GENERAL MILLS INC - Quarter Report: 2023 February (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☑
FOR THE QUARTERLY PERIOD ENDED
FEBRUARY 26, 2023
☐
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
☑
☐
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
☑
☐
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 “emergin g growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
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
☐
☑
Number of shares of Common Stock outstanding as of March 13, 2023:
587,354,488
167,258,840
treasury).
3
General Mills, Inc.
Table of Contents
Page
4
5
6
7
9
21
39
40
40
41
42
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
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Net sales
$
5,125.9
$
4,537.7
$
15,064.2
$
14,101.6
Cost of sales
3,461.1
3,134.0
10,246.6
9,469.3
Selling, general, and administrative expenses
946.9
751.4
2,632.5
2,337.6
Divestitures gain, net
(13.7)
(170.1)
(444.6)
(170.1)
Restructuring, impairment, and other exit costs
1.4
7.1
14.1
5.1
Operating profit
730.2
815.3
2,615.6
2,459.7
Benefit plan non-service income
(21.6)
(27.1)
(65.0)
(84.4)
Interest, net
98.3
86.5
277.5
275.1
Earnings before income taxes and after-tax earnings from
653.5
755.9
2,403.1
2,269.0
Income taxes
108.3
123.2
471.5
451.8
After-tax earnings from joint ventures
12.7
29.9
57.9
92.0
Net earnings, including earnings attributable to redeemable
557.9
662.6
1,989.5
1,909.2
Net earnings attributable to redeemable and
4.8
2.3
10.5
24.7
Net earnings attributable to General Mills
$
553.1
$
660.3
$
1,979.0
$
1,884.5
Earnings per share – basic
$
0.94
$
1.09
$
3.32
$
3.10
Earnings per share – diluted
$
0.92
$
1.08
$
3.28
$
3.07
See accompanying notes to consolidated financial statements.
5
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Net earnings, including earnings attributable to
$
557.9
$
662.6
$
1,989.5
$
1,909.2
Other comprehensive income (loss), net of tax:
Foreign currency translation
12.5
(122.5)
(98.7)
(184.9)
Other fair value changes:
Hedge derivatives
(5.7)
(30.8)
(23.2)
(10.4)
Reclassification to earnings:
Foreign currency translation
-
342.2
(7.4)
342.2
Hedge derivatives
18.9
30.2
18.5
34.4
Amortization of losses and prior service costs
13.9
22.3
42.2
53.5
Other comprehensive income (loss), net of tax
39.6
241.4
(68.6)
234.8
Total comprehensive income
597.5
904.0
1,920.9
2,144.0
Comprehensive income (loss) attributable to
4.9
2.3
9.9
(47.0)
Comprehensive income attributable to General Mills
$
592.6
$
901.7
$
1,911.0
$
2,191.0
See accompanying notes to consolidated financial statements.
6
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
Feb. 26, 2023
May 29, 2022
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
618.7
$
569.4
Receivables
1,770.2
1,692.1
Inventories
2,083.3
1,867.3
Prepaid expenses and other current assets
643.8
802.1
Assets held for sale
-
158.9
Total current assets
5,116.0
5,089.8
Land, buildings, and equipment
3,353.6
3,393.8
Goodwill
14,487.8
14,378.5
Other intangible assets
6,968.0
6,999.9
Other assets
1,274.4
1,228.1
Total assets
$
31,199.8
$
31,090.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,868.2
$
3,982.3
Current portion of long-term debt
2,487.2
1,674.2
Notes payable
959.8
811.4
Other current liabilities
2,103.1
1,552.0
Total current liabilities
9,418.3
8,019.9
Long-term debt
8,140.2
9,134.8
Deferred income taxes
2,151.6
2,218.3
Other liabilities
1,006.0
929.1
Total liabilities
20,716.1
20,302.1
Stockholders' equity:
Common stock,
754.6
0.10
75.5
75.5
Additional paid-in capital
1,191.1
1,182.9
Retained earnings
19,226.5
18,532.6
Common stock in treasury, at cost, shares of
166.2
155.7
(8,220.1)
(7,278.1)
Accumulated other comprehensive loss
(2,038.5)
(1,970.5)
Total stockholders' equity
10,234.5
10,542.4
Noncontrolling interests
249.2
245.6
Total equity
10,483.7
10,788.0
Total liabilities and equity
$
31,199.8
$
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
Feb. 26, 2023
Feb. 27, 2022
Shares
Amount
Shares
Amount
Total equity, beginning balance
$
10,372.1
$
9,804.7
Common stock,
1
0.10
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,155.3
1,365.1
Stock compensation plans
21.9
11.5
Unearned compensation related to stock unit awards
(14.8)
(19.1)
Earned compensation
28.7
31.7
Reversal of cumulative redeemable interest
-
(207.4)
Acquisition of noncontrolling interest
-
(19.5)
Ending balance
1,191.1
1,162.3
Retained earnings:
Beginning balance
18,991.9
17,363.2
Net earnings attributable to General Mills
553.1
660.3
Cash dividends declared ($
0.54
0.51
(318.5)
(310.4)
Ending balance
19,226.5
17,713.1
Common stock in treasury:
Beginning balance
(164.4)
(8,023.5)
(151.4)
(6,915.2)
Shares purchased
(2.9)
(251.0)
(2.6)
(175.5)
Stock compensation plans
1.1
54.4
1.6
75.4
Ending balance
(166.2)
(8,220.1)
(152.4)
(7,015.3)
Accumulated other comprehensive loss:
Beginning balance
(2,078.0)
(2,364.1)
Other comprehensive income
39.5
241.4
Ending balance
(2,038.5)
(2,122.7)
Noncontrolling interests:
Beginning balance
250.9
280.2
Comprehensive income
4.9
2.3
Distributions to noncontrolling interest holders
(6.6)
(108.3)
Reclassification from redeemable interest
-
561.6
Reversal of cumulative redeemable interest
-
207.4
Divestiture
-
(680.4)
Ending balance
249.2
262.8
Total equity, ending balance
$
10,483.7
$
10,075.7
Redeemable interest:
Beginning balance
$
-
$
561.6
Reclassification to noncontrolling interest
-
(561.6)
Ending balance
$
-
$
-
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)
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Shares
Amount
Shares
Amount
Total equity, beginning balance
$
10,788.0
$
9,773.2
Common stock,
1
0.10
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,182.9
1,365.5
Stock compensation plans
23.8
15.5
Unearned compensation related to stock unit awards
(100.6)
(91.3)
Earned compensation
85.0
85.4
Decrease in redemption value of
-
14.1
Reversal of cumulative redeemable interest
-
(207.4)
Acquisition of noncontrolling interest
-
(19.5)
Ending balance
1,191.1
1,162.3
Retained earnings:
Beginning balance
18,532.6
17,069.8
Net earnings attributable to General Mills
1,979.0
1,884.5
Cash dividends declared ($
2.16
2.04
(1,285.1)
(1,241.2)
Ending balance
19,226.5
17,713.1
Common stock in treasury:
Beginning balance
(155.7)
(7,278.1)
(146.9)
(6,611.2)
Shares purchased
(15.0)
(1,152.3)
(8.8)
(550.5)
Stock compensation plans
4.5
210.3
3.3
146.4
Ending balance
(166.2)
(8,220.1)
(152.4)
(7,015.3)
Accumulated other comprehensive loss:
Beginning balance
(1,970.5)
(2,429.2)
Other comprehensive (loss) income
(68.0)
306.5
Ending balance
(2,038.5)
(2,122.7)
Noncontrolling interests:
Beginning balance
245.6
302.8
Comprehensive income (loss)
9.9
(17.8)
Distributions to noncontrolling interest holders
(11.4)
(110.8)
Reclassification from redeemable interest
-
561.6
Reversal of cumulative redeemable interest
-
207.4
Divestiture
5.1
(680.4)
Ending balance
249.2
262.8
Total equity, ending balance
$
10,483.7
$
10,075.7
Redeemable interest:
Beginning balance
$
-
$
604.9
Comprehensive loss
-
(29.2)
Decrease in redemption value of
-
(14.1)
Reclassification to noncontrolling interest
-
(561.6)
Ending balance
$
-
$
-
See accompanying notes to consolidated financial statements.
