UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 27, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File Number: 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 W. 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)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $5.00 par value	CAG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒     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.

Large accelerated filer  ☒ Accelerated filer  ☐ Non-accelerated filer    ☐ Smaller reporting company   ☐ Emerging growth company    ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Number of shares outstanding of issuer's common stock as of November 27, 2022 was 476,622,501.

Table of Contents

PART I. FINANCIAL INFORMATION		1
Item 1	Financial Statements	1
	Unaudited Condensed Consolidated Statements of Earnings for the Thirteen and Twenty-Six Weeks Ended November 27, 2022 and November 28, 2021	1
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Thirteen and Twenty-Six Weeks Ended November 27, 2022 and November 28, 2021	2
	Unaudited Condensed Consolidated Balance Sheets as of November 27, 2022 and May 29, 2022	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended November 27, 2022 and November 28, 2021	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4	Controls and Procedures	39
PART II. OTHER INFORMATION		39
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 6	Exhibits	40
Signatures		41
Exhibit 31.1
Exhibit 31.2
Exhibit 32
Exhibit 101
Exhibit 104

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						Twenty-Six Weeks Ended
	November 27, 2022			November 28, 2021			November 27, 2022			November 28, 2021
Net sales	$	3,312.9		$	3,058.9		$	6,217.2		$	5,712.2
Costs and expenses:
Cost of goods sold		2,390.6			2,304.1			4,574.6			4,284.0
Selling, general and administrative expenses		372.7			345.4			1,114.3			655.5
Pension and postretirement non-service income		(6.1	)		(16.1	)		(12.2	)		(32.2	)
Interest expense, net		100.3			94.9			197.4			189.1
Income before income taxes and equity method investment earnings		455.4			330.6			343.1			615.8
Income tax expense		122.5			84.2			136.9			153.9
Equity method investment earnings		49.3			29.5			98.5			49.7
Net income	$	382.2		$	275.9		$	304.7		$	511.6
Less: Net income attributable to noncontrolling interests		0.3			0.4			0.3			0.7
Net income attributable to Conagra Brands, Inc.	$	381.9		$	275.5		$	304.4		$	510.9
Earnings per share — basic
Net income attributable to Conagra Brands, Inc. common stockholders	$	0.80		$	0.57		$	0.63		$	1.06
Earnings per share — diluted
Net income attributable to Conagra Brands, Inc. common stockholders	$	0.79		$	0.57		$	0.63		$	1.06

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
	November 27, 2022									November 28, 2021
	Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount			Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount
Net income	$	504.7		$	(122.5	)	$	382.2		$	360.1		$	(84.2	)	$	275.9
Other comprehensive income:
Derivative adjustments:
Unrealized derivative adjustments		9.7			(2.4	)		7.3			2.2			(0.5	)		1.7
Reclassification for derivative adjustments included in net income		(1.0	)		0.3			(0.7	)		(0.3	)		—			(0.3	)
Unrealized currency translation losses		(8.2	)		—			(8.2	)		(17.7	)		—			(17.7	)
Pension and post-employment benefit obligations:
Unrealized pension and post-employment benefit obligations		(0.6	)		0.1			(0.5	)		—			—			—
Reclassification for pension and post-employment benefit obligations included in net income		(1.2	)		0.3			(0.9	)		(0.9	)		0.3			(0.6	)
Comprehensive income		503.4			(124.2	)		379.2			343.4			(84.4	)		259.0
Comprehensive loss attributable to noncontrolling interests		(1.4	)		(0.1	)		(1.5	)		(1.0	)		(0.1	)		(1.1	)
Comprehensive income attributable to Conagra Brands, Inc.	$	504.8		$	(124.1	)	$	380.7		$	344.4		$	(84.3	)	$	260.1

