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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
NOVEMBER 27, 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
December 13,
2022:
589,610,717
(excluding
165,002,611
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 and six-month periods ended November 27, 2022 and
November 28, 2021
4
Consolidated Statements of Comprehensive Income for the quarters and six-month periods ended November
27, 2022 and November 28, 2021
5
Consolidated Balance Sheets as of November 27, 2022 and May 29, 2022
6
Consolidated Statements of Total Equity and Redeemable Interest for the quarters and six-month periods
ended November 27, 2022 and November 28, 2021
7
Consolidated Statements of Cash Flows for the six-month periods ended November 27, 2022 and November
28, 2021
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
21
Item 3. Quantitative and Qualitative Disclosures About Market Risk
40
Item 4. Controls and Procedures
41
PART II – Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
41
Item 6. Exhibits
42
Signatures
43
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
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Net sales
$
5,220.7
$
5,024.0
$
9,938.3
$
9,563.9
Cost of sales
3,515.6
3,392.8
6,785.5
6,335.3
Selling, general, and administrative expenses
894.2
828.8
1,685.6
1,586.2
Divestitures gain, net
-
-
(430.9)
-
Restructuring, impairment, and other exit
costs (recoveries)
11.1
2.3
12.7
(2.0)
Operating profit
799.8
800.1
1,885.4
1,644.4
Benefit plan non-service income
(21.7)
(27.7)
(43.4)
(57.3)
Interest, net
91.5
92.7
179.2
188.6
Earnings before income taxes and after-tax earnings
from
joint ventures
730.0
735.1
1,749.6
1,513.1
Income taxes
147.1
159.7
363.2
328.6
After-tax earnings from joint ventures
25.4
33.0
45.2
62.1
Net earnings, including earnings attributable to redeemable
and noncontrolling interests
608.3
608.4
1,431.6
1,246.6
Net earnings attributable to redeemable and
noncontrolling interests
2.4
11.2
5.7
22.4
Net earnings attributable to General Mills
$
605.9
$
597.2
$
1,425.9
$
1,224.2
Earnings per share – basic
$
1.01
$
0.98
$
2.38
$
2.01
Earnings per share – diluted
$
1.01
$
0.97
$
2.36
$
1.99
See accompanying notes to consolidated financial statements.
5
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$
608.3
$
608.4
$
1,431.6
$
1,246.6
Other comprehensive loss, net of tax:
Foreign currency translation
(115.0)
(38.5)
(111.2)
(62.4)
Other fair value changes:
Hedge derivatives
20.8
18.7
(17.5)
20.4
Reclassification to earnings:
Foreign currency translation
-
-
(7.4)
-
Hedge derivatives
1.0
(6.4)
(0.4)
4.2
Amortization of losses and prior service costs
14.2
22.8
28.3
31.2
Other comprehensive loss, net of tax
(79.0)
(3.4)
(108.2)
(6.6)
Total comprehensive
income
529.3
605.0
1,323.4
1,240.0
Comprehensive income (loss) attributable to
redeemable and noncontrolling interests
3.0
(25.8)
5.0
(49.3)
Comprehensive income attributable to General Mills
$
526.3
$
630.8
$
1,318.4
$
1,289.3
See accompanying notes to consolidated financial statements.
6
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
Nov. 27, 2022
May 29, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
644.1
$
569.4
Receivables
1,834.0
1,692.1
Inventories
2,121.3
1,867.3
Prepaid expenses and other current assets
731.2
802.1
Assets held for sale
-
158.9
Total current
assets
5,330.6
5,089.8
Land, buildings, and equipment
3,358.0
3,393.8
Goodwill
14,476.0
14,378.5
Other intangible assets
6,974.8
6,999.9
Other assets
1,180.4
1,228.1
Total assets
$
31,319.8
$
31,090.1
LIABILITIES
AND EQUITY
Current liabilities:
Accounts payable
$
4,022.6
$
3,982.3
Current portion of long-term debt
1,964.3
1,674.2
Notes payable
1,153.4
811.4
Other current liabilities
2,067.9
1,552.0
Total current
liabilities
9,208.2
8,019.9
Long-term debt
8,622.5
9,134.8
Deferred income taxes
2,186.9
2,218.3
Other liabilities
930.1
929.1
Total liabilities
20,947.7
20,302.1
Stockholders' equity:
Common stock,
754.6
shares issued, $
0.10
par value
75.5
75.5
Additional paid-in capital
1,155.3
1,182.9
Retained earnings
18,991.9
18,532.6
Common stock in treasury,
at cost, shares of
164.4
and
155.7
(8,023.5)
(7,278.1)
Accumulated other comprehensive loss
(2,078.0)
(1,970.5)
Total stockholders' equity
10,121.2
10,542.4
Noncontrolling interests
250.9
245.6
Total equity
10,372.1
10,788.0
Total liabilities and equity
$
31,319.8
$
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
Nov. 27, 2022
Nov. 28, 2021
Shares
Amount
Shares
Amount
Total equity,
beginning balance
$
10,825.6
$
9,985.9
Common stock,
1
billion shares authorized, $
0.10
par value
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,146.1
1,345.0
Stock compensation plans
(7.4)
(5.1)
Unearned compensation related to stock unit awards
(6.8)
(3.9)
Earned compensation
23.4
20.6
Decrease in redemption value of
redeemable interest
-
8.5
Ending balance
1,155.3
1,365.1
Retained earnings:
Beginning balance
19,027.6
17,384.5
Net earnings attributable to General Mills
605.9
597.2
Cash dividends declared ($
1.08
and $
1.02
per share)
(641.6)
(618.5)
Ending balance
18,991.9
17,363.2
Common stock in treasury:
Beginning balance
(160.3)
(7,676.0)
(148.3)
(6,715.0)
Shares purchased
(5.2)
(400.5)
(3.7)
(224.9)
Stock compensation plans
1.1
53.0
0.6
24.7
Ending balance
(164.4)
(8,023.5)
(151.4)
(6,915.2)
Accumulated other comprehensive loss:
Beginning balance
(1,998.4)
(2,397.7)
Comprehensive (loss) income
(79.6)
33.6
Ending balance
(2,078.0)
(2,364.1)
Noncontrolling interests:
Beginning balance
250.8
293.5
Comprehensive income (loss)
3.0
(11.9)
Distributions to noncontrolling interest holders
(2.9)
(1.4)
Ending balance
250.9
280.2
Total equity,
ending balance
$
10,372.1
$
9,804.7
Redeemable interest:
Beginning balance
$
-
$
584.0
Comprehensive loss
-
(13.9)
Decrease in redemption value of
redeemable interest
-
(8.5)
Ending balance
$
-
$
561.6
See accompanying notes to consolidated financial statements.
8
Consolidated Statements of Total
Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 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
1.9
4.0
Unearned compensation related to stock unit awards
(85.8)
(72.2)
Earned compensation
56.3
53.7
Decrease in redemption value of
redeemable interest
-
14.1
Ending balance
1,155.3
1,365.1
Retained earnings:
Beginning balance
18,532.6
17,069.8
Net earnings attributable to General Mills
1,425.9
1,224.2
Cash dividends declared ($
1.62
and $
1.53
per share)
(966.6)
(930.8)
Ending balance
18,991.9
17,363.2
Common stock in treasury:
Beginning balance
(155.7)
(7,278.1)
(146.9)
(6,611.2)
Shares purchased
(12.1)
(901.3)
(6.2)
(375.0)
Stock compensation plans
3.4
155.9
1.7
71.0
Ending balance
(164.4)
(8,023.5)
(151.4)
(6,915.2)
Accumulated other comprehensive loss:
Beginning balance
(1,970.5)
(2,429.2)
Other comprehensive (loss) income
(107.5)
65.1
Ending balance
(2,078.0)
(2,364.1)
Noncontrolling interests:
Beginning balance
245.6
302.8
Comprehensive income (loss)
5.0
(20.1)
Distributions to noncontrolling interest holders
(4.8)
(2.5)
Divestiture
5.1
-
Ending balance
250.9
280.2
Total equity,
ending balance
$
10,372.1
$
9,804.7
Redeemable interest:
Beginning balance
$
-
$
604.9
Comprehensive loss
-
(29.2)
Decrease in redemption value of
redeemable interest
-
(14.1)
Ending balance
$
-
$
561.6
See accompanying notes to consolidated financial statements.