9
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests
$
1,989.5
$
1,909.2
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
411.0
430.6
After-tax earnings from joint ventures
(57.9)
(92.0)
Distributions of earnings from joint ventures
36.6
49.0
Stock-based compensation
86.7
80.3
Deferred income taxes
(71.2)
81.3
Pension and other postretirement benefit plan contributions
(20.2)
(20.7)
Pension and other postretirement benefit plan costs
(20.2)
(10.6)
Divestitures gain, net
(444.6)
(170.1)
Restructuring, impairment, and other exit costs
(14.6)
(62.5)
Changes in current assets and liabilities, excluding the effects of
21.3
91.5
Other, net
110.6
(57.9)
Net cash provided by operating activities
2,027.0
2,228.1
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(351.3)
(350.6)
Acquisition, net of cash acquired
(251.5)
(1,201.3)
Proceeds from divestitures, net of cash divested
633.1
46.1
Investments in affiliates, net
(30.8)
30.1
Proceeds from disposal of land, buildings, and equipment
0.8
1.6
Other, net
(6.4)
12.3
Net cash used by investing activities
(6.1)
(1,461.8)
Cash Flows - Financing Activities
Change in notes payable
159.2
471.5
Issuance of long-term debt
501.8
1,935.2
Payment of long-term debt
(600.0)
(2,278.2)
Proceeds from common stock issued on exercised options
168.0
96.2
Purchases of common stock for treasury
(1,152.3)
(550.5)
Dividends paid
(967.4)
(934.1)
Distributions to noncontrolling and redeemable interest holders
(11.4)
(110.8)
Other, net
(53.5)
(26.8)
Net cash used by financing activities
(1,955.6)
(1,397.5)
Effect of exchange rate changes on cash and cash equivalents
(16.0)
(29.6)
Increase (decrease) in cash and cash equivalents
49.3
(660.8)
Cash and cash equivalents - beginning of year
569.4
1,505.2
Cash and cash equivalents - end of period
$
618.7
$
844.4
Cash Flow from changes in current assets and liabilities, excluding the effects of
Receivables
$
(132.4)
$
(214.5)
Inventories
(237.0)
102.5
Prepaid expenses and other current assets
151.5
41.5
Accounts payable
(41.6)
(14.0)
Other current liabilities
280.8
176.0
Changes in current assets and liabilities
$
21.3
$
91.5
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 February 26,
2023, 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 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
with U.S. commercial paper. We consol idated the TNT Crust business into our Consolidated Balance Sheets and recorded goodwill of
$
154.3
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
442.2
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
Liberté
$
148.8
During the third quarter of fiscal 2022, we sold a European dough business and recorded a net pre-tax gain on sale of $
21.3
During the first quarter of fiscal 2022, we acquired Tyson Foods’ pet treats business for $
1.2
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
Nudges
,
Top Chews
, and
True
Chews
330.0
40.0
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 nine-month period ended February 26, 2023, we did not undertake any new restructuring actions. We recorded $
2.1
restructuring charges in the third quarter of fiscal 2023 and $
16.0
February 26, 2023, related to restructuring actions previously announced. We recorded $
9.3
third quarter of fiscal 2022 and $
7.9
restructuring actions previously announced.
We
expect these actions to be completed by the end of
fiscal 2024
.
We paid net $
30.6
announced. We paid net $
70.4
11
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
8.6
Utilized in fiscal 2023
(26.5)
Reserve balance as of Feb. 26, 2023
$
18.9
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
Feb. 26, 2023
May 29, 2022
Goodwill
$
14,487.8
$
14,378.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,708.2
6,725.8
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
385.5
400.3
Less accumulated amortization
(125.7)
(126.2)
Intangible assets subject to amortization, net
259.8
274.1
Other intangible assets
6,968.0
6,999.9
Total
$
21,455.8
$
21,378.4
Based on the carrying value of finite-lived intangible assets as of February 26, 2023, annual amortization expense for each of the next
five fiscal years is estimated to be approximately $
20
The changes in the carrying amount of goodwill during the nine-month period ended February 26, 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
Divestitures
(2.0)
-
-
(0.4)
-
(2.4)
Other activity, primarily
(8.5)
-
-
(27.2)
(6.9)
(42.6)
Balance as of Feb. 26, 2023
$
6,542.4
$
6,062.8
$
803.1
$
694.0
$
385.5
$
14,487.8
The changes in the carrying amount of other intangible assets during the nine-month period ended February 26, 2023, were as follows:
In Millions
Total
Balance as of May 29, 2022
$
6,999.9
Acquisition
3.8
Divestiture
(3.6)
Other activity, primarily foreign currency translation
(32.1)
Balance as of Feb. 26, 2023
$
6,968.0
12
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
excess of the carrying values, except for the
Uncle Toby’s
our fiscal 2023 assessment date, the
Progresso
EPIC
monitor these businesses for potential impairment.
(5) Inventories
The components of inventories were as follows:
In Millions
Feb. 26, 2023
May 29, 2022
Raw materials and packaging
$
560.2
$
532.0
Finished goods
1,929.7
1,634.7
Grain
148.6
164.0
Excess of FIFO over LIFO cost
(555.2)
(463.4)
Total
$
2,083.3
$
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.
Unallocated corporate items for the quarters and nine-month periods ended February 26, 2023, and February 27, 2022, included:
Quarter Ended
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Net (loss) gain on mark-to-market valuation of certain
$
(30.2)
$
72.3
$
(123.4)
$
119.3
Net gain on commodity positions reclassified from
(21.5)
(48.1)
(85.0)
(118.7)
Net mark-to-market revaluation of certain grain inventories
(14.9)
(44.2)
(58.0)
15.6
Net mark-to-market valuation of certain commodity
$
(66.6)
$
(20.0)
$
(266.4)
$
16.2
As of February 26, 2023, the net notional value of commodity derivatives was $
448.0
153.0
energy inputs and $
295.0
next
12
As of February 26, 2023, the notional value of foreign exchange derivatives was $
1,111.8
We
also have net investments in foreign subsidiaries that are denominated in euros. As of February 26, 2023, we hedged a portion of
these investments with €
2,942.8
13
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 February 26, 2023, 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.
