10-Q
General Mills Inc (GIS)
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
AUGUST 28, 2022
☐
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:
001-01185
________________
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware
41-0274440
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Number One General Mills Boulevard
Minneapolis
,
Minnesota
55426
(Address of principal executive offices)
(Zip Code)
(763)
764-7600
(Registrant’s telephone number,
including area code)
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, $.10 par value
GIS
New York Stock Exchange
1.000% Notes due 2023
GIS23A
New York Stock Exchange
0.125% Notes due 2025
GIS25A
New York Stock Exchange
0.450% Notes due 2026
GIS26
New York Stock Exchange
1.500% Notes due 2027
GIS27
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 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,
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 of
Common Stock
outstanding
as of
September 14,
2022:
593,535,650
(excluding
161,077,678
shares held
in the
treasury).
3
General Mills, Inc.
Table of Contents
Page
PART I – Financial Information
Item 1. Financial Statements
Consolidated Statements of Earnings for the quarters ended August 28, 2022 and August 29, 2021
4
Consolidated Statements of Comprehensive Income for the quarters ended August 28, 2022 and August 29,
2021
5
Consolidated Balance Sheets as of August 28, 2022 and May 29, 2022
6
Consolidated Statements of Total Equity and Redeemable Interest for the quarters ended August 28, 2022 and
August 29, 2021
7
Consolidated Statements of Cash Flows for the quarters ended August 28, 2022 and August 29, 2021
8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
19
Item 3. Quantitative and Qualitative Disclosures About Market Risk
33
Item 4. Controls and Procedures
34
PART II – Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
34
Item 6. Exhibits
35
Signatures
36
4
PART
I.
FINANCIAL INFORMATION
Item 1.
Financial Statements
Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Net sales
$
4,717.6
$
4,539.9
Cost of sales
3,269.9
2,942.5
Selling, general, and administrative expenses
791.4
757.4
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs (recoveries)
1.6
(4.3)
Operating profit
1,085.6
844.3
Benefit plan non-service income
(21.7)
(29.6)
Interest, net
87.7
95.9
Earnings before income taxes and after-tax earnings
from
joint ventures
1,019.6
778.0
Income taxes
216.1
168.9
After-tax earnings from joint ventures
19.8
29.1
Net earnings, including earnings attributable to redeemable
and noncontrolling interests
823.3
638.2
Net earnings attributable to redeemable and
noncontrolling interests
3.3
11.2
Net earnings attributable to General Mills
$
820.0
$
627.0
Earnings per share – basic
$
1.37
$
1.03
Earnings per share – diluted
$
1.35
$
1.02
See accompanying notes to consolidated financial statements.
5
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$
823.3
$
638.2
Other comprehensive income (loss), net of tax:
Foreign currency translation
3.8
(23.9)
Other fair value changes:
Hedge derivatives
(38.3)
1.7
Reclassification to earnings:
Foreign currency translation
(7.4)
-
Hedge derivatives
(1.4)
10.6
Amortization of losses and prior service costs
14.1
8.4
Other comprehensive loss, net of tax
(29.2)
(3.2)
Total comprehensive
income
794.1
635.0
Comprehensive income (loss) attributable to
redeemable and noncontrolling interests
2.0
(23.5)
Comprehensive income attributable to General Mills
$
792.1
$
658.5
See accompanying notes to consolidated financial statements.
6
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
Aug. 28, 2022
May 29, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
594.4
$
569.4
Receivables
1,730.4
1,692.1
Inventories
2,089.9
1,867.3
Prepaid expenses and other current assets
719.3
802.1
Assets held for sale
-
158.9
Total current
assets
5,134.0
5,089.8
Land, buildings, and equipment
3,358.6
3,393.8
Goodwill
14,454.6
14,378.5
Other intangible assets
6,979.4
6,999.9
Other assets
1,180.6
1,228.1
Total assets
$
31,107.2
$
31,090.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,786.3
$
3,982.3
Current portion of long-term debt
2,095.4
1,674.2
Notes payable
991.9
811.4
Other current liabilities
1,721.9
1,552.0
Total current
liabilities
8,595.5
8,019.9
Long-term debt
8,474.6
9,134.8
Deferred income taxes
2,262.4
2,218.3
Other liabilities
949.1
929.1
Total liabilities
20,281.6
20,302.1
Stockholders' equity:
Common stock,
754.6
shares issued, $
0.10
par value
75.5
75.5
Additional paid-in capital
1,146.1
1,182.9
Retained earnings
19,027.6
18,532.6
Common stock in treasury,
at cost, shares of
160.3
and
155.7
(7,676.0)
(7,278.1)
Accumulated other comprehensive loss
(1,998.4)
(1,970.5)
Total stockholders' equity
10,574.8
10,542.4
Noncontrolling interests
250.8
245.6
Total equity
10,825.6
10,788.0
Total liabilities and equity
$
31,107.2
$
31,090.1
See accompanying notes to consolidated financial statements.
7
Consolidated Statements of Total
Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Shares
Amount
Shares
Amount
Total equity,
beginning balance
$
10,788.0
$
9,773.2
Common stock,
1
billion shares authorized, $
0.10
par value
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,182.9
1,365.5
Stock compensation plans
9.3
9.1
Unearned compensation related to stock unit awards
(79.0)
(68.3)
Earned compensation
32.9
33.1
Decrease in redemption value of
redeemable interest
-
5.6
Ending balance
1,146.1
1,345.0
Retained earnings:
Beginning balance
18,532.6
17,069.8
Net earnings attributable to General Mills
820.0
627.0
Cash dividends declared ($
0.54
and $
0.51
per share)
(325.0)
(312.3)
Ending balance
19,027.6
17,384.5
Common stock in treasury:
Beginning balance
(155.7)
(7,278.1)
(146.9)
(6,611.2)
Shares purchased
(6.9)
(500.8)
(2.5)
(150.1)
Stock compensation plans
2.3
102.9
1.1
46.3
Ending balance
(160.3)
(7,676.0)
(148.3)
(6,715.0)
Accumulated other comprehensive loss:
Beginning balance
(1,970.5)
(2,429.2)
Comprehensive (loss) income
(27.9)
31.5
Ending balance
(1,998.4)
(2,397.7)
Noncontrolling interests:
Beginning balance
245.6
302.8
Comprehensive income (loss)
2.0
(8.2)
Distributions to noncontrolling interest holders
(1.9)
(1.1)
Divestiture
5.1
-
Ending balance
250.8
293.5
Total equity,
ending balance
$
10,825.6
$
9,985.8
Redeemable interest:
Beginning balance
$
-
$
604.9
Comprehensive loss
-
(15.3)
Decrease in redemption value of
redeemable interest
-
(5.6)
Ending balance
$
-
$
584.0
See accompanying notes to consolidated financial statements.
8
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling
interests
$
823.3
$
638.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
134.3
145.8
After-tax earnings from joint ventures
(19.8)
(29.1)
Distributions of earnings from joint ventures
15.5
22.6
Stock-based compensation
33.5
26.8
Deferred income taxes
9.2
19.6
Pension and other postretirement benefit plan contributions
(5.3)
(5.4)
Pension and other postretirement benefit plan costs
(6.7)
(7.2)
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs
(15.7)
(19.5)
Changes in current assets and liabilities, excluding the effects of
acquisitions and divestitures
(209.7)
(389.5)
Other, net
61.1
(32.5)
Net cash provided by operating activities
388.8
369.8
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(90.9)
(104.0)
Acquisition, net of cash acquired
(252.1)
(1,198.6)
Proceeds from divestitures, net of cash divested
610.7
-
Investments in affiliates, net
-
5.7
Proceeds from disposal of land, buildings, and equipment
-
0.3
Other, net
(1.9)
(1.3)
Net cash provided (used) by investing activities
265.8
(1,297.9)
Cash Flows - Financing Activities
Change in notes payable
188.0
698.7
Issuance of long-term debt
-
582.2
Payment of long-term debt
-
(612.1)
Proceeds from common stock issued on exercised options
65.5
7.9
Purchases of common stock for treasury
(500.8)
(150.1)
Dividends paid
(325.0)
(312.3)
Distributions to noncontrolling and redeemable interest holders
(1.9)
(1.1)
Other, net
(34.9)
(18.2)
Net cash (used) provided by financing activities
(609.1)
195.0
Effect of exchange rate changes on cash and cash equivalents
(20.5)
(18.1)
Increase (decrease) in cash and cash equivalents
25.0
(751.2)
Cash and cash equivalents - beginning of year
569.4
1,505.2
Cash and cash equivalents - end of period
$
594.4
$
754.0
Cash Flow from changes in current assets and liabilities, excluding the effects
of
acquisitions and divestitures:
Receivables
$
(91.1)
$
(145.3)
Inventories
(243.3)
(116.1)
Prepaid expenses and other current assets
79.5
39.0
Accounts payable
(130.4)
(214.9)
Other current liabilities
175.6
47.8
Changes in current assets and liabilities
$
(209.7)
$
(389.5)
See accompanying notes to consolidated financial statements.
9
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
(1) Background
The accompanying
Consolidated Financial
Statements of
General Mills,
Inc. (we,
us, our,
General Mills,
or the Company)
have been
prepared in
accordance with
accounting principles
generally accepted
in the
United States
(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.
In
the
opinion
of
management,
all
adjustments
considered
necessary
for
a
fair
presentation have
been included
and are
of a
normal recurring
nature, including
the elimination
of all
intercompany transactions
and
any
noncontrolling
and
redeemable
interests’
share
of
those
transactions.
Operating
results
for
the
fiscal
quarter
ended
August
28,
2022,
are not necessarily indicative of the results that may be expected for the fiscal year
ending May 28, 2023.
These
statements
should
be
read
in
conjunction
with
the
Consolidated
Financial
Statements
and
footnotes
included
in
our
Annual
Report on Form
10-K for the fiscal
year ended May
29, 2022. The
accounting policies used
in preparing these
Consolidated Financial
Statements are the same as those described in Note 2 to the Consolidated Financial
Statements in that Form 10-K.
Certain terms used throughout this report are defined in the “Glossary” section below.
(2) Acquisition and Divestitures
During
the first
quarter
of fiscal
2023,
we
acquired
TNT Crust,
a
manufacturer
of high-quality
frozen pizza
crusts
for
regional
and
national pizza
chains, foodservice
distributors, and
retail outlets,
for a
purchase price
of $
253.0
million. We
financed the
transaction
with U.S. commercial paper.
We consolidated
the TNT Crust business into
our Consolidated Balance
Sheets and recorded goodwill
of
$
154.3
million. The
goodwill is
included in
the North
America Foodservice
segment and
is not
deductible for
tax purposes.
The pro
forma
effects
of
this
acquisition
were
not
material.
We
have
conducted
a
preliminary
assessment
of
the
fair
value
of
the
acquired
assets
and
liabilities
of
the
TNT
Crust
business
and
will
continue
to
review
these
items
during
the
measurement
period.
If
new
information is obtained
about facts and circumstances
that existed at the
acquisition date, the
acquisition accounting will
be revised to
reflect the resulting adjustments to
current estimates of these items.
The consolidated results of the
TNT Crust business are reported
in
our North America Foodservice segment on a one-month lag.
During the
first quarter
of fiscal
2023,
we completed
the sale
of our
Helper main
meals and
Suddenly
Salad side
dishes business
to
Eagle Family Foods Group for $
606.8
million and recorded a pre-tax gain of $
442.2
million.
During
the
first
quarter
of
fiscal
2022,
we
acquired
Tyson
Foods’
pet
treats
business
for
$
1.2
billion
in
cash.
We
financed
the
transaction
with
a
combination
of
cash
on
hand
and
short-term
debt.
We
consolidated
Tyson
Foods’
pet
treats
business
into
our
Consolidated Balance
Sheets and
recorded goodwill
of $
762.3
million, indefinite-lived
intangible assets
for the
Nudges
,
Top
Chews
,
and
True
Chews
brands
totaling
$
330.0
million
in
aggregate,
and
a
finite-lived
customer
relationship
asset
of
$
40.0
million.