	Twenty-Six Weeks Ended
	November 27, 2022									November 28, 2021
	Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount			Pre-Tax Amount			Tax (Expense) Benefit			After- Tax Amount
Net income	$	441.6		$	(136.9	)	$	304.7		$	665.5		$	(153.9	)	$	511.6
Other comprehensive income:
Derivative adjustments:
Unrealized derivative adjustments		7.4			(1.8	)		5.6			(0.3	)		0.1			(0.2	)
Reclassification for derivative adjustments included in net income		(1.6	)		0.5			(1.1	)		(0.6	)		0.1			(0.5	)
Unrealized currency translation losses		(21.8	)		—			(21.8	)		(33.4	)		—			(33.4	)
Pension and post-employment benefit obligations:
Unrealized pension and post-employment benefit obligations		1.6			—			1.6			2.1			(0.2	)		1.9
Reclassification for pension and post-employment benefit obligations included in net income		(2.3	)		0.7			(1.6	)		(1.7	)		0.5			(1.2	)
Comprehensive income		424.9			(137.5	)		287.4			631.6			(153.4	)		478.2
Comprehensive loss attributable to noncontrolling interests		(3.5	)		(0.1	)		(3.6	)		(1.9	)		(0.2	)		(2.1	)
Comprehensive income attributable to Conagra Brands, Inc.	$	428.4		$	(137.4	)	$	291.0		$	633.5		$	(153.2	)	$	480.3

See Notes to the Condensed Consolidated Financial Statements.

2

Conagra Brands, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions except share data)

(unaudited)

	November 27, 2022			May 29, 2022
ASSETS
Current assets
Cash and cash equivalents	$	39.7		$	83.3
Receivables, less allowance for doubtful accounts of $3.7 and $3.9		910.5			867.4
Inventories		2,347.7			1,966.7
Prepaid expenses and other current assets		118.5			116.3
Total current assets		3,416.4			3,033.7
Property, plant and equipment		5,993.1			5,896.3
Less accumulated depreciation		(3,304.9	)		(3,159.1	)
Property, plant and equipment, net		2,688.2			2,737.2
Goodwill		11,180.1			11,329.2
Brands, trademarks and other intangibles, net		3,579.0			3,857.8
Other assets		1,550.3			1,477.2
	$	22,414.0		$	22,435.1
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable	$	365.5		$	184.3
Current installments of long-term debt		954.3			707.3
Accounts payable		1,596.3			1,864.6
Accrued payroll		119.4			151.7
Other accrued liabilities		687.2			610.9
Total current liabilities		3,722.7			3,518.8
Senior long-term debt, excluding current installments		8,081.8			8,088.2
Other noncurrent liabilities		1,871.8			1,965.9
Total liabilities		13,676.3			13,572.9
Common stockholders' equity
Common stock of $5 par value, authorized 1,200,000,000 shares; issued 584,219,229		2,921.2			2,921.2
Additional paid-in capital		2,360.9			2,324.6
Retained earnings		6,536.5			6,550.7
Accumulated other comprehensive loss		(24.6	)		(11.2	)
Less treasury stock, at cost, 107,596,728 and 104,157,169 common shares		(3,127.7	)		(2,997.6	)
Total Conagra Brands, Inc. common stockholders' equity		8,666.3			8,787.7
Noncontrolling interests		71.4			74.5
Total stockholders' equity		8,737.7			8,862.2
	$	22,414.0		$	22,435.1

See Notes to the Condensed Consolidated Financial Statements.

3

Conagra Brands, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions)

(unaudited)