During the third quarter of fiscal 2023, in advance of a planned debt refinancing, we entered into a €
250.0
forward-starting interest rate swap.
During the second quarter of fiscal 2023, we entered into a $
500.0
$
500.0
November 18, 2025
, to a floating rate.
Subsequent to the end of the third quarter of fiscal 2023, in advance of planned debt refinancings, we entered into €
500.0
notional amount of forward-starting interest rate swaps and $
350.0
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 February 26, 2023, $
1,483.9
these third-party services. As of February 27, 2022, $
1,382.8
utilize these third-party services.
(7) Debt
The components of notes payable were as follows:
In Millions
Feb. 26, 2023
May 29, 2022
U.S. commercial paper
$
948.1
$
694.8
Financial institutions
11.7
116.6
Total
$
959.8
$
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 February 26, 2023:
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
We
were in compliance with all credit facility covenants as of February 26, 2023.
Long-Term Debt
The fair values and carrying amounts of long-term debt, including the current portion, were $
9,840.9
10,627.4
respectively, as of February 26, 2023. 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 second quarter of fiscal 2023, we issued $
500.0
5.241
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
May 16, 2023
. We used the net proceeds to
repay €
250.0
0.0
November 11, 2022
.
In the fourth quarter of fiscal 2022, we repaid $
850.0
3.7
October 17, 2023
, using proceeds
from the issuance of commercial paper.
14
In the fourth quarter of fiscal 2022, we issued €
250.0
0.0
November 11, 2022
. We used the net
proceeds for general corporate purposes.
In the second quarter of fiscal 2022, we issued €
500.0
0.125
November 15, 2025
. We used the
net proceeds to repay a portion of our €
500.0
0.0
November 16, 2021
, and for general corporate
purposes.
In the second quarter of fiscal 2022, we issued €
250.0
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
2.25
October 14, 2031
. We used the net proceeds
together with proceeds from the issuance of commercial paper, to repay $
1,000.0
3.15
December 15, 2021
.
In the first quarter of fiscal 2022, we issued €
500.0
July 27, 2023
. We used the net proceeds to repay
€
500.0
0.0
August 21, 2021
.
In the first quarter of fiscal 2022, we repaid €
200.0
2.2
June 24, 2021
, using proceeds from the
issuance of €
50.0
2.2
November 29, 2021
, and borrowings under a committed credit facility.
Certain of our long-term debt agreements contain restrictive covenants.
As of February 26, 2023, 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
the sum of the
three-month Term SOFR
186
three years
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 in exchange for Sodiaal’s interest in our Canadian yogurt business, a modified agreement for the use of
Yoplait
Liberté
brands in the United States and Canada, and cash. Please see Note 2 to the Consolidated Financial Statements.
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
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
Our noncontrolling interests contain restrictive covenants. As of February 26, 2023, 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
Feb. 26, 2023
Feb. 27, 2022
General Mills
Noncontrolling
Interests
General Mills
Noncontrolling
Interests
In Millions
Pretax
Tax
Net
Net
Pretax
Tax
Net
Net
Net earnings, including earnings
$
553.1
$
4.8
$
660.3
$
2.3
Other comprehensive income (loss):
Foreign currency translation
$
3.4
$
9.0
12.4
0.1
$
(125.7)
$
3.2
(122.5)
-
Other fair value changes:
Hedge derivatives
(6.3)
0.6
(5.7)
-
(23.9)
(6.9)
(30.8)
-
Reclassification to earnings:
Foreign currency translation (a)
-
-
-
-
342.2
-
342.2
-
Hedge derivatives (b)
23.1
(4.2)
18.9
-
23.1
7.1
30.2
-
Amortization of losses and
18.1
(4.2)
13.9
-
28.8
(6.5)
22.3
-
Other comprehensive income
$
38.3
$
1.2
39.5
0.1
$
244.5
$
(3.1)
241.4
-
Total comprehensive income
$
592.6
$
4.9
$
901.7
$
2.3
(a) Loss reclassified from AOCI into earnings is reported in the divestitures gain.
(b) 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.
Nine-Month Period Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
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
$
1,979.0
$
10.5
$
1,884.5
$
7.2
$
17.5
Other comprehensive (loss) income:
Foreign currency translation
$
(83.3)
$
(14.8)
(98.1)
(0.6)
$
(166.6)
$
53.7
(112.9)
(25.0)
(47.0)
Other fair value changes:
Hedge derivatives
(29.3)
6.1
(23.2)
-
8.0
(18.9)
(10.9)
-
0.5
Reclassification to earnings:
Foreign currency translation (a)
(7.4)
-
(7.4)
-
342.2
-
342.2
-
-
Hedge derivatives (b)
23.0
(4.5)
18.5
-
23.0
11.6
34.6
-
(0.2)
Amortization of losses and
prior service costs (c)
54.6
(12.4)
42.2
-
68.8
(15.3)
53.5
-
-
Other comprehensive (loss) income
$
(42.4)
$
(25.6)
(68.0)
(0.6)
$
275.4
$
31.1
306.5
(25.0)
(46.7)
Total comprehensive income (loss)
$
1,911.0
$
9.9
$
2,191.0
$
(17.8)
$
(29.2)
(a) (Gain) loss reclassified from AOCI into earnings is reported in the divestitures gain.
(b) Loss (gain) 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
Feb. 26, 2023
May 29, 2022
Foreign currency translation adjustments
$
(696.2)
$
(590.7)
Unrealized gain from hedge derivatives
18.6
23.3
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,459.1)
(1,513.4)
Prior service credits
98.2
110.3
Accumulated other comprehensive loss
$
(2,038.5)
$
(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
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Compensation expense related to stock-based payments
$
29.1
$
31.4
$
86.7
$
78.9
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
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Windfall tax benefits from stock-based payments
$
6.2
$
6.7
$
24.6
$
13.0
As of February 26, 2023, unrecognized compensation expense related to non-vested stock options, restricted stock units, and
performance share units was $
133.1
20
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:
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Net cash proceeds
$
168.0
$
96.2
Intrinsic value of options exercised
$
81.8
$
44.4
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:
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
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:
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Total grant date fair value
$
105.4
$
79.0
17
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
Quarter Ended
Nine-Month Period Ended
In Millions, Except per Share Data
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Net earnings attributable to General Mills
$
553.1
$
660.3
$
1,979.0
$
1,884.5
Average number of common shares - basic EPS
592.5
606.8
596.2
608.6
Incremental share effect from: (a)
Stock options
3.7
2.9
3.6
2.4
Restricted stock units and performance share units
2.8
2.7
2.6
2.5
Average number of common shares - diluted EPS
599.0
612.4
602.4
613.5
Earnings per share – basic
$
0.94
$
1.09
$
3.32
$
3.10
Earnings per share – diluted
$
0.92
$
1.08
$
3.28
$
3.07
(a) Incremental shares from stock options, restricted stock units, and performance share units are computed by the treasury stock
method.