The
goodwill is included in the Pet segment and is deductible for tax purposes. The
pro forma effects of this acquisition were not material.
(3) Restructuring, Impairment, and Other Exit Costs
During the
first quarter
of fiscal 2023,
we did not
undertake any
new restructuring
actions. We
recorded $
2.3
million of restructuring
charges in the
first quarter of fiscal
2023 and a
$
4.1
million net recovery
of restructuring charges
in the first quarter
of fiscal 2022 for
previously announced restructuring actions. We
expect these actions to be completed by the end of
fiscal 2024
.
We
paid net $
18.0
million of cash in
the first quarter of
fiscal 2023 related to
restructuring actions previously
announced. We
paid net
$
15.4
million of cash in the same period of fiscal 2022.
The roll forward of our restructuring and other exit cost reserves, included
in other current liabilities, is as follows:
In Millions
Total
Reserve balance as of May 29, 2022
$
36.8
Fiscal 2023 charges, including foreign currency translation
(0.4)
Utilized in fiscal 2023
(17.1)
Reserve balance as of Aug. 28, 2022
$
19.3
The reserve balance primarily consists of expected severance payments
associated with restructuring actions.
10
The charges
recognized in
the roll forward
of our reserves
for restructuring
and other
exit costs do
not include
items charged
directly
to expense
(e.g., asset
impairment charges,
accelerated depreciation,
the gain
or loss
on the
sale of
restructured assets,
and the
write-
off
of
spare parts)
and other
periodic
exit costs
are
recognized
as incurred,
as those
items are
not reflected
in our
restructuring
and
other exit cost reserves on our Consolidated Balance Sheets.
(4) Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets are as follows:
In Millions
Aug. 28, 2022
May 29, 2022
Goodwill
$
14,454.6
$
14,378.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,706.4
6,725.8
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
402.1
400.3
Less accumulated amortization
(129.1)
(126.2)
Intangible assets subject to amortization, net
273.0
274.1
Other intangible assets
6,979.4
6,999.9
Total
$
21,434.0
$
21,378.4
Based on
the carrying
value of
finite-lived intangible
assets as
of August
28, 2022,
annual amortization
expense for
each of
the next
five fiscal years is estimated to be approximately $
20
million.
The changes in the carrying amount of goodwill during the first quarter of fiscal 2023
were as follows:
In Millions
North
America
Retail
Pet
North
America
Foodservice
International
Joint
Ventures
Total
Balance as of May 29, 2022
$
6,552.9
$
6,062.8
$
648.8
$
721.6
$
392.4
$
14,378.5
Acquisition
-
-
154.3
-
-
154.3
Divestiture
-
-
-
(0.4)
-
(0.4)
Other activity, primarily
foreign currency translation
(3.0)
-
-
(46.6)
(28.2)
(77.8)
Balance as of Aug. 28, 2022
$
6,549.9
$
6,062.8
$
803.1
$
674.6
$
364.2
$
14,454.6
The changes in the carrying amount of other intangible assets during the first quarter
of fiscal 2023 were as follows:
In Millions
Total
Balance as of May 29, 2022
$
6,999.9
Acquisition
3.8
Other activity, primarily
foreign currency translation
(24.3)
Balance as of Aug. 28, 2022
$
6,979.4
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal
2022,
and
we
determined
there
was
no
impairment
of
our
intangible
assets
as
their
related
fair
values
were
substantially
in
excess of the carrying values, except for the
Uncle Toby’s
brand intangible asset.
The excess fair value as of the fiscal 2022 test date of the
Uncle Toby’s
brand intangible asset is as follows:
In Millions
Carrying Value
of
Intangible Asset
Excess Fair Value
as of
Fiscal 2022 Test
Date
Uncle Toby's
$
55.0
7
%
In
addition,
while
having
significant
coverage
as
of
our
fiscal
2022
assessment
date,
the
Progresso
,
Green
Giant
,
and
EPIC
brand
intangible assets had risk of decreasing coverage. We
will continue to monitor these businesses for potential impairment.
11
(5) Inventories
The components of inventories were as follows:
In Millions
Aug. 28, 2022
May 29, 2022
Raw materials and packaging
$
579.6
$
532.0
Finished goods
1,887.0
1,634.7
Grain
122.5
164.0
Excess of FIFO over LIFO cost
(499.2)
(463.4)
Total
$
2,089.9
$
1,867.3
(6) Risk Management Activities
Many commodities we
use in the
production and distribution
of our products
are exposed to
market price risks.
We
utilize derivatives
to manage price risk for our principal
ingredients and energy costs, including
grains (oats, wheat, and corn), oils
(principally soybean),
dairy products, natural
gas, and diesel fuel.
Our primary objective
when entering into
these derivative contracts
is to achieve
certainty
with
regard
to
the
future
price
of
commodities
purchased
for
use
in
our
supply
chain.
We
manage
our
exposures
through
a
combination of purchase orders, long-term
contracts with suppliers, exchange-traded
futures and options, and over-the-counter
options
and swaps.
We
offset
our exposures
based on
current and
projected market
conditions and
generally seek
to acquire
the inputs
at as
close as possible to or below our planned cost.
We
use derivatives
to manage
our exposure
to changes
in commodity
prices. We
do not
perform the
assessments required
to achieve
hedge
accounting
for
commodity
derivative
positions.
Accordingly,
the
changes
in
the
values
of
these
derivatives
are
recorded
currently in cost of sales in our Consolidated Statements of Earnings.
Although we do
not meet the
criteria for
cash flow hedge
accounting, we believe
that these instruments
are effective
in achieving our
objective of providing certainty
in the future price of commodities purchased
for use in our supply chain.
Accordingly, for
purposes of
measuring
segment
operating
performance,
these
gains
and
losses
are
reported
in
unallocated
corporate
items
outside
of
segment
operating results
until such
time that
the exposure
we are
managing affects
earnings. At
that time
we reclassify
the gain
or loss
from
unallocated
corporate
items
to
segment
operating
profit,
allowing
our
operating
segments
to
realize
the
economic
effects
of
the
derivative without experiencing any resulting mark-to-market volatility,
which remains in unallocated corporate items.
Unallocated corporate items for the quarters ended August 28, 2022, and
August 29, 2021, included:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net (loss) gain on mark-to-market valuation of certain
commodity positions
$
(72.3)
$
30.4
Net gain on commodity positions reclassified from
unallocated corporate items to segment operating profit
(43.0)
(34.7)
Net mark-to-market revaluation of certain grain inventories
(59.4)
28.4
Net mark-to-market valuation of certain commodity
positions recognized in unallocated corporate items
$
(174.7)
$
24.1
As of August 28, 2022,
the net notional value of commodity
derivatives was $
432.6
million, of which $
152.4
million related to energy
inputs and
$
280.2
million related
to agricultural
inputs. These
contracts relate
to inputs
that generally
will be
utilized within
the next
12
months.
The
fair
values
of
the
derivative
positions
used
in
our
risk
management
activities
and
other
assets
recorded
at
fair
value
were
not
material as
of August
28, 2022
and were
Level 1
or Level
2 assets
and liabilities
in the
fair value
hierarchy.
We
did not
significantly
change our valuation techniques from prior periods.
We
offer
certain
suppliers
access
to
third
party
services
that
allow
them
to
view
our
scheduled
payments
online.
The
third-party
services also
allow suppliers
to finance
advances on
our scheduled
payments at
the sole
discretion of
the supplier
and the third
party.
We
have no
economic interest
in these
financing arrangements
and no
direct relationship
with the
suppliers, the
third parties,
or any
financial
institutions
concerning
these
services.
All
of
our
accounts
payable
remain
as
obligations
to
our
suppliers
as
stated
in
our
supplier
agreements.
As
of
August
28,
2022,
$
1,413.3
million
of
our
total
accounts
payable
were
payable
to
suppliers
who
utilize
these third-party services. As
of August 29, 2021, $
1,312.8
million of our total accounts
payable were payable to suppliers
who utilize
these third-party services.
12
(7) Debt
The components of notes payable were as follows:
In Millions
Aug. 28, 2022
May 29, 2022
U.S. commercial paper
$
839.8
$
694.8
Financial institutions
152.1
116.6
Total
$
991.9
$
811.4
To ensure availability
of funds, we maintain bank credit lines and have commercial paper programs
available to us in the United States
and Europe. We also
have committed and asset-backed credit lines that support our foreign
operations.
The following table details the fee-paid committed and uncommitted credit
lines we had available as of August 28, 2022:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
0.2
Total committed
and uncommitted credit facilities
$
3.3
$
0.2
The
credit
facilities
contain
covenants,
including
a
requirement
to
maintain
a
fixed
charge
coverage
ratio
of
at
least
2.5
times.
We
were in compliance with all credit facility covenants as of August 28, 2022.
Long-Term
Debt
The fair values
and carrying
amounts of long-term
debt, including
the current portion,
were $
10,129.1
million and $
10,570.0
million,
respectively,
as
of
August
28,
2022.
The
fair
value
of
long-term
debt
was
estimated
using
market
quotations
and
discounted
cash
flows based
on our
current incremental
borrowing rates
for similar
types of
instruments. Long
-term debt
is a
Level 2
liability in
the
fair value hierarchy.
In
the fourth
quarter
of fiscal
2022,
we repaid
$
850.0
million
of
3.7
percent
fixed
rate notes
due
October 17, 2023
, using
proceeds
from the issuance of commercial paper.
In the fourth quarter of fiscal 2022, we issued €
250.0
million of
0.0
percent fixed-rate notes due
November 11, 2022
. We used the net
proceeds for general corporate purposes.
In the second quarter of fiscal 2022, we issued €
500.0
million of
0.125
percent fixed-rate notes due
November 15, 2025
. We used the
net proceeds to repay a portion of our €
500.0
million of
0.0
percent fixed-rate notes due
November 16, 2021
, and for general corporate
purposes.
In the second quarter of fiscal 2022, we issued €
250.0
million of floating-rate notes due
May 16, 2023
. We used the net proceeds
to
repay a portion of our outstanding commercial paper and for general
corporate purposes.
In the second quarter of fiscal 2022, we issued $
500.0
million of
2.25
percent notes due
October 14, 2031
. We used the net proceeds
together with proceeds from the issuance of commercial paper,
to repay $
1,000.0
million of
3.15
percent fixed-rate notes due
December 15, 2021
.
In the first quarter of fiscal 2022, we issued €
500.0
million of floating-rate notes due
July 27, 2023
. We used the net proceeds to
repay
€
500.0
million of
0.0
percent fixed-rate notes due
August 21, 2021
.
In the first quarter of fiscal 2022, we repaid €
200.0
million of
2.2
percent fixed-rate notes due
June 24, 2021
, using proceeds from the
issuance of €
50.0
million of
2.2
percent fixed-rate notes due
November 29, 2021
, and borrowings under a committed credit facility.
Certain
of
our
long-term
debt
agreements
contain
restrictive
covenants.
As of August 28, 2022, we were in compliance with all of
these covenants.
13
(8) Redeemable and Noncontrolling Interests
The
third-party
holder
of
the
General
Mills
Cereals,
LLC
(GMC)
Class A
Interests
receives
quarterly
preferred
distributions
from
available net
income based
on the application
of a
floating preferred
return rate
to the
holder’s capital
account balance
established in
the
most
recent
mark-to-market
valuation
(currently
$
251.5
million).
On
June 1,
2021,
the
floating
preferred
return
rate
on
GMC’s
Class A Interests
was reset
to the
sum of
three-month LIBOR
plus
160
basis points.
The preferred
return rate
is adjusted
every
three
years
through a negotiated agreement with the Class A Interest holder or through
a remarketing auction.
