Employer, provided that: (i) the debt was incurred in the ordinary course of the Participant’s employment by the Employer; and (ii) the offset is made at the same time and in the same amount as the debt otherwise would have been due and collected from the Participant.
11.21 Severability . If any provision of the Plan is held invalid or unenforceable, its invalidity or unenforceability shall not affect any other provision of the Plan, and the Plan shall be construed and enforced as if such provision had not been included herein.
11.22 Compliance with a Domestic Relations Order . Notwithstanding any provision in the Plan or any Participant election to the contrary, with respect to payments to a person other than the Participant, the Company may provide for acceleration of the time or form of payment to an individual other than the Participant, or a payment may be made to an individual other than the Participant, to the extent necessary to fulfill a domestic relations order (as defined in Code Section 414(p)(1)(B)). The Company may, in its sole and absolute discretion, impose any restrictions it desires on the terms of a domestic relations order with which it will comply pursuant to this Section.
11.23 Expenses . The reasonable expenses incident to the operation of the Plan may be paid by the Company; however, the Company may, in its sole discretion, allocate specific categories of Plan expenses to the 409A Accounts and Grandfathered Amounts to which the expenses are attributable. Plan expenses that are not specifically allocated and are not paid by the Company shall be charged to the 409A Accounts and Grandfathered Amounts of Participants and Beneficiaries in proportion to their respective balances. The Company may, in its sole discretion, chose to pay all or a portion of the Plan expenses allocable to Participants who are current Employees while not paying, or paying a lesser portion of, Plan expenses allocated to other 409A Accounts and Grandfathered Amounts.

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IN WITNESS WHEREOF , the Company has caused the Plan to be executed this 2 nd day of October, 2017, effective as of January 1, 2017.
CONAGRA BRANDS, INC.
By /s/ Ryan Egan__________________________________
Its: Vice President, Human Resources
    


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Exhibit 10.7.6



FORM OF RESTRICTED STOCK UNIT AGREEMENT
[CASH or STOCK SETTLED]
CONAGRA FOODS, INC. 2014 STOCK PLAN

This Restricted Stock Unit Agreement, hereinafter referred to as the “Agreement”, is made between Conagra Brands, Inc., a Delaware corporation (“Conagra” or the “Company”), and the undersigned employee of the Company (the “Participant”).

1.
Award Grant. Conagra hereby grants Restricted Stock Units ("RSUs", and each such unit an “RSU”) to the Participant under the ConAgra Foods, Inc. 2014 Stock Plan (the “Plan”), as follows, effective as of the Date of Grant set forth below:

Participant :    

Employee ID:     

Number of RSUs :    

Date of Grant:     

Vesting Date[s] :    

Dividend Equivalents:  Dividend equivalents on the RSUs will [ as applicable : be accumulated for the benefit of the Participant if and when regular cash dividends are declared and paid on the Stock in accordance with Section 7, and will be paid in shares of Stock to the Participant upon settlement of the RSUs/ not be paid or accumulated].


Please read this Agreement and the Plan carefully. Conagra has caused this Agreement to be executed effective as of the Date of Grant. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the Plan shall control. If you do not wish to receive this Award and/or you do not consent and agree to the terms and conditions on which this Award is offered, as set forth in this Agreement and the Plan, then you must reject the award no later than 11:59 p.m., Pacific Time, on the 90th calendar day following the Date of Grant by (1) indicating your rejection on the "Grant Acceptance" page of the Merrill Lynch Benefits Online website or (2) contacting the Merrill Lynch call center. The award will only be cancelled if you take one of these affirmative actions. Your failure to validly reject the award prior to the deadline will constitute your acceptance of the award with its terms and conditions, as set forth in this Agreement and the Plan.