were not dilutive were as follows
:
Quarter Ended
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Anti-dilutive stock options, restricted stock units, and
0.8
1.0
0.9
4.5
(12) Share Repurchases
Share repurchases were as follows:
Quarter Ended
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Shares of common stock
2.9
2.6
15.0
8.8
Aggregate purchase price
$
251.0
$
175.5
$
1,152.3
$
550.5
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Net cash interest payments
$
225.6
$
234.2
Net income tax payments
$
538.4
$
397.3
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
Feb. 26,
2023
Feb. 27,
2022
Feb. 26,
2023
Feb. 27,
2022
Feb. 26,
2023
Feb. 27,
2022
Service cost
$
17.6
$
23.2
$
1.4
$
2.0
$
2.1
$
1.8
Interest cost
64.6
46.0
4.5
3.1
0.7
0.4
Expected return on plan assets
(105.0)
(102.8)
(7.7)
(6.6)
-
-
Amortization of losses (gains)
28.3
35.7
(4.9)
(2.7)
0.1
0.8
Amortization of prior service costs (credits)
0.4
0.2
(5.9)
(5.3)
0.1
0.1
Other adjustments
-
-
-
-
3.2
4.0
Net expense (income)
$
5.9
$
2.3
$
(12.6)
$
(9.5)
$
6.2
$
7.1
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
Nine-Month
Period Ended
Nine-Month
Period Ended
Nine-Month
Period Ended
In Millions
Feb. 26,
2023
Feb. 27,
2022
Feb. 26,
2023
Feb. 27,
2022
Feb. 26,
2023
Feb. 27,
2022
Service cost
$
52.7
$
70.4
$
4.0
$
5.8
$
6.3
$
5.3
Interest cost
193.8
138.4
13.5
9.4
2.3
1.1
Expected return on plan assets
(315.0)
(308.5)
(23.3)
(20.0)
-
-
Amortization of losses (gains)
85.0
106.1
(14.6)
(8.1)
0.2
2.3
Amortization of prior service costs (credits)
1.1
0.6
(17.4)
(15.7)
0.3
0.3
Other adjustments
-
-
-
-
9.1
9.7
Curtailment gain
-
(14.3)
-
(5.7)
-
-
Net expense (income)
$
17.6
$
(7.3)
$
(37.8)
$
(34.3)
$
18.2
$
18.7
(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. The amount of excise tax on the repurchase of corporate stock was immaterial in the third quarter of fiscal
2023. 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 February 26, 2023, 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
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Net sales:
North America Retail
$
3,232.0
$
2,811.9
$
9,593.9
$
8,567.1
International
700.6
721.0
2,024.8
2,566.0
Pet
645.5
567.7
1,818.3
1,649.1
North America Foodservice
547.8
437.1
1,627.2
1,319.4
Total
$
5,125.9
$
4,537.7
$
15,064.2
$
14,101.6
Operating profit:
North America Retail
$
786.9
$
611.5
$
2,401.8
$
1,935.5
International
42.4
35.9
95.0
155.9
Pet
102.6
110.6
312.3
357.3
North America Foodservice
82.4
35.2
217.5
174.9
Total segment operating profit
$
1,014.3
$
793.2
$
3,026.6
$
2,623.6
Unallocated corporate items
296.4
140.9
841.5
328.9
Divestitures gain, net
(13.7)
(170.1)
(444.6)
(170.1)
Restructuring, impairment, and other exit costs
1.4
7.1
14.1
5.1
Operating profit
$
730.2
$
815.3
$
2,615.6
$
2,459.7
Net sales for our North America Retail operating units were as follows:
Quarter Ended
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
U.S. Meals & Baking Solutions
$
1,185.3
$
968.0
$
3,456.2
$
3,032.6
U.S. Morning Foods
918.6
858.0
2,731.1
2,514.4
U.S. Snacks
883.5
745.0
2,663.6
2,282.3
Canada
244.6
240.9
743.0
737.8
Total
$
3,232.0
$
2,811.9
$
9,593.9
$
8,567.1
Net sales by class of similar products were as follows:
Quarter Ended
Nine-Month Period Ended
In Millions
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
Snacks
$
1,065.5
$
925.3
$
3,236.7
$
2,827.4
Cereal
801.9
754.4
2,427.5
2,227.6
Convenient meals
815.6
772.8
2,281.2
2,258.1
Dough
644.8
446.6
1,855.2
1,458.8
Pet
646.2
568.1
1,820.7
1,649.5
Baking mixes and ingredients
517.7
465.9
1,554.9
1,379.4
Yogurt
378.0
349.3
1,081.5
1,362.3
Super-premium ice cream
148.2
151.4
496.6
596.2
Other
108.0
103.9
309.9
342.3
Total
$
5,125.9
$
4,537.7
$
15,064.2
$
14,101.6
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
Third Quarter Results
In the third quarter of fiscal 2023, net sales increased 13 percent and organic net sales increased 16 percent compared to the same
period last year. Operating profit decreased 10 percent to $730 million, primarily driven by higher input costs, an increase in selling,
general and administrative (SG&A) expenses, a lower net gain on divestitures, and an unfavorable change to the mark-to-market
valuation of certain commodity positions and grain inventories, partially offset by favorable net price realization and mix. Operating
profit margin of 14.2 percent decreased 380 basis points. Adjusted operating profit of $807 million increased 20 percent on a constant-
currency basis, primarily driven by favorable net price realization and mix, partially offset by higher input costs and an increase in
SG&A expenses. Adjusted operating profit margin increased 80 basis points to 15.7 percent. Diluted earnings per share of $0.92
decreased 15 percent in the third quarter of fiscal 2023. Adjusted diluted earnings per share of $0.97 increased 17 percent on a
constant-currency basis compared to the third 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 third quarter of fiscal 2023 follows:
Quarter Ended Feb. 26, 2023
In millions,
except per share
Quarter Ended
Feb. 26, 2023 vs.
Feb. 27, 2022
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
5,125.9
13
%
Operating profit
730.2
(10)
%
14.2
%
Net earnings attributable to General Mills
553.1
(16)
%
Diluted earnings per share
$
0.92
(15)
%
Organic net sales growth rate (a)
16
%
Adjusted operating profit (a)
807.0
19
%
15.7
%
20
%
Adjusted diluted earnings per share (a)
$
0.97
15
%
17
%
(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
Consolidated
net sales
Quarter Ended
Feb. 26, 2023
Feb. 26, 2023 vs.
Feb. 27, 2022
Feb. 27, 2022
Net sales (in millions)
$
5,125.9
13%
$
4,537.7
Contributions from volume growth (a)
Flat
Net price realization and mix
14
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 third quarter of fiscal 2023 increased 13 percent compared to the same period in fiscal 2022, driven by favorable net
price realization and mix, partially offset by unfavorable foreign currency exchange.
