filings.toolsItem 8. Financial Statements and Supplementary Data
162K characters. Original on sec.gov · Markdown
Item 8. Financial Statements and Supplementary Data
REPORT OF MANAGEMENT RESPONSIBILITIES
The
management
of
General
Mills,
Inc.
is
responsible
for
the
fairness
and
accuracy
of
the
consolidated
financial
statements.
The
statements
have
been
prepared
in
accordance
with
accounting
principles
that
are
generally
accepted
in
the
United
States,
using
management’s
best estimates and judgments where
appropriate. The financial information throughout
this Annual Report on Form
10-
K is consistent with our consolidated financial statements.
Management
has established
a system
of internal
controls that
provides
reasonable
assurance that
assets are
adequately
safeguarded
and
transactions
are
recorded
accurately
in
all
material
respects,
in
accordance
with
management’s
authorization.
We
maintain
a
strong
audit program
that independently
evaluates
the adequacy
and effectiveness
of internal
controls. Our
internal controls
provide
for
appropriate
separation
of
duties
and
responsibilities,
and
there
are
documented
policies
regarding
use
of
our
assets
and
proper
financial reporting. These formally stated and regularly communicated
policies demand highly ethical conduct from all employees.
The Audit
Committee of
the Board
of Directors
meets regularly
with management,
internal auditors,
and our
independent registered
public
accounting
firm
to
review
internal
control,
auditing,
and
financial
reporting
matters.
The
independent
registered
public
accounting firm, internal auditors, and employees have full and free access to
the Audit Committee at any time.
The Audit
Committee reviewed
and approved
the Company’s
annual financial
statements. The
Audit Committee
recommended,
and
the Board
of Directors
approved, that
the consolidated
financial statements
be included
in the
Annual Report.
The Audit
Committee
also appointed KPMG LLP to serve as the Company’s
independent registered public accounting firm for fiscal 2024.
/s/ J. L. Harmening
/s/ K. A. Bruce
J. L. Harmening
K. A. Bruce
Chief Executive Officer
Chief Financial Officer
June 28, 2023
Report of Independent Registered Public Accounting Firm
To the Stockholders
and Board of Directors
General Mills, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control
Over Financial Reporting
We
have
audited
the
accompanying
consolidated
balance
sheets
of
General
Mills,
Inc. and
subsidiaries
(the
Company)
as
of
May 28, 2023, and May 29, 2022,
the related consolidated statements of
earnings, comprehensive income, total equity
and redeemable
interest,
and
cash
flows
for
each
of
the
years
in
the
three-year
period
ended
May 28, 2023,
and
the
related
notes
and
financial
statement schedule
II (collectively,
the consolidated
financial statements).
We
also have
audited the
Company’s
internal control
over
financial reporting as
of May 28, 2023, based
on criteria established
in
Internal Control
– Integrated Framework
(2013)
issued by the
Committee of Sponsoring Organizations of the Treadway
Commission.
In our
opinion, the
consolidated financial
statements referred
to above
present fairly,
in all material
respects, the
financial position
of
the Company
as of
May 28, 2023, and
May 29,
2022, and
the results
of its
operations and
its cash
flows for
each of
the years
in the
three-year
period
ended
May 28, 2023,
in
conformity
with
U.S.
generally
accepted
accounting
principles.
Also
in
our
opinion,
the
Company maintained,
in all material
respects, effective
internal control
over financial
reporting as of
May 28, 2023, based
on criteria
established
in
Internal
Control
–
Integrated
Framework
(2013)
issued
by
the
Committee
of
Sponsoring
Organizations
of
the
Treadway Commission.
Basis for Opinions
The Company’s
management is responsible
for these consolidated
financial statements, for
maintaining effective
internal control over
financial
reporting,
and
for
its
assessment
of
the
effectiveness
of
internal
control
over
financial
reporting,
included
in
the
accompanying Management's
Report on
Internal Control
over Financial
Reporting. Our
responsibility is
to express
an opinion
on the
Company’s
consolidated financial
statements and an
opinion on
the Company’s
internal control
over financial reporting
based on
our
audits. We
are a
public accounting
firm registered
with the
Public Company
Accounting Oversight
Board (United
States) (PCAOB)
and are required to
be independent with
respect to the Company
in accordance with the
U.S. federal securities laws
and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted
our audits in accordance with the
standards of the PCAOB. Those standards require
that we plan and perform the audits
to obtain
reasonable assurance
about whether
the consolidated
financial statements
are free
of material
misstatement, whether
due to
error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of
the consolidated financial
statements included performing
procedures to assess
the risks of
material misstatement
of the
consolidated
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
consolidated
financial
statements. Our audits also included
evaluating the accounting principles
used and significant estimates made
by management, as well
as evaluating
the overall
presentation
of the
consolidated
financial
statements.
Our
audit of
internal
control over
financial
reporting
included obtaining an understanding
of internal control over financial
reporting, assessing the risk that
a material weakness exists,
and
testing and
evaluating the
design and
operating effectiveness
of internal
control based
on the
assessed risk.
Our audits
also included
performing
such other
procedures as
we considered
necessary in
the circumstances.
We
believe that
our audits
provide a
reasonable
basis for our opinions.
Definition and Limitations of Internal Control
Over Financial Reporting
A company’s
internal control over financial reporting is a
process designed to provide reasonable assurance
regarding the reliability of
financial reporting and
the preparation of
financial statements for
external purposes in
accordance with generally
accepted accounting
principles.
A
company’s
internal
control
over
financial
reporting
includes
those
policies
and
procedures
that
(1)
pertain
to
the
maintenance
of
records
that,
in
reasonable
detail,
accurately
and
fairly
reflect
the
transactions
and
dispositions
of
the
assets
of
the
company; (2) provide
reasonable assurance that
transactions are recorded
as necessary to permit
preparation of financial
statements in
accordance with
generally accepted
accounting principles,
and that
receipts and
expenditures of
the company
are being
made only
in
accordance
with
authorizations
of
management
and
directors
of
the
company;
and
(3)
provide
reasonable
assurance
regarding
prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s
assets that could have a material effect
on the financial statements.
Because of its inherent
limitations, internal control
over financial reporting may
not prevent or detect
misstatements. Also, projections
of any evaluation
of effectiveness to
future periods are
subject to the
risk that controls
may become inadequate
because of changes
in
conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Critical Audit Matter
The critical audit matter
communicated below is a
matter arising from the
current period audit of the
consolidated financial statements
that was communicated
or required to
be communicated to
the audit committee
and that: (1) relates
to accounts or
disclosures that are
material to
the consolidated
financial statements
and (2)
involved our
especially challenging,
subjective, or
complex judgments.
The
communication
of
a
critical
audit matter
does
not
alter
in any
way
our
opinion
on the
consolidated
financial
statements, taken
as a
whole, and
we are
not, by
communicating the
critical audit
matter below,
providing a
separate opinion
on the
critical audit
matter or
on the accounts or disclosures to which it relates.
Valuation
of goodwill and brand intangible assets
As discussed in Note 6 to the consolidated financial statements, the goodwill
and brands and other indefinite-lived intangibles
balances
as
of
May
28,
2023,
were
$14,511.2
million
and
$6,712.4
million,
respectively.
The
impairment
tests
for
these
assets, which
are performed
annually and
whenever
events or
changes in
circumstances
indicate that
impairment may
have
occurred, require
the Company
to estimate
the fair
value of
the reporting
units to
which goodwill
is assigned
as well
as the
brands and
other indefinite
-lived intangible
assets. The
fair value
estimates are
derived
from discounted
cash flow
analyses
that
require
the
Company
to make
judgments
about
highly subjective
matters,
including
future
operating
results,
including
revenue growth rates and operating margins,
and an estimate of the discount rates and royalty rates.
We
identified the
assessment of the
valuation of certain
goodwill and
brand intangible assets
as a critical
audit matter.
There
was
a
significant
degree
of
judgment
required
in
evaluating
audit
evidence,
which
consists
primarily
of
forward-looking
assumptions
about
future
operating
results,
specifically
the
revenue
growth
rates
and
operating
margins,
royalty
rates
and
subjective inputs used to estimate the discount rates.
The
following
are
the
primary
procedures
we
performed
to address
this critical
audit
matter.
We
evaluated
the
design
and
tested
the
operating
effectiveness
of
internal
controls
related
to
the valuation
of goodwill
and
brand
intangible
assets. This
included controls related
to the assumptions
about future operating
results and the discount
and royalty rates
used to measure
the fair value
of the reporting
units and brands
intangible assets.
We
performed sensitivity
analyses over
the revenue
growth
rates, operating margins, brand
royalty rates and discount rates
to assess the impact of
other points within a range
of potential
assumptions.
We
evaluated
the
revenue
growth
rates
and
operating
margin
assumptions
by
comparing
them
to
recent
financial performance
and external
market and
industry data.
We
evaluated whether
these assumptions
were consistent
with
evidence obtained
in other areas
of the audit.
We
involved professionals with
specialized skills and
knowledge, who assisted
in the evaluation
of the Company’s
discount rates by
comparing them
against rate ranges
that were independently
developed
using publicly available market data
for comparable entities and the royalty
rates by evaluating the methods, assumptions
and
market data used to estimate the royalty rates.
/s/
KPMG
LLP
We have served
as the Company’s auditor since 1928.
Minneapolis, Minnesota
June 28, 2023
Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except per Share Data)
Fiscal Year
2023
2022
2021
Net sales
$
20,094.2
$
18,992.8
$
18,127.0
Cost of sales
13,548.4
12,590.6
11,678.7
Selling, general, and administrative expenses
3,500.4
3,147.0
3,079.6
Divestitures (gain) loss, net
(444.6)
(194.1)
53.5
Restructuring, impairment, and other exit costs (recoveries)
56.2
(26.5)
170.4
Operating profit
3,433.8
3,475.8
3,144.8
Benefit plan non-service income
(88.8)
(113.4)
(132.9)
Interest, net
382.1
379.6
420.3
Earnings before income taxes and after-tax earnings
from joint ventures
3,140.5
3,209.6
2,857.4
Income taxes
612.2
586.3
629.1
After-tax earnings from joint ventures
81.3
111.7
117.7
Net earnings, including earnings attributable to redeemable and
noncontrolling interests
2,609.6
2,735.0
2,346.0
Net earnings attributable to redeemable and noncontrolling interests
15.7
27.7
6.2
Net earnings attributable to General Mills
$
2,593.9
$
2,707.3
$
2,339.8
Earnings per share — basic
$
4.36
$
4.46
$
3.81
Earnings per share — diluted
$
4.31
$
4.42
$
3.78
Dividends per share
$
2.16
$
2.04
$
2.02
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions)
Fiscal Year
2023
2022
2021
Net earnings, including earnings attributable to redeemable and
noncontrolling interests
$
2,609.6
$
2,735.0
$
2,346.0
Other comprehensive (loss) income, net of tax:
Foreign currency translation
(110.8)
(175.9)
175.1
Net actuarial (loss) income
(228.0)
101.6
353.4
Other fair value changes:
Hedge derivatives
1.3
7.0
(20.7)
Reclassification to earnings:
Foreign currency translation
(7.4)
342.2
-
Hedge derivatives
(18.7)
35.1
13.5
Amortization of losses and prior service costs
56.9
75.8
78.9
Other comprehensive (loss) income, net of tax
(306.7)
385.8
600.2
Total comprehensive
income
2,302.9
3,120.8
2,946.2
Comprehensive income (loss) attributable to redeemable and
noncontrolling interests
15.4
(45.2)
121.2
Comprehensive income attributable to General Mills
$
2,287.5
$
3,166.0
$
2,825.0
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
May 28, 2023
May 29, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
585.5
$
569.4
Receivables
1,683.2
1,692.1
Inventories
2,172.0
1,867.3
Prepaid expenses and other current assets
735.7
802.1
Assets held for sale
-
158.9
Total current
assets
5,176.4
5,089.8
Land, buildings, and equipment
3,636.2
3,393.8
Goodwill
14,511.2
14,378.5
Other intangible assets
6,967.6
6,999.9
Other assets
1,160.3
1,228.1
Total assets
$
31,451.7
$
31,090.1
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
4,194.2
$
3,982.3
Current portion of long-term debt
1,709.1
1,674.2
Notes payable
31.7
811.4
Other current liabilities
1,600.7
1,552.0
Total current
liabilities
7,535.7
8,019.9
Long-term debt
9,965.1
9,134.8
Deferred income taxes
2,110.9
2,218.3
Other liabilities
1,140.0
929.1
Total liabilities
20,751.7
20,302.1
Stockholders' equity:
Common stock,
754.6
shares issued, $
0.10
par value
75.5
75.5
Additional paid-in capital
1,222.4
1,182.9
Retained earnings
19,838.6
18,532.6
Common stock in treasury,
at cost, shares of
.0 and
155.7
(8,410.0)
(7,278.1)
Accumulated other comprehensive loss
(2,276.9)
(1,970.5)
Total stockholders' equity
10,449.6
10,542.4
Noncontrolling interests
250.4
245.6
Total equity
10,700.0
10,788.0
Total liabilities and equity
$
31,451.7
$
31,090.1
See accompanying notes to consolidated financial statements.