	Twenty-Six Weeks Ended
	November 27, 2022			November 28, 2021
Cash flows from operating activities:
Net income	$	304.7		$	511.6
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization		185.5			193.5
Asset impairment charges		413.7			41.6
Equity method investment earnings in excess of distributions		(55.6	)		(24.2	)
Stock-settled share-based payments expense		59.0			14.3
Contributions to pension plans		(5.9	)		(4.9	)
Pension benefit		(6.9	)		(25.5	)
Other items		(4.5	)		(14.5	)
Change in operating assets and liabilities excluding effects of business acquisitions and dispositions:
Receivables		(46.1	)		(183.3	)
Inventories		(380.9	)		(148.4	)
Deferred income taxes and income taxes payable, net		(39.4	)		(13.9	)
Prepaid expenses and other current assets		(13.8	)		(10.4	)
Accounts payable		(109.8	)		(14.1	)
Accrued payroll		(32.2	)		(60.6	)
Other accrued liabilities	30.0				0.9
Net cash flows from operating activities		297.8			262.1
Cash flows from investing activities:
Additions to property, plant and equipment		(188.4	)		(257.5	)
Sale of property, plant and equipment		2.4			9.9
Purchase of marketable securities		(1.6	)		(1.9	)
Sale of marketable securities		1.6			1.9
Proceeds from divestitures		—			0.1
Other items		4.1			3.3
Net cash flows from investing activities		(181.9	)		(244.2	)
Cash flows from financing activities:
Issuance of short-term borrowings, maturities greater than 90 days		172.2			392.6
Repayment of short-term borrowings, maturities greater than 90 days		(168.8	)		(249.8	)
Net issuance (repayment) of other short-term borrowings, maturities less than or equal to 90 days		72.0			(264.4	)
Issuance of long-term debt		500.0			499.1
Repayment of long-term debt		(265.8	)		(29.4	)
Debt issuance costs		(4.0	)		(2.5	)
Repurchase of Conagra Brands, Inc. common shares		(150.0	)		(50.0	)
Payment of intangible asset financing arrangement		—			(12.6	)
Cash dividends paid		(308.6	)		(282.0	)
Exercise of stock options and issuance of other stock awards, including tax withholdings		(5.7	)		(17.4	)
Other items		1.3			(7.3	)
Net cash flows from financing activities		(157.4	)		(23.7	)
Effect of exchange rate changes on cash and cash equivalents and restricted cash		(2.1	)		(5.7	)
Net change in cash and cash equivalents and restricted cash		(43.6	)		(11.5	)
Cash and cash equivalents and restricted cash at beginning of period		83.3			80.2
Cash and cash equivalents and restricted cash at end of period	$	39.7		$	68.7

See Notes to the Condensed Consolidated Financial Statements.

4

Conagra Brands, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(columnar dollars in millions except per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements of Conagra Brands, Inc. (the "Company", "Conagra Brands", "we", "us", or "our") have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. The unaudited financial information reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position, and cash flows for the periods presented. During the second quarter of fiscal 2023, it was determined that certain assets and liabilities previously presented as assets and liabilities held for sale within our Condensed Consolidated Balance Sheets no longer met the held for sale criteria. Assets of $58.9 million and liabilities of $4.1 million as of May 29, 2022 have been reclassified to assets and liabilities held and used. All other adjustments are of a normal recurring nature. The results of operations for any quarter or a partial fiscal year period are not necessarily indicative of the results to be expected for other periods or the full fiscal year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended May 29, 2022. There were no significant changes to our accounting policies from those disclosed in Note 1, "Summary of Significant Accounting Policies", to the Consolidated Financial Statements in that Form 10-K.

2. RESTRUCTURING ACTIVITIES

Conagra Restructuring Plan

In fiscal 2019, senior management initiated a restructuring plan for costs incurred in connection with actions taken to improve selling, general and administrative ("SG&A") expense effectiveness and efficiencies and to optimize our supply chain network (the "Conagra Restructuring Plan"). Although we remain unable to make good faith estimates relating to the entire Conagra Restructuring Plan, we are reporting on actions initiated through the end of the second quarter of fiscal 2023, 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 November 27, 2022, we had approved the incurrence of $184.0 million ($57.2 million of cash charges and $126.8 million of non-cash charges) for several projects associated with the Conagra Restructuring Plan. As of November 27, 2022, we had incurred or expected to incur $152.6 million of charges ($50.7 million of cash charges and $101.9 million of non-cash charges) for actions identified as of such date under the Conagra Restructuring Plan. In the second quarter and first half of fiscal 2023, we recognized charges of $1.8 million and $5.9 million, respectively, in connection with the Conagra Restructuring Plan. In the second quarter and first half of fiscal 2022, we recognized charges of $6.6 million and $15.1 million, respectively, in connection with the Conagra Restructuring Plan. We expect to incur costs related to the Conagra Restructuring Plan over a multi-year period.