22
Components of organic net sales growth are shown in the following table:
Quarter Ended Feb. 26, 2023 vs.
Quarter Ended Feb. 27, 2022
Contributions from organic volume growth (a)
Flat
Organic net price realization and mix
16
pts
Organic net sales growth
16
pts
Foreign currency exchange
(1)
pt
Acquisitions and divestitures
(2)
pts
Net sales growth
13
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 16 percent in the third quarter of fiscal 2023 compared to the same period in fiscal 2022 driven by
favorable organic net price realization and mix.
Cost of sales
increased $327 million to $3,461 million in the third quarter of fiscal 2023 compared to the same period in fiscal 2022.
The increase was primarily driven by a $290 million increase attributable to product rate and mix, partially offset by a $10 million
decrease attributable to lower volume. We recorded a $67 million net increase in cost of sales related to the mark-to-market valuation
of certain commodity positions and grain inventories in the third quarter of fiscal 2023 compared to a $20 million net increase in the
third quarter of fiscal 2022.
Divestitures gain, net
fiscal 2022. In fiscal 2022, we sold our interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl and a European
dough business (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).
SG&A expenses
increased $196 million to $947 million in the third quarter of fiscal 2023, compared to the same period in fiscal
2022, primarily driven by increased media and advertising expenses, an increase in certain compensation and benefits expenses, an
increase in charitable contributions, and unfavorable valuation adjustments on certain corporate investments in fiscal 2023. SG&A
expenses as a percent of net sales in the third quarter of fiscal 2023 increased 190 basis points compared to the third quarter of fiscal
2022.
Restructuring, impairment, and other exit costs
totaled $1 million in the third quarter of fiscal 2023, compared to $7 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 third quarter of fiscal 2023, compared to $27 million in the same period
last year, primarily reflecting an increase in interest costs, partially offset by lower amortization of losses and higher expected return
on plan assets.
Interest, net
for the third quarter of fiscal 2023 totaled $98 million, up $12 million from the third quarter of fiscal 2022, primarily
driven by higher interest rates, partially offset by lower average long-term debt levels.
The
effective tax rate
2022. The 0.3 percentage point increase was primarily due to certain unfavorable nonrecurring discrete tax items, partially offset by
favorable changes in earnings mix by jurisdiction in fiscal 2023. Our effective tax rate excluding certain items affecting comparability
was 21.6 percent in the third quarter of fiscal 2023, compared to 21.0 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 0.6 percentage point increase was
primarily due to certain unfavorable nonrecurring discrete tax items, partially offset by favorable changes in earnings mix by
jurisdiction in fiscal 2023.
23
After-tax earnings from joint ventures
decreased to $13 million compared to $30 million in the
same period in fiscal 2022, primarily driven by higher input costs and unfavorable nonrecurring discrete tax items at Cereal Partners
Worldwide (CPW), partially offset by favorable net price realization and mix at CPW. On a constant-currency basis, after-tax
earnings from joint ventures decreased 51 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 Feb. 26, 2023 vs.
Quarter Ended Feb. 27, 2022
CPW
HDJ (a)
Total
Contributions from volume growth (b)
(13)
pts
(2)
pts
Net price realization and mix
15
pts
3
pts
Net sales growth in constant currency
2
pts
1
pt
2
pts
Foreign currency exchange
(5)
pts
(14)
pts
(7)
pts
Net sales growth
(3)
pts
(13)
pts
(5)
pts
Note: Table may not foot due to rounding.
(a) Häagen-Dazs Japan, Inc.
(b) Measured in tons based on the stated weight of our product shipments.
Average diluted shares outstanding
decreased by 13 million in the third quarter of fiscal 2023 from the same period a year ago
primarily due to share repurchases, partially offset by option exercises.
Nine-Month Results
In the nine-month period ended February 26, 2023, net sales increased 7 percent compared to the same period last year, and organic
net sales increased 12 percent compared to the same period last year. Operating profit increased 6 percent to $2,616 million, primarily
driven by favorable net price realization and mix and a higher 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, an increase in SG&A expenses, and lower net corporate investment activity. Operating profit margin of 17.4 percent
essentially matched the same period last year. Adjusted operating profit of $2,568 million increased 11 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 17.0 percent.
Diluted earnings per share of $3.28 increased 7 percent in the nine-month period ended February 26, 2023, and adjusted diluted
earnings per share of $3.18 increased 14 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 nine-month period ended February 26, 2023, follows:
Nine-Month Period Ended Feb. 26, 2023
In millions,
except per
share
Nine-Month
Period Ended
Feb. 26, 2023 vs.
Feb. 27, 2022
Percent of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
15,064.2
7
%
Operating profit
2,615.6
6
%
17.4
%
Net earnings attributable to General Mills
1,979.0
5
%
Diluted earnings per share
$
3.28
7
%
Organic net sales growth rate (a)
12
%
Adjusted operating profit (a)
2,567.9
11
%
17.0
%
11
%
Adjusted diluted earnings per share (a)
$
3.18
13
%
14
%
(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
24
Consolidated
net sales
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023 vs.
Feb. 27, 2022
Feb. 27, 2022
Net sales (in millions)
$
15,064.2
7
%
$
14,101.6
Contributions from volume growth (a)
(8)
pts
Net price realization and mix
16
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 7 percent increase in net sales for the nine-month period ended February 26, 2023, 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:
Nine-Month Period Ended Feb. 26, 2023 vs.
Nine-Month Period Ended Feb. 27, 2022
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
16
pts
Organic net sales growth
12
pts
Foreign currency exchange
(1)
pt
Acquisition and divestitures
(4)
pts
Net sales growth
7
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 12 percent in the nine-month period ended February 26, 2023, driven by favorable organic net price
realization and mix, partially offset by a decrease in contributions from organic volume growth.
Cost of sales
period in fiscal 2022. The increase was driven by a $1,229 million increase attributable to product rate and mix, partially offset by a
$759 million decrease due to lower volume. We recorded a $266 million net increase in cost of sales related to the mark-to-market
valuation of certain commodity positions and grain inventories in the nine-month period ended February 26, 2023, compared to a
$16 million net decrease in the nine-month period ended February 27, 2022. In the nine-month period ended February 26, 2023, we
recorded a $25 million charge related to a voluntary recall on certain international
Häagen-Dazs
SG&A expenses
increased $295 million to $2,632 million in the nine-month period ended February 26, 2023, compared to the same
period in fiscal 2022, primarily driven by unfavorable valuation adjustments and the loss on sale of certain corporate investments,
increased media and advertising expenses, an increase in certain compensation and benefits expenses, and an increase in charitable
contributions in fiscal 2023. SG&A expenses as a percent of net sales increased 90 basis points in the nine-month period ended
February 26, 2023, compared to the same period of fiscal 2022.