Consolidated Statements of Total
Equity and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except per Share Data)
Fiscal Year
2023
2022
2021
Shares
Amount
Shares
Amount
Shares
Amount
Total equity,
beginning balance
$
10,788.0
$
9,773.2
$
8,349.5
Common stock,
billion shares authorized, $
0.10
par value
754.6
75.5
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,182.9
1,365.5
1,348.6
Stock compensation plans
34.5
17.9
6.2
Unearned compensation related to stock unit awards
(104.7)
(92.2)
(78.0)
Earned compensation
109.7
104.5
88.5
Decrease in redemption value of
redeemable interest
-
14.1
0.2
Reversal of cumulative redeemable interest
value adjustments
-
(207.4)
-
Acquisition of noncontrolling interest
-
(19.5)
-
Ending balance
1,222.4
1,182.9
1,365.5
Retained earnings:
Beginning balance
18,532.6
17,069.8
15,982.1
Net earnings attributable to General Mills
2,593.9
2,707.3
2,339.8
Cash dividends declared ($
2.16
, $
2.04
, and $
2.02
per share)
(1,287.9)
(1,244.5)
(1,246.4)
Adoption of current expected credit loss
accounting requirements
-
-
(5.7)
Ending balance
19,838.6
18,532.6
17,069.8
Common stock in treasury:
Beginning balance
(155.7)
(7,278.1)
(146.9)
(6,611.2)
(144.8)
(6,433.3)
Shares purchased
(18.0)
(1,403.6)
(13.5)
(876.8)
(5.0)
(301.4)
Stock compensation plans
5.7
271.7
4.7
209.9
2.9
123.5
Ending balance
(168.0)
(8,410.0)
(155.7)
(7,278.1)
(146.9)
(6,611.2)
Accumulated other comprehensive loss:
Beginning balance
(1,970.5)
(2,429.2)
(2,914.4)
Comprehensive (loss) income
(306.4)
458.7
485.2
Ending balance
(2,276.9)
(1,970.5)
(2,429.2)
Noncontrolling interests:
Beginning balance
245.6
302.8
291.0
Comprehensive income (loss)
15.4
(16.0)
38.0
Distributions to noncontrolling interest holders
(15.7)
(129.8)
(26.2)
Reclassification from redeemable interest
-
561.6
-
Reversal of cumulative redeemable interest
value adjustments
-
207.4
-
Divestiture
5.1
(680.4)
-
Ending balance
250.4
245.6
302.8
Total equity,
ending balance
$
10,700.0
$
10,788.0
$
9,773.2
Redeemable interest:
Beginning balance
$
-
$
604.9
$
544.6
Comprehensive (loss) income
-
(29.2)
83.2
Decrease in redemption value of
redeemable interest
-
(14.1)
(0.2)
Distributions to redeemable interest holder
-
-
(22.7)
Reclassification to noncontrolling interest
-
(561.6)
-
Ending balance
$
-
$
-
$
604.9
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions)
Fiscal Year
2023
2022
2021
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests
$
2,609.6
$
2,735.0
$
2,346.0
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
546.6
570.3
601.3
After-tax earnings from joint ventures
(81.3)
(111.7)
(117.7)
Distributions of earnings from joint ventures
69.9
107.5
95.2
Stock-based compensation
111.7
98.7
89.9
Deferred income taxes
(22.2)
62.2
118.8
Pension and other postretirement benefit plan contributions
(30.1)
(31.3)
(33.4)
Pension and other postretirement benefit plan costs
(27.6)
(30.1)
(33.6)
Divestitures (gain) loss, net
(444.6)
(194.1)
53.5
Restructuring, impairment, and other exit costs (recoveries)
24.4
(117.1)
150.9
Changes in current assets and liabilities, excluding the effects of acquisitions and divestitures
(48.9)
277.4
(155.9)
Other, net
71.1
(50.7)
(131.8)
Net cash provided by operating activities
2,778.6
3,316.1
2,983.2
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(689.5)
(568.7)
(530.8)
Acquisition, net of cash acquired
(251.5)
(1,201.3)
-
Investments in affiliates, net
(32.2)
15.4
15.5
Proceeds from disposal of land, buildings, and equipment
1.3
3.3
2.7
Proceeds from divestitures, net of cash divested
633.1
74.1
2.9
Other, net
(7.6)
(13.5)
(3.1)
Net cash used by investing activities
(346.4)
(1,690.7)
(512.8)
Cash Flows - Financing Activities
Change in notes payable
(769.3)
551.4
71.7
Issuance of long-term debt
2,324.4
2,203.7
1,576.5
Payment of long-term debt
(1,421.7)
(3,140.9)
(2,609.0)
Debt exchange participation incentive cash payment
-
-
(201.4)
Proceeds from common stock issued on exercised options
232.3
161.7
74.3
Purchases of common stock for treasury
(1,403.6)
(876.8)
(301.4)
Dividends paid
(1,287.9)
(1,244.5)
(1,246.4)
Distributions to noncontrolling and redeemable interest holders
(15.7)
(129.8)
(48.9)
Other, net
(62.6)
(28.0)
(30.9)
Net cash used by financing activities
(2,404.1)
(2,503.2)
(2,715.5)
Effect of exchange rate changes on cash and cash equivalents
(12.0)
(58.0)
72.5
Increase (decrease) in cash and cash equivalents
16.1
(935.8)
(172.6)
Cash and cash equivalents - beginning of year
569.4
1,505.2
1,677.8
Cash and cash equivalents - end of year
$
585.5
$
569.4
$
1,505.2
Cash flow from changes in current assets and liabilities, excluding the effects of acquisitions and
divestitures:
Receivables
$
(41.2)
$
(166.3)
$
27.9
Inventories
(319.0)
(85.8)
(354.7)
Prepaid expenses and other current assets
61.6
(35.3)
(42.7)
Accounts payable
199.8
456.7
343.1
Other current liabilities
49.9
108.1
(129.5)
Changes in current assets and liabilities
$
(48.9)
$
277.4
$
(155.9)
See accompanying notes to consolidated financial statements.
Notes to Consolidated Financial Statements
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTE 1. BASIS OF PRESENTATION
AND RECLASSIFICATIONS
Basis of Presentation
Our Consolidated Financial
Statements include the
accounts of General
Mills, Inc. and all
subsidiaries in which
we have a controlling
financial
interest.
Intercompany
transactions
and
accounts,
including
any
noncontrolling
and
redeemable
interests’
share
of
those
transactions, are eliminated in consolidation.
Our fiscal year ends on the last Sunday in May.
Our India business is on an April fiscal year end.
Certain
reclassifications
to
our
previously
reported
financial
information
have
been
made
to
conform
to
the
current
period
presentation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Cash and Cash Equivalents
We consider all investments
purchased with an original maturity of three months or less to be cash equivalents.
Inventories
All
inventories
in
the
United
States
other
than
grain
are
valued
at
the
lower
of
cost,
using
the
last-in,
first-out
(LIFO)
method,
or
market. Grain inventories are
valued at net realizable
value, and all related cash
contracts and derivatives are valued
at fair value, with
all net changes in value recorded in earnings currently.
Inventories
outside
of the
United
States are
generally
valued
at
the lower
of
cost, using
the
first-in,
first-out
(FIFO) method,
or net
realizable value.
Shipping
costs associated
with the
distribution of
finished product
to our
customers are
recorded as
cost of
sales and
are recognized
when the related finished product is shipped to and accepted by the customer.
Land, Buildings, Equipment, and Depreciation
Land is recorded at historical cost.
Buildings and equipment, including
capitalized interest and internal engineering
costs, are recorded
at
cost
and
depreciated
over
estimated
useful
lives,
primarily
using
the
straight-line
method.
Ordinary
maintenance
and
repairs
are
charged
to
cost
of
sales.
Buildings
are
usually
depreciated
over
years,
and
equipment,
furniture,
and
software
are
usually
depreciated over
to
years. Fully depreciated assets are retained
in buildings and equipment until disposal.
When an item is sold or
retired,
the
accounts
are
relieved
of
its
cost
and
related
accumulated
depreciation
and
the
resulting
gains
and
losses,
if
any,
are
recognized in earnings.
Long-lived assets
are reviewed
for impairment
whenever events
or changes
in circumstances
indicate that
the carrying
amount of
an
asset
(or
asset
group)
may
not
be
recoverable.
An
impairment
loss
would
be
recognized
when
estimated
undiscounted
future
cash
flows from
the operation
and disposition
of the
asset group
are less
than the
carrying amount
of the
asset group.
Asset groups
have
identifiable cash
flows and
are largely
independent of
other asset groups.
Measurement of
an impairment
loss would
be based
on the
excess
of
the
carrying
amount of
the
asset group
over
its fair
value.
Fair
value
is measured
using
a discounted
cash
flow model
or
independent appraisals, as appropriate.
Goodwill and Other Intangible Assets
Goodwill
is
not
subject
to
amortization
and
is
tested
for
impairment
annually
and
whenever
events
or
changes
in
circumstances
indicate that impairment may have
occurred. We
perform our annual goodwill and
indefinite-lived intangible assets impairment
test as
of the
first day
of the
second quarter
of the
fiscal year.
Impairment testing
is performed
for each
of our
reporting units.
We
compare
the
carrying
value
of
a
reporting
unit,
including
goodwill,
to
the
fair
value
of
the
unit.
Carrying
value
is
based
on
the
assets
and
liabilities
associated
with
the
operations
of
that
reporting
unit,
which
often
requires
allocation
of
shared
or
corporate
items
among
reporting
units.
If
the
carrying
amount
of
a
reporting
unit
exceeds
its
fair
value,
impairment
has
occurred.
We
recognize
an
impairment charge
for the
amount by
which the carrying
amount of
the reporting
unit exceeds
its fair
value up
to the
total amount
of
goodwill allocated
to the
reporting unit.
Our estimates
of fair
value are
determined based
on a
discounted
cash flow
model. Growth
rates for sales and profits are determined using inputs from our long-range
planning process. We also make
estimates of discount rates,
perpetuity growth assumptions, market comparables, and other factors.
We evaluate the
useful lives of our other intangible assets, mainly brands, to
determine if they are finite or indefinite-lived.
Reaching a
determination
on
useful
life
requires
significant
judgments
and
assumptions
regarding
the
future
effects
of
obsolescence,
demand,
competition, other economic
factors (such as the
stability of the industry,
known technological advances,
legislative action that
results
in an uncertain or
changing regulatory environment,
and expected changes in
distribution channels), the level
of required maintenance
expenditures,
and
the
expected
lives
of
other
related
groups
of
assets.
Intangible
assets
that
are
deemed
to
have
finite
lives
are
amortized on a straight-line basis, over their useful lives, generally ranging
from
to
years.
Our indefinite-lived
intangible assets,
mainly intangible
assets primarily
associated with
the
Blue Buffalo
,
Pillsbury
,
Totino’s
,
Old El
Paso
,
Progresso
,
Annie’s
,
Nudges
, and
Häagen-Dazs
brands, are also tested
for impairment annually
and whenever events or
changes
in circumstances
indicate that
their carrying
value may
not be
recoverable. Our
estimate of
the fair
value of
the brands
is based
on a
discounted
cash
flow
model
using
inputs
which
included
projected
revenues
from
our
long-range
plan,
assumed
royalty
rates
that
could be payable if we did not own the brands, and a discount rate.
Our finite-lived intangible
assets, primarily acquired
customer relationships, are
reviewed for impairment
whenever events or
changes
in circumstances indicate
that the carrying amount
of an asset may not
be recoverable. An impairment
loss would be recognized
when
estimated undiscounted future cash
flows from the operation and disposition
of the asset are less than
the carrying amount of the asset.
Assets generally
have identifiable
cash flows
and are
largely independent
of other
assets. Measurement
of an
impairment loss
would
be
based on
the
excess of
the carrying
amount of
the asset
over
its fair
value.
Fair
value
is measured
using
a discounted
cash flow
model or other similar valuation model, as appropriate.
Leases
We
determine whether
an arrangement
is a lease
at inception.
When our
lease arrangements
include lease and
non-lease components,
we account for lease and non-lease components (e.g. common area maintenance)
separately based on their relative standalone prices.
Any
lease
arrangements
with
an
initial
term
of
months
or
less
are
not
recorded
on
our
Consolidated
Balance
Sheet,
and
we
recognize lease costs for these
lease arrangements on a straight-line
basis over the lease term. Many
of our lease arrangements provide
us with
options to
exercise one
or more
renewal terms
or to
terminate the
lease arrangement.
We
include these
options when
we are
reasonably certain
to exercise them
in the lease
term used to
establish our
right of use
assets and lease
liabilities. Generally,
our lease
agreements do not include an option to purchase the leased asset, residual value guarantees,
or material restrictive covenants.
We
have
certain
lease
arrangements
with
variable
rental
payments.
Our
lease
arrangements
for
our
Häagen-Dazs
retail
shops
often
include rental payments
that are based
on a percentage
of retail sales. We
have other lease
arrangements that are
adjusted periodically
based on
an inflation
index or rate.
The future
variability of these
payments and
adjustments are
unknown, and
therefore they are
not
included
as
minimum
lease
payments
used
to
determine
our
right
of
use
assets
and
lease
liabilities.
Variable
rental
payments
are
recognized in the period in which the obligation is incurred.
As
most
of
our
lease
arrangements
do
not
provide
an
implicit
interest
rate,
we
apply
an
incremental
borrowing
rate
based
on
the
information available at the commencement date of the lease arrangement
to determine the present value of lease payments.
Investments in Unconsolidated Joint Ventures
Our
investments
in
companies
over
which
we
have
the
ability
to
exercise
significant
influence
are
stated
at
cost
plus
our
share
of
undistributed
earnings
or
losses.
We
receive
royalty
income
from
certain
joint
ventures,
incur
various
expenses
(primarily
research
and
development),
and
record
the
tax
impact
of
certain
joint
venture
operations
that
are
structured
as
partnerships.
In
addition,
we
make
advances
to
our
joint
ventures
in
the
form
of
loans
or
capital
investments.
We
also
sell
certain
raw
materials,
semi-finished
goods, and finished goods to the joint ventures, generally at market prices.
In addition,
we assess our
investments in our
joint ventures if
we have reason
to believe an
impairment may have
occurred including,
but not
limited to,
as a
result of
ongoing operating
losses, projected
decreases in
earnings, increases
in the
weighted-average
cost of
capital,
or
significant
business
disruptions.
The
significant
assumptions
used
to
estimate
fair
value
include
revenue
growth
and
profitability,
royalty
rates,
capital
spending,
depreciation
and
taxes,
foreign
currency
exchange
rates,
and
a
discount
rate.
By
their
nature, these projections
and assumptions are uncertain.