9
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling
interests
$
1,431.6
$
1,246.6
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
273.9
286.9
After-tax earnings from joint ventures
(45.2)
(62.1)
Distributions of earnings from joint ventures
26.5
35.8
Stock-based compensation
57.6
47.9
Deferred income taxes
(48.1)
56.4
Pension and other postretirement benefit plan contributions
(12.7)
(12.5)
Pension and other postretirement benefit plan costs
(13.5)
(14.4)
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs
(13.7)
(44.2)
Changes in current assets and liabilities, excluding the effects of
acquisitions and divestitures
(64.4)
(88.7)
Other, net
39.6
46.1
Net cash provided by operating activities
1,200.7
1,497.8
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(226.7)
(224.3)
Acquisition, net of cash acquired
(251.5)
(1,198.6)
Proceeds from divestitures, net of cash divested
610.7
-
Investments in affiliates, net
(1.4)
4.8
Proceeds from disposal of land, buildings, and equipment
0.5
1.5
Other, net
(6.5)
20.6
Net cash provided (used) by investing activities
125.1
(1,396.0)
Cash Flows - Financing Activities
Change in notes payable
353.4
854.2
Issuance of long-term debt
500.0
1,935.0
Payment of long-term debt
(600.0)
(2,221.7)
Proceeds from common stock issued on exercised options
118.5
26.1
Purchases of common stock for treasury
(901.3)
(375.0)
Dividends paid
(647.9)
(623.2)
Distributions to noncontrolling and redeemable interest holders
(4.8)
(2.5)
Other, net
(48.4)
(20.1)
Net cash used by financing activities
(1,230.5)
(427.2)
Effect of exchange rate changes on cash and cash equivalents
(20.6)
(35.1)
Increase (decrease) in cash and cash equivalents
74.7
(360.5)
Cash and cash equivalents - beginning of year
569.4
1,505.2
Cash and cash equivalents - end of period (includes $
123.7
million of cash classified as
held for sale as of November 28, 2021)
$
644.1
$
1,144.7
Cash Flow from changes in current assets and liabilities, excluding the effects
of
acquisitions and divestitures:
Receivables
$
(200.8)
$
(237.3)
Inventories
(278.5)
9.2
Prepaid expenses and other current assets
62.9
(1.2)
Accounts payable
112.5
(28.4)
Other current liabilities
239.5
169.0
Changes in current assets and liabilities
$
(64.4)
$
(88.7)
See accompanying notes to consolidated financial statements.
10
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
November 27,
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) Acquisitions and Divestiture
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 consoli
dated 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
the 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
In the six-month period
ended November 27, 2022,
we did not undertake
any new restructuring
actions. We
recorded $
11.6
million of
restructuring
charges
in
the
second
quarter
of
fiscal
2023
and
$
13.9
million
of
restructuring
charges
in
the
six-month
period
ended
November 27,
2022, related
to restructuring
actions previously
announced.
We
recorded $
2.7
million of
restructuring charges
in the
second
quarter of
fiscal 2022
and
a $
1.4
million net
recovery of
restructuring
charges
in the
six-month
period
ended November
28,
2021, related to restructuring actions previously announced. We
expect these actions to be completed by the end of
fiscal 2024
.
In
the
second
quarter
of
fiscal
2023,
we
increased
the
estimate
of
restructuring
charges
that
we
expect
to
incur
related
to
our
previously announced
actions in the
International segment
to drive efficiencies
in manufacturing
and logistics operations.
As a result,
we recorded
a $
4.5
million increase
to our
restructuring reserve
primarily related
to estimated
severance charges.
We
expect to
incur
approximately
$
25
million
of
restructuring
charges
and
project-related
costs
related
to
these
actions,
of
which
approximately
$
16
million will be
cash. These charges
are expected
to consist of
approximately $
12
million of severance
and $
10
million of other
costs,
primarily
asset write-offs.
We
also
expect
to
incur
approximately
$
3
million
of project-related
costs.
We
expect
these actions
to be
completed by the end of
fiscal 2024
.
In
the
second
quarter
of
fiscal
2023,
we
increased
the
estimate
of
restructuring
charges
that
we
expect
to
incur
related
to
our
previously
announced
global
organizational
structure
and
resource
realignment
actions.
As
a
result,
we
recorded
a
$
4.1
million
increase to our
restructuring reserve primarily
related to estimated
severance charges.
We
expect to incur
approximately $
140
million
11
of
restructuring
charges
related
to
these
actions,
of
which
approximately
$
115
million
will
be
cash.
These
charges
are
expected
to
consist
of
approximately
$
105
million
of
severance
and
approximately
$
35
million
of
other
costs.
We
expect
these
actions
to
be
completed by the end of
fiscal 2023
.
We
paid
net
$
27.6
million
of
cash
in
the
six-month
period
ended
November
27,
2022,
related
to
restructuring
actions
previously
announced. We
paid net $
42.8
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
7.5
Utilized in fiscal 2023
(24.1)
Reserve balance as of Nov. 27, 2022
$
20.2
The reserve balance primarily consists of expected severance payments
associated with restructuring actions.
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
Nov. 27, 2022
May 29, 2022
Goodwill
$
14,476.0
$
14,378.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,706.6
6,725.8
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
401.9
400.3
Less accumulated amortization
(133.7)
(126.2)
Intangible assets subject to amortization, net
268.2
274.1
Other intangible assets
6,974.8
6,999.9
Total
$
21,450.8
$
21,378.4
Based
on
the carrying
value
of
finite-lived
intangible
assets as
of
November
27,
2022,
annual
amortization
expense
for
each of
the
next five fiscal years is estimated to be approximately $
20
million.
12
The changes in the carrying amount of goodwill during the six-month period
ended November 27, 2022, 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
(6.4)
-
-
(37.5)
(12.5)
(56.4)
Balance as of Nov. 27, 2022
$
6,546.5
$
6,062.8
$
803.1
$
683.7
$
379.9
$
14,476.0
The changes in the carrying amount of other intangible assets during the six-month
period ended November 27, 2022, were as follows:
In Millions
Total
Balance as of May 29, 2022
$
6,999.9
Acquisition
3.8
Other activity, primarily
foreign currency translation
(28.9)
Balance as of Nov. 27, 2022
$
6,974.8
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal
2023,
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. In addition,
while having
significant coverage
as of
our fiscal 2023
assessment date, the
Progresso
and
EPIC
brand intangible assets
had risk of decreasing
coverage. We
will continue to
monitor these businesses for potential impairment.
(5) Inventories
The components of inventories were as follows:
In Millions
Nov. 27, 2022
May 29, 2022
Raw materials and packaging
$
565.8
$
532.0
Finished goods
1,923.6
1,634.7
Grain
156.1
164.0
Excess of FIFO over LIFO cost
(524.2)
(463.4)
Total
$
2,121.3
$
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.
