10-Q 1 d366574d10q.htm 10-Q 10-Q
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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
AUGUST 28, 2022
 
TRANSITION
 
REPORT
 
PURSUANT
 
TO
 
SECTION
 
13
 
OR
 
15(d)
 
OF
 
THE
 
SECURITIES
 
EXCHANGE
 
ACT
 
OF
 
1934
FOR THE TRANSITION PERIOD FROM
 
TO
 
Commission file number:
001-01185
________________
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
41-0274440
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Number One General Mills Boulevard
 
Minneapolis
,
Minnesota
55426
(Address of principal executive offices)
(Zip Code)
(763)
764-7600
(Registrant’s telephone number,
 
including area code)
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading Symbol(s)
 
Name of each exchange
on which registered
Common Stock, $.10 par value
 
GIS
 
New York Stock Exchange
1.000% Notes due 2023
 
GIS23A
 
New York Stock Exchange
0.125% Notes due 2025
GIS25A
New York Stock Exchange
0.450% Notes due 2026
 
GIS26
 
New York Stock Exchange
1.500% Notes due 2027
 
GIS27
 
New York Stock Exchange
________________
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant
 
(1)
 
has
 
filed
 
all
 
reports
 
required
 
to
 
be
 
filed
 
by
 
Section
 
13
 
or
 
15(d)
 
of
 
the
 
Securities
Exchange Act of 1934
 
during the preceding 12
 
months (or for such shorter
 
period that the registrant
 
was required to file such
 
reports),
and (2) has been subject to such filing requirements for the past 90 days.
 
Yes
 
No
Indicate
 
by
 
check
 
mark
 
whether
 
the
 
registrant
 
has
 
submitted
 
electronically
 
every
 
Interactive
 
Data
 
File
 
required
 
to
 
be
 
submitted
pursuant to Rule
 
405 of Regulation
 
S-T during
 
the preceding 12
 
months (or for
 
such shorter period
 
that the registrant
 
was required
 
to
submit such files).
Yes
 
 
No
Indicate by check mark
 
whether the registrant is a
 
large accelerated filer,
 
an accelerated filer,
 
a non-accelerated filer,
 
smaller reporting
company,
 
or
 
an
 
emerging
 
growth
 
company.
 
See
 
the
 
definitions
 
of
 
“large
 
accelerated
 
filer,”
 
“accelerated
 
filer,”
 
“smaller
 
reporting
company,” and “emerging
 
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
 
Non-accelerated filer
Smaller reporting company
Emerging growth company
 
If
 
an
 
emerging
 
growth
 
company,
 
indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
has
 
elected
 
not
 
to
 
use
 
the
 
extended
 
transition
 
period
 
for
complying with any new or revised financial accounting standards provided
 
pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined
 
in Rule 12b-2 of the Exchange Act).
Yes
 
No
Number of
 
shares of
 
Common Stock
 
outstanding
 
as of
 
September 14,
 
2022:
593,535,650
 
(excluding
161,077,678
 
shares held
 
in the
treasury).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4
 
PART
 
I.
 
FINANCIAL INFORMATION
Item 1.
 
Financial Statements
Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Net sales
$
4,717.6
$
4,539.9
Cost of sales
3,269.9
2,942.5
Selling, general, and administrative expenses
791.4
757.4
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs (recoveries)
1.6
(4.3)
Operating profit
1,085.6
844.3
Benefit plan non-service income
(21.7)
(29.6)
Interest, net
87.7
95.9
Earnings before income taxes and after-tax earnings
 
from
 
 
joint ventures
1,019.6
778.0
Income taxes
216.1
168.9
After-tax earnings from joint ventures
19.8
29.1
Net earnings, including earnings attributable to redeemable
 
 
and noncontrolling interests
823.3
638.2
Net earnings attributable to redeemable and
 
 
noncontrolling interests
3.3
11.2
Net earnings attributable to General Mills
$
820.0
$
627.0
Earnings per share – basic
$
1.37
$
1.03
Earnings per share – diluted
$
1.35
$
1.02
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5
 
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Net earnings, including earnings attributable to
 
 
redeemable and noncontrolling interests
$
823.3
$
638.2
Other comprehensive income (loss), net of tax:
Foreign currency translation
3.8
(23.9)
Other fair value changes:
Hedge derivatives
(38.3)
1.7
Reclassification to earnings:
Foreign currency translation
(7.4)
-
Hedge derivatives
(1.4)
10.6
Amortization of losses and prior service costs
14.1
8.4
Other comprehensive loss, net of tax
(29.2)
(3.2)
Total comprehensive
 
income
 
794.1
635.0
Comprehensive income (loss) attributable to
 
 
redeemable and noncontrolling interests
2.0
(23.5)
Comprehensive income attributable to General Mills
$
792.1
$
658.5
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6
 
 
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
Aug. 28, 2022
May 29, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
594.4
$
569.4
Receivables
1,730.4
1,692.1
Inventories
2,089.9
1,867.3
Prepaid expenses and other current assets
719.3
802.1
Assets held for sale
-
158.9
Total current
 
assets
5,134.0
5,089.8
Land, buildings, and equipment
3,358.6
3,393.8
Goodwill
14,454.6
14,378.5
Other intangible assets
6,979.4
6,999.9
Other assets
1,180.6
1,228.1
Total assets
$
31,107.2
$
31,090.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,786.3
$
3,982.3
Current portion of long-term debt
2,095.4
1,674.2
Notes payable
991.9
811.4
Other current liabilities
1,721.9
1,552.0
Total current
 
liabilities
8,595.5
8,019.9
Long-term debt
8,474.6
9,134.8
Deferred income taxes
2,262.4
2,218.3
Other liabilities
949.1
929.1
Total liabilities
20,281.6
20,302.1
Stockholders' equity:
Common stock,
754.6
 
shares issued, $
0.10
 
par value
75.5
75.5
Additional paid-in capital
1,146.1
1,182.9
Retained earnings
19,027.6
18,532.6
Common stock in treasury,
 
at cost, shares of
160.3
 
and
155.7
(7,676.0)
(7,278.1)
Accumulated other comprehensive loss
(1,998.4)
(1,970.5)
Total stockholders' equity
10,574.8
10,542.4
Noncontrolling interests
250.8
245.6
Total equity
10,825.6
10,788.0
Total liabilities and equity
$
31,107.2
$
31,090.1
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7
 
Consolidated Statements of Total
 
Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Shares
Amount
Shares
Amount
Total equity,
 
beginning balance
$
10,788.0
$
9,773.2
Common stock,
1
 
billion shares authorized, $
0.10
 
par value
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,182.9
1,365.5
Stock compensation plans
9.3
9.1
Unearned compensation related to stock unit awards
(79.0)
(68.3)
Earned compensation
32.9
33.1
Decrease in redemption value of
 
redeemable interest
-
5.6
Ending balance
1,146.1
1,345.0
Retained earnings:
Beginning balance
18,532.6
17,069.8
Net earnings attributable to General Mills
820.0
627.0
Cash dividends declared ($
0.54
 
and $
0.51
 
per share)
(325.0)
(312.3)
Ending balance
19,027.6
17,384.5
Common stock in treasury:
Beginning balance
(155.7)
(7,278.1)
(146.9)
(6,611.2)
Shares purchased
(6.9)
(500.8)
(2.5)
(150.1)
Stock compensation plans
2.3
102.9
1.1
46.3
Ending balance
(160.3)
(7,676.0)
(148.3)
(6,715.0)
Accumulated other comprehensive loss:
Beginning balance
(1,970.5)
(2,429.2)
Comprehensive (loss) income
(27.9)
31.5
Ending balance
(1,998.4)
(2,397.7)
Noncontrolling interests:
Beginning balance
245.6
302.8
Comprehensive income (loss)
2.0
(8.2)
Distributions to noncontrolling interest holders
(1.9)
(1.1)
Divestiture
5.1
-
Ending balance
250.8
293.5
Total equity,
 
ending balance
$
10,825.6
$
9,985.8
Redeemable interest:
Beginning balance
$
-
$
604.9
Comprehensive loss
-
(15.3)
Decrease in redemption value of
 
 
redeemable interest
-
(5.6)
Ending balance
$
-
$
584.0
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8
 
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling
 
interests
$
823.3
$
638.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
134.3
145.8
After-tax earnings from joint ventures
(19.8)
(29.1)
Distributions of earnings from joint ventures
15.5
22.6
Stock-based compensation
33.5
26.8
Deferred income taxes
9.2
19.6
Pension and other postretirement benefit plan contributions
(5.3)
(5.4)
Pension and other postretirement benefit plan costs
(6.7)
(7.2)
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs
(15.7)
(19.5)
Changes in current assets and liabilities, excluding the effects of
 
 
acquisitions and divestitures
(209.7)
(389.5)
Other, net
61.1
(32.5)
Net cash provided by operating activities
388.8
369.8
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(90.9)
(104.0)
Acquisition, net of cash acquired
(252.1)
(1,198.6)
Proceeds from divestitures, net of cash divested
610.7
-
Investments in affiliates, net
-
5.7
Proceeds from disposal of land, buildings, and equipment
-
0.3
Other, net
(1.9)
(1.3)
Net cash provided (used) by investing activities
265.8
(1,297.9)
Cash Flows - Financing Activities
Change in notes payable
188.0
698.7
Issuance of long-term debt
-
582.2
Payment of long-term debt
-
(612.1)
Proceeds from common stock issued on exercised options
65.5
7.9
Purchases of common stock for treasury
(500.8)
(150.1)
Dividends paid
(325.0)
(312.3)
Distributions to noncontrolling and redeemable interest holders
(1.9)
(1.1)
Other, net
(34.9)
(18.2)
Net cash (used) provided by financing activities
(609.1)
195.0
Effect of exchange rate changes on cash and cash equivalents
(20.5)
(18.1)
Increase (decrease) in cash and cash equivalents
25.0
(751.2)
Cash and cash equivalents - beginning of year
569.4
1,505.2
Cash and cash equivalents - end of period
$
594.4
$
754.0
Cash Flow from changes in current assets and liabilities, excluding the effects
 
of
 
 
acquisitions and divestitures:
Receivables
$
(91.1)
$
(145.3)
Inventories
(243.3)
(116.1)
Prepaid expenses and other current assets
79.5
39.0
Accounts payable
(130.4)
(214.9)
Other current liabilities
175.6
47.8
Changes in current assets and liabilities
$
(209.7)
$
(389.5)
See accompanying notes to consolidated financial statements.
 