If we were to
determine the current
fair value of our
investment was less than
the carrying value of
the investment, then we
would assess if the
shortfall was of a temporary
or permanent nature and
write down the
investment to its fair value if we concluded the impairment is other than temporary.
Revenue Recognition
Our revenues primarily result
from contracts with customers,
which are generally short-term
and have a single performance
obligation
– the
delivery of
product. We
recognize revenue
for the
sale of packaged
foods at the
point in
time when our
performance obligation
has been satisfied and control of the
product has transferred to our customer,
which generally occurs when the shipment
is accepted by
our customer.
Sales include
shipping and
handling charges
billed to
the customer
and are
reported
net of
variable consideration
and
consideration
payable
to
our
customers,
including
trade
promotion,
consumer
coupon
redemption
and
other
reductions
to
the
transaction
price,
including
estimated allowances
for
returns, unsalable
product,
and
prompt
pay
discounts.
Sales, use,
value-added,
and
other
excise
taxes
are
not
included
in
revenue.
Trade
promotions
are
recorded
using
significant
judgment
of
estimated
participation and
performance levels
for offered
programs at
the time
of sale.
Differences between
estimated and
actual reductions
to
the
transaction
price
are
recognized
as
a
change
in
estimate
in
a
subsequent
period.
We
generally
do
not
allow
a
right
of
return.
However,
on a
limited case-by-case
basis with
prior
approval, we
may
allow customers
to return
product. In
limited circumstances,
product
returned
in
saleable
condition
is
resold
to
other
customers
or
outlets.
Receivables
from
customers
generally
do
not
bear
interest. Payment terms and
collection patterns vary around
the world and by
channel, and are short-term,
and as such, we do
not have
any significant financing components.
Our allowance for doubtful
accounts represents our estimate of
expected credit losses related
to
our
trade
receivables.
We
pool
our
trade
receivables
based
on
similar
risk
characteristics,
such
as
geographic
location,
business
channel, and other
account data. To
estimate our allowance
for doubtful
accounts, we leverage
information on historical
losses, asset-
specific
risk
characteristics,
current
conditions,
and reasonable
and
supportable
forecasts of
future
conditions.
Account
balances
are
written off
against the
allowance when
we deem
the amount
is uncollectible.
Please see
Note 17
for a
disaggregation of
our revenue
into
categories
that
depict
how
the
nature,
amount,
timing,
and
uncertainty
of
revenue
and
cash
flows
are
affected
by
economic
factors. We do
not have material contract assets or liabilities arising from our contracts with customers.
Environmental Costs
Environmental costs
relating to
existing conditions
caused by
past operations
that do
not contribute
to current
or future
revenues are
expensed. Liabilities
for anticipated
remediation costs
are recorded
on an
undiscounted basis
when they
are probable
and reasonably
estimable, generally no later than the completion of feasibility studies or our commitment
to a plan of action.
Advertising Production Costs
We expense the
production costs of advertising the first time that the advertising takes place.
Research and Development
All expenditures for research and development
(R&D) are charged against earnings in the period
incurred. R&D includes expenditures
for
new
product
and
manufacturing
process
innovation,
and
the
annual
expenditures
are
comprised
primarily
of
internal
salaries,
wages, consulting, and supplies
attributable to R&D activities.
Other costs include depreciation
and maintenance of research
facilities,
including assets at facilities that are engaged in pilot plant activities.
Foreign Currency Translation
For
all
significant
foreign
operations,
the
functional
currency
is
the
local
currency.
Assets
and
liabilities
of
these
operations
are
translated
at
the
period-end
exchange
rates.
Income
statement
accounts
are
translated
using
the
average
exchange
rates
prevailing
during the period. Translation
adjustments are reflected within
accumulated other comprehensive
loss (AOCI) in stockholders’
equity.
Gains
and
losses
from
foreign
currency
transactions
are
included
in
net
earnings
for
the
period,
except
for
gains
and
losses
on
investments
in
subsidiaries
for
which
settlement
is not
planned
for
the foreseeable
future and
foreign
exchange
gains and
losses on
instruments designated as net investment hedges. These gains and losses are recorded
in AOCI.
Derivative Instruments
All derivatives are recognized
on our Consolidated
Balance Sheets at fair
value based on quoted
market prices or our
estimate of their
fair value,
and are
recorded in
either current
or noncurrent
assets or
liabilities based
on their
maturity.
Changes in
the fair
values of
derivatives are
recorded in
net earnings
or other
comprehensive income,
based on
whether the
instrument is
designated and
effective
as
a
hedge
transaction
and,
if
so,
the
type
of
hedge
transaction.
Gains
or
losses
on
derivative
instruments
reported
in
AOCI
are
reclassified
to
earnings
in
the
period
the
hedged
item
affects
earnings.
If
the
underlying
hedged
transaction
ceases
to
exist,
any
associated amounts reported in AOCI are reclassified to earnings at that time.
Stock-based Compensation
We generally
measure compensation expense for grants of restricted stock
units and performance share units using the value of
a share
of
our
stock
on
the
date
of
grant.
We
estimate
the
value
of
stock
option
grants
using
a
Black-Scholes
valuation
model.
Generally,
stock-based
compensation
is recognized
straight
line over
the
vesting
period.
Our stock-based
compensation
expense is
recorded
in
selling, general
,
and administrative
(SG&A) expenses
and cost
of sales
in our
Consolidated Statements
of Earnings
and allocated
to
each reportable segment in our segment results.
Certain equity-based compensation plans contain provisions
that accelerate vesting of awards upon retirement, termination,
or death of
eligible
employees
and
directors.
We
consider
a
stock-based
award
to
be vested
when
the employee’s
or
director’s
retention
of
the
award
is no
longer
contingent
on
providing
subsequent
service.
Accordingly,
the
related
compensation
cost
is generally
recognized
immediately
for
awards
granted
to
retirement-eligible
individuals
or
over
the
period
from
the
grant
date
to
the
date
retirement
eligibility is achieved, if less than the stated vesting period.
We report the
benefits of tax deductions in excess of recognized compensation cost as an operating
cash flow.
Defined Benefit Pension, Other Postretirement Benefit, and Postemployment
Benefit Plans
We
sponsor
several domestic
and foreign
defined
benefit plans
to provide
pension, health
care, and
other welfare
benefits to
retired
employees. Under
certain circumstances,
we also
provide accruable
benefits, primarily
severance, to
former or
inactive employees
in
the
United
States,
Canada,
and
Mexico.
We
recognize
an
obligation
for
any
of
these
benefits
that
vest
or
accumulate
with
service.
Postemployment benefits
that do not
vest or
accumulate with
service (such
as severance
based solely
on annual pay
rather than years
of service) are charged to expense when incurred. Our postemployment
benefit plans are unfunded.
We
recognize the underfunded
or overfunded status
of a defined
benefit pension plan
as an asset
or liability and
recognize changes in
the funded status in the year in which the changes occur through AOCI.
Use of Estimates
Preparing
our
Consolidated
Financial
Statements
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
requires
us to
make estimates
and assumptions
that affect
reported amounts
of assets
and
liabilities, disclosures
of contingent
assets
and liabilities
at the
date of
the financial
statements, and
the reported
amounts of
revenues and
expenses during
the reporting
period.
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.
Actual
results could differ from our estimates.
New Accounting Standards
In the
first quarter
of fiscal
2021,
we adopted
new accounting
requirements
related
to the
measurement
of credit
losses on
financial
instruments, including
trade receivables.
The new
standard and
subsequent
amendments replace
the incurred
loss impairment
model
with a
forward-looking
expected credit
loss model,
which will
generally
result in
earlier recognition
of credit
losses. Our
allowance
for doubtful
accounts represents
our estimate
of expected
credit losses related
to our trade
receivables. We
pool our trade
receivables
based on similar risk characteristics,
such as geographic location,
business channel, and other
account data. To
estimate our allowance
for
doubtful
accounts,
we
leverage
information
on
historical
losses,
asset-specific
risk
characteristics,
current
conditions,
and
reasonable and
supportable forecasts
of future
conditions. Account
balances are
written off
against the
allowance when
we deem
the
amount
is
uncollectible.
We
adopted
the
requirements
of
the
new
standard
and
subsequent
amendments
using
the
modified
retrospective transition approach, and recorded a decrease to retained
earnings of $
5.7
million after-tax
.
NOTE 3. ACQUISITION AND DIVESTITURES
During
the first
quarter
of fiscal
2023,
we
acquired
TNT Crust,
a
manufacturer
of high-quality
frozen pizza
crusts
for
regional
and
national pizza
chains, foodservice
distributors, and
retail outlets,
for a
purchase price
of $
253.0
million. We
financed the
transaction
with U.S. commercial paper.
We consolidated
the TNT Crust business into
our Consolidated Balance
Sheets and recorded goodwill
of
$
156.8
million. The
goodwill is
included in
the North
America Foodservice
segment and
is not
deductible for
tax purposes.
The pro
forma
effects
of
this
acquisition
were
not
material.
We
have
conducted
a
preliminary
assessment
of
the
fair
value
of
the
acquired
assets
and
liabilities
of
the
TNT
Crust
business
and
will
continue
to
review
these
items
during
the
measurement
period.
If
new
information is obtained
about facts and circumstances
that existed at the
acquisition date, the
acquisition accounting
will be revised to
reflect the resulting adjustments to
current estimates of these items.
The consolidated results of the
TNT Crust business are reported
in
our North America Foodservice segment on a one-month lag.
During the
first quarter
of fiscal
2023,
we completed
the sale
of our
Helper main
meals and
Suddenly
Salad side
dishes business
to
Eagle Family Foods Group for $
606.8
million and recorded a pre-tax gain of $
442.2
million.
In fiscal 2022, we sold our European dough businesses and recorded
a net pre-tax gain on sale of $
30.4
million.
During
the
third
quarter
of
fiscal
2022,
we
sold
our
interests
in
Yoplait
SAS,
Yoplait
Marques
SNC,
and
Liberté
Marques
Sàrl
to
Sodiaal International (Sodiaal) in
exchange for Sodiaal’s
interest in our Canadian yogurt business, a
modified agreement for the use of
Yoplait
and
Liberté
brands in the
United States and
Canada, and cash.
We
recorded a net
pre-tax gain of
$
163.7
million on the
sale of
these businesses.
During
the
first
quarter
of
fiscal
2022,
we
acquired
Tyson
Foods’
pet
treats
business
for
$
1.2
billion
in
cash.
We
financed
the
transaction
with
a
combination
of
cash
on
hand
and
short-term
debt.
We
consolidated
Tyson
Foods’
pet
treats
business
into
our
Consolidated
Balance
Sheets
and
recorded
goodwill
of
$
762.3
million,
indefinite-lived
intangible
assets
for
the
Nudges
,
Top
Chews
, and
True
Chews
brands
totaling
$
330.0
million
in
aggregate,
and
a
finite-lived
customer
relationship
asset
of
$
40.0
million.
The goodwill is included in
the Pet reporting unit and is
deductible for tax purposes. The
pro forma effects of
this acquisition were not
material.
During
the
fourth
quarter
of
fiscal
2021,
we
recorded
a
pre-tax
loss
of
$
53.5
million
related
to
the
sale
of
our
Laticínios
Carolina
business in Brazil.
NOTE 4. RESTRUCTURING, IMPAIRMENT,
AND OTHER EXIT COSTS
We view
our restructuring activities as actions
that help us meet our long-term
growth targets and are evaluated
against internal rate of
return and net
present value targets.
Each restructuring
action normally takes
one to two
years to complete.
At completion (or
as each
major stage
is completed
in the
case of
multi-year programs),
the project
begins to
deliver cash
savings and/or
reduced depreciation.
These activities
result in
various restructuring
costs, including
asset write-offs,
exit charges
including severance,
contract termination
fees, and decommissioning
and other costs.
Accelerated depreciation
associated with restructured
assets, as used
in the context
of our
disclosures
regarding
restructuring
activity,
refers
to
the
increase
in
depreciation
expense
caused
by
shortening
the
useful
life
or
updating
the salvage
value
of depreciable
fixed
assets to
coincide
with the
end of
production
under an
approved
restructuring
plan.
Any impairment of the asset is recognized immediately in the period
the plan is approved.
Restructuring charges recorded in fiscal 2023 were
as follows:
Expense, in Millions
Global supply chain actions
$
36.2
Network optimization actions
6.4
Charges associated with restructuring actions previously
announced
18.4
Total restructuring
charges
$
61.0
In fiscal
2023,
we approved
restructuring actions
to enhance
the efficiency
of our
global supply
chain structure.
We
expect to
incur
approximately
$
million
of
restructuring
charges
and
project-related
costs
related
to
these
actions,
of
which
approximately
$
million will be
cash. These charges
are expected
to consist of
approximately $
million of severance
and $
million of other
costs,
primarily
$
million
of
asset
impairment
and
$
million
of
other
asset
write-offs.
We
recognized
$
25.8
million
of
severance
and
$
10.4
million of other costs in fiscal 2023. We
expect these actions to be completed by the end of fiscal 2025.
In fiscal 2023, we approved restructuring actions in
our International segment to optimize our Häagen-Dazs
shops network. We
expect
to incur
approximately $
million of
restructuring charges
and project-related
costs related
to these
actions, of
which approximately
$
million will be
cash. These charges
are expected to
consist of approximately
$
million of severance
and $
million of other
costs.
We
recognized $
5.6
million of
severance and
$
0.8
million of
other costs
in fiscal
- We
expect these
actions to
be completed
by
the
end of fiscal 2024
.
Certain actions are subject to union negotiations and works counsel consultations,
where required.
We paid net
$
36.6
million of cash related to restructuring actions in fiscal 2023. We
paid net $
93.9
million of cash in fiscal 2022.