During
the
third
quarter
of
fiscal
2022,
we
completed
the
sale
of
our
interests
in
Yoplait
SAS,
Yoplait
Marques
SNC
and
Liberté
Marques
Sàrl
to
Sodiaal
International
(Sodiaal)
in
exchange
for
Sodiaal’s
interest
in
our
Canadian
yogurt
business,
a
modified
agreement for the use of
Yoplait
and
Liberté
brands in the United States and Canada, and cash.
Up to
the date
of the
divestiture, Sodiaal
held the remaining
interests in
each of
the entities.
On the
acquisition date,
we recorded
the
fair
value
of
Sodiaal’s
49
percent
euro-denominated
interest
in
Yoplait
SAS
as
a
redeemable
interest
on
our
Consolidated
Balance
Sheets. Sodiaal had
the right to
put all or
a portion of
its redeemable interest
to us at
fair value until
the divestiture closed
in the third
quarter of
fiscal 2022.
In connection
with the
divestiture, cumulative
adjustments made
to the
redeemable
interest related
to the
fair
value put feature were
reversed against additional paid-in
capital, where changes in the
redemption amount were historically recorded,
and the resulting carrying value of the noncontrolling interests were included in
the calculation of the gain on divestiture.
A subsidiary of
Yoplait
SAS had an exclusive
milk supply agreement
for its European operations
with Sodiaal through
November 28,
- Net purchases totaled $
50.1
million for the quarter ended August 29, 2021.
Our noncontrolling interests contain restrictive covenants. As of August 28, 2022, we were in compliance with all of these covenants.
(9) Stockholders’ Equity
The following tables provide details of total comprehensive income:
Quarter Ended
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
General Mills
Noncontrolling
Interests
General Mills
Noncontrolling
Interests
Redeemable
Interest
In Millions
Pretax
Tax
Net
Net
Pretax
Tax
Net
Net
Net
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
$
820.0
$
3.3
$
627.0
$
3.0
$
8.2
Other comprehensive (loss) income:
Foreign currency translation
$
(48.0)
$
53.1
5.1
(1.3)
$
(11.9)
$
22.7
10.8
(11.2)
(23.5)
Other fair value changes:
Hedge derivatives
(49.8)
11.5
(38.3)
-
2.8
(1.0)
1.8
-
(0.1)
Reclassification to earnings:
Foreign currency translation (a)
(7.4)
-
(7.4)
-
-
-
-
-
-
Hedge derivatives (b)
(1.9)
0.5
(1.4)
-
12.0
(1.5)
10.5
-
0.1
Amortization of losses and
prior service costs (c)
18.2
(4.1)
14.1
-
10.8
(2.4)
8.4
-
-
Other comprehensive (loss) income
$
(88.9)
$
61.0
(27.9)
(1.3)
$
13.7
$
17.8
31.5
(11.2)
(23.5)
Total comprehensive income (loss)
$
792.1
$
2.0
$
$
658.5
$
(8.2)
$
(15.3)
(a)
Gain reclassified from AOCI into earnings is reported in the divestitures gain, net.
(b)
(Gain) loss reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.
(c)
Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.
Accumulated other comprehensive loss balances, net of tax effects,
were as follows:
In Millions
Aug. 28, 2022
May 29, 2022
Foreign currency translation adjustments
$
(593.0)
$
(590.7)
Unrealized (loss) gain from hedge derivatives
(16.4)
23.3
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,495.2)
(1,513.4)
Prior service credits
106.2
110.3
Accumulated other comprehensive loss
$
(1,998.4)
$
(1,970.5)
(10) Stock Plans
We
have various
stock-based compensation
programs under
which awards,
including stock
options, restricted
stock, restricted
stock
units, and performance
awards, may be granted
to employees and non-employee
directors. These programs
and related accounting
are
14
described in Note
12 to the
Consolidated Financial
Statements included
in our Annual
Report on Form
10-K for the
fiscal year ended
May 29, 2022.
Compensation expense related to stock-based payments recognized
in the Consolidated Statements of Earnings was as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Compensation expense related to stock-based payments
$
33.5
$
33.6
Windfall tax benefits from stock-based payments
in income tax expense in our Consolidated Statements of Earnings were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Windfall tax benefits from stock-based payments
$
12.8
$
4.7
As
of
August
28,
2022,
unrecognized
compensation
expense
related
to
non-vested
stock
options,
restricted
stock
units,
and
performance share units was $
166.8
million. This expense will be recognized over
26
months, on average.
Net cash proceeds from the exercise of stock options
less shares used for withholding taxes and the intrinsic
value of options exercised
were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net cash proceeds
$
65.5
$
7.9
Intrinsic value of options exercised
$
32.0
$
5.1
We estimate the fair value of each stock option on the grant date using a Black-Scholes option-pricing model. Black-Scholes option-
pricing models require us to make predictive assumptions regarding future stock price volatility, employee exercise behavior, and
dividend yield. We estimate our future stock price volatility using the historical volatility over the expected term of the option,
excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. We
also have considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially
those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility. Our method of selecting
the other valuation assumptions is explained in Note 12 to the Consolidated Financial Statements included in our Annual Report on
Form 10-K for the fiscal year ended May 29, 2022.
The
estimated
fair
values
of
stock
options
granted
and
the
assumptions
used
for
the
Black-Scholes
option-pricing
model
were
as
follows:
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Estimated fair values of stock options granted
$
14.16
$
8.77
Assumptions:
Risk-free interest rate
3.3
%
1.5
%
Expected term
8.5
years
8.5
years
Expected volatility
20.9
%
20.2
%
Dividend yield
3.1
%
3.4
%
The total grant date fair value of restricted stock unit awards that vested during
the period was as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Total grant date fair
value
$
82.0
$
69.5
15
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
Quarter Ended
In Millions, Except per Share Data
Aug. 28, 2022
Aug. 29, 2021
Net earnings attributable to General Mills
$
820.0
$
627.0
Average number
of common shares - basic EPS
600.2
610.4
Incremental share effect from: (a)
Stock options
3.3
2.1
Restricted stock units and performance share units
2.5
2.3
Average number
of common shares - diluted EPS
606.0
614.8
Earnings per share – basic
$
1.37
$
1.03
Earnings per share – diluted
$
1.35
$
1.02
(a)
Incremental
shares
from
stock
options,
restricted
stock
units,
and
performance
share
units
are
computed
by
the
treasury
stock
method.
Stock
options,
restricted
stock
units,
and
performance
share units
excluded
from
our
computation
of
diluted
EPS
because
they
were not dilutive were as follows
:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Anti-dilutive stock options, restricted stock units, and
performance share units
0.8
4.6
(12) Share Repurchases
Share repurchases were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Shares of common stock
6.9
2.5
Aggregate purchase price
$
500.8
$
150.1
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net cash interest payments
$
55.2
$
69.9
Net income tax payments
$
9.0
$
33.1
16
(14) Retirement and Postemployment Benefits
Components of net periodic benefit expense (income) are as follows:
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
Quarter Ended
Quarter Ended
Quarter Ended
In Millions
Aug. 28,
2022
Aug. 29,
2021
Aug. 28,
2022
Aug. 29,
2021
Aug. 28,
2022
Aug. 29,
2021
Service cost
$
17.6
$
23.7
$
1.4
$
1.9
$
2.1
$
1.8
Interest cost
64.6
46.3
4.5
3.2
0.8
0.4
Expected return on plan assets
(105.0)
(102.8)
(7.8)
(6.7)
-
-
Amortization of losses (gains)
28.3
34.9
(4.9)
(2.7)
0.1
0.8
Amortization of prior service costs (credits)
0.4
0.2
(5.8)
(5.2)
0.1
0.1
Other adjustments
-
-
-
-
3.0
1.9
Curtailment gain
-
(14.8)
-
(5.5)
-
-
Net expense (income)
$
5.9
$
(12.5)
$
(12.6)
$
(15.0)
$
6.1
$
5.0
(15) Income Taxes
During
the
first
quarter
of
fiscal
2023,
the
Inflation
Reduction
Act
(IRA)
was
signed
into
law.
The
IRA
introduces
a
Corporate
Alternative Minimum Tax
beginning in our fiscal 2024
and an excise tax on the
repurchase of corporate
stock starting after January
1,
- We
do not
currently expect the
IRA to have
a material impact
on our financial
results, including our
annual estimated effective
tax
rate,
or
on
our
liquidity.
We
will
continue
to
monitor
and
assess
the
impact
the
IRA
may
have
on
our
business
and
financial
results.
During fiscal
2022, the
Brazilian tax
authority,
Secretaria da
Receita Federal
do Brasil
(RFB), concluded
audits of
our 2012
through
2018
tax
return
years.
These
audits
included
a
review
of
our
determinations
of
amortization
of
certain
goodwill
arising
from
the
acquisition of
Yoki
Alimentos S.A.
The RFB
has proposed
adjustments that
effectively
eliminate the
goodwill amortization
benefits
related to this transaction. We
believe we have meritorious defenses and intend to continue to contest the disallowance
for all years.
(16) Contingencies
During
fiscal
2020,
we
received
notice
from
the
tax
authorities of
the
State of
São
Paulo,
Brazil
regarding
our
compliance
with
its
state sales tax requirements.
As a result, we
have been assessed additional
state sales taxes, interest,
and penalties. We
believe that we
have meritorious defenses against this claim and will vigorously defend
our position. As of August 28, 2022, we are unable to estimate
any possible loss and have not recorded a loss contingency for this matter.
(17) Business Segment and Geographic Information
We
operate
in
the
packaged
foods
industry.
In
fiscal
2022,
we
completed
a
new
organization
structure
to
streamline
our
global
operations.
This
global
reorganization
required
us
to
reevaluate
our
operating
segments.
Under
our
new
organization
structure,
our
chief operating decision maker assesses performance
and makes decisions about resources to be allocated to
our operating segments as
follows: North America Retail; International; Pet; and North America
Foodservice.
We
have restated
our net
sales by segment
and segment
operating profit
to reflect our
previously reported
operating segment
change.
These
segment
changes
had
no
effect
on
previously
reported
consolidated
net
sales,
operating
profit,
net
earnings
attributable
to
General Mills, or earnings per share.
Our North America Retail
operating segment reflects business
with a wide variety of
grocery stores, mass merchandisers, membership
stores,
natural
food
chains,
drug,
dollar
and
discount
chains,
convenience
stores,
and
e-commerce
grocery
providers.
Our
product
categories
in
this
business
segment
include
ready-to-eat
cereals,
refrigerated
yogurt,
soup,
meal
kits,
refrigerated
and
frozen
dough
products,
dessert
and
baking
mixes,
frozen
pizza
and
pizza
snacks,
snack
bars,
fruit
snacks,
savory
snacks,
and
a
wide
variety
of
organic products
including ready-to-eat
cereal, frozen
and shelf-stable vegetables,
meal kits, fruit
snacks, snack
bars, and
refrigerated
yogurt.
Our
International
operating
segment
consists
of
retail
and
foodservice
businesses
outside
of
the
United
States
and
Canada.
Our
product categories include super-premium
ice cream and frozen desserts, meal kits, salty snacks,
snack bars, dessert and baking mixes,
and
shelf
stable
vegetables.
We
also
sell
super-premium
ice
cream
and
frozen
desserts
directly
to
consumers
through
owned
retail
17
shops. Our
International segment
also includes
products manufactured
in the United
States for
export, mainly
to Caribbean
and Latin
American markets, as well as
products we manufacture
for sale to our international
joint ventures. Revenues from
export activities are
reported in the region or country where the end customer is located.
Our Pet operating segment includes
pet food products sold primarily in the
United States and Canada in national
pet superstore chains,
e-commerce retailers,
grocery stores,
regional pet
store chains,
mass merchandisers,
and veterinary
clinics and
hospitals. Our
product
categories include dog and cat food (dry
foods, wet foods, and treats) made with
whole meats, fruits, vegetables and other
high-quality
natural
ingredients.