We anticipate that we will recognize the following pre-tax expenses in association with the Conagra Restructuring Plan (amounts include charges recognized from plan inception through the second quarter of fiscal 2023):

	Grocery & Snacks		Refrigerated & Frozen		International		Foodservice		Corporate		Total
Accelerated depreciation	$	33.2	$	39.6	$	—	$	—	$	—	$	72.8
Other cost of goods sold		8.7		2.5		—		—		—		11.2
Total cost of goods sold		41.9		42.1		—		—		—		84.0
Severance and related costs		11.6		1.2		1.3		0.3		5.1		19.5
Asset impairment (net of gains on disposal)		21.9		0.8		0.1		—		—		22.8
Contract/lease termination		0.5		0.1		—		—		0.1		0.7
Consulting/professional fees		0.5		2.4		—		—		5.7		8.6
Other SG&A		12.8		3.1		—		—		0.5		16.4
Total SG&A		47.3		7.6		1.4		0.3		11.4		68.0
Total	$	89.2	$	49.7	$	1.4	$	0.3	$	11.4	$	152.0
Pension and postretirement non-service income												0.6
Consolidated total											$	152.6

5

 

During the second quarter of fiscal 2023, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

	Grocery & Snacks			Refrigerated & Frozen			Corporate		Total
Severance and related costs	$	(0.1	)	$	(0.1	)	$	0.7	$	0.5
Contract/lease termination		—			0.1			—		0.1
Consulting/professional fees		—			—			0.4		0.4
Other SG&A		—			0.7			0.1		0.8
Total	$	(0.1	)	$	0.7		$	1.2	$	1.8

Included in the above results are $1.8 million of charges that have resulted or will result in cash outflows.

During the first half of fiscal 2023, we recognized the following pre-tax expenses for the Conagra Restructuring Plan:

	Grocery & Snacks		Refrigerated & Frozen		Corporate		Total
Other cost of goods sold	$	—	$	0.2	$	—	$	0.2
Total cost of goods sold		—		0.2		—		0.2
Severance and related costs		—		—		0.7		0.7
Contract/lease termination		0.1		0.1		—		0.2
Consulting/professional fees		—		—		3.4		3.4
Other SG&A		0.1		1.1		0.2		1.4
Total SG&A		0.2		1.2		4.3		5.7
Total	$	0.2	$	1.4	$	4.3	$	5.9

Included in the above results are $6.0 million in charges that have resulted or will result in cash outflows and a non-cash net benefit of $0.1 million.

We recognized the following cumulative (plan inception to November 27, 2022) pre-tax expenses for the Conagra Restructuring Plan in our Condensed Consolidated Statement of Earnings:

	Grocery & Snacks		Refrigerated & Frozen		International		Foodservice		Corporate		Total
Accelerated depreciation	$	33.2	$	39.6	$	—	$	—	$	—	$	72.8
Other cost of goods sold		8.7		2.5		—		—		—		11.2
Total cost of goods sold		41.9		42.1		—		—		—		84.0
Severance and related costs		11.6		1.2		1.3		0.3		5.1		19.5
Asset impairment (net of gains on disposal)		21.9		0.8		0.1		—		—		22.8
Contract/lease termination		0.5		0.1		—		—		0.1		0.7
Consulting/professional fees		—		—		—		—		5.1		5.1
Other SG&A		12.7		2.2		—		—		0.5		15.4
Total SG&A		46.7		4.3		1.4		0.3		10.8		63.5
Total	$	88.6	$	46.4	$	1.4	$	0.3	$	10.8	$	147.5
Pension and postretirement non-service income												0.6
Consolidated total											$	148.1

6

 

Included in the above results are $46.1 million of charges that have resulted or will result in cash outflows and $102.0 million in non-cash charges.