CONAGRA BRANDS, INC.                 
By:      Sean Connolly                 
Date: _____             

1



2.
Definitions. Capitalized terms used herein without definition have the meanings set forth in the Plan. The following terms shall have the respective meanings set forth below:
(a) “Continuous Employment ” means the absence of any interruption or termination of employment with the Company and the performance of substantial services. Continuous Employment shall not be considered interrupted or terminated in the case of sick leave, short-term disability (as defined in the Company’s sole discretion), military leave or any other leave of absence approved by the Company unless and until there is a Separation from Service (as defined in Section 2(f)).
(b) “ Disability ” means that the Participant, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, is receiving income replacement benefits for a period of not less than three months under the Company’s long‑term disability plan.
(c) “ Divestiture ” means a permanent disposition to a person other than the Company or a Subsidiary (i) of a plant at which the Participant performs a majority of the Participant’s services, (ii) of any discreet organizational unit, division or business of the Company with which the Participant's employment is principally associated, or (iii) of assets or Subsidiary stock that is determined by the Committee in its sole discretion to be treated as a "Divestiture" for purposes of this Agreement, in each case in this sentence regardless of whether such disposition is effected by means of a sale of assets, a sale of Subsidiary stock or otherwise. However, “Divestiture” shall not include any event that constitutes a “Change of Control”.
(d) “ Early Retirement ” means a Separation from Service with the Company when the Participant (i) is at least age 55, and (ii) has at least 10 years of credited service with the Company.
(e) “ Normal Retirement ” means a Separation from Service with the Company on or after (i) attaining age 65 or (ii) attaining age 60 with at least five years of credited service with the Company.
(f) “ Separation from Service, ” “ termination of employment ” and similar terms mean the date that the Participant “separates from service” within the meaning of Code Section 409A. Generally, a Participant separates from service if and only if the Participant dies, retires, or otherwise has a termination of employment with the Company determined in accordance with Code Section 409A and the following:
(i)
Leaves of Absence . The employment relationship is treated as continuing intact while the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six months, or, if longer, so long as the Participant retains a right to reemployment with the Company under an applicable statute or by contract. A leave of absence constitutes a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Company. If the period of leave exceeds six months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship is deemed to terminate on the first date immediately following such six‑month period. Notwithstanding the foregoing, where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, a 12‑month period of absence shall be substituted for such six-month period.
(ii)
Dual Status . Generally, if a Participant performs services both as an employee and an independent contractor, such Participant must separate from service both as an employee and as an independent contractor, pursuant to standards set forth in Treasury Regulations, to be treated as having a separation from service. However, if a Participant provides services to the Company as an employee and as a member of the Board, and if any plan in which such person participates as a Board member is not aggregated with this Agreement pursuant to Treasury Regulation Section 1.409A-1(c)(2)(ii), then the services provided as a director are not taken into account in determining whether the Participant has a separation from service as an employee for purposes of this Agreement.
(iii)
Termination of Employment . Whether a termination of employment has occurred is determined based on whether the facts and circumstances indicate that the Company and the Participant reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Participant would perform after such date (whether as an employee or as an independent contractor except as provided in (ii) above) would permanently decrease to no more than 20% of the average level of bona fide services performed (whether as an employee or an independent contractor,