13
Unallocated corporate items for the quarters and six-month periods ended
November 27, 2022, and November 28, 2021, included:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Net (loss) gain on mark-to-market valuation of certain
commodity positions
$
(20.9)
$
16.6
$
(93.2)
$
47.0
Net gain on commodity positions reclassified from
unallocated corporate items to segment operating profit
(20.5)
(35.9)
(63.5)
(70.6)
Net mark-to-market revaluation of certain grain inventories
16.3
31.4
(43.1)
59.8
Net mark-to-market valuation of certain commodity
positions recognized in unallocated corporate items
$
(25.1)
$
12.1
$
(199.8)
$
36.2
As of
November
27,
2022,
the net
notional
value
of
commodity
derivatives
was $
429.4
million,
of
which
$
158.1
million
related
to
energy inputs and $
271.3
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
November
27,
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
November 27,
2022, $
1,477.4
million of
our total
accounts payable
were payable
to suppliers
who utilize
these third-party
services. As
of November
28,
2021, $
1,378.1
million
of our
total accounts
payable
were payable
to suppliers
who
utilize these third-party services.
During
the
second
quarter
of
fiscal
2023,
we
entered
into
a
$
500.0
million
notional
amount
interest
rate
swap
to
convert
our
$
500.0
million fixed rate notes due
November 18, 2025
, to a floating rate.
(7) Debt
The components of notes payable were as follows:
In Millions
Nov. 27, 2022
May 29, 2022
U.S. commercial paper
$
1,126.6
$
694.8
Financial institutions
26.8
116.6
Total
$
1,153.4
$
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.
The following table details the fee-paid committed and uncommitted credit
lines we had available as of November 27, 2022:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
-
Total committed
and uncommitted credit facilities
$
3.3
$
-
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 November 27, 2022.
Long-Term
Debt
The fair
values and
carrying amounts
of long-term
debt, including
the current
portion, were
$
9,875.3
million and
$
10,586.8
million,
respectively,
as of
November 27,
2022. The
fair value
of long-term
debt was
estimated using
market quotations
and discounted
cash
14
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
second
quarter
of
fiscal
2023,
we
issued
$
500.0
million
of
5.241
percent
notes
due
November 18, 2025
.
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
2023, we
issued €
250.0
million of
floating-rate notes
due
May 16, 2023
.
We
used the
net proceeds
to
repay €
250.0
million of
0.0
percent fixed-rate notes due
November 11, 2022
.
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 November 27, 2022, we were in compliance with all of
these covenants.
(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,
2021. Net purchases totaled $
99.5
million for the six-month period ended November 28, 2021.
Our noncontrolling interests contain restrictive covenants. As of November 27, 2022, we were in compliance with all of these
covenants.
15
(9) Stockholders’ Equity
The following tables provide details of total comprehensive income:
Quarter Ended
Quarter Ended
Nov. 27, 2022
Nov. 28, 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
$
605.9
$
2.4
$
597.2
$
1.9
$
9.3
Other comprehensive (loss) income:
Foreign currency translation
$
(144.7)
$
29.1
(115.6)
0.6
$
(29.0)
$
27.8
(1.2)
(13.8)
(23.5)
Other fair value changes:
Hedge derivatives
26.8
(6.0)
20.8
-
29.1
(11.0)
18.1
-
0.6
Reclassification to earnings:
Hedge derivatives (a)
1.8
(0.8)
1.0
-
(12.1)
6.0
(6.1)
-
(0.3)
Amortization of losses and
prior service costs (b)
18.3
(4.1)
14.2
-
29.2
(6.4)
22.8
-
-
Other comprehensive (loss) income
$
(97.8)
$
18.2
(79.6)
0.6
$
17.2
$
16.4
33.6
(13.8)
(23.2)
Total comprehensive income (loss)
$
526.3
$
3.0
$
$
630.8
$
(11.9)
$
(13.9)
(a)
(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.
(b)
Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.
Six-Month Period Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 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
$
1,425.9
$
5.7
$
$
1,224.2
$
4.9
$
17.5
Other comprehensive (loss) income:
Foreign currency translation
$
(86.7)
$
(23.8)
(110.5)
(0.7)
$
(40.9)
$
50.5
9.6
(25.0)
(47.0)
Other fair value changes:
Hedge derivatives
(23.0)
5.5
(17.5)
-
31.9
(12.0)
19.9
-
0.5
Reclassification to earnings:
Foreign currency translation (a)
(7.4)
-
(7.4)
-
-
-
-
-
-
Hedge derivatives (b)
(0.1)
(0.3)
(0.4)
-
(0.1)
4.5
4.4
-
(0.2)
Amortization of losses and
prior service costs (c)
36.5
(8.2)
28.3
-
40.0
(8.8)
31.2
-
-
Other comprehensive (loss) income
$
(80.7)
$
(26.8)
(107.5)
(0.7)
$
30.9
$
34.2
65.1
(25.0)
(46.7)
Total comprehensive income (loss)
$
1,318.4
$
5.0
$
$
1,289.3
$
(20.1)
$
(29.2)
(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
Nov. 27, 2022
May 29, 2022
Foreign currency translation adjustments
$
(708.6)
$
(590.7)
Unrealized gain from hedge derivatives
5.4
23.3
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,477.0)
(1,513.4)
Prior service credits
102.2
110.3
Accumulated other comprehensive loss
$
(2,078.0)
$
(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
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.
16
Compensation expense related to stock-based payments recognized
in the Consolidated Statements of Earnings was as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Compensation expense related to stock-based payments
$
24.1
$
13.9
$
57.6
$
47.5
Compensation
expense
related
to
stock-based
payments
recognized
in
the
Consolidated
Statements
of
Earnings
includes
amounts
recognized in restructuring, impairment, and other exit costs in fiscal 2022.
Windfall tax benefits from stock-based payments
in income tax expense in our Consolidated Statements of Earnings were as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Windfall tax benefits from stock-based payments
$
5.6
$
1.6
$
18.4
$
6.3
As
of
November
27,
2022,
unrecognized
compensation
expense
related
to
non-vested
stock
options,
restricted
stock
units,
and
performance share units was $
147.4
million. This expense will be recognized over
23
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:
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Net cash proceeds
$
118.5
$
26.1
Intrinsic value of options exercised
$
55.7
$
12.1
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:
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 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:
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Total grant date fair
value
$
102.6
$
76.0
17
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
Quarter Ended
Six-Month Period Ended
In Millions, Except per Share Data
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Net earnings attributable to General Mills
$
605.9
$
597.2
$
1,425.9
$
1,224.2
Average number
of common shares - basic EPS
595.9
608.6
598.0
609.5
Incremental share effect from: (a)
Stock options
3.7
2.2
3.6
2.1
Restricted stock units and performance share units
2.4
2.2
2.4
2.2
Average number
of common shares - diluted EPS
602.0
613.0
604.0
613.8
Earnings per share – basic
$
1.01
$
0.98
$
2.38
$
2.01
Earnings per share – diluted
$
1.01
$
0.97
$
2.36
$
1.99
(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
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Anti-dilutive stock options, restricted stock units, and
performance share units
1.0
4.6
1.0
4.7
(12) Share Repurchases
Share repurchases were as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Shares of common stock
5.2
3.7
12.1
6.2
Aggregate purchase price
$
400.5
$
224.9
$
901.3
$
375.0
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Net cash interest payments
$
154.3
$
185.7
Net income tax payments
$
365.4
$
271.1
18
(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
Nov. 27,
2022
Nov. 28,
2021
Nov. 27,
2022
Nov. 28,
2021
Nov. 27,
2022
Nov. 28,
2021
Service cost
$
17.5
$
23.5
$
1.2
$
1.9
$
2.1
$
1.7
Interest cost
64.6
46.1
4.5
3.1
0.8
0.3
Expected return on plan assets
(105.0)
(102.9)
(7.8)
(6.7)
-
-
Amortization of losses (gains)
28.4
35.5
(4.8)
(2.7)
-
0.7
Amortization of prior service costs (credits)
0.3
0.2
(5.7)
(5.2)
0.1
0.1
Other adjustments
-
-
-
-
2.9
3.8
Curtailment loss (gain)
-
0.5
-
(0.2)
-
-
Net expense (income)
$
5.8
$
2.9
$
(12.6)
$
(9.8)
$
5.9
$
6.6
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
Six-Month
Period Ended
Six-Month
Period Ended
Six-Month
Period Ended
In Millions
Nov. 27,
2022
Nov. 28,
2021
Nov. 27,
2022
Nov. 28,
2021
Nov. 27,
2022
Nov. 28,
2021
Service cost
$
35.1
$
47.2
$
2.6
$
3.8
$
4.2
$
3.5
Interest cost
129.2
92.4
9.0
6.3
1.6
0.7
Expected return on plan assets
(210.0)
(205.7)
(15.6)
(13.4)
-
-
Amortization of losses (gains)
56.7
70.4
(9.7)
(5.4)
0.1
1.5
Amortization of prior service costs (credits)
0.7
0.4
(11.5)
(10.4)
0.2
0.2
Other adjustments
-
-
-
-
5.9
5.7
Curtailment gain
-
(14.3)
-
(5.7)
-
-
Net expense (income)
$
11.7
$
(9.6)
$
(25.2)
$
(24.8)
$
12.0
$
11.6
(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,
2023. 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
November
27,
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
19
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
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.