Liabilities recorded for the Conagra Restructuring Plan and changes therein for the first half of fiscal 2023 were as follows:

	Balance at May 29, 2022		Costs Incurred and Charged to Expense		Costs Paid or Otherwise Settled			Changes in Estimates			Balance at November 27, 2022
Severance and related costs	$	3.2	$	1.3	$	(1.7	)	$	(0.6	)	$	2.2
Contract/lease termination		—		0.2		(0.2	)		—			—
Consulting/professional fees		1.7		3.4		(5.0	)		—			0.1
Other costs		0.2		1.6		(1.8	)		—			—
Total	$	5.1	$	6.5	$	(8.7	)	$	(0.6	)	$	2.3

Pinnacle Integration Restructuring Plan

As of the end of the first quarter of fiscal 2023, we had substantially completed our restructuring and integration plan related to our acquisition of Pinnacle Foods, Inc. ("Pinnacle") in 2018 for the purpose of achieving significant cost synergies (the "Pinnacle Integration Restructuring Plan"). In the first half of fiscal 2023, we recognized charges of $0.8 million in connection with the Pinnacle Integration Restructuring Plan. In the second quarter and first half of fiscal 2022, we recognized charges of $5.8 million and $13.1 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

We had recognized $294.1 million in pre-tax expenses ($12.8 million in cost of goods sold and $281.3 million in SG&A expenses) from the inception of this plan through  November 27, 2022, related to our continuing operations. Included in these results were $266.1 million of cash charges and $28.0 million of non-cash charges. Our total pre-tax expenses for the Pinnacle Integration Restructuring Plan related to our continuing operations are expected to be $344.8 million ($283.6 million of cash charges and $61.2 million of non-cash charges). The remaining charges relate primarily to certain leased facilities that are not expected to be used in their current capacity through the contractual lease term.          

3. DEBT AND REVOLVING CREDIT FACILITY

During the first quarter of fiscal 2023, we entered into an unsecured Term Loan Agreement (the "Term Loan Agreement") with a syndicate of financial institutions. The Term Loan Agreement provided for delayed draw term loans to the Company in an aggregate principal amount of up to $500.0 million. The Term Loan Agreement matures on August 26, 2025. During the second quarter of fiscal 2023, we borrowed the full $500.0 million aggregate principal amount available under the Term Loan Agreement. The proceeds were used to repay the full outstanding $250.0 million aggregate principal amount of our 3.25% senior notes on their maturity date of September 15, 2022, as well as to repay outstanding borrowings under our commercial paper program. Borrowings under the Term Loan Agreement bear interest at the sum of Term SOFR (as defined in the Term Loan Agreement), plus a 0.10% per annum rate spread adjustment, plus a percentage spread (ranging from 0.90% per annum to 1.375% per annum) based on the Company's senior unsecured long-term indebtedness ratings. The Company may voluntarily prepay term loans under the Term Loan Agreement, in whole or in part, without premium or penalty, subject to certain conditions. As of November 27, 2022, there were $500.0 million of borrowings outstanding under the Term Loan Agreement.

During the first quarter of fiscal 2022, we issued $500.0 million aggregate principal amount of 0.500% senior notes due August 11, 2023.

In the first quarter of fiscal 2023, we entered into a Second Amended and Restated Revolving Credit Agreement (the "Revolving Credit Agreement") with a syndicate of financial institutions providing for a revolving credit facility in a maximum aggregate principal amount outstanding at any one time of $2.0 billion (subject to increase to a maximum aggregate principal amount of $2.5 billion with consent of the lenders). The revolving credit facility provided for under the Revolving Credit Agreement replaced the Company's revolving credit facility under the prior revolving credit agreement, which was terminated. The revolving credit facility provided for under the Revolving Credit Agreement matures on August 26, 2027 and is unsecured. The Company may request the term of the Revolving Credit Agreement be extended for additional one-year or two-year periods from the then-applicable maturity date on an annual basis. As of November 27, 2022, there were no outstanding borrowings under the Revolving Credit Agreement.

7

 

The Revolving Credit Agreement generally requires our ratio of earnings before interest, taxes, depreciation and amortization ("EBITDA") to interest expense not to be less than 3.0 to 1.0 and our ratio of funded net debt to EBITDA not to exceed 4.75 to 1.0 through the third quarter of fiscal 2023 and 4.5 to 1.0 for each quarter thereafter, with each ratio to be calculated on a rolling four-quarter basis. As of November 27, 2022, we were in compliance with all financial covenants under the Revolving Credit Agreement.