2


except as provided in (ii) above) over the immediately preceding 36‑month period (or the full period of services to the Company if the Participant has been providing services to the Company less than 36 months). For periods during which a Participant is on a paid bona fide leave of absence and has not otherwise terminated employment as described above, for purposes of this paragraph (iii), the Participant is treated as providing bona fide services at a level equal to the level of services that the Participant would have been required to perform to receive the compensation paid with respect to such leave of absence. Periods during which a Participant is on an unpaid bona fide leave of absence and has not otherwise terminated employment are disregarded for purposes of this paragraph (iii) (including for purposes of determining the applicable 36‑month (or shorter) period).
As used in connection with the definition of “Separation from Service,” Company includes the Company and any other entity that with the Company constitutes a controlled group of corporations (as defined in Code Section 414(b)), or a group of trades or businesses (whether or not incorporated) under common control (as defined in Code Section 414(c)), substituting 25% for the 80% ownership level for purposes of both Code Sections 414(b) and 414(c).
(g)
“ Settlement Amount ” means [ as applicable : one share of Stock/an amount in cash equal to the closing price on the New York Stock Exchange of one share of Stock on the Vesting Date].
(h) “ Specified Employee ” is as defined under Code Section 409A and Treasury Regulation Section 1.409A-1(i).
(i) “ Successors ” means the beneficiaries, executors, administrators, heirs, successors and assigns of a person.
3.
Vesting of RSUs .
(a)
Normal Vesting . Subject to the Plan and this Agreement, if the Participant has been in Continuous Employment through the respective Vesting Date[s] as set forth in Section 1, then the RSUs subject to such Vesting Date[s] shall become nonforfeitable (“Vest” or similar terms).
(b) Termination of Employment . If, prior to the Vesting Date[s] set forth in Section 1, the Participant’s employment with the Company terminates:
(i)
by reason of death, then all unvested RSUs evidenced by this Agreement shall, to the extent such RSUs have not previously been forfeited, become 100% Vested.
(ii)
by reason of Normal Retirement, then all unvested RSUs evidenced by this Agreement shall, to the extent such RSUs have not previously been forfeited, become 100% Vested.
(iii)
by reason of Early Retirement, involuntary termination due to Disability, position elimination, reduction in force (each as defined in the Company's sole discretion), or Divestiture, then the Participant shall Vest in a pro rata portion of the RSUs determined by multiplying the number of RSUs evidenced by this Agreement, to the extent not previously Vested or forfeited, by a fraction, the numerator of which is the total number of calendar days during which the Participant was employed by the Company during the period beginning on the Date of Grant and ending on the Participant’s Separation from Service and the denominator of which is the total number of calendar days beginning on the Date of Grant and ending on the final Vesting Date, rounded to the nearest whole number of RSUs.
(iv)
for Cause prior to the final Vesting Date, then all RSUs, whether Vested or unvested prior to the final Vesting Date, shall be immediately forfeited without further consideration to the Participant.
(c) Accelerated Vesting in Connection with a Change of Control .
(i)
If a Change of Control occurs prior to the final Vesting Date, and the Participant has been in Continuous Employment between the Date of Grant and the date of such Change of Control, then all unvested RSUs evidenced by this Agreement shall become 100% Vested, except (A) to the extent such RSUs have previously been forfeited, or (B) to the extent that a Replacement Award is provided to the Participant to replace, continue or adjust the outstanding RSUs (the “Replaced Award”). If the Participant’s employment with the Company (or any of its successors after the Change of Control) (as applicable, the “Successor Company”) is terminated by the Participant for Good Reason or by the Successor Company other than for Cause, in each case within a period of two years after the Change of Control but prior to the final Vesting Date, to the extent that the Replacement Award has not previously been Vested or forfeited, the Replacement Award shall become 100% Vested (and become entitled to settlement as specified in Section 4(b)(ii)).
(ii)
For purposes of this Agreement, a “Replacement Award” means an award (A) of the same type ( i.e. , time-based restricted stock units) as the Replaced Award, (B) that has a value at least equal to the