20
Our operating segment results were as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Net sales:
North America Retail
$
3,373.1
$
3,044.6
$
6,361.9
$
5,755.2
International
671.7
914.4
1,324.2
1,845.0
Pet
592.9
593.4
1,172.8
1,081.4
North America Foodservice
583.0
471.6
1,079.4
882.3
Total
$
5,220.7
$
5,024.0
$
9,938.3
$
9,563.9
Operating profit:
North America Retail
$
837.1
$
675.4
$
1,614.9
$
1,324.0
International
17.8
59.4
52.6
120.0
Pet
86.6
131.5
209.7
246.7
North America Foodservice
81.5
67.9
135.1
139.7
Total segment operating
profit
$
1,023.0
$
934.2
$
2,012.3
$
1,830.4
Unallocated corporate items
212.1
131.8
545.1
188.0
Divestitures gain, net
-
-
(430.9)
-
Restructuring, impairment, and other exit costs (recoveries)
11.1
2.3
12.7
(2.0)
Operating profit
$
799.8
$
800.1
$
1,885.4
$
1,644.4
Net sales for our North America Retail operating units were as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
U.S. Meals & Baking Solutions
$
1,321.7
$
1,203.1
$
2,270.9
$
2,064.6
U.S. Morning Foods
908.5
826.7
1,812.5
1,656.4
U.S. Snacks
892.9
757.2
1,780.1
1,537.3
Canada
250.0
257.6
498.4
496.9
Total
$
3,373.1
$
3,044.6
$
6,361.9
$
5,755.2
Net sales by class of similar products were as follows:
Quarter Ended
Six-Month Period Ended
In Millions
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
Snacks
$
1,102.8
$
947.6
$
2,171.2
$
1,902.1
Cereal
810.9
742.2
1,625.6
1,473.2
Convenient meals
786.4
789.8
1,465.6
1,485.3
Dough
745.6
607.0
1,210.4
1,012.2
Pet
593.7
593.4
1,174.5
1,081.4
Baking mixes and ingredients
563.7
517.2
1,037.2
913.5
Yogurt
357.5
507.1
703.5
1,013.0
Super-premium ice cream
164.9
200.0
348.4
444.8
Other
95.2
119.7
201.9
238.4
Total
$
5,220.7
$
5,024.0
$
9,938.3
$
9,563.9
21
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
Second Quarter Results
In the
second quarter
of fiscal
2023,
net sales
increased
4 percent
and organic
net sales
increased
11
percent compared
to the
same
period
last
year.
Operating
profit
essentially
matched
the
second
quarter
of
fiscal
2022
at
$800 million
as
favorable
net
price
realization and
mix was offset
by higher
input costs, a
decrease in contributions
from volume growth
,
lower net corporate
investment
activity,
an unfavorable change to
the mark-to-market valuation
of certain commodity
positions and grain
inventories, and an increase
in
certain
selling,
general
and
administrative
(SG&A)
expenses.
Operating
profit
margin
of
15.3
percent
decreased
60 basis
points.
Adjusted
operating
profit
of $880
million
increased
7
percent
on
a
constant-currency
basis,
primarily
driven
by
favorable
net
price
realization and
mix, partially offset
by higher
input costs,
a decrease
in contributions
from volume
growth, and
an increase in
SG&A
expenses. Adjusted
operating profit
margin increased
60 basis points
to 16.9
percent. Diluted
earnings per
share of
$1.01 increased
4
percent in the
second quarter of
fiscal 2023. Adjusted
diluted earnings
per share of
$1.10 increased
12 percent on a
constant-currency
basis compared
to
the
second
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 second quarter
of fiscal 2023 follows:
Quarter Ended Nov. 27, 2022
In millions,
except per share
Quarter Ended
Nov. 27, 2022 vs.
Nov. 28, 2021
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
5,220.7
4
%
Operating profit
799.8
Flat
15.3
%
Net earnings attributable to General Mills
605.9
1
%
Diluted earnings per share
$
1.01
4
%
Organic net sales growth rate (a)
11
%
Adjusted operating profit (a)
879.7
7
%
16.9
%
7
%
Adjusted diluted earnings per share (a)
$
1.10
11
%
12
%
(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
Nov. 27, 2022
Nov. 27, 2022 vs.
Nov. 28, 2021
Nov. 28, 2021
Net sales (in millions)
$
5,220.7
4%
$
5,024.0
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.
22
Net sales in
the second 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.
Components of organic net sales growth are shown in the following
table:
Quarter Ended Nov. 27, 2022 vs.
Quarter Ended Nov. 28, 2021
Contributions from organic volume growth (a)
(6)
pts
Organic net price realization and mix
17
pts
Organic net sales growth
11
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 11
percent in
the second
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 $123 million to $3,516 million in the second quarter of
fiscal 2023 compared to the same period in fiscal 2022.
The increase
was primarily
driven by
a $489 million
increase attributable
to product
rate and
mix partially
offset
by a
$406 million
decrease attributable
to lower volume.
We
recorded a $25 million
net increase in
cost of sales
related to the
mark-to-market valuation
of certain commodity positions and grain inventories in the second
quarter of fiscal 2023 compared to a $12 million net decrease in the
second
quarter of
fiscal 2022.
In the
second quarter
of fiscal
2023, we
recorded a
$3 million charge
related
to a
voluntary recall
on
certain international
Häagen-Dazs
ice cream products.
SG&A
expenses
increased
$65 million
to
$894 million
in
the
second
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
and
increased
media
and
advertising expenses
in fiscal
2023.
SG&A expenses
as a
percent of
net sales
in the
second quarter
of fiscal
2023 increased
60 basis
points compared to the second quarter of fiscal 2022.
Restructuring,
impairment,
and other
exit costs
totaled $11
million of
expense in
the second
quarter of
fiscal 2023,
compared
to
$2 million of expense
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 second quarter
of fiscal 2023, compared to $28
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
second
quarter
of
fiscal
2023
totaled
$92 million,
down
$1 million
from
the
second
quarter
of
fiscal
2022,
primarily driven by lower average long-term debt levels, partially offset
by higher interest rates.
The
effective tax rate
for the second quarter
of fiscal 2023 was 20.2
percent compared to 21.7
percent for the second
quarter of fiscal
2022.