Our
tailored
pet
product
offerings
address
specific
dietary,
lifestyle,
and
life-stage
needs
and
span
different
product types, diet types, breed sizes for dogs, lifestages, flavors, product
functions,
and textures and cuts for wet foods.
Our
North
America
Foodservice
segment
consists
of
foodservice
businesses
in
the
United
States
and
Canada.
Our
major
product
categories
in
our
North
America
Foodservice
operating
segment
are
ready-to-eat
cereals,
snacks,
refrigerated
yogurt,
frozen
meals,
unbaked and
fully baked
frozen dough products,
baking mixes,
and bakery
flour.
Many products
we sell are
branded to the
consumer
and nearly
all are
branded to
our customers.
We
sell to
distributors and
operators in
many customer
channels including
foodservice,
vending, and supermarket bakeries.
Operating profit
for these
segments excludes
unallocated corporate
items, gain
or loss
on divestitures,
and restructuring,
impairment,
and
other
exit
costs.
Unallocated
corporate
items
include
corporate
overhead
expenses,
variances
to
planned
North
American
employee
benefits
and
incentives,
certain
charitable
contributions,
restructuring
initiative
project-related
costs,
gains
and
losses
on
corporate investments,
and other
items that
are not
part of
our measurement
of segment
operating performance.
These include
gains
and
losses
arising
from
the
revaluation
of
certain
grain
inventories
and
gains
and
losses
from
mark-to-market
valuation
of
certain
commodity positions
until passed back
to our operating
segments. These items
affecting operating
profit are centrally
managed at
the
corporate
level
and
are
excluded
from
the
measure
of
segment
profitability
reviewed
by
executive
management.
Under
our
supply
chain organization, our manufacturing,
warehouse, and distribution activities are substantially integrated
across our operations in order
to maximize
efficiency
and productivity.
As a
result, fixed
assets and
depreciation and
amortization expenses
are neither
maintained
nor available by operating segment.
Our operating segment results were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net sales:
North America Retail
$
2,988.8
$
2,710.6
International
652.5
930.6
Pet
579.9
488.0
North America Foodservice
496.4
410.7
Total
$
4,717.6
$
4,539.9
Operating profit:
North America Retail
$
777.8
$
648.6
International
34.8
60.6
Pet
123.1
115.2
North America Foodservice
53.6
71.8
Total segment operating
profit
$
989.3
$
896.2
Unallocated corporate items
333.0
56.2
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs (recoveries)
1.6
(4.3)
Operating profit
$
1,085.6
$
844.3
18
Net sales for our North America Retail operating units were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
U.S. Meals & Baking Solutions
$
949.2
$
861.5
U.S. Morning Foods
904.0
829.7
U.S. Snacks
887.2
780.1
Canada
248.4
239.3
Total
$
2,988.8
$
2,710.6
Net sales by class of similar products were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Snacks
$
1,068.4
$
954.5
Cereal
814.7
731.0
Convenient meals
679.2
695.5
Pet
580.8
488.0
Baking mixes and ingredients
473.5
396.3
Dough
464.8
405.2
Yogurt
346.0
505.9
Super-premium ice cream
183.5
244.8
Other
106.7
118.7
Total
$
4,717.6
$
4,539.9
19
Item 2.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
INTRODUCTION
This
Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
(MD&A)
should
be
read
in
conjunction
with
the
MD&A
included
in
our
Annual
Report
on
Form
10-K
for
the
fiscal
year
ended
May
29,
2022
for
important
background
regarding,
among other
things, our
key business
drivers.
Significant
trademarks and
service marks
used in
our business
are set forth in
italics
herein. Certain terms used throughout this report are defined in the
“Glossary” section below.
We expect
the largest factors impacting our
performance in fiscal 2023 will be
the economic health of consumers, the
inflationary cost
environment, and the frequency and
severity of disruptions in the supply
chain. We
anticipate double-digit input cost inflation
in fiscal
2023
and
are
addressing
inflation
headwinds
with
Holistic
Margin
Management
(HMM)
cost
savings
and
net
price
realization
generated
through
our
Strategic
Revenue
Management
(SRM)
capability.
We
are
planning
for
volume
elasticities
to
increase
but
remain below historical levels and supply chain disruptions to slowly moderate
in fiscal 2023 compared to fiscal 2022 levels.
CONSOLIDATED
RESULTS
OF OPERATIONS
First Quarter Results
In the first quarter of fiscal
2023, net sales increased 4
percent and organic net sales
increased 10 percent compared
to the same period
last year.
Operating profit increased 29 percent to $1,086
million, primarily driven by favorable
net price realization and mix and
a net
gain
on
divestitures,
partially
offset
by
higher
input
costs,
an
unfavorable
change
to
the
mark-to-market
valuation
of
certain
commodity
positions
and
grain
inventories,
volume
declines,
an
increase
in
certain
selling,
general
and
administrative
(SG&A)
expenses,
and
lower
net
corporate
investment
activity.
Operating
profit
margin
of
23
percent
increased
440
basis
points.
Adjusted
operating profit
of $881
million increased
8 percent
on a
constant-currency basis,
primarily driven
by favorable
net price
realization
and mix,
partially offset
by higher
input costs, volume
declines and
an increase in
certain SG&A expenses.
Adjusted operating
profit
margin increased
70 basis points
to 18.7 percent.
Diluted earnings
per share of
$1.35 increased 32
percent in the
first quarter of
fiscal
2023.
Adjusted diluted
earnings per
share of
$1.11
increased 13 percent
on a
constant-currency basis
compared to
the first
quarter of
fiscal 2022. See the “Non-GAAP Measures” section below for a description
of our use of measures not defined by GAAP.
A summary of our consolidated financial results for the first quarter of
fiscal 2023 follows:
Quarter Ended Aug. 28, 2022
In millions,
except per share
Quarter Ended
Aug. 28, 2022 vs.
Aug. 29, 2021
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
4,717.6
4
%
Operating profit
1,085.6
29
%
23.0
%
Net earnings attributable to General Mills
820.0
31
%
Diluted earnings per share
$
1.35
32
%
Organic net sales growth rate (a)
10
%
Adjusted operating profit (a)
881.2
8
%
18.7
%
8
%
Adjusted diluted earnings per share (a)
$
1.11
12
%
13
%
(a)
See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
Consolidated
net sales
were as follows:
Quarter Ended
Aug. 28, 2022
Aug. 28, 2022 vs.
Aug. 29, 2021
Aug. 29, 2021
Net sales (in millions)
$
4,717.6
4%
$
4,539.9
Contributions from volume growth (a)
(12)
pts
Net price realization and mix
17
pts
Foreign currency exchange
(1)
pt
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Net sales
in the
first quarter
of fiscal
2023
increased 4
percent compared
to the
same period
in fiscal
2022,
driven by
favorable
net
price
realization
and
mix,
partially
offset
by
a
decrease
in
contributions
from
volume
growth
and
unfavorable
foreign
currency
exchange.
20
Components of organic net sales growth are shown in the following
table:
Quarter Ended Aug. 28, 2022 vs.
Quarter Ended Aug. 29, 2021
Contributions from organic volume growth (a)
(5)
pts
Organic net price realization and mix
15
pts
Organic net sales growth
10
pts
Foreign currency exchange
(1)
pt
Acquisitions and divestitures
(5)
pts
Net sales growth
4
pts
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Organic
net
sales
increased
10
percent
in
the
first
quarter
of
fiscal
2023
compared
to
the
same
period
in
fiscal
2022,
as
favorable
organic net price realization and mix was partially offset
by a decrease in contributions from organic volume growth.
Cost of
sales
increased $328 million
to $3,270
million in
the first
quarter of
fiscal 2023
compared to
the same
period in
fiscal 2022.
The increase
was primarily
driven by
a $451 million
increase attributable
to product
rate and
mix partially
offset
by a
$343 million
decrease attributable to lower volume. We
recorded a $175 million net increase in cost of
sales related to the mark-to-market valuation
of certain
commodity positions
and grain
inventories in
the first
quarter of
fiscal 2023
compared to
a $24
million net
decrease in
the
first quarter of
fiscal 2022. In the
first quarter of
fiscal 2023, we recorded
a $21 million
charge related
to a voluntary
recall on certain
international
Häagen-Dazs
ice cream products.
SG&A expenses
increased $34 million
to $791 million in
the first quarter
of fiscal 2023,
compared to the
same period in
fiscal 2022,
primarily driven by valuation adjustments
and the loss on sale of
certain corporate investments in fiscal
2023 and a recovery related
to
a Brazil indirect
tax item in
fiscal 2022. SG&A
expenses as a
percent of net
sales in the
first quarter of
fiscal 2023 increased
10 basis
points compared to the first quarter of fiscal 2022.
Divestitures
gain, net
totaled $431
million in
the first
quarter of
fiscal 2023,
primarily related
to the
sale of
our Helper
main meals
and
Suddenly
Salad
side
dishes
business
(please
refer
to
Note
2
to
the
Consolidated
Financial
Statements
in
Part
I,
Item
1
of
this
report).
Restructuring,
impairment,
and
other
exit
costs
(recoveries)
totaled
$2
million
of
expenses
in
the
first
quarter
of
fiscal
2023,
compared to a
net recovery of $4
million in the
same period last year
(please refer to
Note 3 to the
Consolidated Financial Statements
in Part I, Item 1 of this report).
Benefit plan
non-service income
totaled $22 million
in the
first quarter
of fiscal
2023, compare
d
to $30 million
in the
same period
last year, primarily reflecting an increase
in interest costs, partially offset by lower amortization of losses.
Interest,
net
for
the first
quarter of
fiscal 2023
totaled $88 million,
down $8 million
from the
first quarter
of fiscal
2022,
primarily
driven by lower average long-term debt levels.
The
effective tax rate
for the first quarter of fiscal
2023 was 21.2 percent compared
to 21.7 percent for the first
quarter of fiscal 2022.
The
0.5
percentage
point
decrease
was
primarily
due
to
certain
nonrecurring
discrete
tax
benefits,
partially
offset
by
certain
unfavorable tax components
related to the
divestitures
in the first quarter
of fiscal 2023. Our
effective tax
rate excluding certain
items
affecting comparability
was 19.7 percent
in the first
quarter of fiscal
2023, compared
to 21.7 percent
in the same
period last year
(see
the “Non-GAAP
Measures” section
below for
a description
of our
use of
measures not
defined by
GAAP). The
2.0 percentage
point
decrease was primarily due to certain nonrecurring discrete tax benefits
in the first quarter of fiscal 2023.
21
After-tax earnings
from
joint ventures
for the
first quarter
of fiscal
2023
decreased to
$20 million compared
to $29 million
in the
same period
in fiscal 2022,
primarily driven
by higher
input costs at
Cereal Partners Worldwide
(CPW) and Häagen
-Dazs Japan, Inc.
(HDJ), partially
offset
by positive
net price
realization and
mix at
CPW.
On a
constant-currency
basis, after-tax
earnings from
joint
ventures decreased
27 percent (see
the “Non-GAAP
Measures” section
below for
a description of
our use of
measures not defined
by
GAAP).
The components of our joint ventures’ net sales growth are shown in the following
table:
Quarter Ended Aug. 28, 2022 vs.
Quarter Ended Aug. 29, 2021
CPW
HDJ
Total
Contributions from volume growth (a)
(5)
pts
(8)
pts
Net price realization and mix
8
pts
Flat
Net sales growth in constant currency
3
pts
(8)
pts
1
pt
Foreign currency exchange
(11)
pts
(17)
pts
(12)
pts
Net sales growth
(7)
pts
(25)
pts
(11)
pts
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Average
diluted
shares
outstanding
decreased
by
9
million
in
the
first
quarter
of
fiscal
2023
from
the
same
period
a
year
ago
primarily due to share repurchases.
SEGMENT OPERATING
RESULTS
Our businesses are
organized into four
operating segments: North
America Retail; International;
Pet, and North
America Foodservice.
Please
refer
to
Note
17
of
the
Consolidated
Financial
Statements
in
Part
I,
Item
1
of
this
report
for
a
description
of
our
operating
segments.
