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SHARE-BASED PAYMENTS | 12 Months Ended
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May 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
SHARE-BASED PAYMENTS | 13. SHARE-BASED PAYMENTS In accordance with stockholder-approved equity incentive plans, we grant stock-based compensation awards, including restricted stock units, cash-settled restricted stock units, performance shares, performance-based restricted stock units, stock options, and stock appreciation rights. The shares delivered upon vesting or lapse of restriction under any such arrangement may consist, in whole or part, of treasury stock or authorized but unissued stock, not reserved for any other purpose. On September 19, 2014, our stockholders approved the Conagra Brands, Inc. 2014 Stock Plan (as amended effective December 11, 2017, the "Plan"). The Plan authorizes the issuance of up to 40.3 million shares of Conagra Brands common stock. In addition to the shares under the 2014 Stock Plan, certain shares of Conagra Brands common stock subject to outstanding awards under predecessor stock plans that expire, lapse, are cancelled, terminated, forfeited, otherwise become unexercisable, or are settled for cash are available for issuance. At May 31, 2020, approximately 40.6 million shares were reserved for granting new share-based awards. Share Unit Awards In accordance with stockholder-approved equity incentive plans, we grant awards of restricted stock units and cash-settled restricted stock units ("share units") to employees and directors. These awards generally have requisite service periods of three years. Under each such award, stock or cash (as applicable) is issued without direct cost to the employee. We estimate the fair value of the share units based upon the market price of our stock at the date of grant. Certain share unit grants do not provide for the payment of dividend equivalents to the participant during the requisite service period (the "vesting period"). For those grants, the value of the grants is reduced by the net present value of the foregone dividend equivalent payments. We recognize compensation expense for share unit awards on a straight-line basis over the requisite service period, accounting for forfeitures as they occur. All cash-settled restricted stock units are marked-to-market and presented within other current and noncurrent liabilities in our Consolidated Balance Sheets. The compensation expense for our stock-settled share unit awards totaled $24.5 million, $23.9 million, and $21.8 million for fiscal 2020, 2019, and 2018, respectively. The tax benefit related to the stock-settled share unit award compensation expense for fiscal 2020, 2019, and 2018 was $5.3 million, $6.0 million, and $7.2 million, respectively. The compensation expense for our cash-settled share unit awards totaled $4.2 million, $17.5 million, and $5.8 million for fiscal 2020, 2019, and 2018, respectively. The tax benefit related to the cash-settled share unit award compensation expense for fiscal 2020, 2019, and 2018 was $1.1 million, $4.4 million, and $1.9 million, respectively. During the second quarter of fiscal 2019, in connection with the completion of the Pinnacle acquisition, we granted 2.0 million cash-settled share unit awards at a grant date fair value of $36.37 per share unit to Pinnacle employees in replacement of their unvested restricted share unit awards that were outstanding as of the closing date. Included in the compensation expense described above for fiscal 2020 and 2019 is expense of $1.0 million and $18.9 million, respectively, for accelerated vesting of awards related to Pinnacle integration restructuring activities, net of the impact of marking-to-market these awards based on a lower market price of shares of Conagra Brands common stock. Approximately $36.3 million of the fair value of the replacement share unit awards granted to Pinnacle employees was attributable to pre-combination service and was included in the purchase price and established as a liability. Included in the fiscal 2020 and 2019 expense for cash-settled share unit awards above is expense of $0.2 million and income of $6.7 million, respectively, related to the mark-to-market of this liability. As of May 31, 2020, our liability for the replacement awards was $3.4 million, which includes post-combination service expense, the mark-to-market of the liability, and the impact of payouts since completing the Pinnacle acquisition. Post-combination expense of approximately $0.8 million, based on the market price of shares of Conagra Brands common stock as of May 31, 2020, is expected to be recognized related to the replacement awards over the remaining post-combination service period of approximately one year. The following table summarizes the nonvested share units as of May 31, 2020 and changes during the fiscal year then ended:
|  | Stock-Settled |  |  | Cash-Settled |
Share Units |  | Share Units (in Millions) |  |  | Weighted Average Grant-Date Fair Value |  |  | Share Units (in Millions) |  |  | Weighted Average Grant-Date Fair Value |
Nonvested share units at May 26, 2019 |  |  | 1.81 |  |  | $ | 34.89 |  |  |  | 0.97 |  |  | $ | 36.20 |
Granted |  |  | 1.25 |  |  | $ | 28.32 |  |  |  | — |  |  | $ | — |
Vested/Issued |  |  | (0.49 | ) |  | $ | 34.43 |  |  |  | (0.84 | ) |  | $ | 36.17 |