The
1.5
percentage
point
decrease
was
primarily
due
to
certain
nonrecurring
discrete
tax
benefits
and
favorable
changes
in
earnings mix
by jurisdiction
in fiscal
2023. Our
effective tax
rate excluding
certain items
affecting comparability
was 21.1 percent
in
the
second
quarter
of
fiscal
2023,
compared
to
22.3
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 1.2 percentage
point decrease was
primarily due to
certain
nonrecurring discrete tax benefits and favorable changes in earnings
mix by jurisdiction in fiscal 2023.
23
After-tax earnings from joint
ventures
for the second quarter of fiscal 2023
decreased to $25 million compared to $33 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) and
lower net
sales at
HDJ, partially
offset by
favorable net
price realization
and mix
at CPW.
On a
constant-currency basis,
after-tax earnings
from joint
ventures decreased
8 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 Nov. 27, 2022 vs.
Quarter Ended Nov. 28, 2021
CPW
HDJ
Total
Contributions from volume growth (a)
(13)
pts
(10)
pts
Net price realization and mix
15
pts
(1)
pt
Net sales growth in constant currency
2
pts
(10)
pts
(1)
pt
Foreign currency exchange
(14)
pts
(20)
pts
(15)
pts
Net sales growth
(11)
pts
(30)
pts
(16)
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
11 million
in the
second quarter
of fiscal
2023 from
the same
period a
year ago
primarily due to share repurchases, partially offset by option
exercises.
Six-Month Results
In the
six-month period
ended November
27, 2022,
net sales
increased 4
percent compared
to the
same period
last year,
and organic
net
sales
increased
11
percent
compared
to
the
same
period
last
year.
Operating
profit
increased
15
percent
to
$1,885 million,
primarily
driven
by
favorable
net
price
realization
and
mix
and
a
net
gain
on
divestitures,
partially
offset
by
higher
input
costs,
a
decrease in contributions from
volume growth, an unfavorable
change to the mark-to-market
valuation of certain commodity
positions
and
grain
inventories,
lower
net
corporate
investment
activity,
and
an
increase
in
SG&A
expenses.
Operating
profit
margin
of
19
percent
increased
180
basis
points
compared
to
the
same
period
last
year.
Adjusted
operating
profit
of
$1,761 million
increased
8 percent
on
a
constant-currency
basis,
primarily
driven
by
favorable
net
price
realization
and
mix,
partially
offset
by
higher
input
costs,
a
decrease
in
contributions
from
volume
growth,
and
an
increase
in
SG&A
expenses.
Adjusted
operating
profit
margin
increased 50
basis points
compared to
the same
period in fiscal
2022. Diluted
earnings per
share of $2.36
increased 19
percent in
the
six-month
period
ended
November
27,
2022,
and
adjusted
diluted
earnings
per
share
of
$2.21 increased
13
percent
on
a
constant-
currency basis
compared
to the
same period
last year
(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 six-month period
ended November 27, 2022, follows:
Six-Month Period Ended Nov.
27, 2022
In millions,
except per
share
Six-Month
Period Ended
Nov. 27, 2022
vs. Nov. 28,
2021
Percent of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
9,938.3
4
%
Operating profit
1,885.4
15
%
19.0
%
Net earnings attributable to General Mills
1,425.9
16
%
Diluted earnings per share
$
2.36
19
%
Organic net sales growth rate (a)
11
%
Adjusted operating profit (a)
1,760.9
7
%
17.7
%
8
%
Adjusted diluted earnings per share (a)
$
2.21
12
%
13
%
(a)
See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
24
Consolidated
net sales
were as follows:
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022 vs.
Nov. 28, 2021
Nov. 28, 2021
Net sales (in millions)
$
9,938.3
4
%
$
9,563.9
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.
The 4
percent increase
in net
sales for
the six-month
period ended
November 27,
2022, was
driven
by favorable
net price
realization
and mix, partially offset by a decrease in contributions
from volume
growth and unfavorable foreign currency exchange.
Components of organic net sales growth are shown in the following
table:
Six-Month Period Ended Nov.
27, 2022 vs.
Six-Month Period Ended Nov.
28, 2021
Contributions from organic volume growth (a)
(5)
pts
Organic net price realization and mix
16
pts
Organic net sales growth
11
pts
Foreign currency exchange
(1)
pt
Acquisition 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
11
percent
in
the
six-month
period
ended
November
27,
2022,
driven
by
favorable
organic
net
price
realization and mix, partially offset by a decrease in
contributions from organic volume growth.
Cost
of
sales
increased
$450 million
to
$6,786 million
in
the
six-month
period
ended
November
27,
2022,
compared
to
the
same
period
in fiscal
2022.
The increase
was
driven
by a
$939 million
increase
attributable
to product
rate
and
mix,
partially
offset
by
a
$749
million
decrease due
to lower
volume.
We
recorded
a $200
million
net increase
in cost
of sales
related
to the
mark-to-market
valuation
of
certain
commodity
positions
and
grain
inventories
in
the
six-month
period
ended
November
27,
2022,
compared
to
a
$36 million net
decrease in
the six-month
period ended
November 28,
2021. In
the six-month
period ended
November 27, 2022,
we
recorded a $24 million charge related to a voluntary recall
on certain international
Häagen-Dazs
ice cream products.
SG&A expenses
increased
$99 million
to $1,686 million
in the
six-month period
ended November
27, 2022,
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 increased
40 basis points in
the six-month period ended November 27, 2022, compared to the same period
of fiscal 2022.
Divestitures
gain,
net
totaled
$431
million
in
the
six-month
period
ended
November
27,
2022,
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
$13 million
of
expense
in
the
six-month
period
ended
November 27,
2022, compared
to $2 million
of net recoveries
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 $43 million
in the six-month
period ended November
27, 2022,
compared to $57 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
six-month period
ended November
27, 2022,
decreased $9 million
to $179 million
compared to
the same
period
of fiscal 2022, primarily driven by lower average long-term debt balances
,
partially offset by higher interest rates.
The
effective
tax
rate
for
the six-month
period
ended
November
27,
2022,
was
20.8
percent
compared
to
21.7
percent
in
the
six-
month
period
ended
November
28,
2021.
The
0.9
percentage
point
decrease
was
primarily
due
to
certain
nonrecurring
discrete
tax
25
benefits and favorable changes in
earnings mix by jurisdiction
in fiscal 2023, partially offset
by unfavorable tax components
related to
the divestitures
incurred
in the
six-month
period ended
November 27,
2022. Our
effective
tax rate
excluding certain
items affecting
comparability was
20.4 percent in
the six-month
period ended
November 27,
2022, compared
to 22.0
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
1.6
percentage
point
decrease
is
primarily
due
to
certain
nonrecurring
discrete
tax
benefits
and
favorable
changes
in
earnings
mix
by
jurisdiction in fiscal 2023.
After-tax
earnings from
joint ventures
decreased
to $45 million
for the
six-month
period ended
November 27,
2022 compared
to
$62 million
in the
same period
in fiscal
2022,
primarily
driven by
higher input
costs at
CPW and
HDJ and
lower
net sales
at HDJ
,
partially offset by favorable net price realization
and mix at CPW.
On a constant-currency basis, after-tax earnings from
joint ventures
decreased 17
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:
Six-Month Period Ended Nov.
27, 2022 vs.
Six-Month Period Ended Nov.
28, 2021
CPW
HDJ
Total
Contributions from volume growth (a)
(9)
pts
(9)
pts
Net price realization and mix
12
pts
(1)
pt
Net sales growth in constant currency
3
pts
(9)
pts
Flat
Foreign currency exchange
(12)
pts
(18)
pts
(13)
pts
Net sales growth
(9)
pts
(28)
pts
(14)
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
10 million
in
the
six-month
period
ended
November
27,
2022,
from
the
same
period a year ago primarily due to share repurchases, partially offset
by option exercises.