As of  November 27, 2022 and May 29, 2022, we had $254.0 million and $180.0 million, respectively, outstanding under our commercial paper program.

We enter into various supplier financing arrangements to facilitate supply from our vendors. Balance sheet classification is based on the nature of the arrangement and amounts are classified as either Accounts payable or Notes payable within our Condensed Consolidated Balance Sheets. We have concluded that certain obligations to our suppliers, including amounts due and scheduled payment terms, are impacted by third-party service programs and therefore we have classified certain amounts outstanding under these programs as Notes payable. We had approximately $109.2 million of short-term borrowings as of  November 27, 2022 related to these arrangements.

Net interest expense consists of:

	Thirteen Weeks Ended						Twenty-Six Weeks Ended
	November 27, 2022			November 28, 2021			November 27, 2022			November 28, 2021
Long-term debt	$	100.4		$	97.7		$	198.1		$	194.6
Short-term debt		2.1			0.5			4.0			1.1
Interest income		(0.6	)		(0.3	)		(1.5	)		(0.6	)
Interest capitalized		(1.6	)		(3.0	)		(3.2	)		(6.0	)
	$	100.3		$	94.9		$	197.4		$	189.1

4. GOODWILL AND OTHER IDENTIFIABLE INTANGIBLE ASSETS

The change in the carrying amount of goodwill for the first half of fiscal 2023 was as follows:

	Grocery & Snacks		Refrigerated & Frozen			International			Foodservice		Total
Balance as of May 29, 2022	$	4,692.4	$	5,611.2		$	292.8		$	732.8	$	11,329.2
Currency translation		—		—			(7.4	)		—		(7.4	)
Impairment		—		(141.7	)		—			—		(141.7	)
Balance as of November 27, 2022	$	4,692.4	$	5,469.5		$	285.4		$	732.8	$	11,180.1

Other identifiable intangible assets were as follows:

	November 27, 2022				May 29, 2022
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Non-amortizing intangible assets
Brands and trademarks	$	2,816.2	$	—	$	3,061.6	$	—
Amortizing intangible assets
Customer relationships and intellectual property		1,232.6		469.8		1,233.9		437.7
	$	4,048.8	$	469.8	$	4,295.5	$	437.7

During the first quarter of fiscal 2023, management reorganized its reporting structure for certain brands within two reporting units in our Refrigerated & Frozen segment. The change in management reporting required us to reassign assets and liabilities, including goodwill, between the reporting units, complete a goodwill impairment test both prior to and subsequent to the change, and evaluate other assets in the reporting units for impairment, including indefinite-lived intangibles (brand names and trademarks). The fair value of our indefinite-lived intangibles was determined using the "relief from royalty" methodology.  

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Fair value of our reporting units is estimated using a discounted cash flow analysis. Both the "relief from royalty" methodology used to value our indefinite-lived intangible assets and the discounted cash flow analysis require us to estimate the future cash flows as well as to select a risk-adjusted discount rate to measure the present value of the anticipated cash flows. When determining future cash flow estimates, we consider historical results adjusted to reflect current and anticipated operating conditions. We estimate cash flows for a reporting unit over a discrete period (typically five years) and a terminal period (considering expected long-term growth rates and trends). We used a discount rate of 7.75% and a terminal growth rate that approximated 1% in estimating the fair value of our Sides, Components, Enhancers reporting unit. Estimating the fair value of individual reporting units and our indefinite-lived intangible assets requires us to make assumptions and estimates in areas such as future economic conditions, industry-specific conditions, product pricing, and necessary capital expenditures. The use of different assumptions or estimates for future cash flows, discount rates, or terminal growth rates could produce substantially different estimates of the fair value.

As a result of our impairment tests, we recognized goodwill impairment charges within SG&A expenses of $141.7 million within our Sides, Components, Enhancers reporting unit in the first quarter of fiscal 2023.  In addition, we recognized an impairment charge within SG&A expenses of $244.0 million related to our Birds Eye^® brand name in the first quarter of fiscal 2023. The impairments were largely due to the 125 basis point increase in the discount rate as a result of current economic conditions, including a significant increase in interest rates since our last quantitative impairment tests, as well as a downward revision to our sales forecasts.    