3


value of the Replaced Award, (C) that relates to U.S. publicly traded equity securities of the Successor Company in the Change of Control (or another U.S. publicly traded entity that is affiliated with the Successor Company following the Change of Control), (D) the tax consequences of which for such Participant under the Code, if the Participant is subject to U.S. federal income tax under the Code, are not less favorable to the Participant than the tax consequences of the Replaced Award, and (E) the other terms and conditions of which are not less favorable to the Participant than the terms and conditions of the Replaced Award (including the provisions that would apply in the event of a subsequent change of control). A Replacement Award may be granted only to the extent it does not result in the Replaced Award or Replacement Award failing to comply with or ceasing to be exempt from Code Section 409A. Without limiting the generality of the foregoing, the Replacement Award may take the form of a continuation of the Replaced Award if the requirements of the preceding two sentences are satisfied. The determination of whether the conditions of this Section 3(c)(ii) are satisfied will be made in good faith by the Committee, as constituted immediately before the Change of Control, in its sole discretion.
(iii)
For purposes of this Agreement, “Cause” means: (A) the willful and continued failure by the Participant to substantially perform the Participant’s duties with the Successor Company (other than any such failure resulting from termination by the Participant for Good Reason) after a demand for substantial performance is delivered to the Participant that specifically identifies the manner in which the Successor Company believes that the Participant has not substantially performed the Participant’s duties, and the Participant has failed to resume substantial performance of the Participant’s duties on a continuous basis within five days of receiving such demand; (B) the willful engaging by the Participant in conduct that is demonstrably and materially injurious to the Successor Company, monetarily or otherwise; or (C) the Participant’s conviction of a felony or conviction of a misdemeanor that impairs the Participant’s ability substantially to perform the Participant’s duties with the Successor Company. For the purposes of this definition, no act, or failure to act, on the Participant’s part shall be deemed “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interest of the Successor Company.
Notwithstanding anything in this Agreement to the contrary, nothing in this Agreement prevents a Participant from providing, without prior notice to the Company, information to governmental authorities regarding possible legal violations or otherwise testifying or participating in any investigation or proceeding by any governmental authorities regarding possible legal violations and, for purpose of clarity, the Participant is not prohibited from providing information voluntarily to the Securities and Exchange Commission pursuant to Section 21F of the Securities Exchange Act of 1934, as amended.
(iv)
For purposes of this Agreement, “Good Reason” means: (A) any material failure of the Successor Company to comply with and satisfy any of the terms of any employment or change of control (or similar) agreement between the Successor Company and the Participant pursuant to which the Participant provides services to the Successor Company; (B) any significant involuntary reduction of the authority, duties or responsibilities held by the Participant immediately prior to the Change of Control (and, for the avoidance of doubt, involuntary removal of the Participant from an officer position that the Participant holds immediately prior to the Change of Control will not, by itself, constitute a significant involuntary reduction of the authority, duties or responsibilities held by the Participant immediately prior to the Change of Control); (C) any material involuntary reduction in the aggregate remuneration of the Participant as in effect immediately prior to the Change of Control; or (D) requiring the Participant to become based at any office or location more than the minimum number of miles required by the Code for the Participant to claim a moving expense deduction, from the office or location at which the Participant was based immediately prior to such Change of Control, except for travel reasonably required in the performance of the Participant’s responsibilities; provided, however, that no termination shall be deemed to be for Good Reason unless (x) the Participant provides the Successor Company with written notice setting forth the specific facts or circumstances constituting Good Reason within 90 days after the initial existence of the occurrence of such facts or circumstances, and (y) the Successor Company has failed to cure such facts or circumstances within 30 days of its receipt of such written notice.
(v)
If a Replacement Award is provided, notwithstanding anything in this Agreement to the contrary, any outstanding RSUs that, at the time of the Change of Control, are not subject to a "substantial risk of forfeiture" (within the meaning of Code Section 409A) shall be deemed to be Vested at the time of such Change of Control.
(d)
Forfeiture of Unvested RSUs . Subject to Section 3(b)(iv), any RSUs that have not Vested pursuant to Section