 
 
 
 
 
 
 
 
 
9
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
 
FINANCIAL STATEMENTS
(Unaudited)
(1) Background
The accompanying
 
Consolidated Financial
 
Statements of
 
General Mills,
 
Inc. (we,
 
us, our,
 
General Mills,
 
or the Company)
 
have been
prepared in
 
accordance with
 
accounting principles
 
generally accepted
 
in the
 
United States
 
(GAAP) for
 
interim financial
 
information
and with
 
the rules
 
and regulations
 
for reporting
 
on Form
 
10-Q. Accordingly,
 
they do
 
not include
 
certain information
 
and disclosures
required
 
for
 
comprehensive
 
financial
 
statements.
 
In
 
the
 
opinion
 
of
 
management,
 
all
 
adjustments
 
considered
 
necessary
 
for
 
a
 
fair
presentation have
 
been included
 
and are
 
of a
 
normal recurring
 
nature, including
 
the elimination
 
of all
 
intercompany transactions
 
and
any
 
noncontrolling
 
and
 
redeemable
 
interests’
 
share
 
of
 
those
 
transactions.
 
Operating
 
results
 
for
 
the
 
fiscal
 
quarter
 
ended
 
August
 
28,
2022,
 
are not necessarily indicative of the results that may be expected for the fiscal year
 
ending May 28, 2023.
 
These
 
statements
 
should
 
be
 
read
 
in
 
conjunction
 
with
 
the
 
Consolidated
 
Financial
 
Statements
 
and
 
footnotes
 
included
 
in
 
our
 
Annual
Report on Form
 
10-K for the fiscal
 
year ended May
 
29, 2022. The
 
accounting policies used
 
in preparing these
 
Consolidated Financial
Statements are the same as those described in Note 2 to the Consolidated Financial
 
Statements in that Form 10-K.
Certain terms used throughout this report are defined in the “Glossary” section below.
(2) Acquisition and Divestitures
During
 
the first
 
quarter
 
of fiscal
 
2023,
 
we
 
acquired
 
TNT Crust,
 
a
 
manufacturer
 
of high-quality
 
frozen pizza
 
crusts
 
for
 
regional
 
and
national pizza
 
chains, foodservice
 
distributors, and
 
retail outlets,
 
for a
 
purchase price
 
of $
253.0
 
million. We
 
financed the
 
transaction
with U.S. commercial paper.
 
We consolidated
 
the TNT Crust business into
 
our Consolidated Balance
 
Sheets and recorded goodwill
 
of
$
154.3
 
million. The
 
goodwill is
 
included in
 
the North
 
America Foodservice
 
segment and
 
is not
 
deductible for
 
tax purposes.
 
The pro
forma
 
effects
 
of
 
this
 
acquisition
 
were
 
not
 
material.
 
We
 
have
 
conducted
 
a
 
preliminary
 
assessment
 
of
 
the
 
fair
 
value
 
of
 
the
 
acquired
assets
 
and
 
liabilities
 
of
 
the
 
TNT
 
Crust
 
business
 
and
 
will
 
continue
 
to
 
review
 
these
 
items
 
during
 
the
 
measurement
 
period.
 
If
 
new
information is obtained
 
about facts and circumstances
 
that existed at the
 
acquisition date, the
 
acquisition accounting will
 
be revised to
reflect the resulting adjustments to
 
current estimates of these items.
 
The consolidated results of the
 
TNT Crust business are reported
 
in
our North America Foodservice segment on a one-month lag.
During the
 
first quarter
 
of fiscal
 
2023,
 
we completed
 
the sale
 
of our
 
Helper main
 
meals and
 
Suddenly
 
Salad side
 
dishes business
 
to
Eagle Family Foods Group for $
606.8
 
million and recorded a pre-tax gain of $
442.2
 
million.
During
 
the
 
first
 
quarter
 
of
 
fiscal
 
2022,
 
we
 
acquired
 
Tyson
 
Foods’
 
pet
 
treats
 
business
 
for
 
$
1.2
 
billion
 
in
 
cash.
 
We
 
financed
 
the
transaction
 
with
 
a
 
combination
 
of
 
cash
 
on
 
hand
 
and
 
short-term
 
debt.
 
We
 
consolidated
 
Tyson
 
Foods’
 
pet
 
treats
 
business
 
into
 
our
Consolidated Balance
 
Sheets and
 
recorded goodwill
 
of $
762.3
 
million, indefinite-lived
 
intangible assets
 
for the
Nudges
,
Top
 
Chews
,
and
True
 
Chews
 
brands
 
totaling
 
$
330.0
 
million
 
in
 
aggregate,
 
and
 
a
 
finite-lived
 
customer
 
relationship
 
asset
 
of
 
$
40.0
 
million.
 
The
goodwill is included in the Pet segment and is deductible for tax purposes. The
 
pro forma effects of this acquisition were not material.
(3) Restructuring, Impairment, and Other Exit Costs
During the
 
first quarter
 
of fiscal 2023,
 
we did not
 
undertake any
 
new restructuring
 
actions. We
 
recorded $
2.3
 
million of restructuring
charges in the
 
first quarter of fiscal
 
2023 and a
 
$
4.1
 
million net recovery
 
of restructuring charges
 
in the first quarter
 
of fiscal 2022 for
previously announced restructuring actions. We
 
expect these actions to be completed by the end of
fiscal 2024
.
We
 
paid net $
18.0
 
million of cash in
 
the first quarter of
 
fiscal 2023 related to
 
restructuring actions previously
 
announced. We
 
paid net
$
15.4
 
million of cash in the same period of fiscal 2022.
The roll forward of our restructuring and other exit cost reserves, included
 
in other current liabilities, is as follows:
In Millions
Total
Reserve balance as of May 29, 2022
$
36.8
Fiscal 2023 charges, including foreign currency translation
(0.4)
Utilized in fiscal 2023
(17.1)
Reserve balance as of Aug. 28, 2022
$
19.3
The reserve balance primarily consists of expected severance payments
 
associated with restructuring actions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10
The charges
 
recognized in
 
the roll forward
 
of our reserves
 
for restructuring
 
and other
 
exit costs do
 
not include
 
items charged
 
directly
to expense
 
(e.g., asset
 
impairment charges,
 
accelerated depreciation,
 
the gain
 
or loss
 
on the
 
sale of
 
restructured assets,
 
and the
 
write-
off
 
of
 
spare parts)
 
and other
 
periodic
 
exit costs
 
are
 
recognized
 
as incurred,
 
as those
 
items are
 
not reflected
 
in our
 
restructuring
 
and
other exit cost reserves on our Consolidated Balance Sheets.
(4) Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets are as follows:
 
 
In Millions
Aug. 28, 2022
May 29, 2022
Goodwill
$
14,454.6
$
14,378.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,706.4
6,725.8
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
402.1
400.3
Less accumulated amortization
(129.1)
(126.2)
Intangible assets subject to amortization, net
273.0
274.1
Other intangible assets
6,979.4
6,999.9
Total
$
21,434.0
$
21,378.4
Based on
 
the carrying
 
value of
 
finite-lived intangible
 
assets as
 
of August
 
28, 2022,
 
annual amortization
 
expense for
 
each of
 
the next
five fiscal years is estimated to be approximately $
20
 
million.
The changes in the carrying amount of goodwill during the first quarter of fiscal 2023
 
were as follows:
In Millions
North
America
Retail
Pet
North
America
Foodservice
International
Joint
Ventures
Total
Balance as of May 29, 2022
$
6,552.9
$
6,062.8
$
648.8
$
721.6
$
392.4
$
14,378.5
Acquisition
-
-
154.3
-
-
154.3
Divestiture
-
-
-
(0.4)
-
(0.4)
Other activity, primarily
 
 
foreign currency translation
(3.0)
-
-
(46.6)
(28.2)
(77.8)
Balance as of Aug. 28, 2022
$
6,549.9
$
6,062.8
$
803.1
$
674.6
$
364.2
$
14,454.6
The changes in the carrying amount of other intangible assets during the first quarter
 
of fiscal 2023 were as follows:
In Millions
Total
Balance as of May 29, 2022
$
6,999.9
Acquisition
3.8
Other activity, primarily
 
foreign currency translation
(24.3)
Balance as of Aug. 28, 2022
$
6,979.4
Our
 
annual
 
goodwill
 
and
 
indefinite-lived
 
intangible
 
assets
 
impairment
 
test
 
was
 
performed
 
on
 
the
 
first
 
day
 
of
 
the
 
second
 
quarter
 
of
fiscal
 
2022,
 
and
 
we
 
determined
 
there
 
was
no
 
impairment
 
of
 
our
 
intangible
 
assets
 
as
 
their
 
related
 
fair
 
values
 
were
 
substantially
 
in
excess of the carrying values, except for the
Uncle Toby’s
 
brand intangible asset.
The excess fair value as of the fiscal 2022 test date of the
Uncle Toby’s
 
brand intangible asset is as follows:
In Millions
Carrying Value
 
of
Intangible Asset
Excess Fair Value
 
as of
Fiscal 2022 Test
 
Date
Uncle Toby's
$
55.0
7
%
In
 
addition,
 
while
 
having
 
significant
 
coverage
 
as
 
of
 
our
 
fiscal
 
2022
 
assessment
 
date,
 
the
Progresso
,
Green
 
Giant
,
 
and
EPIC
 
brand
intangible assets had risk of decreasing coverage. We
 
will continue to monitor these businesses for potential impairment.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11
(5) Inventories
The components of inventories were as follows:
In Millions
Aug. 28, 2022
May 29, 2022
Raw materials and packaging
$
579.6
$
532.0
Finished goods
1,887.0
1,634.7
Grain
122.5
164.0
Excess of FIFO over LIFO cost
(499.2)
(463.4)
Total
$
2,089.9
$
1,867.3
(6) Risk Management Activities
 
Many commodities we
 
use in the
 
production and distribution
 
of our products
 
are exposed to
 
market price risks.
 