Restructuring charges recorded in fiscal 2022 were
as follows:
Expense, in Millions
International manufacturing and logistics operations
$
15.0
Net recoveries associated with restructuring actions previously announced
(38.2)
Total net restructuring
recoveries
$
(23.2)
Restructuring charges recorded in fiscal 2021 were
as follows:
Expense, in Millions
Global organizational structure and resource alignment
$
157.3
International route-to-market and supply chain optimization
13.0
Charges associated with restructuring actions previously
announced
2.4
Total restructuring
charges
$
172.7
Restructuring and impairment charges and project-related
costs are classified in our Consolidated Statements of Earnings as follows:
Fiscal Year
In Millions
2023
2022
2021
Restructuring, impairment, and other exit costs (recoveries)
$
56.2
$
(26.5)
$
170.4
Cost of sales
4.8
3.3
2.3
Total restructuring
and impairment charges (recoveries)
61.0
(23.2)
172.7
Project-related costs classified in cost of sales
$
2.4
$
-
$
-
The roll forward of our restructuring and other exit cost reserves, included
in other current liabilities, is as follows:
In Millions
Severance
Other Exit
Costs
Total
Reserve balance as of May 31, 2020
$
17.8
$
-
$
17.8
Fiscal 2021 charges, including foreign currency translation
142.3
1.6
143.9
Utilized in fiscal 2021
(12.8)
(0.1)
(12.9)
Reserve balance as of May 30, 2021
147.3
1.5
148.8
Fiscal 2022 charges, including foreign currency translation
2.2
1.2
3.4
Reserve adjustment
(34.0)
-
(34.0)
Utilized in fiscal 2022
(80.1)
(1.3)
(81.4)
Reserve balance as of May 29, 2022
35.4
1.4
36.8
Fiscal 2023 charges, including foreign currency translation
41.6
0.1
41.7
Utilized in fiscal 2023
(29.4)
(1.4)
(30.8)
Reserve balance as of May 28, 2023
$
47.6
$
0.1
$
47.7
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,
the gain or loss on the sale of restructured assets, and the
write-off of spare parts) and other
periodic
exit
costs
recognized
as
incurred,
as
those
items
are
not
reflected
in
our
restructuring
and
other
exit
cost
reserves
on
our
Consolidated Balance Sheets.
NOTE 5. INVESTMENTS IN UNCONSOLIDATED
JOINT VENTURES
We
have a
percent interest
in Cereal
Partners Worldwide
(CPW), which
manufactures and
markets ready-to-eat
cereal products
in
approximately
countries
outside
the
United
States
and
Canada.
CPW
also
markets
cereal
bars
in
European
countries
and
manufactures private label cereals for
customers in the United Kingdom.
We have
guaranteed a portion of CPW’s
debt and its pension
obligation in the United Kingdom.
We
also have
a
percent interest
in Häagen-Dazs
Japan, Inc.
(HDJ). This joint
venture manufactures
and markets
Häagen-Dazs
ice
cream products and frozen novelties.
Results from our CPW and HDJ joint ventures are reported for the
12 months
ended March 31.
Joint venture related balance sheet activity is as follows:
In Millions
May 28, 2023
May 29, 2022
Cumulative investments
$
401.5
$
416.4
Goodwill and other intangibles
444.1
444.9
Aggregate advances included in cumulative investments
275.6
254.4
Joint venture earnings and cash flow activity is as follows:
Fiscal Year
In Millions
2023
2022
2021
Sales to joint ventures
$
5.8
$
6.3
$
6.7
Net advances (repayments)
32.2
(15.4)
(15.5)
Dividends received
69.9
107.5
95.2
Summary combined financial information for the joint ventures on
a 100 percent basis is as follows:
Fiscal Year
In Millions
2023
2022
2021
Net sales:
CPW
$
1,618.9
$
1,706.5
$
1,766.8
HDJ
338.5
427.8
422.4
Total net sales
1,957.4
2,134.3
2,189.2
Gross margin
667.7
803.1
882.9
Earnings before income taxes
169.3
249.9
247.8
Earnings after income taxes
126.9
201.0
201.7
In Millions
May 28, 2023
May 29, 2022
Current assets
$
817.7
$
823.9
Noncurrent assets
772.7
839.8
Current liabilities
1,300.0
1,298.8
Noncurrent liabilities
100.3
106.5
NOTE 6. GOODWILL AND OTHER INTANGIBLE
ASSETS
The components of goodwill and other intangible assets are as follows:
In Millions
May 28, 2023
May 29, 2022
Goodwill
$
14,511.2
$
14,378.5
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,712.4
6,725.8
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
386.3
400.3
Less accumulated amortization
(131.1)
(126.2)
Intangible assets subject to amortization
255.2
274.1
Other intangible assets
6,967.6
6,999.9
Total
$
21,478.8
$
21,378.4
Based on
the carrying
value of
finite-lived intangible
assets as of
May 28,
2023, amortization
expense for
each of
the next five
fiscal
years is estimated to be approximately $
million.
The changes in the carrying amount of goodwill for fiscal 2021, 2022, and 2023
are as follows:
In Millions
North
America
Retail
Pet
North
America
Foodservice
International
Joint
Ventures
Total
Balance as of May 31, 2020
$
6,673.7
$
5,300.5
$
648.8
$
894.5
$
405.7
$
13,923.2
Divestiture
-
-
-
(1.2)
-
(1.2)
Other activity, primarily
foreign
currency translation
15.6
-
-
84.9
39.9
140.4
Balance as of May 30, 2021
6,689.3
5,300.5
648.8
978.2
445.6
14,062.4
Acquisition
-
762.3
-
-
-
762.3
Divestitures
-
-
-
(201.8)
-
(201.8)
Reclassified to assets held for sale
(130.0)
-
-
-
-
(130.0)
Other activity, primarily
foreign
currency translation
(6.4)
-
-
(54.8)
(53.2)
(114.4)
Balance as of May 29, 2022
6,552.9
6,062.8
648.8
721.6
392.4
14,378.5
Acquisition
-
-
156.8
-
-
156.8
Divestitures
(2.0)
-
-
(0.4)
-
(2.4)
Other activity, primarily
foreign
currency translation
(8.5)
-
-
(12.8)
(0.4)
(21.7)
Balance as of May 28, 2023
$
6,542.4
$
6,062.8
$
805.6
$
708.4
$
392.0
$
14,511.2
The changes in the carrying amount of other intangible assets for fiscal 2021, 2022, and
2023 are as follows:
In Millions
Total
Balance as of May 31, 2020
$
7,095.8
Divestiture
(5.3)
Other activity, primarily
amortization and foreign currency translation
60.1
Balance as of May 30, 2021
7,150.6
Acquisition
370.0
Divestitures
(621.8)
Intellectual property intangible asset
210.4
Other activity, primarily
amortization and foreign currency translation
(109.3)
Balance as of May 29, 2022
6,999.9
Acquisition
3.8
Divestiture
(3.6)
Other activity, primarily
amortization and foreign currency translation
(32.5)
Balance as of May 28, 2023
$
6,967.6
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal
2023,
and
we
determined
there
was
no
impairment
of
our
intangible
assets
as
their
related
fair
values
were
substantially
in
excess of the
carrying values,
except for
the
Uncle Toby’s
brand intangible
asset. In addition,
while having
significant coverage
as of
our fiscal 2023
assessment date, the
Progresso
and
EPIC
brand intangible assets had
risk of decreasing coverage.
We
will continue to
monitor these businesses for potential impairment.
We did not
identify any indicators of impairment for any goodwill or indefinite-lived
intangible assets as of May 28, 2023.
NOTE 7. LEASES
Our lease portfolio primarily
consists of operating lease
arrangements for certain
warehouse and distribution space,
office space, retail
shops,
production
facilities,
rail
cars,
production
and
distribution
equipment,
automobiles,
and
office
equipment.
Our
lease
costs
associated with finance
leases and
sale-leaseback transactions
and our
lease income associated
with lessor and
sublease arrangements
are not material to our Consolidated Financial Statements.
Components of our lease cost are as follows:
Fiscal Year
In Millions
2023
2022
2021
Operating lease cost
$
127.6
$
129.7
$
132.7
Variable
lease cost
6.1
8.5
21.8
Short-term lease cost
30.0
29.1
23.4
Maturities of our operating and finance lease obligations by fiscal year are
as follows:
In Millions
Operating Leases
Finance Leases
Fiscal 2024
$
111.9
$
1.0
Fiscal 2025
86.4
0.6
Fiscal 2026
64.3
0.6
Fiscal 2027
42.9
0.3
Fiscal 2028
28.6
-
After fiscal 2028
68.6
-
Total noncancelable
future lease obligations
$
402.7
$
2.5
Less: Interest
(43.8)
(0.2)
Present value of lease obligations
$
358.9
$
2.3
The
lease
payments
presented
in
the
table
above
exclude
$
107.2
million
of
minimum
lease
payments
for
operating
leases
we
have
committed to but have not yet commenced as of May 28, 2023.
The weighted-average remaining lease term and weighted-average
discount rate for our operating leases are as follows:
May 28, 2023
May 29, 2022
Weighted-average
remaining lease term
5.2
years
4.5
years
Weighted-average
discount rate
4.4
%
3.8
%
Supplemental operating cash flow information and non-cash activity related
to our operating leases are as follows:
Fiscal Year
In Millions
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
$
129.9
$
128.7
Right of use assets obtained in exchange for new lease liabilities
$
124.4
$
84.6
NOTE 8. FINANCIAL INSTRUMENTS, RISK MANAGEMENT ACTIVITIES,
AND FAIR VALUES
FINANCIAL INSTRUMENTS
The
carrying
values
of
cash
and
cash
equivalents,
receivables,
accounts
payable,
other
current
liabilities,
and
notes
payable
approximate fair
value. Marketable
securities are
carried at
fair value.
As of
May 28,
2023, and
May 29,
2022, a
comparison of
cost
and market values of our marketable debt and equity securities is as follows:
Cost
Fair Value
Gross Unrealized Gains
Gross Unrealized Losses
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
In Millions
2023
2022
2023
2022
2023
2022
2023
2022
Available for
sale
debt securities
$
2.3
$
2.3
$
2.3
$
2.3
$
-
$
-
$
-
$
-
Equity securities
117.5
250.1
122.7
255.3
5.2
5.2
10.0
15.1
Total
$
119.8
$
252.4
$
125.0
$
257.6
$
5.2
$
5.2
$
10.0
$
15.1
As of May 28, 2023, the fair value and carrying value
of equity securities restricted for payment of active employee
health and welfare
benefits were $
117.2
million.
There were
no
realized gains or losses from sales
of marketable securities in
fiscal 2023 and 2022.
Gains and losses are determined
by
specific identification.
Classification
of
marketable
securities
as
current
or
noncurrent
is
dependent
upon
our
intended
holding
period
and
the
security’s
maturity date. The
aggregate unrealized gains
and losses on available
for sale debt securities,
net of tax effects,
are classified in AOCI
within stockholders’ equity.
Scheduled maturities of our marketable securities are as follows:
Marketable Securities
In Millions
Cost
Fair Value
Under 1 year (current)
$
2.3
$
2.3
Equity securities
117.5
122.7
Total
$
119.8
$
125.0
As of May 28, 2023, we had $
2.2
million of marketable debt securities pledged as collateral for derivative contracts.
RISK MANAGEMENT ACTIVITIES
As a
part of
our ongoing
operations, we
are exposed
to market
risks such
as changes
in interest
and foreign
currency exchange
rates
and commodity and
equity prices. To
manage these risks, we
may enter into various
derivative transactions (e.g.,
futures, options, and
swaps) pursuant to our established policies.
COMMODITY PRICE RISK
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 fiscal 2023, 2022, and 2021 included:
Fiscal Year
In Millions
2023
2022
2021
Net (loss) gain on mark-to-market valuation of commodity positions
$
(154.4)
$
303.3
$
138.2
Net gain on commodity positions reclassified from unallocated corporate
items to segment operating profit
(89.5)
(188.0)
(8.8)
Net mark-to-market revaluation of certain grain inventories
(48.0)
17.8
9.4
Net mark-to-market valuation of certain commodity positions recognized
in
unallocated corporate items
$
(291.9)
$
133.1
$
138.8
As
of
May
28,
2023,
the
net
notional
value
of
commodity
derivatives
was
$
406.8
million,
of
which
$
257.9
million
related
to
agricultural inputs and $
148.9
million related to energy inputs. These contracts relate to inputs
that generally will be utilized within the
next
months.
INTEREST RATE RISK
We
are
exposed
to
interest
rate
volatility
with
regard
to
future
issuances
of
fixed-rate
debt,
and
existing
and
future
issuances
of
floating-rate debt. Primary exposures include U.S. Treasury
rates, SOFR, Euribor, and
commercial paper rates in the United States and
Europe.
We
use
interest
rate
swaps,
forward-starting
interest
rate
swaps,
and
treasury
locks
to
hedge
our
exposure
to
interest
rate
changes,
to
reduce
the
volatility
of
our
financing
costs,
and
to
achieve
a
desired
proportion
of
fixed-rate
versus
floating-rate
debt,
based
on
current
and
projected
market
conditions.
Generally
under
these
swaps,
we
agree
with
a
counterparty
to
exchange
the
difference between fixed-rate and floating-rate
interest amounts based on an agreed upon notional principal amount.
Floating Interest
Rate Exposures
— Floating-to-fixed
interest rate
swaps are
accounted for
as cash
flow hedges,
as are
all hedges
of
forecasted
issuances
of
debt.
Effectiveness
is
assessed
based
on
either
the
perfectly
effective
hypothetical
derivative
method
or
changes in the
present value of
interest payments on
the underlying debt.
Effective gains
and losses deferred
to AOCI are
reclassified
into earnings over the life of the associated debt.
Fixed
Interest
Rate
Exposures
—
Fixed-to-floating
interest
rate
swaps
are
accounted
for
as
fair
value
hedges
with
effectiveness
assessed
based
on
changes
in
the
fair
value
of
the
underlying
debt
and
derivatives,
using
incremental
borrowing
rates
currently
available on loans with similar terms and maturities.