4


3(a), Section 3(b), or Section 3(c) as of the final Vesting Date shall be forfeited automatically and without further notice on such date (or earlier if, and on such date that, the Participant ceases to be in Continuous Employment prior to the final Vesting Date for any reason other than as described in Section 3(b) or Section 3(c) ) .
4.
Settlement of RSUs .
(a)
Normal . Subject to Section 4(b), the Company shall pay to the Participant the Settlement Amount on or within 30 days after the Vesting Date for each Vested RSU to the extent the RSU has not previously been Vested, forfeited or settled.
(b) Other Settlement Events . Notwithstanding Section 4(a), to the extent the RSUs are Vested RSUs on the dates set forth below and to the extent the Vested RSUs have not previously been Vested, forfeited or settled, the Company will settle such Vested RSUs as follows:
(i)
Death . Within 30 days of the Participant's death, the Company will pay, to the person entitled by will or the applicable laws of descent and distribution to such Vested RSUs, the Settlement Amount for each such Vested RSU.
(ii)
Separation from Service . Within 30 days of the Participant's Separation from Service, the Company will pay to the Participant the Settlement Amount for each such Vested RSU.
(iii)
Change of Control . The Participant is entitled to receive payment of the Settlement Amount for each Vested RSU on the date of the Change of Control; provided, however, that if such Change of Control would not qualify as a permissible date of distribution under Code Section 409A(a)(2)(A), and the regulations thereunder, and where Code Section 409A applies to such distribution, the Participant is entitled to receive the corresponding payment on the date that would have otherwise applied pursuant to Section 4 as though such Change of Control had not occurred.
(c) Payment of Taxes Upon Settlement . As a condition of the payment of the Settlement Amount upon settlement of RSUs hereunder, the Participant agrees that the Company shall withhold from the Settlement Amount any taxes required to be withheld by the Company under Federal, State or local law as a result of the settlement of the RSUs in an amount sufficient to satisfy the minimum amount of taxes that is required to be withheld. To the extent permitted under the Plan, the Committee may allow for withholding up to the maximum amount permissible in accordance with applicable law in effect as of the date the RSUs are settled; provided, however, and notwithstanding Section 11.4 of the Plan, additional tax withholding above the statutory minimum may not be satisfied by delivering to the Company previously acquired shares of Stock.
(d) Specified Employee . Notwithstanding anything (including any provision of this Agreement or the Plan) to the contrary, if a Participant is a Specified Employee and if the RSUs are subject to Code Section 409A, payment to the Participant on account of a Separation from Service shall, to the extent required to comply with Treasury Regulation Section 1.409A-3(i)(2), be made to the Participant on the earlier of (i) the Participant’s death or (ii) the first business day (or within 30 days after such first business day) that is more than six months after the date of Separation from Service. In the Company’s sole and absolute discretion, interest may be paid due to such delay. Further, any interest shall be calculated in the manner determined by the Company in its sole and absolute discretion in a manner that qualifies any interest as reasonable earnings under Code Section 409A. Dividend equivalents shall not be paid with respect to any dividends that would have been paid during the delay.
5. Non-Transferability of RSUs . The RSUs may not be assigned, transferred, pledged or hypothecated in any manner (otherwise than by will or the laws of descent or distribution) nor may the Participant enter into any transaction for the purpose of, or which has the effect of, reducing the market risk of holding the RSUs by using puts, calls or similar financial techniques. The RSUs subject to this Agreement may be settled during the lifetime of the Participant only with the Participant or the Participant’s guardian or legal representative. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of the RSUs or any related rights to the RSUs that is contrary to the provisions of this Agreement or the Plan, or upon the levy of any attachment or similar process upon the RSUs or such rights, the RSUs and such rights shall immediately become null and void. The terms of this Agreement shall be binding upon the Successors of the Participant.
6. Rights as Stockholder . The Participant, or his/her Successors, shall have no rights as stockholder with respect to any RSUs covered by this Agreement, and, except as provided in Section 7 [ If applicable or Section 8], no adjustment shall be made for dividends or distributions or other rights in respect of such RSUs.

5


7. [ As applicable :  Payment of Dividend Equivalents .  From and after the Date of Grant until the earlier of (a) the time when the RSUs become Vested and are settled in accordance with Section 3 and Section 4 or (b) the time when the Participant’s right to receive shares of Stock in settlement of the RSUs is forfeited in accordance with Section 3, on the date that the Company pays a cash dividend (if any) to holders of Stock generally, the Participant shall be entitled to a number of additional RSUs determined by dividing (i) the product of (x) the dollar amount of the cash dividend paid per share of Stock on such date and (y) the total number of RSUs (including dividend equivalents paid thereon) previously credited to the Participant as of such date, by (ii) the Fair Market Value of the Stock on such date. Such dividend equivalents (if any) shall be subject to the same terms and conditions and shall be paid, in the aggregate rounded up to the nearest whole number, or forfeited in the same manner and at the same time as the RSUs to which the dividend equivalents were credited./ No Dividend Equivalents .  No dividend equivalents will be paid or accumulated on the RSUs.]
8. Adjustments Upon Changes in Capitalization; Change of Control . In the event of any change in corporate capitalization, corporate transaction, sale or other disposition of assets or similar corporate transaction or event involving the Company as described in Section 5.5 of the Plan, the Committee shall make equitable adjustment as it determines necessary and appropriate in the number of RSUs subject to this Agreement; provided , however , that no fractional share shall be issued upon subsequent settlement of the RSUs. No adjustment shall be made if such adjustment is prohibited by Section 5.5 of the Plan (relating to Code Section 409A).
9. Notices. Each notice relating to this Agreement shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to its principal office in Chicago, Illinois, Attention: Compensation. Each notice to the Participant or any other person or persons entitled to receive a Settlement Amount upon settlement of the RSUs shall be addressed to the Participant’s address and may be in written or electronic form. Anyone to whom a notice may be given under this Agreement may designate a new address by giving notice to the effect.
10. Benefits of Agreement , This Agreement shall inure to the benefit of and be binding upon each successor of the Company. All obligations imposed upon the Participant and all rights granted to the Company under this Agreement shall be binding upon the Participant's Successors. This Agreement shall be the sole and exclusive source of any and all rights that the Participant or his/her Successors may have in respect to the Plan or this Agreement.
11. No Right to Continued Employment . Nothing in this Agreement shall interfere with or affect the rights of the Company or the Participant under any employment agreement or confer upon the Participant any right to continued employment with the Company.
12. Resolution of Disputes . Any dispute or disagreement that should arise under or as a result of or in any way related to the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive for all purposes. This Agreement and the legal relations between the parties hereto shall be governed by and construed in accordance with the laws of the state of Delaware.
13. Section 409A Compliance . To the extent applicable, this Agreement is intended to comply with Code Section 409A and any regulations or notices provided thereunder. This Agreement and the Plan shall be interpreted in a manner consistent with this intent. The Company reserves the unilateral right to amend this Agreement on written notice to the Participant in order to comply with Code Section 409A. It is intended that all compensation and benefits payable or provided to Participant under this Agreement shall, to the extent required to comply with Code Section 409A, fully comply with the provisions of Code Section 409A and the Treasury Regulations relating thereto so as not to subject Participants to the additional tax, interest or penalties that may be imposed under Code Section 409A. None of the Company, its contractors, agents and employees, the Board and each member of the Board shall be liable for any consequences of any failure to follow the requirements of Code Section 409A or any guidance or regulations thereunder, unless such failure was the direct result of an action or failure to act that was undertaken by the Company in bad faith.
14. Amendment . Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto.