We
 
utilize derivatives
to manage price risk for our principal
 
ingredients and energy costs, including
 
grains (oats, wheat, and corn), oils
 
(principally soybean),
dairy products, natural
 
gas, and diesel fuel.
 
Our primary objective
 
when entering into
 
these derivative contracts
 
is to achieve
 
certainty
with
 
regard
 
to
 
the
 
future
 
price
 
of
 
commodities
 
purchased
 
for
 
use
 
in
 
our
 
supply
 
chain.
 
We
 
manage
 
our
 
exposures
 
through
 
a
combination of purchase orders, long-term
 
contracts with suppliers, exchange-traded
 
futures and options, and over-the-counter
 
options
and swaps.
 
We
 
offset
 
our exposures
 
based on
 
current and
 
projected market
 
conditions and
 
generally seek
 
to acquire
 
the inputs
 
at as
close as possible to or below our planned cost.
We
 
use derivatives
 
to manage
 
our exposure
 
to changes
 
in commodity
 
prices. We
 
do not
 
perform the
 
assessments required
 
to achieve
hedge
 
accounting
 
for
 
commodity
 
derivative
 
positions.
 
Accordingly,
 
the
 
changes
 
in
 
the
 
values
 
of
 
these
 
derivatives
 
are
 
recorded
currently in cost of sales in our Consolidated Statements of Earnings.
Although we do
 
not meet the
 
criteria for
 
cash flow hedge
 
accounting, we believe
 
that these instruments
 
are effective
 
in achieving our
objective of providing certainty
 
in the future price of commodities purchased
 
for use in our supply chain.
 
Accordingly, for
 
purposes of
measuring
 
segment
 
operating
 
performance,
 
these
 
gains
 
and
 
losses
 
are
 
reported
 
in
 
unallocated
 
corporate
 
items
 
outside
 
of
 
segment
operating results
 
until such
 
time that
 
the exposure
 
we are
 
managing affects
 
earnings. At
 
that time
 
we reclassify
 
the gain
 
or loss
 
from
unallocated
 
corporate
 
items
 
to
 
segment
 
operating
 
profit,
 
allowing
 
our
 
operating
 
segments
 
to
 
realize
 
the
 
economic
 
effects
 
of
 
the
derivative without experiencing any resulting mark-to-market volatility,
 
which remains in unallocated corporate items.
 
Unallocated corporate items for the quarters ended August 28, 2022, and
 
August 29, 2021, included:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net (loss) gain on mark-to-market valuation of certain
 
 
commodity positions
$
(72.3)
$
30.4
Net gain on commodity positions reclassified from
 
 
unallocated corporate items to segment operating profit
(43.0)
(34.7)
Net mark-to-market revaluation of certain grain inventories
(59.4)
28.4
Net mark-to-market valuation of certain commodity
 
 
positions recognized in unallocated corporate items
$
(174.7)
$
24.1
As of August 28, 2022,
 
the net notional value of commodity
 
derivatives was $
432.6
 
million, of which $
152.4
 
million related to energy
inputs and
 
$
280.2
 
million related
 
to agricultural
 
inputs. These
 
contracts relate
 
to inputs
 
that generally
 
will be
 
utilized within
 
the next
12
 
months.
The
 
fair
 
values
 
of
 
the
 
derivative
 
positions
 
used
 
in
 
our
 
risk
 
management
 
activities
 
and
 
other
 
assets
 
recorded
 
at
 
fair
 
value
 
were
 
not
material as
 
of August
 
28, 2022
 
and were
 
Level 1
 
or Level
 
2 assets
 
and liabilities
 
in the
 
fair value
 
hierarchy.
 
We
 
did not
 
significantly
change our valuation techniques from prior periods.
 
We
 
offer
 
certain
 
suppliers
 
access
 
to
 
third
 
party
 
services
 
that
 
allow
 
them
 
to
 
view
 
our
 
scheduled
 
payments
 
online.
 
The
 
third-party
services also
 
allow suppliers
 
to finance
 
advances on
 
our scheduled
 
payments at
 
the sole
 
discretion of
 
the supplier
 
and the third
 
party.
We
 
have no
 
economic interest
 
in these
 
financing arrangements
 
and no
 
direct relationship
 
with the
 
suppliers, the
 
third parties,
 
or any
financial
 
institutions
 
concerning
 
these
 
services.
 
All
 
of
 
our
 
accounts
 
payable
 
remain
 
as
 
obligations
 
to
 
our
 
suppliers
 
as
 
stated
 
in
 
our
supplier
 
agreements.
 
As
 
of
 
August
 
28,
 
2022,
 
$
1,413.3
 
million
 
of
 
our
 
total
 
accounts
 
payable
 
were
 
payable
 
to
 
suppliers
 
who
 
utilize
these third-party services. As
 
of August 29, 2021, $
1,312.8
 
million of our total accounts
 
payable were payable to suppliers
 
who utilize
these third-party services.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12
(7) Debt
The components of notes payable were as follows:
 
 
In Millions
Aug. 28, 2022
May 29, 2022
U.S. commercial paper
$
839.8
$
694.8
Financial institutions
152.1
116.6
Total
$
991.9
$
811.4
To ensure availability
 
of funds, we maintain bank credit lines and have commercial paper programs
 
available to us in the United States
and Europe. We also
 
have committed and asset-backed credit lines that support our foreign
 
operations.
The following table details the fee-paid committed and uncommitted credit
 
lines we had available as of August 28, 2022:
 
In Billions
Facility
 
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
0.2
Total committed
 
and uncommitted credit facilities
$
3.3
$
0.2
The
 
credit
 
facilities
 
contain
 
covenants,
 
including
 
a
 
requirement
 
to
 
maintain
 
a
 
fixed
 
charge
 
coverage
 
ratio
 
of
 
at
 
least
2.5
 
times.
We
were in compliance with all credit facility covenants as of August 28, 2022.
Long-Term
 
Debt
 
The fair values
 
and carrying
 
amounts of long-term
 
debt, including
 
the current portion,
 
were $
10,129.1
 
million and $
10,570.0
 
million,
respectively,
 
as
 
of
 
August
 
28,
 
2022.
 
The
 
fair
 
value
 
of
 
long-term
 
debt
 
was
 
estimated
 
using
 
market
 
quotations
 
and
 
discounted
 
cash
flows based
 
on our
 
current incremental
 
borrowing rates
 
for similar
 
types of
 
instruments. Long
 
-term debt
 
is a
 
Level 2
 
liability in
 
the
fair value hierarchy.
 
In
 
the fourth
 
quarter
 
of fiscal
 
2022,
 
we repaid
 
$
850.0
 
million
 
of
3.7
 
percent
 
fixed
 
rate notes
 
due
October 17, 2023
, using
 
proceeds
from the issuance of commercial paper.
In the fourth quarter of fiscal 2022, we issued €
250.0
 
million of
0.0
 
percent fixed-rate notes due
November 11, 2022
. We used the net
proceeds for general corporate purposes.
In the second quarter of fiscal 2022, we issued €
500.0
 
million of
0.125
 
percent fixed-rate notes due
November 15, 2025
. We used the
net proceeds to repay a portion of our €
500.0
 
million of
0.0
 
percent fixed-rate notes due
November 16, 2021
, and for general corporate
purposes.
In the second quarter of fiscal 2022, we issued €
250.0
 
million of floating-rate notes due
May 16, 2023
. We used the net proceeds
 
to
repay a portion of our outstanding commercial paper and for general
 
corporate purposes.
In the second quarter of fiscal 2022, we issued $
500.0
 
million of
2.25
 
percent notes due
October 14, 2031
. We used the net proceeds
together with proceeds from the issuance of commercial paper,
 
to repay $
1,000.0
 
million of
3.15
 
percent fixed-rate notes due
December 15, 2021
.
In the first quarter of fiscal 2022, we issued €
500.0
 
million of floating-rate notes due
July 27, 2023
. We used the net proceeds to
 
repay
500.0
 
million of
0.0
 
percent fixed-rate notes due
August 21, 2021
.
In the first quarter of fiscal 2022, we repaid €
200.0
 
million of
2.2
 
percent fixed-rate notes due
June 24, 2021
, using proceeds from the
issuance of €
50.0
 
million of
2.2
 
percent fixed-rate notes due
November 29, 2021
, and borrowings under a committed credit facility.
Certain
 
of
 
our
 
long-term
 
debt
 
agreements
 
contain
 
restrictive
 
covenants.
As of August 28, 2022, we were in compliance with all of
these covenants.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
(8) Redeemable and Noncontrolling Interests
The
 
third-party
 
holder
 
of
 
the
 
General
 
Mills
 
Cereals,
 
LLC
 
(GMC)
 
Class A
 
Interests
 
receives
 
quarterly
 
preferred
 
distributions
 
from
available net
 
income based
 
on the application
 
of a
 
floating preferred
 
return rate
 
to the
 
holder’s capital
 
account balance
 
established in
the
 
most
 
recent
 
mark-to-market
 
valuation
 
(currently
 
$
251.5
 
million).
 
On
 
June 1,
 
2021,
 
the
 
floating
 
preferred
 
return
 
rate
 
on
 
GMC’s
Class A Interests
 
was reset
 
to the
 
sum of
three-month LIBOR
 
plus
160
 
basis points.
 
The preferred
 
return rate
 
is adjusted
 
every
three
years
 
through a negotiated agreement with the Class A Interest holder or through
 
a remarketing auction.
During
 
the
 
third
 
quarter
 
of
 
fiscal
 
2022,
 
we
 
completed
 
the
 
sale
 
of
 
our
 
interests
 
in
 
Yoplait
 
SAS,
 
Yoplait
 
Marques
 
SNC
 
and
 
Liberté
Marques
 
Sàrl
 
to
 
Sodiaal
 
International
 
(Sodiaal)
 
in
 
exchange
 
for
 
Sodiaal’s
 
interest
 
in
 
our
 
Canadian
 
yogurt
 
business,
 
a
 
modified
agreement for the use of
Yoplait
 
and
Liberté
brands in the United States and Canada, and cash.
 
Up to
 
the date
 
of the
 
divestiture, Sodiaal
 
held the remaining
 
interests in
 
each of
 
the entities.
 