During the fourth quarter of fiscal 2023, in advance of planned debt financing,
we entered into €
750.0
million of forward-starting
swaps. The forward-starting swap agreements were terminated during
the fourth quarter of fiscal 2023, in conjunction with the
Company’s issuance of
a €
750.0
million
-year fixed-rate note. Upon termination, a loss of $
5.0
million was recognized in AOCI and
will be amortized through interest expense over the respective term of
the debt.
During the fourth quarter of fiscal 2023, in advance of planned debt
financing, we entered into $
500.0
million of treasury locks. The
treasury locks were terminated during the fourth quarter of fiscal 2023, in
conjunction with the Company’s issuance
of a $
1,000.0
million
-year fixed-rate note. Upon termination, a loss of $
1.4
million was recognized in AOCI and will be amortized through
interest expense over the respective term of the debt.
During the second quarter of fiscal 2023, we entered
into a $
500.0
million notional amount interest swap to convert our $
500.0
million
fixed rate notes due
November 18, 2025
, to a floating rate.
As of May 28,
2023, the pre-tax
amount of cash-settled
interest rate hedge
gain or loss
remaining in AOCI,
which will be
reclassified
to earnings over the remaining term of the related underlying debt, follows:
In Millions
Gain/(Loss)
3.65
% notes due
February 15, 2024
$
1.3
4.0
% notes due
April 17, 2025
(1.1)
3.2
% notes due
February 10, 2027
6.3
1.5
% notes due
April 27, 2027
(1.3)
4.2
% notes due
April 17, 2028
(5.0)
3.907
% notes due
April 13, 2029
(4.9)
2.25
% notes due
October 14, 2031
16.5
4.95
% notes due
March 29, 2033
(1.4)
4.55
% notes due
April 17, 2038
(8.1)
5.4
% notes due
June 15, 2040
(9.5)
4.15
% notes due
February 15, 2043
7.8
4.7
% notes due
April 17, 2048
(11.8)
Net pre-tax hedge loss in AOCI
$
(11.2)
The
following
table
summarizes
the
notional
amounts
and
weighted-average
interest
rates
of
our
interest
rate
derivatives.
Average
floating rates are based on rates as of the end of the reporting period.
In Millions
May 28, 2023
May 29, 2022
Pay-floating swaps - notional amount
$
1,143.4
$
644.1
Average receive
rate
2.6
%
0.4
%
Average pay rate
2.5
%
0.1
%
The floating-rate swap contracts outstanding as of May 28, 2023, mature
in fiscal
2026
.
FOREIGN EXCHANGE RISK
Foreign currency
fluctuations affect
our net
investments in
foreign subsidiaries
and foreign
currency cash
flows related
to third
party
purchases,
intercompany
loans, product
shipments, and
foreign-denominated
debt.
We
are also
exposed
to the
translation of
foreign
currency
earnings
to
the
U.S.
dollar.
Our
principal
exposures
are
to
the
Australian
dollar,
Brazilian
real,
British
pound
sterling,
Canadian
dollar,
Chinese renminbi,
euro, Japanese
yen, Mexican
peso, and
Swiss franc.
We
primarily
use foreign
currency forward
contracts to selectively hedge our
foreign currency cash flow exposures.
We also
generally swap our foreign-denominated
commercial
paper
borrowings
and
nonfunctional
currency
intercompany
loans
back
to U.S.
dollars
or
the
functional
currency
of the
entity
with
foreign exchange exposure.
The gains or losses
on these derivatives offset
the foreign currency
revaluation gains or
losses recorded in
earnings on the associated borrowings. We
generally do not hedge more than 18 months in advance.
As of May 28, 2023, the net notional value of foreign exchange derivatives
was $
933.0
million.
We
also have
net investments
in foreign
subsidiaries that
are denominated
in euros.
We
hedged a portion
of these net
investments by
issuing
euro-denominated
commercial
paper
and
foreign
exchange
forward
contracts.
As of
May
28,
2023,
we
hedged
a
portion
of
these net
investments
with €
2,949.9
million of
euro denominated
bonds.
As of
May 28,
2023,
we had
deferred
net foreign
currency
transaction gains of $
71.9
million in AOCI associated with net investment hedging activity.
EQUITY INSTRUMENTS
Equity
price
movements
affect
our
compensation
expense
as
certain
investments
made
by
our
employees
in
our
deferred
compensation plan
are revalued. We
use equity swaps
to manage this
risk. As of May
28, 2023, the
net notional amount
of our equity
swaps was $
177.5
million. In fiscal 2024, $
165.4
million of swap contracts will mature,
and $
12.1
million of swap contracts mature
in
fiscal 2025.
FAIR VALUE
MEASUREMENTS AND FINANCIAL STATEMENT
PRESENTATION
The
fair
values
of
our
assets,
liabilities,
and
derivative
positions
recorded
at
fair
value
and
their
respective
levels
in
the
fair
value
hierarchy as of May 28, 2023, and May 29, 2022, were as follows:
May 28, 2023
May 28, 2023
Fair Values
of Assets
Fair Values
of Liabilities
In Millions
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)
$
-
$
-
$
-
$
-
$
-
$
(62.2)
$
-
$
(62.2)
Foreign exchange contracts (a) (c)
-
10.3
-
10.3
-
(2.5)
-
(2.5)
Total
-
10.3
-
10.3
-
(64.7)
-
(64.7)
Derivatives not designated as hedging
instruments:
Foreign exchange contracts (a) (c)
-
0.2
-
0.2
-
(5.6)
-
(5.6)
Commodity contracts (a) (d)
-
0.5
-
0.5
-
(29.3)
-
(29.3)
Grain contracts (a) (d)
-
2.3
-
2.3
-
(11.8)
-
(11.8)
Total
-
3.0
-
3.0
-
(46.7)
-
(46.7)
Other assets and liabilities reported at fair value:
Marketable investments (a) (e) (f)
122.7
2.3
34.8
159.8
-
-
-
-
Long-lived assets (g)
-
1.0
-
1.0
-
-
-
-
Total
122.7
3.3
34.8
160.8
-
-
-
-
Total assets, liabilities, and
derivative positions
recorded at fair value
$
122.7
$
16.6
$
34.8
$
174.1
$
-
$
(111.4)
$
-
$
(111.4)
(a)
These contracts and investments
are recorded as prepaid
expenses and other current
assets, other assets, other
current liabilities or
other liabilities,
as appropriate,
based on
whether in
a gain
or loss
position. Certain
marketable investments
are recorded
as cash
and cash equivalents.
(b)
Based on EURIBOR and
swap rates. As
of May 28, 2023,
the carrying amount of
hedged debt designated
as the hedged item
in a
fair value
hedge was
$
589.7
million and
was classified
on the
Consolidated Balance
Sheet within
long-term debt.
As of
May 28,
2023, the cumulative amount of fair value hedging basis adjustments was $
53.7
million.
(c)
Based on observable market transactions of spot currency rates and forward
currency prices.
(d)
Based on prices of futures exchanges and recently reported transactions in
the marketplace.
(e)
Based on prices of common stock, mutual fund net asset values, and bond matrix pricing.
(f)
The level 3
marketable investment represents
an equity security
without a readily
determinable fair value.
During fiscal 2023,
we
recorded
an impairment
charge
of $
32.4
million resulting
from the
determination of
fair value
utilizing level
3 inputs
including
revised projections of future operating results and observable transaction data
for similar instruments.
(g)
We recorded
$
8.6
million in non-cash impairment charges
in fiscal 2023 to write down
certain long-lived assets to their
fair value.
Fair value
was based
on recently
reported transactions
for similar
assets in the
marketplace. These
assets had
a carrying value
of
$
9.6
million and were associated with the restructuring actions described in Note 4.
May 29, 2022
May 29, 2022
Fair Values
of Assets
Fair Values
of Liabilities
In Millions
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)
$
-
$
-
$
-
$
-
$
-
$
(29.8)
$
-
$
(29.8)
Foreign exchange contracts (a) (c)
-
26.9
-
26.9
-
(4.7)
-
(4.7)
Total
-
26.9
-
26.9
-
(34.5)
-
(34.5)
Derivatives not designated as hedging
instruments:
Foreign exchange contracts (a) (c)
-
8.4
-
8.4
-
(15.1)
-
(15.1)
Commodity contracts (a) (d)
10.7
96.9
-
107.6
-
(0.2)
-
(0.2)
Grain contracts (a) (d)
-
28.7
-
28.7
-
(3.0)
-
(3.0)
Total
10.7
134.0
-
144.7
-
(18.3)
-
(18.3)
Other assets and liabilities reported at fair value:
Marketable investments (a) (e) (f)
255.3
2.3
67.2
324.8
-
-
-
-
Total
255.3
2.3
67.2
324.8
-
-
-
-
Total assets, liabilities, and
derivative positions
recorded at fair value
$
266.0
$
163.2
$
67.2
$
496.4
$
-
$
(52.8)
$
-
$
(52.8)
(
a)
These contracts and investments
are recorded as prepaid
expenses and other current
assets, other assets, other
current liabilities or
other liabilities,
as appropriate,
based on
whether in
a gain
or loss
position. Certain
marketable investments
are recorded
as cash
and cash equivalents.
(b)
Based on EURIBOR and
swap rates. As
of May 29, 2022, the
carrying amount of hedged
debt designated as
the hedged item in
a
fair value
hedge was
$
615.7
million and
was classified
on the
Consolidated Balance
Sheet within
long-term debt.
As of
May 29,
2022, the cumulative amount of fair value hedging basis adjustments was
$
28.4
million.
(c)
Based on observable market transactions of spot currency rates and forward
currency prices.
(d)
Based on prices of futures exchanges and recently reported transactions in the marketplace.
(e)
Based on prices of common stock, mutual fund net asset values, and bond matrix
pricing.
(f)
The level 3
marketable investment represents
an equity security
without a readily
determinable fair value.
During fiscal 2022,
we
recorded
an impairment
charge
of $
34.0
million resulting
from the
determination of
fair value
utilizing level
3 inputs
including
revised projections of future operating results and observable transaction data
for similar instruments.
We did not
significantly change our valuation techniques from prior periods.
The
fair value
of our
long-term
debt
is estimated
using
Level 2
inputs based
on quoted
prices
for
those
instruments. Where
quoted
prices are not available, fair value is estimated using
discounted cash flows and market-based expectations
for interest rates, credit risk
and
the
contractual
terms
of
the
debt
instruments.
As
of
May
28,
2023,
the
fair
value
and
carrying
amount
of
our
long-term
debt,
including the
current portion,
were $
10,929.6
million and
$
11,674.2
million, respectively.
As of
May 29,
2022, the
carrying amount
and fair value of our long-term debt, including the current portion, were
$
10,508.8
million and $
10,809.0
million, respectively.
Information
related
to our
cash flow
hedges,
fair value
hedges, and
other
derivatives
not designated
as hedging
instruments for
the
fiscal years ended May 28, 2023, and May 29, 2022, follows:
Interest Rate
Contracts
Foreign
Exchange
Contracts
Equity
Contracts
Commodity
Contracts
Total
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
In Millions
2023
2022
2023
2022
2023
2022
2023
2022
2023
2022
Derivatives in Cash Flow Hedging
Relationships:
Amount of (loss) gain recognized in
other comprehensive income (OCI)
$
(6.4)
$
(5.4)
$
9.4
$
13.2
$
-
$
-
$
-
$
-
$
3.0
$
7.8
Amount of net gain (loss) reclassified
from AOCI into earnings (a)
2.2
(4.7)
22.0
(19.5)
-
-
-
-
24.2
(24.2)
Derivatives in Fair Value
Hedging
Relationships:
Amount of net loss recognized
in earnings (b)
(4.9)
(2.1)
-
-
-
-
-
-
(4.9)
(2.1)
Derivatives Not Designated as
Hedging Instruments:
Amount of net (loss) gain recognized
in earnings (c)
-
-
(46.2)
(32.8)
(3.4)
(8.0)
(152.6)
257.2
(202.2)
216.4
(a)
(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. For the
fiscal year ended May 28,
2023, the amount of
gain reclassified from AOCI
into
cost of
sales was
$
21.1
million and
the amount
of gain
reclassified from
AOCI into
SG&A was
$
0.9
million. For
the fiscal
year
ended
May 29,
2022,
the
amount
of
loss
reclassified
from
AOCI
into
cost
of
sales
was
$
11.1
million
and
the
amount
of
loss
reclassified from AOCI into SG&A was $
8.4
million.
(b)
Loss recognized
in earnings is
reported in
interest, net
for interest rate
contracts, in
cost of sales
for commodity
contracts, and
in
SG&A expenses for equity contracts and foreign exchange contracts.
(c)
(Loss) gain recognized in earnings
is related to the ineffective
portion of the hedging relationship, reported
in SG&A expenses for
foreign
exchange
contracts
and
interest,
net
for
interest rate
contracts.
No
amounts
were reported
as a
result
of being
excluded
from the assessment of hedge effectiveness.
The following
tables reconcile
the net
fair values
of assets
and
liabilities subject
to offsetting
arrangements
that are
recorded
in our
Consolidated Balance Sheets to the net fair values that could be reported
in our Consolidated Balance Sheets:
May 28, 2023
Assets
Liabilities
Gross Amounts Not Offset
in the
Balance Sheet (e)
Gross Amounts Not Offset
in the
Balance Sheet (e)
In Millions
Gross
Amounts of
Recognized
Assets
Gross
Liabilities
Offset in the
Balance Sheet
(a)
Net Amounts
of Assets
(b)
Financial
Instruments
Cash
Collateral
Received
Net Amount
(c)
Gross
Amounts of
Recognized
Liabilities
Gross Assets
Offset in the
Balance Sheet
(a)
Net Amounts
of Liabilities
(b)
Financial
Instruments
Cash
Collateral
Pledged
Net Amount
(d)
Commodity contracts
$
0.5
$
-
$
0.5
$
(0.5)
$
-
$
-
$
(29.3)
$
-
$
(29.3)
$
0.5
$
16.2
$
(12.6)
Interest rate contracts
-
-
-
-
-
-
(69.2)
-
(69.2)
-
44.3
(24.9)
Foreign exchange contracts
10.4
-
10.4
(4.2)
-
6.2
(8.2)
-
(8.2)
4.2
-
(4.0)
Equity contracts
2.8
-
2.8
(1.0)
-
1.8
(1.5)
-
(1.5)
1.0
-
(0.5)
Total
$
13.7
$
-
$
13.7
$
(5.7)
$
-
$
8.0
$
(108.2)
$
-
$
(108.2)
$
5.7
$
60.5
$
(42.0)
(a)
Includes related collateral offset in our Consolidated Balance Sheets.