North America Retail Segment Results
North America Retail net sales were as follows:
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
2,988.8
10
%
$
2,710.6
Contributions from volume growth (a)
(6)
pts
Net price realization and mix
16
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North
America
Retail
net
sales increased
10
percent
in
the first
quarter
of
fiscal
2023 compared
to
the
same
period
in
fiscal
2022,
driven by favorable net price realization and mix, partially offset
by a decrease in contributions from volume growth.
22
The components of North America Retail organic net
sales growth are shown in the following table:
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(5)
pts
Organic net price realization and mix
17
pts
Organic net sales growth
12
pts
Foreign currency exchange
Flat
Divestiture (b)
(1)
pt
Net sales growth
10
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Divestiture of Helper main meals and Suddenly Salad side dishes businesses in fiscal 2023. Please see Note 2 to the Consolidated Financial
Statements in Part I, Item 1 of this report.
North America
Retail organic
net sales
increased 12
percent in
the first
quarter of
fiscal 2023
compared to
the same
period in
fiscal
2022,
driven by
favorable organic
net price
realization and
mix,
partially offset
by a
decrease in
contributions from
organic
volume
growth.
North America Retail net sales percentage change by operating unit are shown
in the following table:
Quarter Ended
Aug. 28, 2022
U.S. Snacks
14
%
U.S. Meals & Baking Solutions
10
%
U.S. Morning Foods
9
%
Canada (a)
4
%
Total
10
%
(a)
On a constant-currency basis, Canada net sales increased 7 percent in the first quarter of fiscal 2023, compared to the same period in fiscal 2022.
See the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP.
Segment operating profit
increased 20 percent
to $778 million in
the first quarter
of fiscal 2023
compared to $649 million
in the same
period in fiscal
2022, primarily driven
by favorable net
price realization
and mix, partially
offset by higher
input costs and
a decrease
in contributions from volume growth. Segment
operating profit increased 20 percent on a constant-currency
basis in the first quarter of
fiscal 2023 compared
to the same period
in fiscal 2022 (see
the “Non-GAAP Measures”
section below for
our use of this
measure not
defined by GAAP).
International Segment Results
International net sales were as follows:
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
652.5
(30)
%
$
930.6
Contributions from volume growth (a)
(39)
pts
Net price realization and mix
14
pts
Foreign currency exchange
(5)
pts
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
International net
sales decreased 30
percent in the
first quarter of
fiscal 2023
compared to the
same period
in fiscal 2022,
driven by
a
decrease in
contributions from
volume growth,
including the
impact of
volume declines
from divestitures
and the
voluntary recall
on
certain
international
Häagen-Dazs
ice
cream
products,
and
unfavorable
foreign
currency
exchange,
partially
offset
by favorable
net
price realization and mix.
23
The components of International organic net sales growth
are shown in the following table:
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(7)
pts
Organic net price realization and mix
5
pts
Organic net sales growth
(2)
pts
Foreign currency exchange
(5)
pts
Divestitures (b)
(23)
pts
Net sales growth
(30)
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Divestitures primarily include the impact of the sale of our interests in Yoplait SAS, Yoplait
Marques SNC, and Liberté Marques Sàrl and our
European dough businesses in fiscal 2022.
International organic net sales decreased
2 percent in the first quarter of fiscal 2023
compared to the same period in fiscal 2022, driven
by a decrease
in contributions from
organic volume
growth, including
the impact of
the ice cream
recall, partially
offset by
favorable
organic net price realization and mix.
Segment operating profit
decreased 43 percent
to $35 million in the
first quarter of
fiscal 2023 from $61
million in the same
period in
fiscal
2022,
primarily
driven
by
a
decrease
in
contributions
from
volume
growth,
including
the
impact
of
volume
declines
from
divestitures and
the ice
cream recall,
and higher
input costs,
partially offset
by favorable net
price realization
and mix and
a decrease
in
SG&A
expenses.
Segment
operating
profit
decreased
34
percent
on
a
constant-currency
basis
in
the
first
quarter
of
fiscal
2023
compared to the
same period in
fiscal 2022 (see
the “Non-GAAP Measures”
section below for
our use of
this measure not
defined by
GAAP).
Pet Segment Results
Pet net sales were as follows:
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
579.9
19
%
$
488.0
Contributions from volume growth (a)
(1)
pt
Net price realization and mix
20
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Pet
net
sales
increased
19
percent
during
the
first
quarter
of
fiscal
2023
compared
to
the
same
period
in
fiscal
2022,
driven
by
favorable net price realization and mix, partially offset
by a decrease in contributions from volume growth.
24
The components of Pet organic net sales growth are shown in the following
table:
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
17
pts
Organic net sales growth
14
pts
Foreign currency exchange
Flat
Acquisition (b)
5
pts
Net sales growth
19
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Acquisition of Tyson Foods’ pet treats business in fiscal 2022. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of
this report.
Pet
organic
net
sales
increased
14 percent
in
the
first
quarter
of
fiscal
2023
compared
to the
same
period
in
fiscal
2022,
driven
by
favorable organic net price realization and mix, partially offset
by a decrease in contributions from organic volume growth.
Segment operating
profit increased
7 percent
to $123 million
in the
first quarter
of fiscal
2023 compared
to $115
million in
the same
period in fiscal 2022,
primarily driven by favorable
net price realization and
mix, partially offset
by higher input costs
and an increase
in
SG&A
expenses.
Segment
operating
profit
increased
7
percent
on
a
constant-currency
basis
in
the
first
quarter
of
fiscal
2023
compared to the
same period in
fiscal 2022 (see
the “Non-GAAP Measures”
section below for
our use of
this measure not
defined by
GAAP).
North America Foodservice Segment Results
North America Foodservice net sales were as follows:
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
496.4
21
%
$
410.7
Contributions from volume growth (a)
(1)
pt
Net price realization and mix
22
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North
America
Foodservice
net
sales
increased
21
percent
in
the
first
quarter
of
fiscal
2023
compared
to
the
same
period
in
fiscal
2022, driven
by favorable net
price realization
and mix, including
market index pricing
on bakery flour,
partially offset
by a decrease
in contributions from volume growth.
The components of North America Foodservice organic
net sales growth are shown in the following table:
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
21
pts
Organic net sales growth
18
pts
Foreign currency exchange
Flat
Acquisition (b)
3
pts
Net sales growth
21
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Acquisition of TNT Crust in fiscal 2023. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
25
North America
Foodservice organic
net sales
increased 18
percent in
the first
quarter of
fiscal 2023
compared to
the same
period in
fiscal 2022, driven
by favorable organic
net price realization
and mix,
including market
index pricing on
bakery flour,
partially offset
by a decrease in contributions from organic volume growth.
Segment operating
profit decreased
25 percent
to $54
million in
the first
quarter of
fiscal 2023
compared to
$72 million in
the same
period in fiscal
2022, primarily driven by
higher input costs and
an increase in SG&A
expenses, partially offset
by favorable net price
realization
and
mix.
Segment
operating
profit
decreased
25
percent
on
a
constant-currency
basis
in
the
first
quarter
of
fiscal
2023
compared to the
same period in
fiscal 2022 (see
the “Non-GAAP Measures”
section below for
our use of
this measure not
defined by
GAAP).
UNALLOCATED
CORPORATE
ITEMS
Unallocated corporate
expense totaled
$333 million in
the first
quarter of
fiscal 2023,
compared to
$56 million in
the same
period in
fiscal
2022.
In
the
first
quarter
of
fiscal
2023,
we
recorded
a
$175 million
net
increase
in
expense
related
to
the
mark-to-market
valuation of
certain commodity
positions and
grain inventories
compared to
a $24 million
net decrease
in expense
in the same
period
last year.
We
recorded $26 million
of net losses
related to valuation
adjustments and
the loss on
sale of certain
corporate investments
in
the
first quarter
of fiscal
2023,
compared
to
$1 million
of
net
losses related
to
valuation
adjustments
in
the
first
quarter
of
fiscal
- In the first quarter of fiscal 2023,
we recorded a $22 million charge related to a
voluntary recall on certain international
Häagen-
Dazs
ice cream products.
In addition, we
recorded $2 million
of integration costs
primarily related
to our acquisition
of TNT Crust
in
the
first
quarter
of
fiscal
2023
compared
to
$12 million
of
integration
costs
related
to
our
acquisition
of
Tyson
Foods’
pet
treats
business
in
the
first
quarter of
fiscal
2022.
Also,
in the
first quarte
r
of fiscal
2022,
we recorded
a $21
million
recovery
related
to
a
Brazil
indirect
tax
item,
a
$13 million
insurance
recovery and
$11 million
of
transaction
costs related
to
the
sale of
our
interests
in
Yoplait
SAS, Yoplait
Marques SNC, and Liberté Marques Sàrl.
LIQUIDITY
AND CAPITAL
RESOURCES
During the first quarter of
fiscal 2023,
cash provided by operations was $389
million compared to $370 million in
the same period last
year.
The $19 million
increase was
mainly driven
by a
$185 million
increase in
net earnings,
a $180
million change
in current
assets
and
liabilities,
and
a
$94
million
change
in
other
non-cash
items
in
net
earnings,
including
changes
in
the
valuation
of
certain
corporate investments.
These were
partially offset
by a
$431 million
net divestitures
gain. The
$180 million
change in
current assets
and liabilities is primarily driven by an $85
million change in the timing of accounts payable and
a $54 million change in the timing of
accounts receivable.
Cash provided by
investing activities during the
first quarter of fiscal
2023 was $266 million
compared to cash used
of $1,298 million
for the same
period in fiscal
- During the
first quarter of the
2023, we completed
the sale of the
Helper main meals and Suddenly
Salad side dishes
business for $607
million cash. In
the first quarter
of fiscal 2023,
we acquired TNT
Crust for $252
million cash, net
of cash
acquired. In
the first
quarter of
fiscal 2022,
we acquired
the Tyson
Foods’ pet
treats business for
an aggregate
purchase price
of
$1.2 billion.
In
addition,
we
spent
$91
million
on
purchases
of
land,
buildings,
and
equipment
in
the
first
quarter
of
fiscal
2023
compared to $104 million in the same period last year.
Cash used
by financing
activities during
the first
quarter of
fiscal 2023
was $609 million
compared to
$195 million of
cash provided
by
financing
activities
in
the
same
period
in
fiscal
2022.
We
paid
$325 million
of
dividends
in
the
first
quarter
of
fiscal
2023,
compared to
$312 million in
the same
period last
year.
We
paid $501
million for
purchases of
common stock
for treasury
in the
first
quarter
of
fiscal
2023,
compared
to
$150
million
in
the
same
period
in
fiscal
2022.
In
addition,
we
had
$188
million
of
net
debt
issuances in the first quarter of fiscal 2023, compared to $669 million in the first quarter
of fiscal 2022.
As of August
28, 2022, we had
$533 million of cash
and cash equivalents
in foreign jurisdictions. In
anticipation of repatriating
funds
from
foreign
jurisdictions,
we
record
local
country
withholding
taxes
on
our
international
earnings,
as
applicable.
Furthermore,
we
may repatriate our
cash and cash equivalents
held by our
foreign subsidiaries without
such funds being
subject to further
U.S. income
tax liability. Earnings prior
to fiscal 2018 from our foreign subsidiaries remain permanently reinvested
in those jurisdictions.
The following table details the fee-paid committed and uncommitted credit
lines we had available as of August 28, 2022:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
0.2
Total committed
and uncommitted credit facilities
$
3.3
$
0.2
26
The
third-party
holder
of
the
General
Mills
Cereals,
LLC
(GMC)
Class A
Interests
receives
quarterly
preferred
distributions
from
available net
income based
on the application
of a
floating preferred
return rate
to the
holder’s capital
account balance
established in
the
most
recent
mark-to-market
valuation
(currently
$252 million).