On the
 
acquisition date,
 
we recorded
 
the
fair
 
value
 
of
 
Sodiaal’s
49
 
percent
 
euro-denominated
 
interest
 
in
 
Yoplait
 
SAS
 
as
 
a
 
redeemable
 
interest
 
on
 
our
 
Consolidated
 
Balance
Sheets. Sodiaal had
 
the right to
 
put all or
 
a portion of
 
its redeemable interest
 
to us at
 
fair value until
 
the divestiture closed
 
in the third
quarter of
 
fiscal 2022.
 
In connection
 
with the
 
divestiture, cumulative
 
adjustments made
 
to the
 
redeemable
 
interest related
 
to the
 
fair
value put feature were
 
reversed against additional paid-in
 
capital, where changes in the
 
redemption amount were historically recorded,
and the resulting carrying value of the noncontrolling interests were included in
 
the calculation of the gain on divestiture.
A subsidiary of
 
Yoplait
 
SAS had an exclusive
 
milk supply agreement
 
for its European operations
 
with Sodiaal through
 
November 28,
2021. Net purchases totaled $
50.1
 
million for the quarter ended August 29, 2021.
Our noncontrolling interests contain restrictive covenants. As of August 28, 2022, we were in compliance with all of these covenants.
(9) Stockholders’ Equity
 
The following tables provide details of total comprehensive income:
Quarter Ended
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
General Mills
Noncontrolling
Interests
 
General Mills
Noncontrolling
Interests
Redeemable
Interest
In Millions
Pretax
Tax
Net
Net
Pretax
Tax
Net
Net
Net
Net earnings, including earnings
 
 
attributable to redeemable and
 
 
noncontrolling interests
 
$
820.0
$
3.3
$
627.0
$
3.0
$
8.2
Other comprehensive (loss) income:
Foreign currency translation
$
(48.0)
$
53.1
5.1
(1.3)
$
(11.9)
$
22.7
10.8
(11.2)
(23.5)
Other fair value changes:
Hedge derivatives
(49.8)
11.5
(38.3)
-
2.8
(1.0)
1.8
-
(0.1)
Reclassification to earnings:
Foreign currency translation (a)
(7.4)
-
(7.4)
-
-
-
-
-
-
Hedge derivatives (b)
(1.9)
0.5
(1.4)
-
12.0
(1.5)
10.5
-
0.1
Amortization of losses and
 
prior service costs (c)
18.2
(4.1)
14.1
-
10.8
(2.4)
8.4
-
-
Other comprehensive (loss) income
$
(88.9)
$
61.0
(27.9)
(1.3)
$
13.7
$
17.8
31.5
(11.2)
(23.5)
Total comprehensive income (loss)
$
792.1
$
2.0
$
$
658.5
$
(8.2)
$
(15.3)
(a)
 
Gain reclassified from AOCI into earnings is reported in the divestitures gain, net.
(b)
 
(Gain) loss reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.
(c)
 
Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.
Accumulated other comprehensive loss balances, net of tax effects,
 
were as follows:
 
In Millions
Aug. 28, 2022
May 29, 2022
Foreign currency translation adjustments
$
(593.0)
$
(590.7)
Unrealized (loss) gain from hedge derivatives
(16.4)
23.3
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,495.2)
(1,513.4)
Prior service credits
106.2
110.3
Accumulated other comprehensive loss
$
(1,998.4)
$
(1,970.5)
(10) Stock Plans
We
 
have various
 
stock-based compensation
 
programs under
 
which awards,
 
including stock
 
options, restricted
 
stock, restricted
 
stock
units, and performance
 
awards, may be granted
 
to employees and non-employee
 
directors. These programs
 
and related accounting
 
are
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14
described in Note
 
12 to the
 
Consolidated Financial
 
Statements included
 
in our Annual
 
Report on Form
 
10-K for the
 
fiscal year ended
May 29, 2022.
Compensation expense related to stock-based payments recognized
 
in the Consolidated Statements of Earnings was as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Compensation expense related to stock-based payments
$
33.5
$
33.6
Windfall tax benefits from stock-based payments
 
in income tax expense in our Consolidated Statements of Earnings were as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Windfall tax benefits from stock-based payments
$
12.8
$
4.7
As
 
of
 
August
 
28,
 
2022,
 
unrecognized
 
compensation
 
expense
 
related
 
to
 
non-vested
 
stock
 
options,
 
restricted
 
stock
 
units,
 
and
performance share units was $
166.8
 
million. This expense will be recognized over
26
 
months, on average.
Net cash proceeds from the exercise of stock options
 
less shares used for withholding taxes and the intrinsic
 
value of options exercised
were as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net cash proceeds
$
65.5
$
7.9
Intrinsic value of options exercised
$
32.0
$
5.1
We estimate the fair value of each stock option on the grant date using a Black-Scholes option-pricing model. Black-Scholes option-
pricing models require us to make predictive assumptions regarding future stock price volatility, employee exercise behavior, and
dividend yield. We estimate our future stock price volatility using the historical volatility over the expected term of the option,
excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. We
also have considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially
those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility. Our method of selecting
the other valuation assumptions is explained in Note 12 to the Consolidated Financial Statements included in our Annual Report on
Form 10-K for the fiscal year ended May 29, 2022.
The
 
estimated
 
fair
 
values
 
of
 
stock
 
options
 
granted
 
and
 
the
 
assumptions
 
used
 
for
 
the
 
Black-Scholes
 
option-pricing
 
model
 
were
 
as
follows:
Quarter Ended
Aug. 28, 2022
Aug. 29, 2021
Estimated fair values of stock options granted
 
$
14.16
$
8.77
Assumptions:
Risk-free interest rate
3.3
%
1.5
%
Expected term
8.5
years
8.5
years
Expected volatility
20.9
%
20.2
%
Dividend yield
3.1
%
3.4
%
The total grant date fair value of restricted stock unit awards that vested during
 
the period was as follows:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Total grant date fair
 
value
$
82.0
$
69.5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
 
Quarter Ended
In Millions, Except per Share Data
Aug. 28, 2022
Aug. 29, 2021
Net earnings attributable to General Mills
$
820.0
$
627.0
Average number
 
of common shares - basic EPS
600.2
610.4
Incremental share effect from: (a)
Stock options
3.3
2.1
Restricted stock units and performance share units
2.5
2.3
Average number
 
of common shares - diluted EPS
606.0
614.8
Earnings per share – basic
$
1.37
$
1.03
Earnings per share – diluted
$
1.35
$
1.02
(a)
 
Incremental
 
shares
 
from
 
stock
 
options,
 
restricted
 
stock
 
units,
 
and
 
performance
 
share
 
units
 
are
 
computed
 
by
 
the
 
treasury
 
stock
method.
 
Stock
 
options,
 
restricted
 
stock
 
units,
 
and
 
performance
 
share units
 
excluded
 
from
 
our
 
computation
 
of
 
diluted
 
EPS
 
because
 
they
were not dilutive were as follows
:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Anti-dilutive stock options, restricted stock units, and
 
performance share units
 
0.8
4.6
(12) Share Repurchases
Share repurchases were as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Shares of common stock
6.9
2.5
Aggregate purchase price
$
500.8
$
150.1
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net cash interest payments
$
55.2
$
69.9
Net income tax payments
$
9.0
$
33.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16
(14) Retirement and Postemployment Benefits
Components of net periodic benefit expense (income) are as follows:
 
Defined Benefit
Pension Plans
Other Postretirement
 
Benefit Plans
Postemployment
Benefit Plans
Quarter Ended
Quarter Ended
Quarter Ended
In Millions
Aug. 28,
2022
Aug. 29,
2021
Aug. 28,
2022
Aug. 29,
2021
Aug. 28,
2022
Aug. 29,
2021
Service cost
$
17.6
$
23.7
$
1.4
$
1.9
$
2.1
$
1.8
Interest cost
64.6
46.3
4.5
3.2
0.8
0.4
Expected return on plan assets
(105.0)
(102.8)
(7.8)
(6.7)
-
-
Amortization of losses (gains)
28.3
34.9
(4.9)
(2.7)
0.1
0.8
Amortization of prior service costs (credits)
0.4
0.2
(5.8)
(5.2)
0.1
0.1
Other adjustments
-
-
-
-
3.0
1.9
Curtailment gain
-
(14.8)
-
(5.5)
-
-
Net expense (income)
$
5.9
$
(12.5)
$
(12.6)
$
(15.0)
$
6.1
$
5.0
(15) Income Taxes
During
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023,
 
the
 
Inflation
 
Reduction
 
Act
 
(IRA)
 
was
 
signed
 
into
 
law.
 
The
 
IRA
 
introduces
 
a
 
Corporate
Alternative Minimum Tax
 
beginning in our fiscal 2024
 
and an excise tax on the
 
repurchase of corporate
 
stock starting after January
 
1,
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 August 28, 2022, we are unable to estimate
any possible loss and have not recorded a loss contingency for this matter.
(17) Business Segment and Geographic Information
We
 
operate
 
in
 
the
 
packaged
 
foods
 
industry.
 
In
 
fiscal
 
2022,
 
we
 
completed
 
a
 
new
 
organization
 
structure
 
to
 
streamline
 
our
 
global
operations.
 
This
 
global
 
reorganization
 
required
 
us
 
to
 
reevaluate
 
our
 
operating
 
segments.
 
Under
 
our
 
new
 
organization
 
structure,
 
our
chief operating decision maker assesses performance
 
and makes decisions about resources to be allocated to
 
our operating segments as
follows: North America Retail; International; Pet; and North America
 
Foodservice.
 
We
 
have restated
 
our net
 
sales by segment
 
and segment
 
operating profit
 
to reflect our
 
previously reported
 
operating segment
 
change.
These
 
segment
 
changes
 
had
 
no
 
effect
 
on
 
previously
 
reported
 
consolidated
 
net
 
sales,
 
operating
 
profit,
 
net
 
earnings
 
attributable
 
to
General Mills, or earnings per share.
 
Our North America Retail
 
operating segment reflects business
 
with a wide variety of
 
grocery stores, mass merchandisers, membership
stores,
 
natural
 
food
 
chains,
 
drug,
 
dollar
 
and
 
discount
 
chains,
 
convenience
 
stores,
 
and
 
e-commerce
 
grocery
 
providers.
 