Forfeited |  |  | (0.19 | ) |  | $ | 31.60 |  |  |  | (0.01 | ) |  | $ | 36.24 |
Nonvested share units at May 31, 2020 |  |  | 2.38 |  |  | $ | 31.76 |  |  |  | 0.12 |  |  | $ | 36.37 |
During fiscal 2020, 2019, and 2018, we granted 1.3 million, 0.9 million, and 0.9 million stock-settled share units, respectively, with a weighted average grant date fair value of $28.32, $35.43, and $34.16 per share unit, respectively. No cash-settled share unit awards were granted in fiscal 2020 or 2018. The total intrinsic value of stock-settled share units vested was $14.2 million, $24.6 million, and $18.5 million during fiscal 2020, 2019, and 2018, respectively. The total intrinsic value of cash-settled share units vested was $24.3 million, $50.5 million, and $14.2 million during fiscal 2020, 2019, and 2018, respectively. At May 31, 2020, we had $27.9 million and $0.8 million of total unrecognized compensation expense that will be recognized over a weighted average period of 1.8 years and 0.9 years, related to stock-settled share unit awards and cash-settled share unit awards, respectively. Performance Share Awards In accordance with stockholder-approved equity incentive plans, we grant performance shares to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goals for the three-year performance periods ending in fiscal 2020 (the "2020 performance period"), fiscal 2021 ("2021 performance period"), and fiscal 2022 ("2022 performance period") are based on our diluted earnings per share ("EPS") compound annual growth rate, subject to certain adjustments, measured over the defined performance periods. In addition, for certain participants, all performance shares for the 2020 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2020 performance period before any payout on the performance shares can be made to such participants. For each of the 2020 performance period, 2021 performance period, and 2022 performance period, the awards actually earned will range from zero to two hundred percent of the targeted number of performance shares for such performance period. Dividend equivalents are paid on the portion of performance shares actually earned at our regular dividend rate in additional shares of common stock. Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in our performance share plan, any shares earned will be distributed after the end of the performance period, and only if the participant continues to be employed with the Company through the date of distribution. For awards where performance against the performance target has not been certified, the value of the performance shares is adjusted based upon the market price of our common stock and current forecasted performance against the performance targets at the end of each reporting period and amortized as compensation expense over the vesting period. Forfeitures are accounted for as they occur. A summary of the activity for performance share awards as of May 31, 2020 and changes during the fiscal year then ended is presented below:
Performance Shares |  | Share Units (in Millions) |  |  | Weighted Average Grant-Date Fair Value |
Nonvested performance shares at May 26, 2019 |  |  | 1.15 |  |  | $ | 34.89 |
Granted |  |  | 0.60 |  |  | $ | 28.41 |
Adjustments for performance results attained and dividend equivalents |  |  | 0.04 |  |  | $ | 34.94 |
Vested/Issued |  |  | (0.29 | ) |  | $ | 34.94 |
Forfeited |  |  | (0.01 | ) |  | $ | 32.60 |
Nonvested performance shares at May 31, 2020 |  |  | 1.49 |  |  | $ | 32.27 |
The compensation expense for our performance share awards totaled $31.8 million, $8.2 million, and $11.8 million for fiscal 2020, 2019, and 2018, respectively. The tax benefit related to the compensation expense for fiscal 2020, 2019, and 2018 was $2.9 million, $2.1 million, and $3.9 million, respectively. The total intrinsic value of performance shares vested (including shares paid in lieu of dividends) during fiscal 2020, 2019, and 2018 was $8.4 million, $15.7 million, and $11.2 million, respectively. Based on estimates at May 31, 2020, we had $17.9 million of total unrecognized compensation expense related to performance shares that will be recognized over a weighted average period of 1.8 years. Performance-Based Restricted Stock Unit Awards On April 15, 2019 (the "grant date"), we made grants of performance-based restricted stock unit ("PBRSU") awards to the Company's named executive officers and a limited group of other senior officers of the Company. A total of 0.2 million PBRSU awards were granted with a grant date fair value of $41.82 per PBRSU. The PBRSU awards are awards of share units with vesting contingent on our achievement of certain absolute total shareholder return performance ("TSR") goals over a performance period beginning on the grant date and ending May 27, 2022 (the "PBRSU performance period"). If PBRSUs are earned based on absolute TSR and absolute TSR meets or exceeds a predetermined rate, they become eligible for an upward adjustment of 25% based on our relative TSR for the PBRSU performance period versus the median TSR of the S&P 500 Index ("RTSR"). Each PBRSU award payout can range from 0% to 500% of the initial target grant and will not exceed 8.6 times the grant value of each grantee's PBRSU award (including earned dividend equivalents). Compensation