On
June 1,
2021,
the
floating
preferred
return
rate
on
GMC’s
Class A Interests
was reset
to the
sum of
three-month LIBOR
plus 160
basis points.
The preferred
return rate
is adjusted
every three
years through a negotiated agreement with the Class A Interest holder
or through a remarketing auction.
We
have an option
to purchase the
Class A Interests for
consideration equal to
the then current
capital account value,
plus any unpaid
preferred return
and the
prescribed make-whole
amount. If
we purchase
these interests,
any change
in the
third-party holder’s
capital
account
from
its
original
value
will
be
charged
directly
to
retained
earnings
and
will
increase
or
decrease
the
net
earnings
used
to
calculate EPS in that period.
To ensure availability
of funds, we maintain bank credit lines and have commercial paper programs
available to us in the United States
and Europe. We
also have uncommitted and asset-backed credit lines that support our
foreign operations.
Certain
of
our
long-term
debt
agreements,
our
credit
facilities,
and
our
noncontrolling
interests
contain
restrictive
covenants.
As
of
August 28, 2022, we were in compliance with all of these covenants.
We
have $2,095 million
of long-term debt
maturing in the
next 12 months
that is classified
as current, including
$500 million of
2.60
percent fixed
-rate notes
due October
12, 2022,
$100 million
of 6.41
percent fixed-rate
notes due
October 15,
2022, €250
million of
0.00 percent
fixed-rate notes due
November 11,
2022, €500 million
of 1.00
percent fixed-rate
notes due
April 27, 2023,
€250 million
of 0.00
percent fixed-rate
notes due
May 16,
2023
and €500
million of
0.00 percent
fixed-rate notes
due July
27, 2023.
We
believe
that cash flows from operations, together with available short-
and long-term debt financing, will be adequate to meet
our liquidity and
capital needs for at least the next 12 months.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are described in Note 2
to the Consolidated Financial Statements included
in our Annual Report on
Form
10-K for
the fiscal
year ended
May 29,
- The
accounting policies
used in
preparing our
interim fiscal
2023
Consolidated
Financial Statements are the same as those described in our Form 10-K.
Our
critical
accounting
estimates
are
those
that
have
meaningful
impact
on
the
reporting
of
our
financial
condition
and
results
of
operations.
These
estimates
include
our
accounting
for
revenue
recognition,
valuation
of
long-lived
assets,
intangible
assets,
stock-
based compensation,
income taxes,
and defined
benefit pension,
other postretirement
benefit, and
postemployment benefit
plans. The
assumptions and methodologies used
in the determination of
those estimates as of August
28, 2022, are the
same as those described in
our Annual Report on Form 10-K for the fiscal year ended May 29, 2022.
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal
2022,
and
we
determined
there
was
no
impairment
of
our
intangible
assets
as
their
related
fair
values
were
substantially
in
excess of the carrying values, except for the
Uncle Toby’s
brand intangible asset.
The excess fair value as of the fiscal 2022
test date of the
Uncle Toby’s
brand intangible asset is as follows:
In Millions
Carrying Value
of
Intangible Asset
Excess Fair Value
as of
Fiscal 2022 Test
Date
Uncle Toby's
$
55.0
7
%
In
addition,
while
having
significant
coverage
as
of
our
fiscal
2022
assessment
date,
the
Progresso
,
Green
Giant
,
and
EPIC
brand
intangible assets had risk of decreasing coverage. We
will continue to monitor these businesses for potential impairment.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2020, the Financial
Accounting Standards Board (FASB)
issued optional accounting guidance
for a limited period of time
to
ease
the
potential
burden
in
accounting
for
reference
rate reform.
The new
standard
provides
expedients
and
exceptions to
existing
accounting
requirements
for
contract
modifications
and
hedge accounting
related
to
transitioning
from discontinued
reference
rates,
such as
LIBOR,
to alternative
reference
rates, if
certain
criteria are
met. The
new accounting
requirements
can be
applied as
of the
beginning of
the interim
period including
March 12, 2020,
or any
date thereafter,
through December 31,
- We
are in
the process
of reviewing our contracts
and arrangements that
will be affected by
a discontinued reference rate
and are analyzing the
impact of this
guidance on our results of operations and financial position.
27
NON-GAAP MEASURES
We
have
included
in
this
report
measures
of
financial
performance
that
are not
defined
by
GAAP.
We
believe
that
these
measures
provide useful information to investors, and include these measures in other
communications to investors.
For each
of these
non-GAAP financial
measures, we
are providing
below a
reconciliation of
the differences
between the
non-GAAP
measure and the most
directly comparable GAAP measure,
an explanation of why
we believe the non-GAAP
measure provides useful
information to
investors, and
any additional
material purposes
for which
our management
or Board
of Directors
uses the
non-GAAP
measure. These non-GAAP measures should be viewed in addition to, and not
in lieu of, the comparable GAAP measure.
Significant Items Impacting Comparability
Several
measures
below
are
presented
on
an
adjusted
basis.
The
adjustments
are
either
items
resulting
from
infrequently
occurring
events or items that, in management’s
judgment, significantly affect the year-to-year
assessment of operating results.
The following are descriptions of significant items impacting comparability
of our results.
Divestitures
gain, net
Net divestitures
gain primarily
related to
the sale
of our
Helper main
meals and
Suddenly Salad
side dishes
business in
fiscal 2023.
Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report
.
Transaction costs
Transaction
costs
primarily
related
to
the
sale
of
our
Helper
main
meals
and
Suddenly
Salad
side
dishes
business
in
fiscal
2023.
Transaction
costs related
to the
sale of
our interests
in Yoplait
SAS, Yoplait
Marques SNC,
and Liberté
Marques Sàrl
in fiscal
2022.
Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report
.
Non-income tax recovery
Recovery related to a Brazil indirect tax item recorded in fiscal 2022.
Acquisition integration costs
Integration costs
primarily resulting
from the acquisition
of TNT Crust
in fiscal 2023.
Integration costs
resulting from
the acquisition
of Tyson
Foods’ pet treats business
in fiscal 2022.
Please see Note
2 to the Consolidated
Financial Statements in
Part I, Item
1 of this
report.
Investment activity,
net
Valuation
adjustments and
the loss on
sale of certain
corporate investments in
fiscal 2023. Valuation
adjustments of certain
corporate
investments in fiscal 2022.
Mark-to-market effects
Net
mark-to-market
valuation
of
certain
commodity
positions
recognized
in
unallocated
corporate
items.
Please
see
Note
6
to
the
Consolidated Financial Statements in Part I, Item 1 of this report.
Restructuring charges (recoveries)
Restructuring charges
for previously announced
restructuring actions recorded
in fiscal 2023
and fiscal 2022.
Please see Note 3
to the
Consolidated Financial Statements in Part I, Item 1 of this report.
Product recall
Voluntary
recall costs recorded in fiscal 2023 related to certain international
Häagen-Dazs
ice cream products.
CPW restructuring charges
CPW restructuring charges related to previously announced
restructuring actions.
Organic Net Sales Growth Rates
We
provide organic
net sales
growth rates
for our
consolidated net
sales and
segment net
sales. This
measure is
used in
reporting to
our
Board
of
Directors
and
executive
management
and
as
a
component
of
the
measurement
of
our
performance
for
incentive
compensation purposes.
We
believe that
organic net
sales growth
rates provide
useful information
to investors
because they
provide
transparency
to
underlying
performance
in
our
net
sales
by
excluding
the
effect
that
foreign
currency
exchange
rate
fluctuations,
acquisitions, divestitures,
and a 53
rd
week, when applicable,
have on year-to-year comparability.
A reconciliation of
these measures to
reported net
sales growth
rates, the
relevant GAAP
measures, are
included in
our Consolidated
Results of
Operations and
Results of
Segment Operations discussions in the MD&A above.
28
Adjusted Operating Profit as a Percent of Net Sales (Adjusted Operating Profit
Margin)
We believe
this measure provides useful information
to investors because it is important
for assessing our operating profit
margin on a
comparable basis.
Our adjusted operating profit margins are calculated as follows:
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
1,085.6
23.0
%
$
844.3
18.6
%
Divestitures gain, net
(430.9)
(9.1)
%
-
-
%
Mark-to-market effects
174.7
3.7
%
(24.1)
(0.5)
%
Investment activity, net
26.3
0.6
%
0.7
-
%
Product recall
21.5
0.5
%
-
-
%
Restructuring charges (recoveries)
2.3
-
%
(4.1)
(0.1)
%
Acquisition integration costs
1.5
-
%
12.4
0.3
%
Transaction costs
0.2
-
%
10.6
0.2
%
Non-income tax recovery
-
-
%
(20.6)
(0.5)
%
Adjusted operating profit
$
881.2
18.7
%
$
819.2
18.0
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
Adjusted Operating Profit Growth on a Constant-currency Basis
This measure is used in reporting
to our Board of Directors and
executive management and as a
component of the measurement of
our
performance for
incentive compensation purposes.
We
believe that
this measure provides
useful information
to investors because
it is
the
operating
profit
measure
we
use
to
evaluate
operating
profit
performance
on
a
comparable
year-to-year
basis.
The
measure
is
evaluated on
a constant-currency
basis by
excluding the
effect that
foreign currency
exchange rate
fluctuations have
on year-to-year
comparability given the volatility in foreign currency exchange rates.
Our adjusted operating profit growth on a constant-currency basis is calculated
as follows:
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Change
Operating profit as reported
$
1,085.6
$
844.3
29
%
Divestitures gain, net
(430.9)
-
Mark-to-market effects
174.7
(24.1)
Investment activity, net
26.3
0.7
Product recall
21.5
-
Restructuring charges (recoveries)
2.3
(4.1)
Acquisition integration costs
1.5
12.4
Transaction costs
0.2
10.6
Non-income tax recovery
-
(20.6)
Adjusted operating profit
$
881.2
$
819.2
8
%
Foreign currency exchange impact
Flat
Adjusted operating profit growth, on a constant-currency basis
8
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
29
Adjusted Diluted EPS and Related Constant-currency Growth Rates
This measure
is used in
reporting to
our Board of
Directors and executive
management. We
believe that
this measure provides
useful
information to
investors because it
is the profitability
measure we use
to evaluate earnings
performance on
a comparable year-to-year
basis.
The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted
EPS and the related constant-currency growth rates follows:
Quarter Ended
Per Share Data
Aug. 28, 2022
Aug. 29, 2021
Change
Diluted earnings per share, as reported
$
1.35
$
1.02
32
%
Divestitures gain, net
(0.54)
-
Mark-to-market effects
0.22
(0.03)
Investment activity, net
0.04
-
Product recall
0.03
-
Restructuring charges (recoveries)
-
(0.01)
Acquisition integration costs
-
0.02
Transaction costs
-
0.01
Non-income tax recovery
-
(0.02)
Adjusted diluted earnings per share
$
1.11
$
0.99
12
%
Foreign currency exchange impact
(1)
pt
Adjusted diluted earnings per share growth, on a constant-currency basis
13
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
See our reconciliation
below of the effective
income tax rate as
reported to the adjusted
effective income tax
rate for the tax
impact of
each item affecting comparability.
Constant-currency After-tax Earnings from Joint Ventures
Growth Rates
We
believe that
this measure
provides useful
information to
investors because
it provides
transparency to
underlying performance
of
our joint
ventures by
excluding the
effect
that foreign
currency exchange
rate fluctuations
have on
year-to-year
comparability given
volatility in foreign currency exchange markets.
After-tax earnings from joint ventures growth rates on a constant-currency
basis are calculated as follows:
Percentage Change in
After-Tax
Earnings from Joint
Ventures
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in After-Tax
Earnings from Joint Ventures
on Constant-Currency Basis
Quarter Ended Aug. 28, 2022
(32)
%
(5)
pts
(27)
%
Note: Table may
not foot due to rounding.