(b)
Net fair value as recorded in our Consolidated Balance Sheets.
(c)
Fair value of assets that could be reported net in our Consolidated Balance Sheets.
(d)
Fair value of liabilities that could be reported net in our Consolidated Balance Sheets.
(e)
Fair value of assets and liabilities reported on a gross basis in our Consolidated Balance Sheets.
May 29, 2022
Assets
Liabilities
Gross Amounts Not Offset
in the Balance Sheet (e)
Gross Amounts Not Offset
in the Balance Sheet (e)
In Millions
Gross
Amounts of
Recognized
Assets
Gross
Liabilities
Offset in the
Balance
Sheet (a)
Net
Amounts of
Assets
(b)
Financial
Instruments
Cash
Collateral
Received
Net Amount
(c)
Gross
Amounts of
Recognized
Liabilities
Gross
Assets
Offset in the
Balance
Sheet (a)
Net
Amounts of
Liabilities
(b)
Financial
Instruments
Cash
Collateral
Pledged
Net Amount
(d)
Commodity contracts
$
107.5
$
-
$
107.5
$
(0.2)
$
(62.8)
$
44.5
$
(0.2)
$
-
$
(0.2)
$
0.2
$
-
$
-
Interest rate contracts
-
-
-
-
-
-
(30.7)
-
(30.7)
-
10.6
(20.1)
Foreign exchange contracts
35.3
-
35.3
(6.4)
-
28.9
(19.7)
-
(19.7)
6.4
-
(13.3)
Equity contracts
0.4
-
0.4
(0.3)
-
0.1
(4.0)
-
(4.0)
0.3
-
(3.7)
Total
$
143.2
$
-
$
143.2
$
(6.9)
$
(62.8)
$
73.5
$
(54.6)
$
-
$
(54.6)
$
6.9
$
10.6
$
(37.1)
(a)
Includes related collateral offset in our Consolidated Balance Sheets.
(b)
Net fair value as recorded in our Consolidated Balance Sheets.
(c)
Fair value of assets that could be reported net in our Consolidated Balance Sheets.
(d)
Fair value of liabilities that could be reported net in our Consolidated Balance Sheets.
(e)
Fair value of assets and liabilities reported on a gross basis in our Consolidated Balance Sheets.
AMOUNTS RECORDED IN ACCUMULATED
OTHER COMPREHENSIVE LOSS
As of May 28, 2023, the after-tax amounts of unrealized
gains in AOCI related to hedge derivatives follows:
In Millions
After-Tax
Gain/(Loss)
Unrealized losses from interest rate cash flow hedges
$
(7.8)
Unrealized gains from foreign currency cash flow hedges
13.7
After-tax gains in AOCI related to hedge derivatives
$
5.9
The net amount
of pre-tax gains and
losses in AOCI as
of May 28,
2023, that we expect
to be reclassified
into net earnings
within the
next 12 months is a $
19.8
million net gain.
CREDIT-RISK-RELATED
CONTINGENT FEATURES
Certain of our
derivative instruments contain
provisions that require
us to maintain an
investment grade credit rating
on our debt from
each
of
the
major
credit
rating
agencies.
If
our
debt
were
to
fall
below
investment
grade,
the
counterparties
to
the
derivative
instruments
could
request
full
collateralization
on
derivative
instruments
in
net
liability
positions.
The
aggregate
fair
value
of
all
derivative
instruments
with
credit-risk-related
contingent
features
that
were
in
a
liability
position
on
May
28,
2023,
was
$
100.1
million. We have
posted $
60.5
million of collateral under these contracts.
CONCENTRATIONS OF
CREDIT AND COUNTERPARTY
CREDIT RISK
During fiscal 2023, customer concentration was as follows:
Percent of total
Consolidated
North America
Retail
North America
Foodservice
International
Pet
Walmart (a):
Net sales
%
%
%
%
%
Accounts receivable
%
%
%
%
Five largest customers:
Net sales
%
%
%
%
(a)
Includes Walmart Inc.
and its affiliates.
No customer other than Walmart
accounted for
percent or more of our consolidated net sales.
We
enter
into
interest
rate,
foreign
exchange,
and
certain
commodity
and
equity
derivatives,
primarily
with
a
diversified
group
of
highly rated
counterparties. We
continually monitor
our positions and
the credit ratings
of the counterparties
involved and,
by policy,
limit
the
amount
of
credit
exposure
to
any
one
party.
These
transactions
may
expose
us
to
potential
losses
due
to
the
risk
of
nonperformance
by
these
counterparties;
however,
we
have
not
incurred
a
material
loss.
We
also
enter
into
commodity
futures
transactions through various regulated exchanges.
The amount
of loss due
to the credit
risk of the
counterparties, should
the counterparties
fail to
perform according
to the terms
of the
contracts,
is $
4.5
million. We
have
no
collateral
held against
these contracts.
Under the
terms of
our swap
agreements,
some of
our
transactions
require
collateral
or
other
security
to
support
financial
instruments
subject
to
threshold
levels
of
exposure
and
counterparty
credit
risk.
Collateral
assets
are
either
cash
or
U.S.
Treasury
instruments
and
are
held
in
a
trust
account
that
we
may
access if the counterparty defaults.
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
this
service.
All
of
our
accounts
payable
remain
as
obligations
to
our
suppliers
as
stated
in
our
supplier agreements.
As of
May 28,
2023, $
1,430.1
million of
our accounts
payable was
payable to
suppliers who
utilize these
third-
party services.
As of
May 29,
2022, $
1,429.6
million of
our accounts
payable was
payable to
suppliers who
utilize these
third-party
services.
NOTE 9. DEBT
NOTES PAYABLE
The components of notes payable and their respective weighted-average
interest rates at the end of the periods were as follows:
May 28, 2023
May 29, 2022
In Millions
Notes Payable
Weighted-
Average
Interest Rate
Notes Payable
Weighted-
Average
Interest Rate
U.S. commercial paper
$
-
-
%
$
694.8
1.1
%
Financial institutions
31.7
10.5
%
116.6
4.4
%
Total
$
31.7
10.5
%
$
811.4
5.5
%
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 May 28, 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
times.
We
were in compliance with all credit facility covenants as of May 28, 2023.
LONG-TERM DEBT
In the fourth quarter
of fiscal 2023, we
issued €
250.0
million of floating-rate notes
due
November 10, 2023
. We
used the net proceeds
to repay €
250.0
million of floating-rate notes due
May 16, 2023
.
In the
fourth quarter
of fiscal
2023, we
issued €
750.0
million of
3.907
percent fixed-rate
notes due
April 13, 2029
. We
used the
net
proceeds to repay
€
500.0
million of
1.0
percent fixed-rate notes
due
April 27, 2023
and €
250.0
million of floating-rate
notes due
May
16, 2023
.
In the fourth
quarter of fiscal
2023, we
issued $
1,000.0
million of
4.95
percent fixed-rate
notes due
March 29, 2033
. We
used the net
proceeds to repay our outstanding commercial paper and for general
corporate purposes.
In the second
quarter of fiscal
2023, we issued
$
500.0
million of
5.241
percent fixed-rate notes
due
November 18, 2025
. We
used the
net proceeds to repay a portion of our outstanding commercial paper and for general
corporate purposes.
In the
second quarter
of fiscal
2023, we
issued €
250.0
million of
floating-rate notes
due
May 16, 2023
. We
used the
net proceeds
to
repay €
250.0
million of
0.0
percent fixed-rate notes due
November 11, 2022
.
In the
second quarter
of fiscal
2023,
we repaid
$
500.0
million of
2.6
percent fixed-rate
notes due
October 12, 2022
, using
proceeds
from the issuance of commercial paper.
In the fourth quarter of fiscal 2022, we repaid $
850.0
million of
3.7
percent fixed-rate notes due
October 17, 2023
using proceeds from
the issuance of commercial paper.
In the
fourth quarter
of fiscal
2022, we
issued €
250.0
million
0.0
percent fixed-rate
notes due
November 11, 2022
. We
used the
net
proceeds for general corporate purposes.
In the second
quarter of fiscal
2022, we issued
€
500.0
million of
0.125
percent fixed-rate notes
due
November 15, 2025
. We
used the
net proceeds to repay a portion of our €
500.0
million of
0.0
percent fixed-rate notes due
November 16, 2021
, and for general corporate
purposes.
In the second quarter of fiscal 2022, we issued €
250.0
million of floating-rate notes due
May 16, 2023
. We used the net proceeds
to
repay a portion of our €
500.0
million of
0.0
percent fixed-rate notes due
November 16, 2021
.
In the second
quarter of fiscal
2022, we issued
$
500.0
million of
2.25
percent fixed-rate notes
due
October 14, 2031
. We
used the net
proceeds,
together with
proceeds from
the issuance
of commercial
paper,
to repay
$
1,000.0
million
of
3.15
percent fixed-rate
notes
due
December 15, 2021
.
In the first quarter of fiscal 2022, we issued €
500.0
million of floating-rate notes due
July 27, 2023
. We used the net proceeds to
repay
€
500.0
million of
0.0
percent fixed-rate notes due
August 21, 2021
.
In the first quarter
of fiscal 2022, we
repaid €
200.0
million of
2.2
percent fixed-rate notes due
June 24, 2021
, using proceeds from
the
issuance of €
50.0
million of
2.2
percent fixed-rate notes due
November 29, 2021
, and borrowings under a committed credit facility.
A summary of our long-term debt is as follows:
In Millions
May 28, 2023
May 29, 2022
4.2
% notes due
April 17, 2028
$
1,400.0
$
1,400.0
4.95
% notes due
March 29, 2033
1,000.0
-
Euro-denominated
3.907
% notes due
April 13, 2029
804.2
-
4.0
% notes due
April 17, 2025
800.0
800.0
3.2
% notes due
February 10, 2027
750.0
750.0
2.875
% notes due
April 15, 2030
750.0
750.0
Euro-denominated
0.45
% notes due
January 15, 2026
643.4
644.1
3.0
% notes due
February 1, 2051
605.2
605.2
Euro-denominated
0.125
% notes due
November 15, 2025
536.2
536.7
Euro-denominated floating rate notes due
July 27, 2023
536.2
537.9
3.65
% notes due
February 15, 2024
500.0
500.0
2.25
% notes due
October 14, 2031
500.0
500.0
5.241
% notes due
November 18, 2025
500.0
-
4.7
% notes due
April 17, 2048
446.2
446.2
4.15
% notes due
February 15, 2043
434.9
434.9
Euro-denominated
1.5
% notes due
April 27, 2027
428.9
429.4
Floating rate notes due
October 17, 2023
400.0
400.0
5.4
% notes due
June 15, 2040
382.5
382.5
4.55
% notes due
April 17, 2038
282.4
282.4
Euro-denominated floating rate notes due
November 10, 2023
268.1
-
Medium-term notes,
0.56
% to
6.41
%, due fiscal
2024
or later
4.0
103.9
Euro-denominated
1.0
% notes due
April 27, 2023
-
536.8
2.6
% notes due
October 12, 2022
-
500.0
Euro-denominated
0.0
% notes due
November 11, 2022
-
268.3
Euro-denominated
0.0
% notes due
May 16, 2023
-
268.3
Other
(298.0)
(267.6)
11,674.2
10,809.0
Less amount due within one year
(1,709.1)
(1,674.2)
Total long-term debt
$
9,965.1
$
9,134.8
Principal payments
due on
long-term debt
and finance
leases in
the next
five fiscal
years based
on stated
contractual maturities,
our
intent to redeem, or put rights of certain note holders are as follows:
In Millions
Fiscal 2024
$
1,709.1
Fiscal 2025
800.5
Fiscal 2026
1,680.1
Fiscal 2027
1,179.3
Fiscal 2028
1,400.0
Certain of our
long-term debt agreements
contain restrictive
covenants.
As of May 28, 2023, we were in compliance with all of these
covenants.
As of
May 28,
2023,
the $
11.2
million
pre-tax loss
recorded
in AOCI
associated with
our previously
designated interest
rate swaps
will be
reclassified
to net
interest over
the remaining
lives of
the hedged
transactions.
The amount
expected to
be reclassified
from
AOCI to net interest in fiscal 2024 is a $
0.7
million pre-tax gain.
NOTE 10. REDEEMABLE AND NONCONTROLLING INTERESTS
Our principal noncontrolling interest relates to our General Mills Cereals, LLC (GMC) subsidiar
y.
The holder of the
GMC Class A Interests receives
quarterly preferred distributions
from available net income
based on the application
of
a
floating
preferred
return
rate
to
the
holder’s
capital
account
balance
established
in
the
most
recent
mark-to-market
valuation
(currently $
251.5
million). The floating
preferred return
rate on
GMC’s
Class A
interests is
the sum
of the
three-month Term SOFR
plus
basis points. The
preferred return rate
is adjusted every
three years
through a negotiated
agreement with the
Class
A
Interest
holder or through a remarketing auction.
During
the
third
quarter
of
fiscal
2022,
we
completed
the
sale
of
our
interests
in
Yoplait
SAS,
Yoplait
Marques
SNC
and
Liberté
Marques
Sàrl
to
Sodiaal
in
exchange
for
Sodiaal’s
interest
in
our
Canadian
yogurt
business,
a
modified
agreement
for
the
use
of
Yoplait
and
Liberté
brands in the United States and Canada, and cash. Please see Note 3 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
percent
euro-denominated
interest
in
Yoplait
SAS
as
a
redeemable
interest
on
our
Consolidated
Balance
Sheets. Sodiaal had
the right to
put all or
a portion of
its redeemable interest
to us at
fair value until
the divestiture closed
in the third
quarter of
fiscal 2022.