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
Six-Month Period Ended
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Net sales (in millions)
$
3,373.1
11
%
$
3,044.6
$
6,361.9
11
%
$
5,755.2
Contributions from volume growth (a)
(8)
pts
(7)
pts
Net price realization and mix
19
pts
18
pts
Foreign currency exchange
(1)
pt
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
11 percent
in the second
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
and unfavorable
foreign currency exchange.
North America
Retail net sales
increased 11
percent in the
six-month period
ended November 27,
2022, 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.
26
The components of North America Retail organic net
sales growth are shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022
Contributions from organic volume growth (a)
(7)
pts
(6)
pts
Organic net price realization and mix
20
pts
18
pts
Organic net sales growth
13
pts
13
pts
Foreign currency exchange
(1)
pt
Flat
Divestiture (b)
(2)
pts
(2)
pts
Net sales growth
11
pts
11
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
13
percent
in
the
second
quarter
of
fiscal
2023
and
the
six-month
period
ended
November 27,
2022, compared
to the same
periods
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
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022
U.S. Snacks
18
%
16
%
U.S. Meals & Baking Solutions
10
%
10
%
U.S. Morning Foods
10
%
9
%
Canada (a)
(3)
%
Flat
Total
11
%
11
%
(a)
On a constant-currency basis, Canada net sales increased 4 percent in the second quarter of fiscal 2023 and increased 6 percent for the six-month
period ended
November 27,
2022, compared
to the
same periods
in fiscal
2022. See
the "Non-GAAP
Measures" section
below for
our use
of
this measure not defined by GAAP.
Segment
operating
profit increased
24
percent
to $837 million
in the
second
quarter of
fiscal 2023
compared
to $675 million
in the
same
period
in
fiscal
2022,
primarily
driven
by
favorable
net
price
realization
and
mix,
partially
offset
by
higher
input
costs,
a
decrease
in
contributions
from
volume
growth,
and
higher
SG&A
expenses.
Segment
operating
profit
increased
24
percent
on
a
constant-currency
basis
in
the
second
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
22
percent
to
$1,615 million
in
the
six-month
period
ended
November
27,
2022,
compared
to
$1,324 million in the
same period in fiscal
2022, primarily driven by
favorable net price realization
and mix, partially offset
by higher
input
costs,
a
decrease
in
contributions
from
volume
growth,
and
higher
SG&A
expenses.
Segment
operating
profit
increased
22
percent on
a constant-currency
basis in
the six-month
period ended
November 27,
2022, 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).
27
International Segment Results
International net sales were as follows:
Quarter Ended
Six-Month Period Ended
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Net sales (in millions)
$
671.7
(27)
%
$
914.4
$
1,324.2
(28)
%
$
1,845.0
Contributions from volume growth (a)
(39)
pts
(39)
pts
Net price realization and mix
18
pts
16
pts
Foreign currency exchange
(6)
pts
(6)
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
27
percent
in
the
second
quarter
of
fiscal
2023
and
28
percent
in
the
six-month
period
ended
November
27,
2022,
compared
to
the
same
periods
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.
The components of International organic net sales growth
are shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022
Contributions from organic volume growth (a)
(7)
pts
(7)
pts
Organic net price realization and mix
12
pts
8
pts
Organic net sales growth
5
pts
1
pt
Foreign currency exchange
(6)
pts
(6)
pts
Divestitures (b)
(26)
pts
(24)
pts
Net sales growth
(27)
pts
(28)
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 increased
5 percent
in the
second 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.
International organic
net sales increased
1 percent in the
six-month period ended
November 27, 2022,
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
decreased 70 percent to
$18 million in the second
quarter of fiscal 2023
from $59 million in the
same period
in
fiscal
2022,
primarily
driven by
higher
input
costs and
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, partially offset by
favorable
net
price
realization
and
mix
and
a
decrease
in
SG&A
expenses.
Segment
operating
profit
decreased
68
percent
on
a
constant-currency
basis
in
the
second
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 decreased 56
percent to $53 million in the six-month
period ended November 27, 2022, from $120
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 voluntary
recall on
certain international
Häagen-Dazs
ice cream
products,
and higher
input costs,
partially offset
by favorable
net price
realization and
mix and
a decrease
in SG&A
expenses. Segment
operating profit
decreased 51
percent on
a constant-currency
basis in
the six-month
period ended
November 27,
2022, 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).
28
Pet Segment Results
Pet net sales were as follows:
Quarter Ended
Six-Month Period Ended
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Net sales (in millions)
$
592.9
Flat
$
593.4
$
1,172.8
8
%
$
1,081.4
Contributions from volume growth (a)
(11)
pts
(6)
pts
Net price realization and mix
11
pts
15
pts
Foreign currency exchange
Flat
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
in the second
quarter of fiscal
2023 essentially
matched the same
period in fiscal
2022, as
favorable net price
realization
and mix was offset by a decrease in contributions from volume
growth.
Pet net sales
increased 8
percent during
the six-month
period ended November
27, 2022, 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.
The components of Pet organic net sales growth are shown in the following
table:
Quarter Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022
Contributions from organic volume growth (a)
(11)
pts
(7)
pts
Organic net price realization and mix
11
pts
13
pts
Organic net sales growth
Flat
6
pts
Foreign currency exchange
Flat
Flat
Acquisition (b)
Flat
2
pts
Net sales growth
Flat
8
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
in the
second quarter
of fiscal
2023 essentially
matched the
same period
in fiscal
2022 as
favorable organic
net
price realization and mix was offset by a decrease in contributions
from organic volume growth.
Pet organic
net sales
increased
6 percent
in the
six-month
period
ended November
27,
2022,
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
decreased
34
percent
to
$87 million
in
the
second
quarter
of
fiscal
2023
compared
to
$132 million
in
the
same period in fiscal 2022,
primarily driven by higher
input costs and a decrease in
contributions from volume
growth, partially offset
by favorable
net price
realization and
mix. Segment
operating profit
decreased 34
percent on
a constant-currency
basis in
the second
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
decreased
15
percent
to
$210 million
in
the
six-month
period
ended
November
27,
2022,
compared
to
$247 million
in
the
same
period
in
fiscal
2022,
primarily
driven
by
higher
input
costs,
a
decrease
in
contributions
from
volume
growth,
and
an
increase
in
SG&A
expenses,
partially
offset
by
favorable
net
price
realization
and
mix.
Segment
operating
profit
decreased 15 percent
on a constant-currency
basis in the six-month
period ended November
27, 2022, 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).
29
North America Foodservice Segment Results
North America Foodservice net sales were as follows:
Quarter Ended
Six-Month Period Ended
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Nov. 27,
2022
Nov. 27, 2022 vs
Nov. 28, 2021
Nov. 28,
2021
Net sales (in millions)
$
583.0
24
%
$
471.6
$
1,079.4
22
%
$
882.3
Contributions from volume growth (a)
2
pts
1
pt
Net price realization and mix
21
pts
22
pts
Foreign currency exchange
Flat
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
24 percent
in the
second 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,
and
an
increase
in
contributions from volume growth.
North America
Foodservice net
sales increased
22 percent
in the
six-month period
ended November
27, 2022,
compared to
the same
period
in
fiscal
2022,
driven
by
favorable
net
price
realization
and
mix,
including
market
index
pricing
on
bakery
flour,
and
an
increase in contributions from volume growth.