Divestitures gain, net
Helper main meals and Suddenly Salad side dishes business. During the nine-month period ended February 27, 2022, we recorded a
$170 million divestitures gain related to the sale of our interest in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl and a
European dough 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
totaled $14 million in the nine-month period ended February 26, 2023, compared
to $5 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
the same period last year, primarily reflecting an increase in interest costs, partially offset by lower amortization of losses and higher
expected return on plan assets.
25
Interest, net
fiscal 2022.
The
effective tax rate
month period ended February 27, 2022. The 0.3 percentage point decrease was primarily due to certain nonrecurring discrete tax
benefits and favorable changes in earnings mix by jurisdiction, partially offset by certain unfavorable tax components related to the
divestitures incurred in the nine-month period ended February 26, 2023. Our effective tax rate excluding certain items affecting
comparability was 20.8 percent in the nine-month period ended February 26, 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 0.9
percentage point decrease is primarily due to certain nonrecurring discrete tax benefits and favorable changes in earnings mix by
jurisdiction in the nine-month period ended February 26, 2023.
After-tax earnings from joint ventures
$92 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 28 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:
Nine-Month Period Ended Feb. 26, 2023 vs.
Nine-Month Period Ended Feb. 27, 2022
CPW
HDJ
Total
Contributions from volume growth (a)
(10)
pts
(7)
pts
Net price realization and mix
13
pts
Flat
Net sales growth in constant currency
3
pts
(6)
pts
1
pt
Foreign currency exchange
(10)
pts
(17)
pts
(11)
pts
Net sales growth
(7)
pts
(23)
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
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
Nine-Month Period Ended
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Net sales (in millions)
$
3,232.0
15
%
$
2,811.9
$
9,593.9
12
%
$
8,567.1
Contributions from volume growth (a)
(1)
pt
(5)
pts
Net price realization and mix
17
pts
17
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 15 percent in the third 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 12 percent in the nine-month period ended February 26, 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.
26
The components of North America Retail organic net sales growth are shown in the following table:
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023
Contributions from organic volume growth (a)
Flat
(4)
pts
Organic net price realization and mix
18
pts
18
pts
Organic net sales growth
18
pts
14
pts
Foreign currency exchange
(1)
pt
Flat
Divestitures (b)
(3)
pts
(2)
pts
Net sales growth
15
pts
12
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 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 18 percent in the third quarter of fiscal 2023, compared to the same period in fiscal
2022, driven by favorable organic net price realization and mix.
North America Retail organic net sales increased 14 percent in the nine-month period ended February 26, 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
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023
U.S. Meals & Baking Solutions
22
%
14
%
U.S. Snacks
19
%
17
%
U.S. Morning Foods
7
%
9
%
Canada (a)
2
%
1
%
Total
15
%
12
%
(a) On a constant-currency basis, Canada net sales increased 8 percent in the third quarter of fiscal 2023 and increased 6 percent for the nine-month
period ended February 26, 2023, 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 29 percent to $787 million in the third quarter of fiscal 2023, compared to $612 million in the
same period in fiscal 2022, primarily driven by favorable net price realization and mix, partially offset by higher input costs and
higher SG&A expenses. Segment operating profit increased 29 percent on a constant-currency basis in the third 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 24 percent to $2,402 million in the nine-month period ended February 26, 2023, compared to
$1,936 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 nine-month period ended February 26, 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).
27
International Segment Results
International net sales were as follows:
Quarter Ended
Nine-Month Period Ended
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Net sales (in millions)
$
700.6
(3)
%
$
721.0
$
2,024.8
(21)
%
$
2,566.0
Contributions from volume growth (a)
(10)
pts
(31)
pts
Net price realization and mix
11
pts
15
pts
Foreign currency exchange
(4)
pts
(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 3 percent in the third 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 unfavorable foreign
currency exchange, partially offset by favorable net price realization and mix.
International net sales decreased 21 percent in the nine-month period ended February 26, 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
by favorable net price realization and mix.
The components of International organic net sales growth are shown in the following table:
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023
Contributions from organic volume growth (a)
(4)
pts
(6)
pts
Organic net price realization and mix
11
pts
9
pts
Organic net sales growth
8
pts
3
pts
Foreign currency exchange
(4)
pts
(5)
pts
Divestitures (b)
(6)
pts
(19)
pts
Net sales growth
(3)
pts
(21)
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
International organic net sales increased 8 percent in the third quarter of fiscal 2023 and 3 percent in the nine-month period ended
February 26, 2023, 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.
Segment operating profit increased 18 percent to $42 million in the third quarter of fiscal 2023, compared to $36 million in the same
period in fiscal 2022, primarily driven by favorable net price realization and mix and a decrease in SG&A expenses, partially offset by
higher input costs and a decrease in contributions from volume growth, including the impact of volume declines from divestitures.
Segment operating profit increased 27 percent on a constant-currency basis in the third 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 39 percent to $95 million in the nine-month period ended February 26, 2023, compared to
$156 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
higher input costs, partially offset by favorable net price realization and mix and a decrease in SG&A expenses. Segment operating
profit decreased 33 percent on a constant-currency basis in the nine-month period ended February 26, 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).
28
Pet Segment Results
Pet net sales were as follows:
Quarter Ended
Nine-Month Period Ended
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Net sales (in millions)
$
645.5
14
%
$
567.7
$
1,818.3
10
%
$
1,649.1
Contributions from volume growth (a)
6
pts
(2)
pts
Net price realization and mix
8
pts
13
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 increased 14 percent in the third quarter of fiscal 2023, compared to the same period in fiscal 2022, driven by favorable
net price realization and mix and an increase in contributions from volume growth .
Pet net sales increased 10 percent during the nine-month period ended February 26, 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.
The components of Pet organic net sales growth are shown in the following table:
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023
Contributions from organic volume growth (a)
6
pts
(3)
pts
Organic net price realization and mix
8
pts
12
pts
Organic net sales growth
14
pts
9
pts
Foreign currency exchange
Flat
Flat
Acquisition (b)
Flat
1
pt
Net sales growth
14
pts
10
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
Pet organic net sales increased 14 percent in the third quarter of fiscal 2023, compared to the same period in fiscal 2022, driven by
favorable organic net price realization and mix and an increase in contributions from organic volume growth.
Pet organic net sales increased 9 percent in the nine-month period ended February 26, 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 decreased 7 percent to $103 million in the third quarter of fiscal 2023, compared to $111 million in the same
period in fiscal 2022, primarily driven by higher input costs and higher SG&A expenses, partially offset by favorable net price
realization and mix and an increase in contributions from volume growth. Segment operating profit decreased 7 percent on a constant-
currency basis in the third 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 13 percent to $312 million in the nine-month period ended February 26, 2023, compared to
$357 million in the same period in fiscal 2022, primarily driven by higher input costs, an increase in SG&A expenses, and a decrease
in contributions from volume growth, partially offset by favorable net price realization and mix. Segment operating profit decreased
13 percent on a constant-currency basis in the nine-month period ended February 26, 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).
