INCOME TAXES |
9 Months Ended |
|---|---|
Feb. 22, 2026 | |
| INCOME TAXES | |
| INCOME TAXES | 12. INCOME TAXES In the third quarter of fiscal 2026 and 2025, we recognized income tax expense of $29.8 million and $43.9 million, respectively. The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was 13.0% and 23.3% for the third quarter of fiscal 2026 and 2025, respectively. In the first three quarters of fiscal 2026 and 2025, we recognized income tax expense of $162.7 million and an income tax benefit of $33.5 million, respectively. The effective tax rate was (119.2)% and (3.9)% for the first three quarters of fiscal 2026 and 2025, respectively. The effective tax rate in the third quarter of fiscal 2026 reflected a benefit of $35.2 million related to certain elections made on an income tax return of a joint venture and expense of $11.1 million related to a prior divestiture. The effective tax rate in the first three quarters of fiscal 2026 reflected the above-cited items, as well as the impact of an impairment of goodwill in the second quarter that was largely non-deductible for tax purposes. During this time period, goodwill impairment charges totaling $771.3 million with an associated tax benefit of $19.3 million were recognized. Additionally, the effective tax rate was negatively impacted by non-deductible goodwill related to the divestiture of the Chef Boyardee ®, Mrs. Paul’s ®, and Van de Kamp’s ® businesses. This resulted in $62.8 million of tax expense being recognized on a pre-tax gain of $42.2 million. The effective tax rate in the third quarter of fiscal 2025 reflected additional tax expense associated with non-deductible goodwill related to assets held for sale for which an impairment charge was recognized. During the third quarter of fiscal 2025, goodwill impairment charges totaling $8.3 million were recognized with no associated tax benefit. The effective tax rate in the first three quarters of fiscal 2025 reflected the above-cited items, as well as a $9.1 million benefit from the settlement of tax issues that were previously reserved and a $220.8 million deferred tax benefit related to the release of valuation allowances booked against certain deferred tax assets. Recent interactions with the U.S. Internal Revenue Service (IRS) regarding certain elections that had previously been under IRS review 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. On July 4, 2025, Public Law No. 119-21, referred to as the “One Big Beautiful Bill Act” (the “Act”), was enacted into law. The Act generally made permanent certain tax provisions of the Tax Cuts and Jobs Act (2017) and included changes to U.S. tax law that are applicable to Conagra beginning in fiscal 2026. These changes included provisions allowing accelerated tax deductions for qualified property and research expenditures. We currently expect a beneficial cash flow impact in fiscal 2026 from the enhanced expensing provisions. The Act does not materially impact our effective tax rate. |