The components of North America Foodservice organic
net sales growth
are shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 27, 2022
Nov. 27, 2022
Contributions from organic volume growth (a)
(2)
pts
(3)
pts
Organic net price realization and mix
19
pts
20
pts
Organic net sales growth
17
pts
17
pts
Foreign currency exchange
Flat
Flat
Acquisition (b)
6
pts
5
pts
Net sales growth
24
pts
22
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.
North America Foodservice organic
net sales increased 17 percent in
the second quarter of fiscal 2023
and the six-month period ended
November 27, 2022, compared
to the same periods
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 increased
20 percent to $82
million in the second
quarter of fiscal 2023
compared to $68 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
20 percent
on a
constant-currency basis
in the
second 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
decreased
3
percent
to
$135
million
in
the
six-month
period
ended
November
27,
2022,
compared
to
$140 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
3 percent on a constant-currency
basis in the six-
month period
ended November
27, 2022,
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).
30
UNALLOCATED
CORPORATE
ITEMS
Unallocated corporate expense
totaled $212 million in
the second quarter
of fiscal 2023,
compared to $132 million
in the same period
in fiscal
2022. In
the second
quarter of
fiscal 2023,
we recorded
a $25 million
net increase
in expense
related to
the mark-to-market
valuation of
certain commodity
positions and
grain inventories
compared to
a $12 million
net decrease
in expense
in the same
period
last
year.
We
recorded
$36 million
of
net
losses
related
to
valuation
adjustments
and
the
sale
of
a
corporate
investment
in
the
second quarter of fiscal 2023,
compared to $10 million of
net gains in the second
quarter of fiscal 2022.
In the second quarter of
fiscal
2023,
we
recorded
a
$3
million
charge
related
to
a
voluntary
recall
on
certain
international
Häagen-Dazs
ice
cream
products.
In
addition, we
recorded $3
million of
integration costs
primarily related
to our
acquisition of
TNT Crust
in the
second quarter
of fiscal
2023 compared to $4 million of integration
costs related to our acquisition of Tyson
Foods’ pet treats business in the
second quarter of
fiscal 2022. In the second
quarter of fiscal 2023, we recorded
$2 million of transaction costs
primarily related to the
sale of our Helper
main meals and Suddenly
Salad side dishes business
compared to $38 million
of transaction costs related to
the sale of our
interests in
Yoplait
SAS, Yoplait
Marques SNC, and Liberté Marques Sàrl
and the sale of our European dough
businesses in the second quarter of
fiscal 2022.
Unallocated corporate
expense totaled
$545 million
in the
six-month period
ended November
27, 2022,
compared to
$188 million
in
the
same
period
last
year.
We
recorded
a
$200
million
net
increase
in
expense
related
to
the
mark-to-market
valuation
of
certain
commodity positions and grain
inventories in the six-month period
ended November 27, 2022, compared
to a $36 million net decrease
in
expense
in
the
same
period
last
year.
We
recorded
$62
million
of
net
losses
related
to
valuation
adjustments
and
the
sale
of
corporate investments in the six-month
period ended November 27, 2022,
compared to $10 million of net
gains in the same period last
year.
In
the
six-month
period
ended
November
27,
2022,
we
recorded
a
$24
million
charge
related
to
a
voluntary
recall on
certain
international
Häagen-Dazs
ice
cream
products.
In
addition,
we
recorded
$4
million
of
integration
costs
primarily
related
to
our
acquisition of
TNT Crust
in the
six-month period
ended November
27, 2022,
compared to
$16 million
of integration
costs related
to
our acquisition of Tyson
Foods’ pet treats business
in the six-month
period ended November 28,
2021.
In the six-month period
ended
November 27,
2022, we recorded
$2 million of
transaction costs primarily
related to
the sale of
our Helper
main meals and
Suddenly
Salad
side
dishes
business
compared
to $48
million
of
transaction
costs related
to
the
sale of
our
interests in
Yopla
it SAS,
Yoplait
Marques SNC, Liberté
Marques Sàrl and
the sale of
our European
dough businesses. In
addition, we
recorded a $21
million recovery
related to a Brazil indirect tax item and a $13 million insurance recovery
in the six-month period ended November 28, 2021.
LIQUIDITY
AND CAPITAL
RESOURCES
During the
six-month period
ended November
27, 2022,
cash provided by
operations was
$1,201 million compared
to $1,498 million
in the
same period
last year.
The $297
million decrease
was primarily
driven by
an increase in
inventory and
higher cash
income tax
payments in the six-month period ended November 27, 2022 as compared
to the same period a year ago.
Cash provided by investing activities during the
six-month period ended November 27, 2022, was $125
million compared to cash used
of $1,396 million
for the
same period
in fiscal
2022. 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 $227
million on purchases of
land, buildings, and
equipment in the six-
months ended November 27, 2022, compared to $224 million in
the same period last year.
Cash
used
by
financing
activities
during
the
six-month
period
ended
November
27,
2022,
was
$1,230
million
compared
to
$427 million
of
cash
used
by
financing
activities
in
the
same
period
in
fiscal
2022.
We
paid
$648
million
of
dividends
in
the
six-
month period ended November
27, 2022, compared to
$623 million in the same period
last year.
We purchased
$901 million of shares
of common
stock in the
six-month period
ended November 27,
2022, compared
to $375 million
in the same
period in fiscal
2022.
In
addition, we
had $253
million of
net debt
issuances in
the six-month
period ended
November 27,
2022, compared
to $568 million
of
net debt issuances in the same period a year ago.
As of
November
27,
2022, we
had
$542 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 permanent
ly reinvested in those jurisdictions.
31
The following table details the fee-paid committed and uncommitted credit
lines we had available as of November 27, 2022:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
-
Total committed
and uncommitted credit facilities
$
3.3
$
-
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.
Certain
of
our
long-term
debt
agreements,
our
credit
facilities,
and
our
noncontrolling
interests
contain
restrictive
covenants.
As
of
November 27, 2022, we were in compliance with all of these covenants.
We
have
$1,964
million
of
long-term
debt
maturing
in
the
next
12
months
that
is
classified
as
current,
including
$400
million
of
floating-rate
notes
due
October
17,
2023,
€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,
€500
million
of
0.00
percent
fixed-rate
notes
due
July
27,
2023,
and
€250
million
of
floating-rate notes
due May
16, 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,
2022. 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 November 27, 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
2023,
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. In addition,
while having
significant coverage
as of
our fiscal 2023
assessment date, the
Progresso
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 September 2022, the Financial Accounting Standards
Board (FASB)
issued Accounting Standards Update (ASU) 2022-04 requiring
enhanced
disclosures
related
to
supplier
financing
programs.
The
ASU
requires
disclosure
of
the
key
terms
of
the
program
and
a
rollforward
of
the
related
obligation
during
the
annual
period,
including
the
amount
of
obligations
confirmed
and
obligations
subsequently
paid.
The
new
disclosure
requirements
are
effective
for
fiscal
years
beginning
after
December
15,
2022,
with
the
exception
of the
rollforward requirement,
which is
effective
for fiscal
years beginning
after December
15, 2023,
which for
us is
the
first
quarter
of
fiscal
2024
for
the
primary
requirement
and
the
first
quarter
of
fiscal
2025
for
the
rollforward
requirement.
Early
adoption is
permitted. We
have historically
presented the
key terms
of these
programs and
the associated
obligation outstanding.
We
do not expect this ASU to have a material impact on our financial statements and
related disclosures.
32
In March
2020, the 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,
2022.
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.
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
.
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.
Investment activity,
net
Valuation
adjustments and the
loss on sale of
certain corporate investments
in fiscal 2023.
Valuation
adjustments and the
gain on sale
of certain corporate investments in fiscal 2022.
Product recall
Voluntary
recall costs recorded in fiscal 2023 related to certain international
Häagen-Dazs
ice cream products.
