DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Nov. 24, 2024

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

8. DERIVATIVE FINANCIAL INSTRUMENTS

See our Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended May 26, 2024, for additional information on our derivative activities.

Derivatives Designated as Cash Flow Hedges

During the first quarter of fiscal 2019, we entered into deal-contingent forward starting interest rate swap contracts to hedge a portion of the interest rate risk related to our issuance of long-term debt to help finance the acquisition of Pinnacle Foods, Inc. We settled these contracts during the second quarter of fiscal 2019 and deferred a $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 24, 2024 was $26.7 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.

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				Twenty-Six Weeks Ended
	November 24, 2024		November 26, 2023		November 24, 2024		November 26, 2023
Gross derivative gains (losses) incurred	$	7.7	$	(10.0)	$	4.0	$	9.5
Less: Net derivative gains (losses) allocated to reporting segments		(3.2)		1.2		(5.6)		(6.9)
Net derivative gains (losses) recognized in general corporate expenses	$	10.9	$	(11.2)	$	9.6	$	16.4
Net derivative gains (losses) allocated to Grocery & Snacks	$	(2.6)	$	0.7	$	(4.1)	$	(3.2)
Net derivative gains (losses) allocated to Refrigerated & Frozen		(1.5)		2.1		(2.3)		(0.2)
Net derivative gains (losses) allocated to International		1.3		(2.0)		1.3		(3.6)
Net derivative gains (losses) allocated to Foodservice		(0.4)		0.4		(0.5)		0.1
Net derivative gains (losses) included in segment operating profit	$	(3.2)	$	1.2	$	(5.6)	$	(6.9)

The fair values of our derivative positions were not material as of November 24, 2024 and were Level 1 or Level 2 assets or liabilities in the fair value hierarchy (see Note 16 for further information). We have not significantly changed our valuation techniques from prior periods.

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

	Location in Condensed Consolidated Statements of Earnings of Gains (Losses)	Gains (Losses) Recognized on Derivatives in Condensed Consolidated Statements of Earnings for the Thirteen Weeks Ended
Derivatives Not Designated as Hedging Instruments	Recognized on Derivatives	November 24, 2024		November 26, 2023
Commodity contracts	Cost of goods sold	$	2.5	$	(10.9)
Foreign exchange contracts	Cost of goods sold		5.2		0.9
Total gains (losses) from derivative instruments not designated as hedging instruments		$	7.7	$	(10.0)

	Location in Condensed Consolidated Statements of Earnings of Gains (Losses)	Gains (Losses) Recognized on Derivatives in Condensed Consolidated Statements of Earnings for the Twenty-Six Weeks Ended
Derivatives Not Designated as Hedging Instruments	Recognized on Derivatives	November 24, 2024		November 26, 2023
Commodity contracts	Cost of goods sold	$	(4.4)	$	11.6
Foreign exchange contracts	Cost of goods sold		8.4		(2.1)
Total gains from derivative instruments not designated as hedging instruments		$	4.0	$	9.5

As of November 24, 2024, our open commodity contracts had a notional value (defined as notional quantity times market value per notional quantity unit) of $98.9 million for purchase contracts. As of May 26, 2024, our open commodity contracts had a notional value of $88.2 million for purchase contracts and $11.0 million for sales contracts. The notional amount of our foreign currency forward contracts as of November 24, 2024 and May 26, 2024 was $88.8 million and $101.5 million, respectively.