29
North America Foodservice Segment Results
North America Foodservice net sales were as follows:
Quarter Ended
Nine-Month Period Ended
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Feb. 26,
2023
Feb. 26, 2023 vs
Feb. 27, 2022
Feb. 27,
2022
Net sales (in millions)
$
547.8
25
%
$
437.1
$
1,627.2
23
%
$
1,319.4
Contributions from volume growth (a)
6
pts
2
pts
Net price realization and mix
20
pts
21
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 25 percent in the third quarter of fiscal 2023, compared to the same period in fiscal
2022, driven by favorable net price realization and mix and an increase in contributions from volume growth.
North America Foodservice net sales increased 23 percent in the nine-month period ended February 26, 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.
The components of North America Foodservice organic net sales growth are shown in the following table:
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 26, 2023
Contributions from organic volume growth (a)
1
pt
(1)
pt
Organic net price realization and mix
18
pts
19
pts
Organic net sales growth
19
pts
18
pts
Foreign currency exchange
Flat
Flat
Acquisition (b)
6
pts
5
pts
Net sales growth
25
pts
23
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 19 percent in the third quarter of fiscal 2023, compared to the same period in
fiscal 2022, driven by favorable organic net price realization and mix and an increase in contributions from organic volume growth .
North America Foodservice organic net sales increased 18 percent in the nine-month period ended February 26, 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 increased 134 percent to $82 million in the third quarter of fiscal 2023, compared to $35 million in the same
period in fiscal 2022, primarily driven by favorable net price realization and mix, partially offset by higher input costs. Segment
operating profit increased 134 percent on a constant-currency basis in the third 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 24 percent to $218 million in the nine-month period ended February 26, 2023, compared to
$175 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 24 percent on a constant-currency basis in the
nine-month period ended February 26, 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).
30
UNALLOCATED CORPORATE ITEMS
Unallocated corporate expense totaled $296 million in the third quarter of fiscal 2023, compared to $141 million in the same period in
fiscal 2022. In the third quarter of fiscal 2023, we recorded a $67 million net increase in expense related to the mark-to-market
valuation of certain commodity positions and grain inventories compared to a $20 million net increase in expense in the same period
last year. We recorded $20 million of net losses related to valuation adjustments on certain corporate investments in the third quarter
of fiscal 2023, compared to $11 million of net gains related to the sale of certain corporate investments and valuation adjustments in
the third quarter of fiscal 2022. In addition, we recorded $1 million of integration costs primarily related to our acquisition of TNT
Crust in the third quarter of fiscal 2023, compared to $4 million of integration costs related to our acquisition of Tyson Foods’ pet
treats business in the third quarter of fiscal 2022. In the third quarter of fiscal 2022, we recorded $9 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 addition, certain compensation and benefits expenses and charitable contributions increased in the third quarter of fiscal
2023, compared to the same period last year.
Unallocated corporate expense totaled $842 million in the nine-month period ended February 26, 2023, compared to $329 million in
the same period last year. We recorded a $266 million net increase in expense related to the mark-to-market valuation of certain
commodity positions and grain inventories in the nine-month period ended February 26, 2023, compared to a $16 million net decrease
in expense in the same period last year. We recorded $82 million of net losses related to valuation adjustments and the sale of
corporate investments in the nine-month period ended February 26, 2023, compared to $21 million of net gains in the same period last
year. In the nine-month period ended February 26, 2023, we recorded a $26 million charge related to a voluntary recall on certain
international
Häagen-Dazs
acquisition of TNT Crust in the nine-month period ended February 26, 2023, compared to $20 million of integration costs related to
our acquisition of Tyson Foods’ pet treats business in the nine-month period ended February 27, 2022. In the nine-month period
ended February 26, 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 $57 million of transaction costs related to the sale of our interests in Yoplait SAS,
Yoplait Marques SNC, Liberté Marques Sàrl and the sale of our European dough businesses. In addition, we recorded a $20 million
recovery related to a Brazil indirect tax item and a $13 million insurance recovery in the nine-month period ended February 27, 2022.
In addition, certain compensation and benefits expenses and charitable contributions increased in the nine-month period ended
February 26, 2023, compared to the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
During the nine-month period ended February 26, 2023, cash provided by operations was $2,027 million compared to $2,228 million
in the same period last year. The $201 million decrease was primarily driven by an increase in inventory and higher cash income tax
payments in the nine-month period ended February 26, 2023, as compared to the same period a year ago.
Cash used by investing activities during the nine -month period ended February 26, 2023, was $6 million compared to cash used of
$1,462 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.
Cash used by financing activities during the nine-month period ended February 26, 2023, was $1,956 million compared to
$1,398 million of cash used by financing activities in the same period in fiscal 2022. We paid $967 million of dividends in the nine-
month period ended February 26, 202 3, compared to $934 million in the same period last year. We purchased $1,152 million of shares
of common stock in the nine-month period ended February 26, 2023, compared to $550 million in the same period in fiscal 2022. In
addition, we had $61 million of net debt issuances in the nine-month period ended February 26, 2023, compared to $128 million of net
debt issuances in the same period a year ago.
As of February 26, 2023, we had $553 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.
31
The following table details the fee-paid committed and uncommitted credit lines we had available as of February 26, 2023:
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). The floating preferred return rate on GMC’s Class A Interests is
the sum of the three-month Term SOFR plus 186 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
February 26, 2023, we were in compliance with all of these covenants.
We have $2,487 million of long-term debt maturing in the next 12 months that is classified as current, including €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, €250 million of floating-
rate notes due May 16, 2023, €500 million of 0.00 percent fixed-rate notes due July 27, 2023, and $400 million of floating-rate notes
due October 17, 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 February 26, 2023, 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
our fiscal 2023 assessment date, the
Progresso
EPIC
brand intangible assets had risk of decreasing coverage. We will continue to
monitor these businesses for potential impairment.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2022, 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
through December 31, 2024. 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.
In September 2022, the 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
32
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.
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.
Divestitures gain related to the sale of our interests in Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl and the sale of a
European dough business in fiscal 2022. 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
Restructuring charges
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 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.