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.
Acquisition integration costs
Integration costs
primarily resulting
from the acquisition
of TNT Crust
in fiscal 2023.
Integration costs
resulting from
the acquisition
of Ty
son Foods’ pet
treats business in fiscal
2022. 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
and the sale
of
our
European
dough
businesses 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.
33
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.
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
Nov. 27, 2022
Nov. 28, 2021
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
799.8
15.3
%
$
800.1
15.9
%
Mark-to-market effects
25.1
0.5
%
(12.1)
(0.2)
%
Investment activity, net
35.7
0.7
%
(10.5)
(0.2)
%
Product recall
2.9
0.1
%
-
-
%
Restructuring charges
11.6
0.2
%
2.7
0.1
%
Acquisition integration costs
2.8
0.1
%
3.5
0.1
%
Transaction costs
1.8
-
%
37.6
0.7
%
Adjusted operating profit
$
879.7
16.9
%
$
821.3
16.3
%
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
1,885.4
19.0
%
$
1,644.4
17.2
%
Divestitures gain, net
(430.9)
(4.3)
%
-
-
%
Mark-to-market effects
199.8
2.0
%
(36.2)
(0.4)
%
Investment activity, net
62.0
0.6
%
(9.8)
(0.1)
%
Product recall
24.4
0.2
%
-
-
%
Restructuring charges (recoveries)
13.9
0.1
%
(1.4)
-
%
Acquisition integration costs
4.3
-
%
15.9
0.2
%
Transaction costs
2.0
-
%
48.2
0.5
%
Non-income tax recovery
-
-
%
(20.6)
(0.2)
%
Adjusted operating profit
$
1,760.9
17.7
%
$
1,640.5
17.2
%
Note: Tables
may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
34
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
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
Change
Nov. 27, 2022
Nov. 28, 2021
Change
Operating profit as reported
$
799.8
$
800.1
Flat
$
1,885.4
$
1,644.4
15
%
Divestitures gain, net
-
-
(430.9)
-
Mark-to-market effects
25.1
(12.1)
199.8
(36.2)
Investment activity, net
35.7
(10.5)
62.0
(9.8)
Product recall
2.9
-
24.4
-
Restructuring charges (recoveries)
11.6
2.7
13.9
(1.4)
Acquisition integration costs
2.8
3.5
4.3
15.9
Transaction costs
1.8
37.6
2.0
48.2
Non-income tax recovery
-
-
-
(20.6)
Adjusted operating profit
$
879.7
$
821.3
7
%
$
1,760.9
$
1,640.5
7
%
Foreign currency exchange impact
Flat
(1)
pt
Adjusted operating profit growth,
on a constant-currency basis
7
%
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.
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 profit
ability 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
Six-Month Period Ended
Per Share Data
Nov. 27, 2022
Nov. 28, 2021
Change
Nov. 27, 2022
Nov. 28, 2021
Change
Diluted earnings per share, as reported
$
1.01
$
0.97
4
%
$
2.36
$
1.99
19
%
Divestitures gain, net
-
-
(0.54)
-
Mark-to-market effects
0.03
(0.02)
0.25
(0.05)
Investment activity, net
0.04
(0.02)
0.08
(0.02)
Product recall
-
-
0.03
-
Restructuring charges (recoveries)
0.02
-
0.02
(0.01)
Acquisition integration costs
0.01
-
0.01
0.02
Transaction costs
-
0.05
-
0.06
Non-income tax recovery
-
-
-
(0.02)
Adjusted diluted earnings per share
$
1.10
$
0.99
11
%
$
2.21
$
1.98
12
%
Foreign currency exchange impact
(1)
pt
(1)
pt
Adjusted diluted earnings per share
growth, on a constant-currency basis
12
%
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.
35
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 Nov. 27,
2022
(23)
%
(15)
pts
(8)
%
Six-Month Period Ended Nov.
27, 2022
(27)
%
(10)
pts
(17)
%
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 Nov. 27,
2022
(3)
%
(7)
pts
4
%
Six-Month Period Ended Nov.
27, 2022
Flat
(5)
pts
6
%
Note: Table may
not foot due to rounding.
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.
36
Our segments’ operating profit growth rates on a constant-currency
basis are calculated as follows:
Quarter Ended Nov. 27, 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
24
%
Flat
24
%
International
(70)
%
(2)
pts
(68)
%
Pet
(34)
%
Flat
(34)
%
North America Foodservice
20
%
Flat
20
%
Six-Month Period Ended Nov.
27, 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
22
%
Flat
22
%
International
(56)
%
(5)
pts
(51)
%
Pet
(15)
%
Flat
(15)
%
North America Foodservice
(3)
%
Flat
(3)
%
Note: Tables may not
foot due to rounding.
37
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
Six-Month Period Ended
Nov. 27, 2022
Nov. 28, 2021
Nov. 27, 2022
Nov. 28, 2021
In Millions
(Except Per Share Data)
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
As reported
$
730.0
$
147.1
$
735.1
$
159.7
$
1,749.6
$
363.2
$
1,513.1
$
328.6
Divestitures gain, net
-
-
-
-
(430.9)
(101.9)
-
-
Mark-to-market effects
25.1
5.8
(12.1)
(2.8)
199.8
46.0
(36.2)
(8.3)
Investment activity, net
35.7
13.0
(10.5)
0.3
62.0
13.5
(9.8)
0.5
Product recall
2.9
0.7
-
-
24.4
5.6
-
-
Restructuring charges
(recoveries)
11.6
3.2
2.7
2.8
13.9
3.8
(1.4)
1.9
Acquisition integration costs
2.8
0.7
3.5
0.8
4.3
1.0
15.9
3.6
Transaction costs
1.8
0.6
37.6
7.8
2.0
0.6
48.2
12.4
Non-income tax recovery
-
-
-
-
-
-
(20.6)
(7.0)
As adjusted
$
809.9
$
171.0
$
756.4
$
168.8
$
1,625.1
$
331.8
$
1,509.2
$
331.8
Effective tax rate:
As reported
20.2%
21.7%
20.8%
21.7%
As adjusted
21.1%
22.3%
20.4%
22.0%
Sum of adjustment to
income taxes
$
23.9
$
8.9
$
(31.4)
$
3.1
Average number
of common
shares - diluted EPS
602.0
613.0
604.0
613.8
Impact of income tax adjustments
on adjusted diluted EPS
$
(0.04)
$
(0.01)
$
0.05
$
-
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.
38
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.
39
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.
40
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 November 27,
2022, was as follows:
In Millions
One-day Risk
of Loss
Change During
Six-Month
Period Ended
Nov. 27, 2022
Analysis of Change
Interest rate instruments
$
51
$
10
Rising interest rates
Foreign currency instruments
35
15
Increase in portfolio basis
Commodity instruments
11
(2)
Decrease in commodity prices
Equity instruments
3
1
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.
41
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
November
27,
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
November
27,
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
November 27, 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)
August 29, 2022 -
October 2, 2022
1,888,000
$
76.66
1,888,000
94,104,938
October 3, 2022 -
October 30, 2022
1,905,000
77.19
1,905,000
92,199,938
October 31, 2022 -
November 27, 2022
1,378,000
78.53
1,378,000
90,821,938
Total
5,171,000
$
77.35
5,171,000
90,821,938
(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.
42
PART
II. OTHER INFORMATION
Item 6.
Exhibits.
10.1
General Mills, Inc. 2022 Stock Compensation Plan (incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K filed September 30, 2022).
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 November
27,
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.
43
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: December 20, 2022
/s/ Mark A. Pallot
Mark A. Pallot
Vice President, Chief Accounting
Officer
(Principal Accounting Officer and Duly Authorized
Officer)