Our
 
product
categories
 
in
 
this
 
business
 
segment
 
include
 
ready-to-eat
 
cereals,
 
refrigerated
 
yogurt,
 
soup,
 
meal
 
kits,
 
refrigerated
 
and
 
frozen
 
dough
products,
 
dessert
 
and
 
baking
 
mixes,
 
frozen
 
pizza
 
and
 
pizza
 
snacks,
 
snack
 
bars,
 
fruit
 
snacks,
 
savory
 
snacks,
 
and
 
a
 
wide
 
variety
 
of
organic products
 
including ready-to-eat
 
cereal, frozen
 
and shelf-stable vegetables,
 
meal kits, fruit
 
snacks, snack
 
bars, and
 
refrigerated
yogurt.
Our
 
International
 
operating
 
segment
 
consists
 
of
 
retail
 
and
 
foodservice
 
businesses
 
outside
 
of
 
the
 
United
 
States
 
and
 
Canada.
 
Our
product categories include super-premium
 
ice cream and frozen desserts, meal kits, salty snacks,
 
snack bars, dessert and baking mixes,
and
 
shelf
 
stable
 
vegetables.
 
We
 
also
 
sell
 
super-premium
 
ice
 
cream
 
and
 
frozen
 
desserts
 
directly
 
to
 
consumers
 
through
 
owned
 
retail
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17
shops. Our
 
International segment
 
also includes
 
products manufactured
 
in the United
 
States for
 
export, mainly
 
to Caribbean
 
and Latin
American markets, as well as
 
products we manufacture
 
for sale to our international
 
joint ventures. Revenues from
 
export activities are
reported in the region or country where the end customer is located.
Our Pet operating segment includes
 
pet food products sold primarily in the
 
United States and Canada in national
 
pet superstore chains,
e-commerce retailers,
 
grocery stores,
 
regional pet
 
store chains,
 
mass merchandisers,
 
and veterinary
 
clinics and
 
hospitals. Our
 
product
categories include dog and cat food (dry
 
foods, wet foods, and treats) made with
 
whole meats, fruits, vegetables and other
 
high-quality
natural
 
ingredients.
 
Our
 
tailored
 
pet
 
product
 
offerings
 
address
 
specific
 
dietary,
 
lifestyle,
 
and
 
life-stage
 
needs
 
and
 
span
 
different
product types, diet types, breed sizes for dogs, lifestages, flavors, product
 
functions,
 
and textures and cuts for wet foods.
Our
 
North
 
America
 
Foodservice
 
segment
 
consists
 
of
 
foodservice
 
businesses
 
in
 
the
 
United
 
States
 
and
 
Canada.
 
Our
 
major
 
product
categories
 
in
 
our
 
North
 
America
 
Foodservice
 
operating
 
segment
 
are
 
ready-to-eat
 
cereals,
 
snacks,
 
refrigerated
 
yogurt,
 
frozen
 
meals,
unbaked and
 
fully baked
 
frozen dough products,
 
baking mixes,
 
and bakery
 
flour.
 
Many products
 
we sell are
 
branded to the
 
consumer
and nearly
 
all are
 
branded to
 
our customers.
 
We
 
sell to
 
distributors and
 
operators in
 
many customer
 
channels including
 
foodservice,
vending, and supermarket bakeries.
Operating profit
 
for these
 
segments excludes
 
unallocated corporate
 
items, gain
 
or loss
 
on divestitures,
 
and restructuring,
 
impairment,
and
 
other
 
exit
 
costs.
 
Unallocated
 
corporate
 
items
 
include
 
corporate
 
overhead
 
expenses,
 
variances
 
to
 
planned
 
North
 
American
employee
 
benefits
 
and
 
incentives,
 
certain
 
charitable
 
contributions,
 
restructuring
 
initiative
 
project-related
 
costs,
 
gains
 
and
 
losses
 
on
corporate investments,
 
and other
 
items that
 
are not
 
part of
 
our measurement
 
of segment
 
operating performance.
 
These include
 
gains
and
 
losses
 
arising
 
from
 
the
 
revaluation
 
of
 
certain
 
grain
 
inventories
 
and
 
gains
 
and
 
losses
 
from
 
mark-to-market
 
valuation
 
of
 
certain
commodity positions
 
until passed back
 
to our operating
 
segments. These items
 
affecting operating
 
profit are centrally
 
managed at
 
the
corporate
 
level
 
and
 
are
 
excluded
 
from
 
the
 
measure
 
of
 
segment
 
profitability
 
reviewed
 
by
 
executive
 
management.
 
Under
 
our
 
supply
chain organization, our manufacturing,
 
warehouse, and distribution activities are substantially integrated
 
across our operations in order
to maximize
 
efficiency
 
and productivity.
 
As a
 
result, fixed
 
assets and
 
depreciation and
 
amortization expenses
 
are neither
 
maintained
nor available by operating segment.
Our operating segment results were as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net sales:
North America Retail
$
2,988.8
$
2,710.6
International
652.5
930.6
Pet
579.9
488.0
North America Foodservice
496.4
410.7
Total
$
4,717.6
$
4,539.9
Operating profit:
North America Retail
$
777.8
$
648.6
International
34.8
60.6
Pet
123.1
115.2
North America Foodservice
53.6
71.8
Total segment operating
 
profit
$
989.3
$
896.2
Unallocated corporate items
333.0
56.2
Divestitures gain, net
(430.9)
-
Restructuring, impairment, and other exit costs (recoveries)
1.6
(4.3)
Operating profit
$
1,085.6
$
844.3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18
Net sales for our North America Retail operating units were as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
U.S. Meals & Baking Solutions
$
949.2
$
861.5
U.S. Morning Foods
904.0
829.7
U.S. Snacks
887.2
780.1
Canada
248.4
239.3
Total
$
2,988.8
$
2,710.6
Net sales by class of similar products were as follows:
 
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Snacks
$
1,068.4
$
954.5
Cereal
814.7
731.0
Convenient meals
679.2
695.5
Pet
580.8
488.0
Baking mixes and ingredients
473.5
396.3
Dough
464.8
405.2
Yogurt
346.0
505.9
Super-premium ice cream
183.5
244.8
Other
106.7
118.7
Total
$
4,717.6
$
4,539.9
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19
Item 2.
 
Management’s Discussion and Analysis
 
of Financial Condition and Results of Operations.
INTRODUCTION
This
 
Management’s
 
Discussion
 
and
 
Analysis
 
of
 
Financial
 
Condition
 
and
 
Results
 
of
 
Operations
 
(MD&A)
 
should
 
be
 
read
 
in
conjunction
 
with
 
the
 
MD&A
 
included
 
in
 
our
 
Annual
 
Report
 
on
 
Form
 
10-K
 
for
 
the
 
fiscal
 
year
 
ended
 
May
 
29,
 
2022
 
for
 
important
background
 
regarding,
 
among other
 
things, our
 
key business
 
drivers.
 
Significant
 
trademarks and
 
service marks
 
used in
 
our business
are set forth in
italics
herein. Certain terms used throughout this report are defined in the
 
“Glossary” section below.
We expect
 
the largest factors impacting our
 
performance in fiscal 2023 will be
 
the economic health of consumers, the
 
inflationary cost
environment, and the frequency and
 
severity of disruptions in the supply
 
chain. We
 
anticipate double-digit input cost inflation
 
in fiscal
2023
 
and
 
are
 
addressing
 
inflation
 
headwinds
 
with
 
Holistic
 
Margin
 
Management
 
(HMM)
 
cost
 
savings
 
and
 
net
 
price
 
realization
generated
 
through
 
our
 
Strategic
 
Revenue
 
Management
 
(SRM)
 
capability.
 
We
 
are
 
planning
 
for
 
volume
 
elasticities
 
to
 
increase
 
but
remain below historical levels and supply chain disruptions to slowly moderate
 
in fiscal 2023 compared to fiscal 2022 levels.
CONSOLIDATED
 
RESULTS
 
OF OPERATIONS
First Quarter Results
In the first quarter of fiscal
 
2023, net sales increased 4
 
percent and organic net sales
 
increased 10 percent compared
 
to the same period
last year.
 
Operating profit increased 29 percent to $1,086
 
million, primarily driven by favorable
 
net price realization and mix and
 
a net
gain
 
on
 
divestitures,
 
partially
 
offset
 
by
 
higher
 
input
 
costs,
 
an
 
unfavorable
 
change
 
to
 
the
 
mark-to-market
 
valuation
 
of
 
certain
commodity
 
positions
 
and
 
grain
 
inventories,
 
volume
 
declines,
 
an
 
increase
 
in
 
certain
 
selling,
 
general
 
and
 
administrative
 
(SG&A)
expenses,
 
and
 
lower
 
net
 
corporate
 
investment
 
activity.
 
Operating
 
profit
 
margin
 
of
 
23
 
percent
 
increased
 
440
 
basis
 
points.
 
Adjusted
operating profit
 
of $881
 
million increased
 
8 percent
 
on a
 
constant-currency basis,
 
primarily driven
 
by favorable
 
net price
 
realization
and mix,
 
partially offset
 
by higher
 
input costs, volume
 
declines and
 
an increase in
 
certain SG&A expenses.
 
Adjusted operating
 
profit
margin increased
 
70 basis points
 
to 18.7 percent.
 
Diluted earnings
 
per share of
 
$1.35 increased 32
 
percent in the
 
first quarter of
 
fiscal
2023.
 
Adjusted diluted
 
earnings per
 
share of
 
$1.11
 
increased 13 percent
 
on a
 
constant-currency basis
 
compared to
 
the first
 
quarter of
fiscal 2022. See the “Non-GAAP Measures” section below for a description
 
of our use of measures not defined by GAAP.
A summary of our consolidated financial results for the first quarter of
 
fiscal 2023 follows:
 
Quarter Ended Aug. 28, 2022
In millions,
except per share
Quarter Ended
Aug. 28, 2022 vs.
Aug. 29, 2021
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
 
$
4,717.6
4
%
Operating profit
1,085.6
29
%
23.0
%
Net earnings attributable to General Mills
820.0
31
%
Diluted earnings per share
$
1.35
32
%
Organic net sales growth rate (a)
10
%
Adjusted operating profit (a)
881.2
8
%
18.7
%
8
%
Adjusted diluted earnings per share (a)
$
1.11
12
%
13
%
(a)
 
See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
Consolidated
net sales
 
were as follows:
 
Quarter Ended
Aug. 28, 2022
Aug. 28, 2022 vs.
 