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15. Severability . If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.
16. Electronic Delivery . The Company may, in its sole discretion, deliver any documents related to the RSUs and the Participant’s participation in the Plan, or future awards that may be granted under the Plan, by electronic means or request the Participant’s consent to participate in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and, if requested, agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.


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Exhibit 12
Conagra Brands, Inc. and Subsidiaries
Computation of Ratio of Earnings to Fixed Charges
($ in millions)



 
Thirteen Weeks Ended
August 27, 2017
Earnings:
 
Income from continuing operations before income taxes and equity method investment earnings
$
243.6

Add (deduct):
 
Fixed charges
43.8

Distributed income of equity method investees
—

Capitalized interest
(1.2
)
Earnings available for fixed charges (a)
$
286.2

 
 
Fixed charges:
 
Interest expense
$
37.4

Capitalized interest
1.2

One third of rental expense (1)
5.2

Total fixed charges (b)
$
43.8

 
 
Ratio of earnings to fixed charges (a/b)
6.5


(1) Considered to be representative of interest factor in rental expense.



Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I, Sean M. Connolly, certify that:
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended August 27, 2017 of Conagra Brands, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date: October 3, 2017
 
 
 
/s/ SEAN M. CONNOLLY

 
Sean M. Connolly
 
Chief Executive Officer
 

Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I, David S. Marberger, certify that:
1.
I have reviewed this quarterly report on Form 10-Q for the quarter ended August 27, 2017 of Conagra Brands, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 

Date: October 3, 2017
 
 
 
/s/ DAVID S. MARBERGER

 
David S. Marberger
 
Executive Vice President and Chief Financial Officer
 

Exhibit 32.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Sean M. Connolly, Chief Executive Officer of Conagra Brands, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that Conagra Brands, Inc.'s Quarterly Report on Form 10-Q for the quarter ended August 27, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Conagra Brands, Inc. as of and for the periods presented.
 
October 3, 2017
 
 
 
/s/ SEAN M. CONNOLLY

 
Sean M. Connolly
 
Chief Executive Officer
 
I, David S. Marberger, Executive Vice President and Chief Financial Officer of Conagra Brands, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that Conagra Brands, Inc.'s Quarterly Report on Form 10-Q for the quarter ended August 27, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and that the information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of Conagra Brands, Inc. as of and for the periods presented.
 
October 3, 2017
 
 
 
/s/ DAVID S. MARBERGER

 
David S. Marberger
 
Executive Vice President and Chief Financial Officer
 
A signed original of this written statement required by Section 906 has been provided to Conagra Brands, Inc. and will be retained by Conagra Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.