Amortizing intangible assets carry a remaining weighted average life of approximately 18 years. Amortization expense was $14.7 million and $29.5 million for the second quarter and first half of fiscal 2023, respectively, and $14.8 million and $29.7 million for the second quarter and first half of fiscal 2022, respectively. Based on amortizing assets recognized in our Condensed Consolidated Balance Sheet as of November 27, 2022, amortization expense is estimated to average $48.4 million for each of the next five years.  

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5. 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 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, diesel fuel 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 November 27, 2022, we had economically hedged certain portions of our anticipated consumption of commodity inputs using derivative instruments with expiration dates through April 2024.

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 November 27, 2022, we had economically hedged certain portions of our foreign currency risk in anticipated transactions using derivative instruments with expiration dates through August 2023.

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.

Derivatives Designated as Cash Flow Hedges

During the first quarter of fiscal 2019, we entered into deal-contingent forward starting interest rate swap contracts to hedge a portion of the interest rate risk related to our issuance of long-term debt to help finance the acquisition of Pinnacle. We settled these contracts during the second quarter of fiscal 2019 and deferred a $47.5 million gain in accumulated other comprehensive income that is being amortized as a reduction of interest expense over the lives of the related debt instruments. The unamortized amount at November 27, 2022, was $33.2 million.

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 SG&A 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 13 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 November 27, 2022 and May 29, 2022, amounts representing an obligation to return cash collateral of $1.1 million and $4.0 million, respectively, were included in prepaid expenses and other current assets in our Condensed Consolidated Balance Sheets.

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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:

	November 27, 2022		May 29, 2022
Prepaid expenses and other current assets	$	11.6	$	7.0
Other accrued liabilities		1.5		2.2

The following table presents our derivative assets and liabilities, at November 27, 2022, on a gross basis, prior to the setoff of $0.7 million to total derivative assets and $0.4 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	$	8.4	Other accrued liabilities	$	0.3
Foreign exchange contracts	Prepaid expenses and other current assets		2.5	Other accrued liabilities		1.6
Total derivatives not designated as hedging instruments		$	10.9		$	1.9

The following table presents our derivative assets and liabilities at May 29, 2022, on a gross basis, prior to the setoff of $20.1 million to total derivative assets and $16.1 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	$	26.8	Other accrued liabilities	$	16.1
Foreign exchange contracts	Prepaid expenses and other current assets		0.3	Other accrued liabilities		2.2
Total derivatives not designated as hedging instruments		$	27.1		$	18.3

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The location and amount of gains from derivatives not designated as hedging instruments in our Condensed Consolidated Statements of Earnings were as follows:

	Location in Condensed Consolidated	Gains Recognized on Derivatives in Condensed Consolidated Statements of Earnings for the Thirteen Weeks Ended
Derivatives Not Designated as Hedging Instruments	Statements of Earnings of Gains Recognized on Derivatives	November 27, 2022		November 28, 2021
Commodity contracts	Cost of goods sold	$	3.7	$	4.6
Foreign exchange contracts	Cost of goods sold		1.6		2.4
Total gains from derivative instruments not designated as hedging instruments		$	5.3	$	7.0

	Location in Condensed Consolidated	Gains Recognized on Derivatives in Condensed Consolidated Statements of Earnings for the Twenty-Six Weeks Ended
Derivatives Not Designated as Hedging Instruments	Statements of Earnings of Gains Recognized on Derivatives	November 27, 2022		November 28, 2021
Commodity contracts	Cost of goods sold	$	10.0	$	8.8
Foreign exchange contracts	Cost of goods sold		4.8		8.4
Total gains from derivative instruments not designated as hedging instruments		$	14.8	$	17.2

As of November 27, 2022, our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $140.4 million for purchase contracts. As of May 29, 2022, our open commodity contracts had a notional value of $115.3 million and $96.7 million for purchase and sales contracts, respectively. The notional amount of our foreign currency forward contracts as of November 27, 2022 and May 29, 2022 was $90.5 million and $