Aug. 29, 2021
Aug. 29, 2021
Net sales (in millions)
$
4,717.6
4%
$
4,539.9
Contributions from volume growth (a)
(12)
pts
Net price realization and mix
17
pts
Foreign currency exchange
(1)
pt
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
Net sales
 
in the
 
first quarter
 
of fiscal
 
2023
 
increased 4
 
percent compared
 
to the
 
same period
 
in fiscal
 
2022,
 
driven by
 
favorable
 
net
price
 
realization
 
and
 
mix,
 
partially
 
offset
 
by
 
a
 
decrease
 
in
 
contributions
 
from
 
volume
 
growth
 
and
 
unfavorable
 
foreign
 
currency
exchange.
 
 
 
 
 
 
 
 
 
 
 
 
20
Components of organic net sales growth are shown in the following
 
table:
 
 
Quarter Ended Aug. 28, 2022 vs.
Quarter Ended Aug. 29, 2021
Contributions from organic volume growth (a)
(5)
pts
Organic net price realization and mix
15
pts
Organic net sales growth
10
pts
Foreign currency exchange
(1)
pt
Acquisitions and divestitures
(5)
pts
Net sales growth
4
pts
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
Organic
 
net
 
sales
 
increased
 
10
 
percent
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
compared
 
to
 
the
 
same
 
period
 
in
 
fiscal
 
2022,
 
as
 
favorable
organic net price realization and mix was partially offset
 
by a decrease in contributions from organic volume growth.
Cost of
 
sales
increased $328 million
 
to $3,270
 
million in
 
the first
 
quarter of
 
fiscal 2023
 
compared to
 
the same
 
period in
 
fiscal 2022.
The increase
 
was primarily
 
driven by
 
a $451 million
 
increase attributable
 
to product
 
rate and
 
mix partially
 
offset
 
by a
 
$343 million
decrease attributable to lower volume. We
 
recorded a $175 million net increase in cost of
 
sales related to the mark-to-market valuation
of certain
 
commodity positions
 
and grain
 
inventories in
 
the first
 
quarter of
 
fiscal 2023
 
compared to
 
a $24
 
million net
 
decrease in
 
the
first quarter of
 
fiscal 2022. In the
 
first quarter of
 
fiscal 2023, we recorded
 
a $21 million
 
charge related
 
to a voluntary
 
recall on certain
international
Häagen-Dazs
 
ice cream products.
SG&A expenses
increased $34 million
 
to $791 million in
 
the first quarter
 
of fiscal 2023,
 
compared to the
 
same period in
 
fiscal 2022,
primarily driven by valuation adjustments
 
and the loss on sale of
 
certain corporate investments in fiscal
 
2023 and a recovery related
 
to
a Brazil indirect
 
tax item in
 
fiscal 2022. SG&A
 
expenses as a
 
percent of net
 
sales in the
 
first quarter of
 
fiscal 2023 increased
 
10 basis
points compared to the first quarter of fiscal 2022.
Divestitures
 
gain, net
 
totaled $431
 
million in
 
the first
 
quarter of
 
fiscal 2023,
 
primarily related
 
to the
 
sale of
 
our Helper
 
main meals
and
 
Suddenly
 
Salad
 
side
 
dishes
 
business
 
(please
 
refer
 
to
 
Note
 
2
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
in
 
Part
 
I,
 
Item
 
1
 
of
 
this
report).
 
Restructuring,
 
impairment,
 
and
 
other
 
exit
 
costs
 
(recoveries)
totaled
 
$2
 
million
 
of
 
expenses
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023,
compared to a
 
net recovery of $4
 
million in the
 
same period last year
 
(please refer to
 
Note 3 to the
 
Consolidated Financial Statements
in Part I, Item 1 of this report).
Benefit plan
 
non-service income
totaled $22 million
 
in the
 
first quarter
 
of fiscal
 
2023, compare
 
d
 
to $30 million
 
in the
 
same period
last year, primarily reflecting an increase
 
in interest costs, partially offset by lower amortization of losses.
 
Interest,
 
net
for
 
the first
 
quarter of
 
fiscal 2023
 
totaled $88 million,
 
down $8 million
 
from the
 
first quarter
 
of fiscal
 
2022,
 
primarily
driven by lower average long-term debt levels.
The
effective tax rate
 
for the first quarter of fiscal
 
2023 was 21.2 percent compared
 
to 21.7 percent for the first
 
quarter of fiscal 2022.
The
 
0.5
 
percentage
 
point
 
decrease
 
was
 
primarily
 
due
 
to
 
certain
 
nonrecurring
 
discrete
 
tax
 
benefits,
 
partially
 
offset
 
by
 
certain
unfavorable tax components
 
related to the
 
divestitures
 
in the first quarter
 
of fiscal 2023. Our
 
effective tax
 
rate excluding certain
 
items
affecting comparability
 
was 19.7 percent
 
in the first
 
quarter of fiscal
 
2023, compared
 
to 21.7 percent
 
in the same
 
period last year
 
(see
the “Non-GAAP
 
Measures” section
 
below for
 
a description
 
of our
 
use of
 
measures not
 
defined by
 
GAAP). The
 
2.0 percentage
 
point
decrease was primarily due to certain nonrecurring discrete tax benefits
 
in the first quarter of fiscal 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
After-tax earnings
 
from
 
joint ventures
 
for the
 
first quarter
 
of fiscal
 
2023
decreased to
 
$20 million compared
 
to $29 million
 
in the
same period
 
in fiscal 2022,
 
primarily driven
 
by higher
 
input costs at
 
Cereal Partners Worldwide
 
(CPW) and Häagen
 
-Dazs Japan, Inc.
(HDJ), partially
 
offset
 
by positive
 
net price
 
realization and
 
mix at
 
CPW.
 
On a
 
constant-currency
 
basis, after-tax
 
earnings from
 
joint
ventures decreased
 
27 percent (see
 
the “Non-GAAP
 
Measures” section
 
below for
 
a description of
 
our use of
 
measures not defined
 
by
GAAP).
 
The components of our joint ventures’ net sales growth are shown in the following
 
table:
 
Quarter Ended Aug. 28, 2022 vs.
Quarter Ended Aug. 29, 2021
CPW
HDJ
Total
Contributions from volume growth (a)
(5)
pts
(8)
pts
Net price realization and mix
8
pts
Flat
Net sales growth in constant currency
3
pts
(8)
pts
1
pt
Foreign currency exchange
(11)
pts
(17)
pts
(12)
pts
Net sales growth
(7)
pts
(25)
pts
(11)
pts
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
Average
 
diluted
 
shares
 
outstanding
decreased
 
by
 
9
 
million
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
from
 
the
 
same
 
period
 
a
 
year
 
ago
primarily due to share repurchases.
 
SEGMENT OPERATING
 
RESULTS
Our businesses are
 
organized into four
 
operating segments: North
 
America Retail; International;
 
Pet, and North
 
America Foodservice.
Please
 
refer
 
to
 
Note
 
17
 
of
 
the
 
Consolidated
 
Financial
 
Statements
 
in
 
Part
 
I,
 
Item
 
1
 
of
 
this
 
report
 
for
 
a
 
description
 
of
 
our
 
operating
segments.
North America Retail Segment Results
North America Retail net sales were as follows:
 
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
2,988.8
10
%
$
2,710.6
Contributions from volume growth (a)
(6)
pts
Net price realization and mix
16
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
North
 
America
 
Retail
 
net
 
sales increased
 
10
 
percent
 
in
 
the first
 
quarter
 
of
 
fiscal
 
2023 compared
 
to
 
the
 
same
 
period
 
in
 
fiscal
 
2022,
driven by favorable net price realization and mix, partially offset
 
by a decrease in contributions from volume growth.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22
The components of North America Retail organic net
 
sales growth are shown in the following table:
 
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(5)
pts
Organic net price realization and mix
17
pts
Organic net sales growth
12
pts
Foreign currency exchange
Flat
Divestiture (b)
(1)
pt
Net sales growth
10
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Divestiture of Helper main meals and Suddenly Salad side dishes businesses in fiscal 2023. Please see Note 2 to the Consolidated Financial
 
 
Statements in Part I, Item 1 of this report.
North America
 
Retail organic
 
net sales
 
increased 12
 
percent in
 
the first
 
quarter of
 
fiscal 2023
 
compared to
 
the same
 
period in
 
fiscal
2022,
 
driven by
 
favorable organic
 
net price
 
realization and
 
mix,
 
partially offset
 
by a
 
decrease in
 
contributions from
 
organic
 
volume
growth.
North America Retail net sales percentage change by operating unit are shown
 
in the following table:
 
Quarter Ended
Aug. 28, 2022
U.S. Snacks
14
%
U.S. Meals & Baking Solutions
10
%
U.S. Morning Foods
9
%
Canada (a)
4
%
Total
10
%
(a)
 
On a constant-currency basis, Canada net sales increased 7 percent in the first quarter of fiscal 2023, compared to the same period in fiscal 2022.
See the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP.
Segment operating profit
 
increased 20 percent
 
to $778 million in
 
the first quarter
 
of fiscal 2023
 
compared to $649 million
 
in the same
period in fiscal
 
2022, primarily driven
 
by favorable net
 
price realization
 
and mix, partially
 
offset by higher
 
input costs and
 
a decrease
in contributions from volume growth. Segment
 
operating profit increased 20 percent on a constant-currency
 
basis in the first quarter of
fiscal 2023 compared
 
to the same period
 
in fiscal 2022 (see
 
the “Non-GAAP Measures”
 
section below for
 
our use of this
 
measure not
defined by GAAP).
International Segment Results
International net sales were as follows:
 