Net Sales Growth Rates for Our Canada Operating Unit on Constant-currency
Basis
We
believe
that
this
measure
of
our
Canada
operating
unit
net
sales
provides
useful
information
to
investors
because
it
provides
transparency to
the underlying
performance for
the Canada operating
unit within our
North America Retail
segment by
excluding the
effect
that
foreign
currency
exchange
rate
fluctuations
have
on
year-to-year
comparability
given
volatility
in
foreign
currency
exchange markets.
Net sales growth rates for our Canada operating unit on a constant-currency
basis are calculated as follows:
Percentage Change in
Net Sales
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in
Net Sales on Constant-
Currency Basis
Quarter Ended Aug. 28, 2022
4
%
(4)
pts
7
%
Note: Table may
not foot due to rounding.
30
Constant-currency Segment Operating Profit Growth Rates
We
believe that
this measure
provides useful
information to
investors because
it provides
transparency to
underlying performance
of
our
segments
by
excluding
the
effect
that
foreign
currency
exchange
rate
fluctuations
have
on
year-to-year
comparability
given
volatility in foreign currency exchange markets.
Our segments’ operating profit growth rates on a constant-currency
basis are calculated as follows:
Quarter Ended Aug. 28, 2022
Percentage Change in
Operating Profit
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in Operating
Profit on Constant-Currency
Basis
North America Retail
20
%
Flat
20
%
International
(43)
%
(9)
pts
(34)
%
Pet
7
%
Flat
7
%
North America Foodservice
(25)
%
Flat
(25)
%
Note: Table may
not foot due to rounding.
Adjusted Effective Income Tax
Rates
We
believe
this
measure
provides
useful
information
to
investors
because
it
presents
the
adjusted
effective
income
tax
rate
on
a
comparable year-to-year basis.
Adjusted effective income tax rates are calculated as follows:
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
In Millions
(Except Per Share Data)
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
As reported
$
1,019.6
$
216.1
$
778.0
$
168.9
Divestitures gain, net
(430.9)
(101.9)
-
-
Mark-to-market effects
174.7
40.2
(24.1)
(5.5)
Investment activity, net
26.3
0.5
0.7
0.2
Product recall
21.5
4.9
-
-
Restructuring charges (recoveries)
2.3
0.6
(4.1)
(0.9)
Acquisition integration costs
1.5
0.3
12.4
2.8
Transaction costs
0.2
-
10.6
4.6
Non-income tax recovery
-
-
(20.6)
(7.0)
As adjusted
$
815.2
$
160.8
$
752.8
$
163.0
Effective tax rate:
As reported
21.2%
21.7%
As adjusted
19.7%
21.7%
Sum of adjustment to income taxes
$
(55.3)
$
(5.9)
Average number
of common shares - diluted EPS
606.0
614.8
Impact of income tax adjustments on adjusted diluted EPS
$
0.09
$
0.01
Note: Table may not foot due to rounding.
(a)
Earnings before income taxes and after-tax earnings from joint ventures.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
31
Glossary
AOCI
. Accumulated other comprehensive income (loss).
Adjusted diluted EPS.
Diluted EPS adjusted for certain items affecting year-to-year
comparability.
Adjusted operating profit.
Operating profit adjusted for certain items affecting year-to-year
comparability.
Adjusted operating profit
margin.
Operating profit adjusted
for certain items
affecting year-over-year
comparability,
divided by net
sales.
Constant currency.
Financial results
translated to
United States
dollars using
constant foreign
currency exchange
rates based
on the
rates
in
effect
for
the
comparable
prior-year
period.
To
present
this
information,
current
period
results
for
entities
reporting
in
currencies other
than United
States dollars
are translated
into United
States dollars
at the
average exchange
rates in
effect during
the
corresponding
period
of
the
prior
fiscal
year,
rather
than
the
actual
average
exchange
rates
in
effect
during
the
current
fiscal
year.
Therefore,
the
foreign
currency
impact
is
equal
to
current
year
results
in
local
currencies
multiplied
by
the
change
in
the
average
foreign currency exchange rate between the current fiscal period and the corresponding
period of the prior fiscal year.
Core working capital.
Accounts receivable plus inventories less accounts payable.
Derivatives.
Financial instruments such
as futures, swaps,
options, and forward
contracts that we
use to manage
our risk arising
from
changes in commodity prices, interest rates, foreign exchange rates, and stock
prices.
Euribor.
Euro Interbank Offered Rate.
Fair value
hierarchy.
For purposes
of fair
value measurement,
we categorize
assets and
liabilities into
one of
three levels
based on
the assumptions
(inputs) used
in valuing
the asset or
liability.
Level 1 provides
the most reliable
measure of
fair value, while
Level 3
generally requires significant management judgment. The three levels
are defined as follows:
Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:
Observable inputs other than quoted prices included in
Level 1, such as quoted prices for similar assets or liabilities in
active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3:
Unobservable inputs reflecting management’s
assumptions about the inputs used in pricing the asset or liability.
Free cash flow.
Net cash provided by operating activities less purchases of land, buildings, and equipment.
Generally Accepted
Accounting Principles
(GAAP).
Guidelines, procedures,
and practices
that we
are required
to use in
recording
and reporting accounting information in our financial statements.
Goodwill.
The difference
between the purchase
price of acquired
companies plus the fair
value of any
noncontrolling and redeemable
interests and the related fair values of net assets acquired.
Gross margin.
Net sales less cost of sales.
Hedge accounting.
Accounting for qualifying
hedges that allows changes in
a hedging instrument’s
fair value to offset
corresponding
changes in
the hedged
item in
the same
reporting period.
Hedge accounting
is permitted
for certain
hedging instruments
and hedged
items
only
if
the
hedging
relationship
is
highly
effective,
and
only
prospectively
from
the
date
a
hedging
relationship
is
formally
documented.
Holistic Margin Management
(HMM).
Company-wide initiative to
use productivity savings, mix
management, and price realization
to offset input cost inflation, protect margins,
and generate funds to reinvest in sales-generating activities.
Interest
bearing
instruments.
Notes
payable,
long-term
debt,
including
current
portion,
cash
and
cash
equivalents,
and
certain
interest bearing investments classified within prepaid expenses and other current
assets and other assets.
LIBOR.
London Interbank Offered Rate.
Mark-to-market.
The act of determining a value for
financial instruments, commodity contracts, and
related assets or liabilities based
on the current market price for that item.
32
Net
mark-to-market
valuation of
certain
commodity
positions.
Realized
and
unrealized
gains
and
losses on
derivative
contracts
that will be allocated to segment operating profit when the exposure we are hedging
affects earnings.
Net price realization.
The impact of list and promoted price changes, net of trade and other price
promotion costs.
Net realizable
value.
The estimated
selling price
in the
ordinary course
of business,
less reasonably
predictable costs
of completion,
disposal, and transportation.
Noncontrolling interests.
Interests of subsidiaries held by third parties.
Notional
amount.
The
amount
of
a
position
or
an
agreed
upon
amount
in
a
derivative
contract
on
which
the
value
of
financial
instruments are calculated.
OCI.
Other Comprehensive Income.
Organic net sales growth
. Net sales growth adjusted
for foreign currency translation,
acquisitions, divestitures and a
53
rd
fiscal week,
when applicable.
Project-related costs.
Costs incurred related to our restructuring initiatives not included in restructuring
charges.
Redeemable interest.
Interest of subsidiaries held by a third party
that can be redeemed outside of our
control and therefore cannot be
classified as a noncontrolling interest in equity.
Reporting unit
. An operating segment or a business one level below an operating
segment.
Strategic
Revenue
Management
(SRM).
A
company-wide
capability
focused
on
generating
sustainable
benefits
from
net
price
realization
and
mix
by
identifying
and
executing
against
specific
opportunities
to
apply
tools
including
pricing,
sizing,
mix
management, and promotion optimization across each of our businesses.
Supply chain
input costs.
Costs incurred
to produce
and deliver
product,
including costs
for
ingredients
and
conversion, inventory
management, logistics, and warehousing.
Translation
adjustments.
The impact
of the conversion
of our foreign
affiliates’ financial
statements to United
States dollars
for the
purpose of consolidating our financial statements.
Variable
interest
entities (VIEs).
A legal
structure
that is
used for
business purposes
that either
(1) does
not have
equity investors
that have voting
rights and share in
all the entity’s
profits and losses or
(2) has equity
investors that do not
provide sufficient financial
resources to support the entity’s activities.
Working capital
. Current assets and current liabilities, all as of the last day of our fiscal year.
33
CAUTIONARY STATEMENT
RELEVANT
TO FORWARD
-LOOKING INFORMATION
FOR THE PURPOSE OF “SAFE
HARBOR” PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION
REFORM ACT OF 1995
This report
contains or
incorporates by
reference
forward-looking
statements within
the meaning
of the
Private Securities
Litigation
Reform Act
of 1995
that are
based on
our current
expectations and
assumptions. We
also may
make written
or oral
forward-looking
statements,
including
statements
contained
in
our
filings
with
the
Securities
and
Exchange
Commission
and
in
our
reports
to
stockholders.
The words or
phrases “will likely
result,” “are expected
to,” “will continue,”
“is anticipated,” “estimate,”
“plan,” “project,” or
similar
expressions identify
“forward-looking statements”
within the
meaning of
the Private
Securities Litigation
Reform Act
of 1995.
Such
statements are
subject to
certain risks
and uncertainties
that could
cause actual
results to
differ
materially from
historical results
and
those currently anticipated or projected. We
wish to caution you not to place undue reliance on any such forward-looking statements.
In connection
with the “safe
harbor” provisions
of the Private
Securities Litigation
Reform Act of
1995, we are
identifying important
factors
that could
affect
our financial
performance
and could
cause our
actual results
in future
periods
to differ
materially
from any
current opinions or statements.
Our future results could
be affected
by a variety of
factors, such as: the impact
of the COVID-19 pandemic
on our business, suppliers,
consumers,
customers,
and
employees;
disruptions
or
inefficiencies
in
the
supply
chain,
including
any
impact
of
the
COVID-19
pandemic;
competitive
dynamics
in
the
consumer
foods
industry
and
the
markets
for
our
products,
including
new
product
introductions,
advertising
activities,
pricing
actions,
and
promotional
activities
of
our
competitors;
economic
conditions,
including
changes
in
inflation
rates,
interest
rates,
tax
rates,
or
the
availability
of
capital;
product
development
and
innovation;
consumer
acceptance
of
new
products
and
product
improvements;
consumer
reaction
to
pricing
actions
and
changes
in
promotion
levels;
acquisitions
or
dispositions
of
businesses
or
assets;
changes
in
capital
structure;
changes
in
the
legal
and
regulatory
environment,
including
tax
legislation,
labeling
and
advertising
regulations,
and
litigation;
impairments
in
the
carrying
value
of
goodwill,
other
intangible assets,
or other
long-lived assets,
or changes
in the
useful lives
of other
intangible assets;
changes in
accounting standards
and
the impact
of critical
accounting
estimates; product
quality and
safety issues,
including
recalls and
product
liability; changes
in
consumer
demand
for
our
products;
effectiveness
of
advertising,
marketing,
and
promotional
programs;
changes
in
consumer
behavior,
trends,
and
preferences,
including
weight
loss
trends;
consumer
perception
of
health-related
issues,
including
obesity;
consolidation
in the
retail environment;
changes in
purchasing and
inventory levels
of significant
customers; fluctuations
in the
cost
and
availability
of
supply
chain
resources,
including
raw
materials,
packaging,
energy,
and
transportation;
effectiveness
of
restructuring
and
cost
saving
initiatives;
volatility
in
the
market
value
of
derivatives
used
to
manage
price
risk
for
certain
commodities; benefit plan
expenses due to
changes in plan
asset values and discount
rates used to
determine plan liabilities;
failure or
breach of
our information
technology systems;
foreign economic
conditions, including
currency rate
fluctuations; and
political unrest
in foreign markets and economic uncertainty due to terrorism or war.