expense for the awards is recognized over the PBRSU performance period based upon the grant date fair value. The grant date fair value was estimated using a Monte-Carlo simulation model with a risk-free rate of 2.35% and an expected volatility of 24.92%. The model includes no expected dividend yield as the PBRSUs earn dividend equivalents. We recognize compensation expense using the straight-line method over the requisite service period, accounting for forfeitures as they occur. The compensation expense for our PBRSU awards totaled $2.7 million and $0.3 million for fiscal 2020 and fiscal 2019, respectively. The tax benefit related to the compensation expense for fiscal 2020 and fiscal 2019 was $0.2 million and $0.1 million, respectively. Based on estimates at May 31, 2020, we had $4.7 million of total unrecognized compensation expense related to the PBRSU awards that will be recognized over a period of 2 years. Stock Option Awards In accordance with stockholder-approved equity incentive plans, we granted stock options to employees and directors for the purchase of common stock at prices equal to its fair value at the date of grant. Stock options become exercisable under various vesting schedules (typically three years) and generally expire seven to ten years after the date of grant. No stock options were granted in fiscal 2020, 2019, or 2018. A summary of the option activity as of May 31, 2020 and changes during the fiscal year then ended is presented below:
Options |  | Number of Options (in Millions) |  |  | Weighted Average Exercise Price |  |  | Average Remaining Contractual Term (Years) |  |  | Aggregate Intrinsic Value (in Millions) |
Outstanding at May 26, 2019 |  |  | 4.4 |  |  | $ | 29.00 |  |  |  |  |  |  |  |  |
Exercised |  |  | (0.5 | ) |  | $ | 20.46 |  |  |  |  |  |  | $ | 3.8 |
Expired |  |  | (0.1 | ) |  | $ | 34.57 |  |  |  |  |  |  |  |  |
Outstanding at May 31, 2020 |  |  | 3.8 |  |  | $ | 30.07 |  |  |  | 4.92 |  |  | $ | 19.0 |
Exercisable at May 31, 2020 |  |  | 3.8 |  |  | $ | 30.07 |  |  |  | 4.92 |  |  | $ | 19.0 |
We recognize compensation expense using the straight-line method over the requisite service period, accounting for forfeitures as they occur. The total intrinsic value of stock options exercised was $3.8 million, $7.9 million, and $15.8 million for fiscal 2020, 2019, and 2018, respectively. The closing market price of our common stock on the last trading day of fiscal 2020 was $34.79 per share. Compensation expense for stock option awards totaled $0.2 million, $2.2 million, and $4.2 million for fiscal 2020, 2019, and 2018, respectively. Included in the compensation expense for stock option awards for fiscal 2019 and 2018 was $0.2 million and $0.4 million, respectively, related to stock options granted by a subsidiary in the subsidiary's shares to the subsidiary's employees. The tax benefit related to the stock option expense for fiscal 2020, 2019, and 2018 was $0.1 million, $0.5 million, and $1.4 million, respectively. At May 31, 2020, we had no unrecognized compensation expense related to stock options. Cash received from stock option exercises for fiscal 2020, 2019, and 2018 was $11.0 million, $12.4 million, and $25.1 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled $1.4 million, $2.3 million, and $5.3 million for fiscal 2020, 2019, and 2018, respectively. Stock Appreciation Rights Awards During the second quarter of fiscal 2019, in connection with the completion of the Pinnacle acquisition, we granted 2.3 million cash-settled stock appreciation rights with a fair value estimated at closing date using a Black-Scholes option-pricing model and a grant date price of $36.37 per share to Pinnacle employees in replacement of their unvested stock option awards that were outstanding as of the closing date. Approximately $14.8 million of the fair value of the replacement awards granted to Pinnacle employees was attributable to pre-combination service and was included in the purchase price and established as a liability. As of May 31, 2020, there were no remaining stock appreciation rights. The compensation income for our cash-settled stock appreciation rights totaled $0.3 million and $13.7 million for fiscal 2020 and fiscal 2019, respectively. Included in this amount for fiscal 2019 is income of $14.0 million related to the mark-to-market of the liability established in connection with the Pinnacle acquisition and expense of $0.2 million for accelerated vesting of awards related to Pinnacle integration restructuring activities, net of the impact of marking-to-market these awards based on a lower market price of Conagra common shares. The related tax expense for fiscal 2020 and fiscal 2019 was $0.1 million and $3.4 million, respectively. A summary of the stock appreciation rights activity as of May 31, 2020 and changes during the fiscal year then ended is presented below:
Stock Appreciation Rights |  | Number of Options (in Millions) |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value (in Millions) |
Outstanding at May 26, 2019 |  |  | 0.4 |  |  | $ | 28.13 |  |  |  |  |
Exercised |  |  | (0.2 | ) |  | $ | 26.47 |  |  | $ | 0.6 |
Expired |  |  | (0.2 | ) |  | $ | 30.76 |  |  |  |  |
Outstanding at May 31, 2020 |  |  | 0.0 |  |  | $ | — |  |  | $ | — |

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