In connection
with the
divestiture, cumulative
adjustments made
to the
redeemable
interest related
to the
fair
value put feature were
reversed against additional paid-in
capital, where changes in the
redemption amount were historically recorded,
and the resulting carrying value of the noncontrolling interests were included
in the calculation of the gain on divestiture.
We
paid dividends
of $
105.1
million in
fiscal 2022
and $
40.3
million in
fiscal 2021
to Sodiaal
under the
terms of
the Yoplait
SAS,
Yoplait
Marques SNC, and Liberté Marques Sàrl shareholder agreements.
A subsidiary of
Yoplait
SAS had an
exclusive milk supply agreement
for its European operations
with Sodiaal through
November 28,
- Net purchases totaled $
99.5
million for the six-month period ended November 28, 2021.
For
financial
reporting
purposes,
the
assets,
liabilities,
results
of
operations,
and
cash
flows
of
our
non-wholly
owned
consolidated
subsidiaries
are
included
in
our
Consolidated
Financial
Statements.
The
third-party
investor’s
share
of
the
net
earnings
of
these
subsidiaries
is
reflected
in
net
earnings
attributable
to
redeemable
and
noncontrolling
interests
in
our
Consolidated
Statements
of
Earnings.
Our noncontrolling interests contain restrictive covenants. As of May 28, 2023, we were in compliance with all of these covenants.
NOTE 11. STOCKHOLDERS’
EQUITY
Cumulative preference stock of
5.0
million shares, without par value, is authorized but unissued.
On June 27, 2022, our Board of Directors authorized the
repurchase of up to
million shares of our common stock. Purchases under
the authorization
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
authorization
has
no
specified
termination date.
Share repurchases were as follows:
Fiscal Year
In Millions
2023
2022
2021
Shares of common stock
18.0
13.5
5.0
Aggregate purchase price
$
1,403.6
$
876.8
$
301.4
The following tables provide details of total comprehensive income:
Fiscal 2023
General Mills
Noncontrolling
Interests
In Millions
Pretax
Tax
Net
Net
Net earnings, including earnings attributable to noncontrolling interests
$
2,593.9
$
15.7
Other comprehensive (loss) income:
Foreign currency translation
$
(110.2)
(0.3)
(110.5)
(0.3)
Net actuarial loss
(295.5)
67.5
(228.0)
-
Other fair value changes:
Hedge derivatives
3.8
(2.5)
1.3
-
Reclassification to earnings:
Foreign currency translation (a)
(7.4)
-
(7.4)
-
Hedge derivatives (b)
(24.7)
6.0
(18.7)
-
Amortization of losses and prior service costs (c)
72.9
(16.0)
56.9
-
Other comprehensive loss
(361.1)
54.7
(306.4)
(0.3)
Total comprehensive
income
$
2,287.5
$
15.4
(a)
Gain reclassified from AOCI into earnings is reported in the divestitures gain.
(b)
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.
Fiscal 2022
General Mills
Noncontrolling
Interests
Redeemable
Interest
In Millions
Pretax
Tax
Net
Net
Net
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$
2,707.3
$
10.2
$
17.5
Other comprehensive income (loss):
Foreign currency translation
$
(188.5)
$
85.8
(102.7)
(26.2)
(47.0)
Net actuarial gain
132.4
(30.8)
101.6
-
-
Other fair value changes:
Hedge derivatives
30.1
(23.6)
6.5
-
0.5
Reclassification to earnings:
Foreign currency translation (a)
342.2
-
342.2
-
-
Hedge derivatives (b)
23.7
11.6
35.3
-
(0.2)
Amortization of losses and prior service costs (c)
97.4
(21.6)
75.8
-
-
Other comprehensive income (loss)
437.3
21.4
458.7
(26.2)
(46.7)
Total comprehensive
income (loss)
$
3,166.0
$
(16.0)
$
(29.2)
(a)
Loss reclassified from
AOCI into earnings
is reported in
divestitures gain related
to the divestiture
of our interests
in Yoplait
SAS, Yoplait
Marques SNC, and Liberte Marques Sarl to Sodiaal in the third quarter
of fiscal 2022.
(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.
Fiscal 2021
General Mills
Noncontrolling
Interests
Redeemable
Interest
In Millions
Pretax
Tax
Net
Net
Net
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$
2,339.8
$
6.5
$
(0.3)
Other comprehensive income (loss):
Foreign currency translation
$
(6.1)
$
64.9
58.8
31.5
84.8
Net actuarial gain
464.9
(111.5)
353.4
-
-
Other fair value changes:
Hedge derivatives
(25.8)
6.5
(19.3)
-
(1.4)
Reclassification to earnings:
Hedge derivatives (a)
19.1
(5.7)
13.4
-
0.1
Amortization of losses and prior service costs (b)
102.5
(23.6)
78.9
-
-
Other comprehensive income
554.6
(69.4)
485.2
31.5
83.5
Total comprehensive
income
$
2,825.0
$
38.0
$
83.2
(a)
Loss reclassified
from AOCI
into earnings
is reported
in interest,
net for
interest rate
swaps and
in cost
of sales
and SG&A
expenses for foreign exchange contracts.
(b)
Loss reclassified from AOCI into earnings is reported in benefit plan non-service
income.
In
fiscal
2023,
2022,
and
2021,
except
for
certain
reclassifications
to
earnings,
changes
in other
comprehensive
income (loss)
were
primarily non-cash items.
Accumulated other comprehensive loss balances, net of tax effects,
were as follows:
In Millions
May 28, 2023
May 29, 2022
Foreign currency translation adjustments
$
(708.6)
$
(590.7)
Unrealized loss from hedge derivatives
5.9
23.3
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,670.6)
(1,513.4)
Prior service credits
96.4
110.3
Accumulated other comprehensive loss
$
(2,276.9)
$
(1,970.5)
NOTE 12. STOCK PLANS
We
use broad-based stock
plans to help
ensure that management’s
interests are aligned
with those of
our shareholders. As
of May 28,
2023,
a total
of
35.1
million shares
were available
for grant
in the
form of
stock options,
restricted
stock, restricted
stock units,
and
shares
of unrestricted
stock under
the 2022
Stock Compensation
Plan
(2022
Plan). The
2022
Plan
also provides
for
the issuance
of
cash-settled
share-based
units, stock
appreciation
rights, and
performance-based
stock awards.
Stock-based
awards now
outstanding
include
some
granted
under
the
2017
Stock
Compensation
Plan,
under
which
no
further
awards
may
be
granted.
The
stock
plans
provide for potential accelerated vesting of awards upon retirement,
termination, or death of eligible employees and directors.
Stock Options
The
estimated
fair
values
of
stock
options
granted
and
the
assumptions
used
for
the
Black-Scholes
option-pricing
model
were
as
follows:
Fiscal Year
2023
2022
2021
Estimated fair values of stock options granted
$
14.16
$
8.77
$
8.03
Assumptions:
Risk-free interest rate
3.3
%
1.5
%
0.7
%
Expected term
8.5
years
8.5
years
8.5
years
Expected volatility
20.9
%
20.2
%
19.5
%
Dividend yield
3.1
%
3.4
%
3.3
%
We estimate the fair value of each option on the grant date using a Black-Scholes option-pricing model, which requires us to make
predictive assumptions regarding future stock price volatility, employee exercise behavior, dividend yield, and the forfeiture rate. 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
expected
term
represents
the
period
of
time
that
options
granted
are
expected
to
be
outstanding
based
on
historical
data
to
estimate option exercises and employee
terminations within the valuation
model. Separate groups of employees
have similar historical
exercise behavior and therefore
were aggregated into a
single pool for valuation
purposes. The weighted-average expected
term for all
employee groups is presented in the table
above. The risk-free interest rate for
periods during the expected term of
the options is based
on the U.S. Treasury zero-coupon yield curve in
effect at the time of grant.
Any corporate
income tax
benefit realized
upon exercise
or vesting
of an
award in
excess of
that previously
recognized in
earnings
(referred to
as a
windfall tax
benefit) is
presented in
our Consolidated
Statements of
Cash Flows
as an
operating cash
flow.
Realized
windfall
tax
benefits
and
shortfall
tax
deficiencies
related
to
the
exercise
or
vesting
of
stock-based
awards
are
recognized
in
the
Consolidated Statements
of Earnings.
Windfall tax benefits from stock-based payments
in income tax expense in our Consolidated Statements of Earnings were as follows:
Fiscal Year
In Millions
2023
2022
2021
Windfall tax benefits from stock-based payments
$
32.3
$
18.4
$
12.4
As of
May 28,
2023, there
were
no
options granted
under the
2022 Plan.
Under the
2017 Stock
Compensation Plan,
options may
be
priced
at
percent
or
more
of
the
fair
market
value
on
the
date
of
grant,
and
generally
vest
four years
after
the
date
of
grant.
Options generally expire within
10 years and one month
after the date of grant.
Information on stock option activity follows:
Options
Outstanding
(Thousands)
Weighted-Average
Exercise Price Per
Share
Weighted-Average
Remaining
Contractual Term
(Years)
Aggregate Intrinsic
Value (Millions)
Balance as of May 29, 2022
15,005.5
$
55.39
5.36
$
217.5
Granted
1,176.5
70.26
Exercised
(4,468.6)
53.84
Forfeited or expired
(138.2)
61.90
Outstanding as of May 28, 2023
11,575.2
$
57.43
5.59
$
309.5
Exercisable as of May 28, 2023
6,165.3
$
54.73
3.90
$
181.6
Stock-based compensation expense related to stock option awards was as follows:
Fiscal Year
In Millions
2023
2022
2021
Compensation expense related to stock option awards
$
12.3
$
12.1
$
11.2
Net
cash
proceeds
from
the
exercise
of
stock
options
less
shares
used
for
minimum
withholding
taxes
and
the
intrinsic
value
of
options exercised were as follows:
Fiscal Year
In Millions
2023
2022
2021
Net cash proceeds
$
232.3
$
161.7
$
74.3
Intrinsic value of options exercised
$
118.7
$
74.0
$
44.8
Restricted Stock, Restricted Stock Units, and Performance Share Units
Stock
and
units
settled
in
stock
subject
to
a
restricted
period
and
a
purchase
price,
if
any
(as
determined
by
the
Compensation
Committee
of
the
Board
of
Directors),
may
be granted
to key
employees
under
the 2022
Plan.
As of
May
28,
2023,
there
were
no
stock-based awards
granted under the
2022 Plan. Under
the 2017 Stock
Compensation Plan, restricted
stock and restricted
stock units
generally vest
and become
unrestricted
four years
after the
date of
grant. Performance
share units
are earned
primarily based
on our
future
achievement
of three-year
goals for
average organic
net sales
growth
and
cumulative operating
cash flow
and a
relative
total
shareholder
return
modifier.
Performance
share
units
are
settled
in
common
stock
and
are
generally
subject
to
a
three-year
performance
and
vesting
period.
The
sale
or
transfer
of
these
awards
is
restricted
during
the
vesting
period.
Participants
holding
restricted
stock,
but
not
restricted
stock
units
or
performance
share
units,
are
entitled
to
vote
on
matters
submitted
to
holders
of
common
stock
for
a
vote.
These
awards
accumulate
dividends
from
the
date
of
grant,
but
participants
only
receive
payment
if
the
awards vest.
Information on restricted stock unit and performance share unit activity
follows:
Equity Classified
Liability Classified
Share-Settled Units
(Thousands)
Weighted-Average
Grant-Date Fair
Value
Share-Settled Units
(Thousands)
Weighted-Average
Grant-Date Fair
Value
Non-vested as of May 29, 2022
5,153.4
$
56.37
77.3
$
56.43
Granted
2,042.8
69.76
23.6
70.53
Vested
(1,976.1)
53.71
(24.7)
52.09
Forfeited or expired
(183.9)
63.08
(6.8)
61.14
Non-vested as of May 28, 2023
5,036.2
$
62.60
69.4
$
62.32
Fiscal Year
2023
2022
2021
Number of units granted (thousands)
2,066.4
1,989.0
1,529.0
Weighted-average
price per unit
$
69.77
$
60.02
$
61.24
The total grant-date
fair value of
restricted stock
unit awards that
vested was $
107.4
million in fiscal
2023 and
$
82.7
million in fiscal
2022, and $
74.4
million in fiscal 2021.
As of May
28, 2023, unrecognized
compensation expense
related to non-vested
stock options, restricted
stock units, and
performance
share units was $
112.1
million. This expense will be recognized over
18 months
, on average.
Stock-based compensation expense related to restricted stock units
and performance share units was as follows:
Fiscal Year
In Millions
2023
2022
2021
Compensation expense related to restricted stock units and performance
share units
$
99.4
$
94.2
$
78.7
Compensation
expense
related
to
stock-based
payments
recognized
in
our
Consolidated
Statements
of
Earnings
includes
amounts
recognized in restructuring, impairment, and other exit costs for fiscal year 2022.
NOTE 13. EARNINGS PER SHARE
Basic and diluted EPS were calculated using the following:
Fiscal Year
In Millions, Except per Share Data
2023
2022
2021
Net earnings attributable to General Mills
$
2,593.9
$
2,707.3
$
2,339.8
Average number
of common shares - basic EPS
594.8
607.5
614.1
Incremental share effect from: (a)
Stock options
3.6
2.5
2.5
Restricted stock units and performance share units
2.8
2.6
2.5
Average number
of common shares - diluted EPS
601.2
612.6
619.1
Earnings per share — basic
$
4.36
$
4.46
$
3.81
Earnings per share — diluted
$
4.31
$
4.42
$
3.78
a)
Incremental shares from
stock options, restricted
stock units, and performance
share units are computed
by the treasury stock
method.