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
652.5
(30)
%
$
930.6
Contributions from volume growth (a)
(39)
pts
Net price realization and mix
14
pts
Foreign currency exchange
(5)
pts
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
International net
 
sales decreased 30
 
percent in the
 
first quarter of
 
fiscal 2023
 
compared to the
 
same period
 
in fiscal 2022,
 
driven by
 
a
decrease in
 
contributions from
 
volume growth,
 
including the
 
impact of
 
volume declines
 
from divestitures
 
and the
 
voluntary recall
 
on
certain
 
international
Häagen-Dazs
 
ice
 
cream
 
products,
 
and
 
unfavorable
 
foreign
 
currency
 
exchange,
 
partially
 
offset
 
by favorable
 
net
price realization and mix.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23
The components of International organic net sales growth
 
are shown in the following table:
 
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(7)
pts
Organic net price realization and mix
5
pts
Organic net sales growth
(2)
pts
Foreign currency exchange
(5)
pts
Divestitures (b)
(23)
pts
Net sales growth
(30)
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Divestitures primarily include the impact of the sale of our interests in Yoplait SAS, Yoplait
 
Marques SNC, and Liberté Marques Sàrl and our
 
 
European dough businesses in fiscal 2022.
International organic net sales decreased
 
2 percent in the first quarter of fiscal 2023
 
compared to the same period in fiscal 2022, driven
by a decrease
 
in contributions from
 
organic volume
 
growth, including
 
the impact of
 
the ice cream
 
recall, partially
 
offset by
 
favorable
organic net price realization and mix.
Segment operating profit
 
decreased 43 percent
 
to $35 million in the
 
first quarter of
 
fiscal 2023 from $61
 
million in the same
 
period in
fiscal
 
2022,
 
primarily
 
driven
 
by
 
a
 
decrease
 
in
 
contributions
 
from
 
volume
 
growth,
 
including
 
the
 
impact
 
of
 
volume
 
declines
 
from
divestitures and
 
the ice
 
cream recall,
 
and higher
 
input costs,
 
partially offset
 
by favorable net
 
price realization
 
and mix and
 
a decrease
in
 
SG&A
 
expenses.
 
Segment
 
operating
 
profit
 
decreased
 
34
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
compared to the
 
same period in
 
fiscal 2022 (see
 
the “Non-GAAP Measures”
 
section below for
 
our use of
 
this measure not
 
defined by
GAAP).
Pet Segment Results
Pet net sales were as follows:
 
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
579.9
19
%
$
488.0
Contributions from volume growth (a)
(1)
pt
Net price realization and mix
20
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
Pet
 
net
 
sales
 
increased
 
19
 
percent
 
during
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
compared
 
to
 
the
 
same
 
period
 
in
 
fiscal
 
2022,
 
driven
 
by
favorable net price realization and mix, partially offset
 
by a decrease in contributions from volume growth.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
The components of Pet organic net sales growth are shown in the following
 
table:
 
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
17
pts
Organic net sales growth
14
pts
Foreign currency exchange
Flat
Acquisition (b)
5
pts
Net sales growth
19
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Acquisition of Tyson Foods’ pet treats business in fiscal 2022. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of
 
this report.
Pet
 
organic
 
net
 
sales
 
increased
 
14 percent
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
compared
 
to the
 
same
 
period
 
in
 
fiscal
 
2022,
 
driven
 
by
favorable organic net price realization and mix, partially offset
 
by a decrease in contributions from organic volume growth.
Segment operating
 
profit increased
 
7 percent
 
to $123 million
 
in the
 
first quarter
 
of fiscal
 
2023 compared
 
to $115
 
million in
 
the same
period in fiscal 2022,
 
primarily driven by favorable
 
net price realization and
 
mix, partially offset
 
by higher input costs
 
and an increase
in
 
SG&A
 
expenses.
 
Segment
 
operating
 
profit
 
increased
 
7
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
compared to the
 
same period in
 
fiscal 2022 (see
 
the “Non-GAAP Measures”
 
section below for
 
our use of
 
this measure not
 
defined by
GAAP).
North America Foodservice Segment Results
North America Foodservice net sales were as follows:
 
Quarter Ended
Aug. 28,
2022
Aug. 28, 2022 vs
Aug. 29, 2021
Aug. 29,
2021
Net sales (in millions)
$
496.4
21
%
$
410.7
Contributions from volume growth (a)
(1)
pt
Net price realization and mix
22
pts
Foreign currency exchange
Flat
Note: Table may not foot due to rounding.
(a)
 
Measured in tons based on the stated weight of our product shipments.
North
 
America
 
Foodservice
 
net
 
sales
 
increased
 
21
 
percent
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
compared
 
to
 
the
 
same
 
period
 
in
 
fiscal
2022, driven
 
by favorable net
 
price realization
 
and mix, including
 
market index pricing
 
on bakery flour,
 
partially offset
 
by a decrease
in contributions from volume growth.
The components of North America Foodservice organic
 
net sales growth are shown in the following table:
 
Quarter Ended
Aug. 28, 2022
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
21
pts
Organic net sales growth
18
pts
Foreign currency exchange
Flat
Acquisition (b)
3
pts
Net sales growth
21
pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Acquisition of TNT Crust in fiscal 2023. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
 
 
 
 
 
 
 
 
 
 
 
25
North America
 
Foodservice organic
 
net sales
 
increased 18
 
percent in
 
the first
 
quarter of
 
fiscal 2023
 
compared to
 
the same
 
period in
fiscal 2022, driven
 
by favorable organic
 
net price realization
 
and mix,
 
including market
 
index pricing on
 
bakery flour,
 
partially offset
by a decrease in contributions from organic volume growth.
Segment operating
 
profit decreased
 
25 percent
 
to $54
 
million in
 
the first
 
quarter of
 
fiscal 2023
 
compared to
 
$72 million in
 
the same
period in fiscal
 
2022, primarily driven by
 
higher input costs and
 
an increase in SG&A
 
expenses, partially offset
 
by favorable net price
realization
 
and
 
mix.
 
Segment
 
operating
 
profit
 
decreased
 
25
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
compared to the
 
same period in
 
fiscal 2022 (see
 
the “Non-GAAP Measures”
 
section below for
 
our use of
 
this measure not
 
defined by
GAAP).
UNALLOCATED
 
CORPORATE
 
ITEMS
Unallocated corporate
 
expense totaled
 
$333 million in
 
the first
 
quarter of
 
fiscal 2023,
 
compared to
 
$56 million in
 
the same
 
period in
fiscal
 
2022.
 
In
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023,
 
we
 
recorded
 
a
 
$175 million
 
net
 
increase
 
in
 
expense
 
related
 
to
 
the
 
mark-to-market
valuation of
 
certain commodity
 
positions and
 
grain inventories
 
compared to
 
a $24 million
 
net decrease
 
in expense
 
in the same
 
period
last year.
 
We
 
recorded $26 million
 
of net losses
 
related to valuation
 
adjustments and
 
the loss on
 
sale of certain
 
corporate investments
in
 
the
 
first quarter
 
of fiscal
 
2023,
 
compared
 
to
 
$1 million
 
of
 
net
 
losses related
 
to
 
valuation
 
adjustments
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
2022. In the first quarter of fiscal 2023,
 
we recorded a $22 million charge related to a
 
voluntary recall on certain international
Häagen-
Dazs
 
ice cream products.
 
In addition, we
 
recorded $2 million
 
of integration costs
 
primarily related
 
to our acquisition
 
of TNT Crust
 
in
the
 
first
 
quarter
 
of
 
fiscal
 
2023
 
compared
 
to
 
$12 million
 
of
 
integration
 
costs
 
related
 
to
 
our
 
acquisition
 
of
 
Tyson
 
Foods’
 
pet
 
treats
business
 
in
 
the
 
first
 
quarter of
 
fiscal
 
2022.
 
Also,
 
in the
 
first quarte
 
r
 
of fiscal
 
2022,
 
we recorded
 
a $21
 
million
 
recovery
 
related
 
to
 
a
Brazil
 
indirect
 
tax
 
item,
 
a
 
$13 million
 
insurance
 
recovery and
 
$11 million
 
of
 
transaction
 
costs related
 
to
 
the
 
sale of
 
our
 
interests
 
in
Yoplait
 
SAS, Yoplait
 
Marques SNC, and Liberté Marques Sàrl.
LIQUIDITY
 
AND CAPITAL
 
RESOURCES
During the first quarter of
 
fiscal 2023,
 
cash provided by operations was $389
 
million compared to $370 million in
 
the same period last
year.
 
The $19 million
 
increase was
 
mainly driven
 
by a
 
$185 million
 
increase in
 
net earnings,
 
a $180
 
million change
 
in current
 
assets
and
 
liabilities,
 
and
 
a
 
$94
 
million
 
change
 
in
 
other
 
non-cash
 
items
 
in
 
net
 
earnings,
 
including
 
changes
 
in
 
the
 
valuation
 
of
 
certain
corporate investments.
 
These were
 
partially offset
 
by a
 
$431 million
 
net divestitures
 
gain. The
 
$180 million
 
change in
 
current assets
and liabilities is primarily driven by an $85
 
million change in the timing of accounts payable and
 
a $54 million change in the timing of
accounts receivable.
 
Cash provided by
 
investing activities during the
 
first quarter of fiscal
 
2023 was $266 million
 
compared to cash used
 
of $1,298 million
for the same
 
period in fiscal
 
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
 
$91
 
million
 
on
 
purchases
 
of
 
land,
 
buildings,
 
and
 
equipment
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023
compared to $104 million in the same period last year.
Cash used
 
by financing
 
activities during
 
the first
 
quarter of
 
fiscal 2023
 
was $609 million
 
compared to
 
$195 million of
 
cash provided
by
 
financing
 
activities
 
in
 
the
 
same
 
period
 
in
 
fiscal
 
2022.
 
We
 
paid
 
$325 million
 
of
 
dividends
 
in
 
the
 
first
 
quarter
 
of
 
fiscal
 
2023,
compared to
 
$312 million in
 
the same
 
period last
 
year.
 
We
 
paid $501
 
million for
 
purchases of
 
common stock
 
for treasury
 
in the
 
first
quarter
 
of
 
fiscal
 
2023,
 
compared
 
to
 
$150
 
million
 
in
 
the
 
same
 
period
 
in
 
fiscal
 
2022.
 