You
should also
consider the risk
factors that we
identify in Item
1A of Part
I of our
Annual Report on
Form 10-K for
the fiscal year
ended May 29, 2022 which could also affect our future results.
We undertake
no obligation to publicly revise any forward-looking
statements to reflect events or circumstances
after the date of those
statements or to reflect the occurrence of anticipated or unanticipated events.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
The
estimated
maximum
potential
value-at-risk
arising
from
a
one-day
loss
in
fair
value
for
our
interest
rate,
foreign
exchange,
commodity, and equity
market-risk-sensitive instruments outstanding as of August 28, 2022,
was as follows:
In Millions
One-day Risk
of Loss
Change During
Quarter Ended
Aug. 28, 2022
Analysis of Change
Interest rate instruments
$
45
$
4
Rising interest rates
Foreign currency instruments
24
3
Larger portfolio
Commodity instruments
10
(3)
Decrease in commodity prices
Equity instruments
3
-
Immaterial
For additional information, see Item 7A of Part II of our Annual Report on Form 10-K
for the fiscal year ended May 29, 2022.
34
Item 4.
Controls and Procedures.
We,
under the
supervision and
with the
participation of
our management,
including our
Chief Executive
Officer and
Chief Financial
Officer,
have
evaluated
the
effectiveness
of
the design
and
operation
of
our
disclosure
controls
and
procedures
(as
defined
in
Rule
13a-15(e)
under
the
Securities
Exchange
Act
of
1934).
Based
on
our
evaluation,
our
Chief
Executive
Officer
and
Chief
Financial
Officer have
concluded that,
as of
August 28,
2022, our
disclosure controls
and procedures
were effective
to ensure
that information
required to
be disclosed
by us
in reports
that we file
or submit
under the
Securities Exchange
Act of
1934 is (1)
recorded, processed,
summarized,
and
reported
within
the
time
periods
specified
in
Securities
and
Exchange
Commission
rules
and
forms,
and
(2)
accumulated and
communicated to
our management,
including our
Chief Executive
Officer and
Chief Financial
Officer,
in a
manner
that allows timely decisions regarding required disclosure.
There were no changes in our internal
control over financial reporting (as defined
in Rule 13a-15(f) under the Securities Exchange
Act
of 1934)
during the
quarter ended
August 28,
2022 that
materially affected,
or are
reasonably likely
to materially
affect, our
internal
control over financial reporting.
PART
II.
OTHER INFORMATION
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
The
following
table
sets forth
information
with
respect
to
shares
of
our
common
stock
that we
purchased
during
the quarter
ended
August 28, 2022:
Period
Total
Number
of Shares
Purchased (a)
Average
Price Paid
Per Share
Total
Number of Shares
Purchased as Part of a Publicly
Announced Program (b)
Maximum Number of Shares
that may yet be Purchased
Under the Program (b)
May 30, 2022 -
July 3, 2022
2,876,550
$
68.59
2,876,550
18,061,626
July 4, 2022 -
July 31, 2022
2,262,422
74.58
2,262,422
97,737,578
August 1, 2022 -
August 28, 2022
1,744,640
77.22
1,744,640
95,992,938
Total
6,883,612
$
72.75
6,883,612
95,992,938
(a)
The total number
of shares purchased
includes shares of
common stock withheld
for the payment
of withholding taxes
upon the distribution
of
deferred option units.
(b)
On June
27, 2022,
our Board
of Directors
approved a
new authorization
for the
repurchase of
up to
100,000,000 shares
of our
common stock
and terminated
the prior
authorization. Purchases
can be
made in
the open
market or
in privately
negotiated transactions,
including the
use of
call options
and other
derivative instruments,
Rule 10b5-1
trading plans,
and accelerated
repurchase programs.
The Board
did not
specify an
expiration date for the authorization.
35
PART
II. OTHER INFORMATION
Item 6.
Exhibits.
10.1+
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101
Financial
Statements
from
the Quarterly
Report
on Form
10-Q
of the
Company
for
the quarter
ended
August
28,
2022,
formatted
in
Inline
Extensible
Business
Reporting
Language:
(i)
Consolidated
Statements
of
Earnings;
(ii)
Consolidated
Statements
of
Comprehensive
Income,
(iii)
Consolidated
Balance
Sheets;
(iv)
Consolidated
Statements of Total
Equity and Redeemable
Interest; (v) Consolidated
Statements of Cash
Flows; and (vi)
Notes to
Consolidated Financial Statements.
104
Cover Page, formatted in Inline Extensible Business Reporting Language
and contained in Exhibit 101.
+
Portions of this exhibit have been excluded in accordance with SEC regulations
.
36
SIGNATURES
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
the
registrant
has
duly
caused
this
report
to
be
signed
on
its
behalf by the undersigned thereunto duly authorized.
GENERAL MILLS, INC.
(Registrant)
Date: September 21, 2022
/s/ Mark A. Pallot
Mark A. Pallot
Vice President, Chief Accounting
Officer
(Principal Accounting Officer and Duly Authorized
Officer)
EX-10.1
1
Exhibit 10.1
[***] – Indicates information excluded from this exhibit because it is not material
and is the type that the registrant treats as private or confidential.
ADDENDUM NO 11 TO THE PROTOCOL OF CEREAL PARTNERS
WORLDWIDE
JAPAN EXCEPTION
TO THE “TERRITORY” OF THE JV
The following
sets forth
the understanding
of General
Mills, Inc
(“
GMI
”) and
Nestlé SA
(“
Nestlé
”) with
respect to
GMI
supplying Breakfast Cereals
in Japan, a country
included in the Territory
of CPW.
It is effective
17 July 2012. CPW
SA is a
party to this understanding.
GMI has identified a
number of opportunities
for the distribution and
sale of Breakfast Cereals in
Japan, including
with the
retailer WALMART.
In the future, it is possible that GMI will identify further opportunities for the
distribution and sale of
Breakfast
Cereals
in
Japan
with
other
retailers
in
addition
to
WALMART,
and
to
COSTCO,
with
whom
GMI
already
cooperates in Japan in accordance with the terms set out in Addendum No 6 to the Protocol.
At
this time,
CPW has
no viable
full entry
business strategy
for
the distribution
and sale
of Breakfast
Cereals
in Japan.
Moreover,
supply by CPW to retailers in Japan could be logistically complex and expensive for CPW.
Consequently, GMI, Nestlé and CPW SA agree as follows:
1.
CPW authorizes
GMI or
its affiliate
to supply
Authorized Retailers
in, or
for,
Japan with
GMI-branded Breakfast
Cereals.
Risks and benefits of such business are for GMI.
2.
GMI will pay
CPW SA a
royalty of [***]
for Japan. Terms of payment
as defined by
article 4 B,
C and
D of the
License
Agreement dated 01 June 1990 between GMI, Societe des Produits Nestlé SA and CPW SA shall apply by analogy.
3.
“Authorized Retailers” shall mean those
retailers registered and
operating in
Japan to
which CPW
SA (in
the person
of
the
VP
Customer
Business
Development)
has
given
its
written
consent
for
GMI
to
enter
into
sales
and
distribution arrangements of Breakfast Cereals.
4.
This arrangement shall be reassessed after a period of one year from its effective date. After this initial period, in
the absence
of
formal
renewal
in favour
of
GMI for
a defined
period, CPW
shall have
the right
at
any
time to
request that GMI stop supplying Breakfast Cereals in Japan.
Capitalised terms not defined herein shall have the meaning assigned in the Protocol.
NESTLÉ SA
GENERAL MILLS, INC.
/s/ José Lopez
/s/ Chris O’Leary
JOSÉ LOPEZ
CHRIS O’LEARY
CPW SA
/s/Jeff Harmening
JEFF HARMENING
EX-31.1
1
Exhibit 31.1
I, Jeffrey L. Harmening, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of General Mills, Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to make
the statements
made,
in light
of the
circumstances under
which such
statements were
made,
not misleading
with respect to the period covered by this report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented in this report;
4.
The registrant’s
other certifying officer
and I are responsible
for establishing and
maintaining disclosure controls
and procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such
disclosure controls
and procedures,
or caused
such disclosure
controls and
procedures to
be designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b)
designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
evaluated
the
effectiveness
of
the
registrant’s
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about the
effectiveness
of the
disclosure
controls and
procedures,
as of
the end
of the
period covered
by this
report based on such evaluation; and
(d)
disclosed
in
this
report
any
change
in
the
registrant’s
internal
control
over
financial
reporting
that
occurred
during
the
registrant’s
most
recent
fiscal
quarter
(the
registrant’s
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially affected, or is reasonably likely to materially
affect, the registrant’s internal
control over financial reporting; and
5.
The
registrant’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
(a)
all significant
deficiencies
and
material
weaknesses in
the
design
or operation
of internal
control
over
financial reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant’s
ability
to
record,
process,
summarize
and
report
financial
information; and
(b)
any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant’s internal control
over financial reporting.
Date: September 21, 2022
/s/ Jeffrey L. Harmening
Jeffrey L. Harmening
Chief Executive Officer
EX-31.2
1
Exhibit 31.2
I, Kofi A. Bruce, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of General Mills, Inc.;
2.
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to make
the statements
made,
in light
of the
circumstances under
which such
statements were
made,
not misleading
with respect to the period covered by this report;
3.
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented in this report;
4.
The registrant’s
other certifying officer
and I are responsible
for establishing and
maintaining disclosure controls
and procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
and
internal
control
over
financial
reporting
(as
defined
in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
designed such
disclosure controls
and procedures,
or caused
such disclosure
controls and
procedures to
be designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b)
designed
such
internal
control
over
financial
reporting,
or
caused
such
internal
control
over
financial
reporting
to
be
designed
under
our
supervision,
to
provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting
and
the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
evaluated
the
effectiveness
of
the
registrant’s
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about the
effectiveness
of the
disclosure
controls and
procedures,
as of
the end
of the
period covered
by this
report based on such evaluation; and
(d)
disclosed
in
this
report
any
change
in
the
registrant’s
internal
control
over
financial
reporting
that
occurred
during
the
registrant’s
most
recent
fiscal
quarter
(the
registrant’s
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially affected, or is reasonably likely to materially affect,
the registrant’s internal control over
financial reporting; and
5.
The
registrant’s
other
certifying
officer
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant’s
auditors
and
the
audit
committee
of
the
registrant’s
board
of
directors
(or
persons
performing the equivalent functions):
(a)
all significant
deficiencies
and
material
weaknesses in
the
design
or operation
of internal
control
over
financial reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant’s
ability
to
record,
process,
summarize
and
report
financial
information; and
(b)
any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant’s internal control
over financial reporting.
Date: September
21, 2022
/s/ Kofi A. Bruce
Kofi A. Bruce
Chief Financial Officer
EX-32.1
1
Exhibit 32.1
I,
Jeffrey
L.
Harmening,
Chief
Executive
Officer
of
General
Mills,
Inc.
(the
“Company”),
certify,
pursuant
to
Section
906
of
the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
the Quarterly
Report on
Form 10-Q
of the
Company for
the fiscal quarter
ended August
28, 2022
(the “Report”)
fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2)
the information
contained in
the Report
fairly presents,
in all
material respects,
the financial
condition and
results of
operations
of the Company.
Dated: September 21, 2022
/s/ Jeffrey L. Harmening
Jeffrey L. Harmening
Chief Executive Officer
EX-32.2
1
Exhibit 32.2
I, Kofi
A. Bruce,
Chief Financial
Officer
of General
Mills, Inc.
(the “Company”),
certify,
pursuant
to Section
906 of
the Sarbanes-
Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
the Quarterly
Report on
Form 10-Q
of the
Company for
the fiscal quarter
ended August
28, 2022
(the “Report”)
fully complies
with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act
of 1934; and
(2)
the information
contained in
the Report
fairly presents,
in all
material respects,
the financial
condition and
results of
operations
of the Company.
Dated: September 21, 2022
/s/ Kofi A. Bruce
Kofi A. Bruce
Chief Financial Officer