PRE-TAX INCOME AMD INCOME TAXES

12 Months Ended

May 25, 2025

Income Tax Disclosure [Abstract]

PRE-TAX INCOME AMD INCOME TAXES

14. PRE-TAX INCOME AND INCOME TAXES

Pre-tax income (including equity method investment earnings) consisted of the following:

	2025		2024		2023
United States	$	1,047.1	$	538.4	$	803.9
Foreign		109.1		71.8		98.0
	$	1,156.2	$	610.2	$	901.9

The provision for income taxes included the following:

	2025		2024		2023
Current
Federal	$	171.7	$	281.2	$	304.6
State		28.1		46.1		42.5
Foreign		28.0		28.3		25.7
		227.8		355.6		372.8
Deferred
Federal		(207.5)		(66.7)		(135.8)
State		(14.7)		(17.6)		(14.4)
Foreign		(1.9)		(8.8)		(3.9)
		(224.1)		(93.1)		(154.1)
	$	3.7	$	262.5	$	218.7

Income taxes computed by applying the U.S. Federal statutory rates to income before income taxes are reconciled to the provision for income taxes set forth in the Consolidated Statements of Earnings as follows:

	2025		2024		2023
Computed U.S. Federal income taxes	$	242.8	$	128.1	$	189.4
State income taxes, net of U.S. Federal tax impact		36.7		25.8		28.9
Goodwill and intangible impairments		1.8		107.6		27.5
Federal audit settlements		(225.8)		—		—
Change of valuation allowance due to certain tax elections		(27.7)		—		(28.1)
Incentive compensation		1.0		1.8		11.1
Tax credits		(27.9)		(9.8)		(7.5)
Tax on unremitted foreign earnings		1.9		10.6		4.7
Other		0.9		(1.6)		(7.3)
	$	3.7	$	262.5	$	218.7

Income taxes paid, net of refunds, were $227.8 million, $343.3 million, and $407.1 million in fiscal 2025, 2024, and 2023, respectively.

The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:

	May 25, 2025					May 26, 2024
	Assets		Liabilities		Assets		Liabilities
Property, plant and equipment	$	—	$	275.1	$	—	$	305.5
Inventory		14.2		—		20.8		—
Goodwill, trademarks and other intangible assets		378.0		842.8		436.2		842.7
Right-of-use assets		—		51.1		—		42.0
Accrued expenses		19.1		—		17.7		—
Compensation related liabilities		29.7		—		31.3		—
Pension and other postretirement benefits		—		49.0		—		28.5
Investment in unconsolidated subsidiaries		—		28.6		—		21.3
Lease liabilities		59.4		—		50.7		—
Other liabilities that will give rise to future tax deductions		65.2		—		67.4		—
Net capital and operating loss carryforwards		29.0		—		36.0		—
Research expenditures		45.1		—		34.5		—
Federal credits		23.8		—		9.4		—
Other		28.7		33.4		30.1		49.5
		692.2		1,280.0		734.1		1,289.5
Less: Valuation allowance		(209.4)		—		(457.2)		—
Net deferred taxes	$	482.8	$	1,280.0	$	276.9	$	1,289.5

The liability for gross unrecognized tax benefits at May 25, 2025 was $11.0 million, excluding a related liability of $3.6 million for gross interest and penalties. As of May 26, 2024, our gross liability for unrecognized tax benefits was $21.7 million, excluding a related liability of $4.1 million for gross interest and penalties. Interest and penalties recognized in the Consolidated Statements of Earnings was a benefit of $0.5 million, $1.4 million, and $1.2 million in fiscal 2025, 2024, and 2023, respectively.

The net amount of unrecognized tax benefits at May 25, 2025 and May 26, 2024 that, if recognized, would favorably impact our effective tax rate was $9.3 million and $19.5 million, respectively.

We accrue interest and penalties associated with uncertain tax positions as part of income tax expense.

We conduct business and file tax returns in numerous countries, states, and local jurisdictions. The U.S. Internal Revenue Service (“IRS”) has completed its audit of the Company for tax years through fiscal 2021. All resulting significant items for fiscal 2021 and prior years have been settled with the IRS. Statutes of limitation for pre-acquisition tax years of Pinnacle generally remain open for calendar year 2005 and subsequent years principally related to net operating losses. Other major jurisdictions where we conduct business generally have statutes of limitations ranging from three to five years.

We estimate that it is reasonably possible that the amount of gross unrecognized tax benefits will decrease by up to $3.8 million over the next twelve months due to various federal, state, and foreign audit settlements and the expiration of statutes of limitations.

The change in the unrecognized tax benefits for the fiscal years ended May 25, 2025 and May 26, 2024 was as follows:

	May 25, 2025		May 26, 2024
Beginning balance	$	21.7	$	23.7
Increases from positions established during prior periods		0.9		0.3
Decreases from positions established during prior periods		(0.8)		—
Increases from positions established during the current period		0.8		1.9
Reductions resulting from lapse of applicable statute of limitation		(2.0)		(4.3)
Decrease from audit settlements		(9.3)		—
Other adjustments to liability		(0.3)		0.1
Ending balance	$	11.0	$	21.7

We have approximately $25.6 million in foreign net operating loss carryforwards which expire between fiscal 2030 and 2045 and $34.2 million of federal net operating loss carryforwards which expire in fiscal 2027. Included in net deferred tax liabilities are $17.7 million of tax effected state net operating loss carryforwards which expire in various years ranging from fiscal 2026 to 2045 and $2.2 million of tax effected state capital loss balances that expire between fiscal 2027 and 2037. Foreign tax credits of $23.4 million will expire between fiscal 2026 and 2035. State tax credits of approximately $3.0 million will expire in various years ranging from fiscal 2026 to 2031.

In fiscal 2022, we reflected additional tax expense of $25.0 million related to tax elections made in conjunction with filing our fiscal 2021 federal tax return. During fiscal 2025, interactions with the U.S. Internal Revenue Service (IRS) regarding these tax elections make the realization of certain deferred tax assets likely. The realization of these deferred tax assets allows for both current and future tax deductions through 2036, and resulted in an income tax benefit of approximately $225.8 million.

We have recognized a valuation allowance for the portion of the net operating loss carryforwards, capital loss carryforwards, tax credit carryforwards, and other deferred tax assets we believe are not more likely than not to be realized. The net change in the valuation allowance for fiscal 2025 was a decrease of $247.8 million, principally related to a federal audit settlement and future generation of income from the disposition of held for sale assets allowing certain tax attributes to be utilized. The net change in the valuation allowance for fiscal 2024 was an increase of $0.4 million.

We have previously made the assessment that the current earnings of certain foreign subsidiaries were not indefinitely reinvested or that we could not remit to the U.S. parent in a tax-neutral transaction. Accordingly, we have recorded a deferred tax liability of $1.8 million on approximately $36.8 million of earnings at May 25, 2025. The deferred tax liability relates to local withholding taxes that will be owed when this cash is distributed. In the first quarter of fiscal 2025, we paid $16.9 million of withholding taxes previously accrued in connection with the restructuring of our ownership interest in Ardent Mills. The undistributed historic earnings in our foreign subsidiaries through May 30, 2021 are considered to be indefinitely reinvested or can be remitted in a tax-neutral transaction. Accordingly, we have not recorded a deferred tax liability related to these undistributed historic earnings.

On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that will be applicable to Conagra beginning in fiscal 2026.  These changes include provisions allowing accelerated tax deductions for qualified property and research expenditures. We are in the process of evaluating the impact of the Act to our Consolidated Financial Statements.