In
 
addition,
 
we
 
had
 
$188
 
million
 
of
 
net
 
debt
issuances in the first quarter of fiscal 2023, compared to $669 million in the first quarter
 
of fiscal 2022.
 
As of August
 
28, 2022, we had
 
$533 million of cash
 
and cash equivalents
 
in foreign jurisdictions. In
 
anticipation of repatriating
 
funds
from
 
foreign
 
jurisdictions,
 
we
 
record
 
local
 
country
 
withholding
 
taxes
 
on
 
our
 
international
 
earnings,
 
as
 
applicable.
 
Furthermore,
 
we
may repatriate our
 
cash and cash equivalents
 
held by our
 
foreign subsidiaries without
 
such funds being
 
subject to further
 
U.S. income
tax liability. Earnings prior
 
to fiscal 2018 from our foreign subsidiaries remain permanently reinvested
 
in those jurisdictions.
The following table details the fee-paid committed and uncommitted credit
 
lines we had available as of August 28, 2022:
 
In Billions
Facility
 
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.6
0.2
Total committed
 
and uncommitted credit facilities
$
3.3
$
0.2
 
 
 
 
 
 
 
26
The
 
third-party
 
holder
 
of
 
the
 
General
 
Mills
 
Cereals,
 
LLC
 
(GMC)
 
Class A
 
Interests
 
receives
 
quarterly
 
preferred
 
distributions
 
from
available net
 
income based
 
on the application
 
of a
 
floating preferred
 
return rate
 
to the
 
holder’s capital
 
account balance
 
established in
the
 
most
 
recent
 
mark-to-market
 
valuation
 
(currently
 
$252 million).
 
On
 
June 1,
 
2021,
 
the
 
floating
 
preferred
 
return
 
rate
 
on
 
GMC’s
Class A Interests
 
was reset
 
to the
 
sum of
 
three-month LIBOR
 
plus 160
 
basis points.
 
The preferred
 
return rate
 
is adjusted
 
every three
years through a negotiated agreement with the Class A Interest holder
 
or through a remarketing auction.
 
We
 
have an option
 
to purchase the
 
Class A Interests for
 
consideration equal to
 
the then current
 
capital account value,
 
plus any unpaid
preferred return
 
and the
 
prescribed make-whole
 
amount. If
 
we purchase
 
these interests,
 
any change
 
in the
 
third-party holder’s
 
capital
account
 
from
 
its
 
original
 
value
 
will
 
be
 
charged
 
directly
 
to
 
retained
 
earnings
 
and
 
will
 
increase
 
or
 
decrease
 
the
 
net
 
earnings
 
used
 
to
calculate EPS in that period.
 
To ensure availability
 
of funds, we maintain bank credit lines and have commercial paper programs
 
available to us in the United States
and Europe. We
 
also have uncommitted and asset-backed credit lines that support our
 
foreign operations.
Certain
 
of
 
our
 
long-term
 
debt
 
agreements,
 
our
 
credit
 
facilities,
 
and
 
our
 
noncontrolling
 
interests
 
contain
 
restrictive
 
covenants.
 
As
 
of
August 28, 2022, we were in compliance with all of these covenants.
 
We
 
have $2,095 million
 
of long-term debt
 
maturing in the
 
next 12 months
 
that is classified
 
as current, including
 
$500 million of
 
2.60
percent fixed
 
-rate notes
 
due October
 
12, 2022,
 
$100 million
 
of 6.41
 
percent fixed-rate
 
notes due
 
October 15,
 
2022, €250
 
million of
0.00 percent
 
fixed-rate notes due
 
November 11,
 
2022, €500 million
 
of 1.00
 
percent fixed-rate
 
notes due
 
April 27, 2023,
 
€250 million
of 0.00
 
percent fixed-rate
 
notes due
 
May 16,
 
2023
 
and €500
 
million of
 
0.00 percent
 
fixed-rate notes
 
due July
 
27, 2023.
 
We
 
believe
that cash flows from operations, together with available short-
 
and long-term debt financing, will be adequate to meet
 
our liquidity and
capital needs for at least the next 12 months.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are described in Note 2
 
to the Consolidated Financial Statements included
 
in our Annual Report on
Form
 
10-K for
 
the fiscal
 
year ended
 
May 29,
 
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 August
 
28, 2022, are the
 
same as those described in
our Annual Report on Form 10-K for the fiscal year ended May 29, 2022.
Our
 
annual
 
goodwill
 
and
 
indefinite-lived
 
intangible
 
assets
 
impairment
 
test
 
was
 
performed
 
on
 
the
 
first
 
day
 
of
 
the
 
second
 
quarter
 
of
fiscal
 
2022,
 
and
 
we
 
determined
 
there
 
was
 
no
 
impairment
 
of
 
our
 
intangible
 
assets
 
as
 
their
 
related
 
fair
 
values
 
were
 
substantially
 
in
excess of the carrying values, except for the
Uncle Toby’s
 
brand intangible asset.
The excess fair value as of the fiscal 2022
 
test date of the
Uncle Toby’s
 
brand intangible asset is as follows:
In Millions
Carrying Value
 
of
Intangible Asset
Excess Fair Value
 
as of
Fiscal 2022 Test
 
Date
Uncle Toby's
$
55.0
7
%
In
 
addition,
 
while
 
having
 
significant
 
coverage
 
as
 
of
 
our
 
fiscal
 
2022
 
assessment
 
date,
 
the
Progresso
,
Green
 
Giant
,
 
and
EPIC
brand
intangible assets had risk of decreasing coverage. We
 
will continue to monitor these businesses for potential impairment.
RECENTLY
 
ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2020, the Financial
 
Accounting Standards Board (FASB)
 
issued optional accounting guidance
 
for a limited period of time
 
to
ease
 
the
 
potential
 
burden
 
in
 
accounting
 
for
 
reference
 
rate reform.
 
The new
 
standard
 
provides
 
expedients
 
and
 
exceptions to
 
existing
accounting
 
requirements
 
for
 
contract
 
modifications
 
and
 
hedge accounting
 
related
 
to
 
transitioning
 
from discontinued
 
reference
 
rates,
such as
 
LIBOR,
 
to alternative
 
reference
 
rates, if
 
certain
 
criteria are
 
met. The
 
new accounting
 
requirements
 
can be
 
applied as
 
of the
beginning of
 
the interim
 
period including
 
March 12, 2020,
 
or any
 
date thereafter,
 
through December 31,
 
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.
 
 
 
 
 
 
 
 
 
 
27
NON-GAAP MEASURES
We
 
have
 
included
 
in
 
this
 
report
 
measures
 
of
 
financial
 
performance
 
that
 
are not
 
defined
 
by
 
GAAP.
 
We
 
believe
 
that
 
these
 
measures
provide useful information to investors, and include these measures in other
 
communications to investors.
 
For each
 
of these
 
non-GAAP financial
 
measures, we
 
are providing
 
below a
 
reconciliation of
 
the differences
 
between the
 
non-GAAP
measure and the most
 
directly comparable GAAP measure,
 
an explanation of why
 
we believe the non-GAAP
 
measure provides useful
information to
 
investors, and
 
any additional
 
material purposes
 
for which
 
our management
 
or Board
 
of Directors
 
uses the
 
non-GAAP
measure. These non-GAAP measures should be viewed in addition to, and not
 
in lieu of, the comparable GAAP measure.
Significant Items Impacting Comparability
Several
 
measures
 
below
 
are
 
presented
 
on
 
an
 
adjusted
 
basis.
 
The
 
adjustments
 
are
 
either
 
items
 
resulting
 
from
 
infrequently
 
occurring
events or items that, in management’s
 
judgment, significantly affect the year-to-year
 
assessment of operating results.
The following are descriptions of significant items impacting comparability
 
of our results.
Divestitures
 
gain, net
Net divestitures
 
gain primarily
 
related to
 
the sale
 
of our
 
Helper main
 
meals and
 
Suddenly Salad
 
side dishes
 
business in
 
fiscal 2023.
Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report
 
.
Transaction costs
Transaction
 
costs
 
primarily
 
related
 
to
 
the
 
sale
 
of
 
our
 
Helper
 
main
 
meals
 
and
 
Suddenly
 
Salad
 
side
 
dishes
 
business
 
in
 
fiscal
 
2023.
Transaction
 
costs related
 
to the
 
sale of
 
our interests
 
in Yoplait
 
SAS, Yoplait
 
Marques SNC,
 
and Liberté
 
Marques Sàrl
 
in fiscal
 
2022.
Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report
 
.
Non-income tax recovery
Recovery related to a Brazil indirect tax item recorded in fiscal 2022.
Acquisition integration costs
Integration costs
 
primarily resulting
 
from the acquisition
 
of TNT Crust
 
in fiscal 2023.
 
Integration costs
 
resulting from
 
the acquisition
of Tyson
 
Foods’ pet treats business
 
in fiscal 2022.
 
Please see Note
 
2 to the Consolidated
 
Financial Statements in
 
Part I, Item
 
1 of this
report.
Investment activity,
 
net
Valuation
 
adjustments and
 
the loss on
 
sale of certain
 
corporate investments in
 
fiscal 2023. Valuation
 
adjustments of certain
 
corporate
investments in fiscal 2022.
Mark-to-market effects
Net
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
recognized
 
in
 
unallocated
 
corporate
 
items.
 
Please
 
see
 
Note
 
6
 
to
 
the
Consolidated Financial Statements in Part I, Item 1 of this report.
Restructuring charges (recoveries)
Restructuring charges
 
for previously announced
 
restructuring actions recorded
 
in fiscal 2023
 
and fiscal 2022.
 
Please see Note 3
 
to the
Consolidated Financial Statements in Part I, Item 1 of this report.
Product recall
Voluntary
 
recall costs recorded in fiscal 2023 related to certain international
Häagen-Dazs
 
ice cream products.
CPW restructuring charges
CPW restructuring charges related to previously announced
 
restructuring actions.
Organic Net Sales Growth Rates
We
 
provide organic
 
net sales
 
growth rates
 
for our
 
consolidated net
 
sales and
 
segment net
 
sales. This
 
measure is
 
used in
 
reporting to
our
 
Board
 
of
 
Directors
 
and
 
executive
 
management
 
and
 
as
 
a
 
component
&