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
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
Feb. 26, 2023
Feb. 27, 2022
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
730.2
14.2
%
$
815.3
18.0
%
Divestitures gain, net
(13.7)
(0.3)
%
(170.1)
(3.7)
%
Mark-to-market effects
66.6
1.3
%
20.0
0.4
%
Investment activity, net
20.1
0.4
%
(11.1)
(0.2)
%
Product recall
1.1
-
%
-
-
%
Restructuring charges
2.1
-
%
9.3
0.2
%
Acquisition integration costs
0.7
-
%
4.3
0.1
%
Transaction costs
-
-
%
8.6
0.2
%
Non-income tax recovery
-
-
%
0.2
-
%
Adjusted operating profit
$
807.0
15.7
%
$
676.5
14.9
%
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
2,615.6
17.4
%
$
2,459.7
17.4
%
Divestitures gain, net
(444.6)
(3.0)
%
(170.1)
(1.2)
%
Mark-to-market effects
266.4
1.8
%
(16.2)
(0.1)
%
Investment activity, net
82.1
0.5
%
(20.9)
(0.1)
%
Product recall
25.5
0.2
%
-
-
%
Restructuring charges
16.0
0.1
%
7.9
0.1
%
Acquisition integration costs
5.0
-
%
20.2
0.1
%
Transaction costs
2.0
-
%
56.8
0.4
%
Non-income tax recovery
-
-
%
(20.4)
(0.1)
%
Adjusted operating profit
$
2,567.9
17.0
%
$
2,317.0
16.4
%
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
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Change
Feb. 26, 2023
Feb. 27, 2022
Change
Operating profit as reported
$
730.2
$
815.3
(10)
%
$
2,615.6
$
2,459.7
6
%
Divestitures gain, net
(13.7)
(170.1)
(444.6)
(170.1)
Mark-to-market effects
66.6
20.0
266.4
(16.2)
Investment activity, net
20.1
(11.1)
82.1
(20.9)
Product recall
1.1
-
25.5
-
Restructuring charges
2.1
9.3
16.0
7.9
Acquisition integration costs
0.7
4.3
5.0
20.2
Transaction costs
-
8.6
2.0
56.8
Non-income tax recovery
-
0.2
-
(20.4)
Adjusted operating profit
$
807.0
$
676.5
19
%
$
2,567.9
$
2,317.0
11
%
Foreign currency exchange impact
(1)
pt
(1)
pt
Adjusted operating profit growth,
20
%
11
%
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 profitability measure we use to evaluate earnings performance on a comparable year-to-year
basis.
The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted EPS and the related constant-currency growth rates follows:
Quarter Ended
Nine-Month Period Ended
Per Share Data
Feb. 26, 2023
Feb. 27, 2022
Change
Feb. 26, 2023
Feb. 27, 2022
Change
Diluted earnings per share, as reported
$
0.92
$
1.08
(15)
%
$
3.28
$
3.07
7
%
Divestitures gain, net
(0.08)
(0.28)
(0.62)
(0.28)
Mark-to-market effects
0.09
0.03
0.34
(0.02)
Investment activity, net
0.03
(0.01)
0.11
(0.03)
Product recall
-
-
0.03
-
Restructuring charges
-
0.02
0.02
0.01
Acquisition integration costs
-
0.01
0.01
0.03
Transaction costs
-
0.01
-
0.07
Non-income tax recovery
-
-
-
(0.02)
Adjusted diluted earnings per share
$
0.97
$
0.84
15
%
$
3.18
$
2.82
13
%
Foreign currency exchange impact
(1)
pt
(1)
pt
Adjusted diluted earnings per share
17
%
14
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
See our reconciliation below of the effective income tax rate as reported to the adjusted effective income tax rate for the tax impact of
each item affecting comparability.
35
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 Feb. 26, 2023
(58)
%
(7)
pts
(51)
%
Nine-Month Period Ended Feb. 26, 2023
(37)
%
(9)
pts
(28)
%
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 Feb. 26, 2023
2
%
(6)
pts
8
%
Nine-Month Period Ended Feb. 26, 2023
1
%
(6)
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 Feb. 26, 2023
Percentage Change in
Operating Profit
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in Operating
Profit on Constant-Currency
Basis
North America Retail
29
%
Flat
29
%
International
18
%
(8)
pts
27
%
Pet
(7)
%
Flat
(7)
%
North America Foodservice
134
%
Flat
134
%
Nine-Month Period Ended Feb. 26, 2023
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
(39)
%
(6)
pts
(33)
%
Pet
(13)
%
Flat
(13)
%
North America Foodservice
24
%
Flat
24
%
Note: Tables may not foot due to rounding.
Adjusted Effective Income Tax Rates
We believe this measure provides useful information to investors because it presents the adjusted effective income tax rate on a
comparable year-to-year basis.
Adjusted effective income tax rates are calculated as follows:
Quarter Ended
Nine-Month Period Ended
Feb. 26, 2023
Feb. 27, 2022
Feb. 26, 2023
Feb. 27, 2022
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
$
653.5
$
108.3
$
755.9
$
123.2
$
2,403.1
$
471.5
$
2,269.0
$
451.8
Divestitures gain, net
(13.7)
28.7
(170.1)
0.4
(444.6)
(73.2)
(170.1)
0.4
Mark-to-market effects
66.6
15.3
20.0
4.6
266.4
61.3
(16.2)
(3.7)
Investment activity, net
20.1
4.5
(11.1)
(0.2)
82.1
18.0
(20.9)
0.3
Product recall
1.1
0.3
-
-
25.5
5.9
-
-
Restructuring charges
2.1
0.7
9.3
1.7
16.0
4.5
7.9
3.6
Acquisition integration costs
0.7
0.1
4.3
1.0
5.0
1.1
20.2
4.6
Transaction costs
-
-
8.6
(1.2)
2.0
0.6
56.8
11.2
Non-income tax recovery
-
-
0.2
0.1
-
-
(20.4)
(6.9)
As adjusted
$
730.3
$
157.8
$
617.1
$
129.5
$
2,355.4
$
489.6
$
2,126.3
$
461.3
Effective tax rate:
As reported
16.6%
16.3%
19.6%
19.9%
As adjusted
21.6%
21.0%
20.8%
21.7%
Sum of adjustment to
$
49.5
$
6.4
$
18.1
$
9.5
Average number of common
599.0
612.4
602.4
613.5
Impact of income tax adjustments
$
(0.08)
$
(0.01)
$
(0.03)
$
(0.02)
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.
37
Glossary
AOCI
. Accumulated other comprehensive income (loss).
Adjusted diluted EPS.
Adjusted operating profit.
Adjusted operating profit margin.
Operating profit adjusted for certain items affecting year-over-year comparability, divided by net
sales.
Constant currency.
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.
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.
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.
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.
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).
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.
38
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
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.
SOFR.
Strategic Revenue Management (SRM).
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.
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).
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.
39
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 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 February 26, 2023, was as follows:
In Millions
One-day Risk
of Loss
Change During
Nine-Month
Period Ended
Feb. 26, 2023
Analysis of Change
Interest rate instruments
$
47
$
6
Rising interest rates
Foreign currency instruments
38
18
Increase in portfolio basis
Commodity instruments
9
(4)
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.
40
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 February 26, 2023, 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 February 26, 2023 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
February 26, 2023:
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)
November 28, 2022 -
January 1, 2023
1,961,407
$
84.61
1,961,407
88,860,531
January 2, 2023 -
January 29, 2023
1,016,544
82.85
1,016,544
87,843,987
January 30, 2023 -
February 26, 2023
2,330
77.99
2,330
87,841,657
Total
2,980,281
$
84.00
2,980,281
87,841,657
(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.
41
PART II. OTHER INFORMATION
Item 6.
Exhibits.
Financial Statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended February 26,
2023, 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.
Cover Page, formatted in Inline Extensible Business Reporting Language and contained in Exhibit 101.
42
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: March 23, 2023
/s/ Mark A. Pallot
Mark A. Pallot
Vice President, Chief Accounting Officer
(Principal Accounting Officer and Duly Authorized Officer)