Stock
options,
restricted
stock
units,
and
performance
share
units
excluded
from
our
computation
of
diluted
EPS
because they were not dilutive were as follows:
Fiscal Year
In Millions
2023
2022
2021
Anti-dilutive stock options, restricted stock units,
and performance share units
0.8
4.4
3.4
NOTE 14. RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS
Defined Benefit Pension Plans
We have
defined benefit pension plans covering
many employees in the United
States, Canada, Switzerland, and the
United Kingdom.
Benefits for salaried
employees are based
on length of service
and final average
compensation. Benefits for
hourly employees include
various monthly
amounts for each
year of credited
service. Our funding
policy is consistent
with the requirements
of applicable laws.
We made
no
voluntary contributions to our
principal U.S. plans in fiscal
2023 or fiscal 2022.
We do
not expect to be required
to make
any
contributions
to
our
principal
U.S.
plans
in
fiscal
Our
principal
U.S.
retirement
plan
covering
salaried
employees
has
a
provision that any excess pension assets would be allocated to active participants
if the plan is terminated within
five years
of a change
in control.
All salaried employees
hired on
or after June 1,
2013, are eligible
for a retirement
program that
does not include
a defined
benefit pension plan.
Other Postretirement Benefit Plans
We
also
sponsor
plans
that
provide
health
care
benefits
to
many
of our
retirees
in
the United
States,
Canada,
and
Brazil.
The
U.S.
salaried
health
care
benefit
plan
is
contributory,
with
retiree
contributions
based
on
years
of
service.
We
make
decisions
to
fund
related trusts
for certain
employees and
retirees on an
annual basis.
We
made
no
voluntary contributions
to these
plans in fiscal
2023
or fiscal 2022. We
do not expect to be required to make any contributions to these plans in fiscal 2024.
In fiscal 2021, we approved
amendments to reorganize
certain U.S. retiree health and
welfare benefit plans. The General
Mills Retiree
Health
Plan
for
Union
Employees
was
divided
into
two
plans,
with
participants
under
age
remaining
within
its
coverage,
and
participants age 65 and over covered by The General Mills Retiree Health Plan
for Union Employees (65+). Effective
January 1, 2022,
the General
Mills Retiree
Health Plan
for Union
Employees (65+)
allows certain
participants to
purchase individual
health insurance
policies on
a private
health care
exchange. Additionally,
the Employees’
Benefit Plan
of General
Mills was
merged
into the
General
Mills
Retiree
Health
Plan
for
Union
Employees.
Separate
benefit
structures
and
plan
provisions
continue
to
apply
to
eligible
participants of
these merged
plans. A
portion of
the General
Mills Retiree
Health Plan
for Union
Employees overfunded
plan assets
were
segregated
to offset
the cost
of
the
Employees’
Benefit Plan
of
General
Mills health
and
welfare
benefits.
The
segregation
of
assets
is
reported
as
a
negative
employer
contribution
in
the
change
in
other
postretirement
benefit
plan
assets.
The
amendments
facilitate targeted investment strategies that reflect each
plan’s unique liability characteristics.
In
fiscal
2021,
we
announced
changes
to
the design
of our
health
care
coverage
for
certain eligible
retirees
to
allow participants
to
purchase
individual
health
insurance
policies
on
a
private
health
care
exchange
effective
January
1,
These
changes
provide
certain eligible retirees with greater flexibility in choosing health care coverage
that best fits their needs.
Health Care Cost Trend
Rates
Assumed health care cost trends are as follows:
Fiscal Year
2023
2022
Health care cost trend rate for next year
6.6
% and
6.6
%
5.9
% and
6.0
%
Rate to which the cost trend rate is assumed to decline (ultimate rate)
4.5
%
4.5
%
Year
that the rate reaches the ultimate trend rate
2032
2031
We
review our
health care
cost trend
rates annually.
Our review
is based
on data
we collect
about our
health care
claims experience
and information
provided by our
actuaries. This information
includes recent
plan experience,
plan design, overall
industry experience
and projections, and
assumptions used by other
similar organizations.
Our initial health
care cost trend
rate is adjusted
as necessary to
remain consistent
with this
review,
recent experiences,
and short-term
expectations. Our
initial health
care cost
trend rate
assumption
is
6.6
percent for retirees age
65 and over and for
retirees under age 65 at
the end of fiscal 2023.
Rates are graded down annually
until
the
ultimate
trend
rate
of
4.5
percent
is
reached
in
2032
for
all
retirees.
The
trend
rates
are
applicable
for
calculations
only
if
the
retirees’ benefits increase
as a result of
health care inflation. The
ultimate trend rate is
adjusted annually,
as necessary,
to approximate
the current
economic
view on
the rate
of long-term
inflation plus
an appropriate
health
care cost
premium.
Assumed trend
rates for
health care costs have an important effect on the amounts reported
for the other postretirement benefit plans.
Postemployment Benefit Plans
Under certain
circumstances, we
also provide
accruable benefits,
primarily severance,
to former
or inactive
employees in
the United
States,
Canada,
and
Mexico.
We
recognize
an
obligation
for
any
of
these
benefits
that
vest
or
accumulate
with
service.
Postemployment benefits
that do not
vest or
accumulate with
service (such
as severance
based solely
on annual pay
rather than years
of service) are charged to expense when incurred. Our postemployment
benefit plans are unfunded.
Summarized
financial
information
about
defined
benefit
pension,
other
postretirement
benefit,
and
postemployment
benefit
plans
is
presented below:
Defined Benefit Pension
Plans
Other
Postretirement
Benefit Plans
Postemployment
Benefit Plans
Fiscal Year
Fiscal Year
Fiscal Year
In Millions
2023
2022
2023
2022
2023
2022
Change in Plan Assets:
Fair value at beginning of year
$
6,510.3
$
7,460.2
$
479.2
$
519.4
Actual return on assets
(413.5)
(618.7)
(6.6)
(18.0)
Employer contributions
30.0
31.2
0.1
0.1
Plan participant contributions
1.3
3.8
5.7
9.6
Benefits payments
(344.6)
(346.2)
(22.4)
(31.9)
Foreign currency
(4.9)
(20.0)
-
-
Fair value at end of year (a)
$
5,778.6
$
6,510.3
$
456.0
$
479.2
Change in Projected Benefit Obligation:
Benefit obligation at beginning of year
$
6,528.3
$
7,714.4
$
469.6
$
600.0
$
138.5
$
151.7
Service cost
70.3
93.5
5.1
7.6
8.4
10.0
Interest cost
258.5
184.3
17.9
12.6
3.1
1.5
Plan amendment
-
3.7
-
(16.1)
-
-
Curtailment/other
(8.5)
(29.4)
-
(3.2)
10.4
12.0
Plan participant contributions
1.3
3.8
5.7
9.6
-
-
Medicare Part D reimbursements
-
-
0.7
1.7
-
-
Actuarial gain
(538.1)
(1,089.7)
(22.5)
(86.0)
(10.7)
(18.7)
Benefits payments
(336.1)
(334.7)
(45.5)
(56.9)
(18.5)
(17.7)
Foreign currency
(5.0)
(17.6)
(0.4)
0.3
(0.2)
(0.3)
Projected benefit obligation at end of year (a)
$
5,970.7
$
6,528.3
$
430.6
$
469.6
$
131.0
$
138.5
Plan assets (less) more than benefit obligation as of
fiscal year end
$
(192.1)
$
(18.0)
$
25.4
$
9.6
$
(131.0)
$
(138.5)
(a)
Plan assets and obligations are measured as of
May 31, 2023
and
May 31, 2022
.
During
fiscal
2023
and
fiscal
2022,
the
decreases
in
defined
benefit
pension
obligations
and
other
postretirement
obligations
were
primarily driven by actuarial gains due to an increase in the discount rate
in each respective year.
As
of
May
28,
2023,
other
postretirement
benefit
plans
had
benefit
obligations
of
$
308.0
million
that
exceeded
plan
assets
of
$
274.2
million. As
of May
29, 2022,
other postretirement
benefit plans
had benefit
obligations of
$
332.4
million that
exceeded
plan
assets
of
$
279.6
million.
Postemployment
benefit
plans
are
not
funded
and
had
benefit
obligations
of
$
131.0
million
and
$
138.5
million as of May 28, 2023 and May 29, 2022, respectively.
The
accumulated
benefit
obligation
for
all
defined
benefit
pension
plans
was
$
5,807.9
million
as
of
May 28,
2023,
and
$
6,330.0
million as of May 29, 2022.
Amounts recognized in AOCI as of May 28, 2023 and May 29, 2022, are as follows:
Defined Benefit Pension
Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
Total
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
In Millions
2023
2022
2023
2022
2023
2022
2023
2022
Net actuarial (loss) gain
$
(1,859.7)
$
(1,720.3)
$
186.9
$
208.5
$
2.2
$
(1.6)
$
(1,670.6)
$
(1,513.4)
Prior service (costs) credits
(4.8)
(7.6)
102.3
118.9
(1.1)
(1.0)
96.4
110.3
Amounts recorded in accumulated
other comprehensive loss
$
(1,864.5)
$
(1,727.9)
$
289.2
$
327.4
$
1.1
$
(2.6)
$
(1,574.2)
$
(1,403.1)
Plans with accumulated benefit obligations in excess of plan assets as of
May 28, 2023 and May 29, 2022 are as follows:
Defined Benefit Pension Plans
Fiscal Year
In Millions
2023
2022
Projected benefit obligation
$
466.2
$
508.2
Accumulated benefit obligation
453.4
479.6
Plan assets at fair value
18.7
20.5
Components of net periodic benefit expense are as follows:
Defined Benefit Pension Plans
Other Postretirement Benefit
Plans
Postemployment Benefit Plans
Fiscal Year
Fiscal Year
Fiscal Year
In Millions
2023
2022
2021
2023
2022
2021
2023
2022
2021
Service cost
$
70.3
$
93.5
$
104.4
$
5.1
$
7.6
$
8.5
$
8.4
$
10.0
$
9.3
Interest cost
258.5
184.3
192.1
17.9
12.6
18.0
3.1
1.5
1.7
Expected return on
plan assets
(420.5)
(411.1)
(420.9)
(31.1)
(26.7)
(34.7)
-
-
-
Amortization of losses
(gains)
113.2
140.5
108.3
(19.3)
(10.9)
(5.1)
0.4
3.0
2.6
Amortization of prior
service costs
(credits)
1.5
1.0
1.3
(23.2)
(20.9)
(5.5)
0.3
0.4
0.9
Other adjustments
-
0.1
-
-
(0.1)
-
10.4
12.9
8.4
Settlement or
curtailment (gains)
losses
(0.7)
(18.4)
14.9
-
(5.5)
-
-
-
-
Net expense (income)
$
22.3
$
(10.1)
$
0.1
$
(50.6)
$
(43.9)
$
(18.8)
$
22.6
$
27.8
$
22.9
Assumptions
Weighted-average
assumptions used to determine fiscal year-end benefit obligations are
as follows:
Defined Benefit Pension
Plans
Other Postretirement
Benefit Plans
Postemployment Benefit
Plans
Fiscal Year
Fiscal Year
Fiscal Year
2023
2022
2023
2022
2023
2022
Discount rate
5.18
%
4.39
%
5.19
%
4.36
%
4.55
%
3.62
%
Rate of salary increases
4.20
4.34
-
-
4.46
4.46
Weighted-average
assumptions used to determine fiscal year net periodic benefit expense are as follows:
Defined Benefit Pension Plans
Other Postretirement Benefit
Plans
Postemployment Benefit Plans
Fiscal Year
Fiscal Year
Fiscal Year
2023
2022
2021
2023
2022
2021
2023
2022
2021
Discount rate
4.39
%
3.17
%
3.20
%
4.36
%
3.03
%
3.02
%
3.62
%
2.04
%
1.86
%
Service cost
effective rate
4.57
3.56
3.58
4.41
3.34
3.40
3.69
2.46
3.51
Interest cost
effective rate
4.03
2.42
2.55
3.80
2.08
2.29
3.35
1.48
2.83
Rate of
salary increases
4.18
4.39
4.44
-
-
-
4.46
4.46
4.47
Expected long-term
rate of return on
plan assets
6.70
5.85
5.72
6.76
6.09
4.57
-
-
-
Discount Rates
We
estimate
the
service
and
interest
cost
components
of
the
net
periodic
benefit
expense
for
our
United
States
and
most
of
our
international
defined
benefit
pension,
other
postretirement
benefit,
and
postemployment
benefit
plans
utilizing
a
full
yield
curve
approach
by applying
the specific
spot rates
along
the yield
curve used
to determine
the benefit
obligation
to the
relevant projected
cash flows. Our
discount rate assumptions
are determined annually
as of May 31
for our defined
benefit pension, other
postretirement
benefit, and
postemployment benefit
plan obligations.
We
also use
discount rates
as of
May 31 to
determine defined
benefit pension,
other
postretirement benefit,
and
postemployment
benefit plan
income and
expense for
the following
fiscal year.
We
work with
our
outside actuaries
to determine
the timing
and amount
of expected
future cash
outflows to
plan participants
and, using
the Aa
Above
Median corporate
bond yield,
to develop
a forward
interest rate
curve, including
a margin
to that
index based on
our credit
risk. This
forward interest rate curve is applied to our expected future cash outflows
to determine our discount rate assumptions.
Fair Value
of Plan Assets
The fair
values of
our pension
and postretirement
benefit plans’
assets and
their respective
levels in
the fair
value hierarchy
by asset
category were as follows:
May 31, 2023
May 31, 2022
In Millions
Level 1
Level 2
Level 3
Total
Assets
Level 1
Level 2
Level 3
Total
Assets
Fair value measurement of pension
plan assets:
Equity (a)
$
278.3
$
484.1
$
34.3
$
796.7
$
623.4
$
442.3
$
66.3
$
1,132.0
Fixed income (b)
1,603.4
1,866.3
-
3,469.7
1,958.7
1,723.4
-
3,682.1
Real asset investments (c)
92.8
-
-
92.8
159.8
-
-
159.8
Other investments (d)
-
-
0.1
0.1
-
-
0.1
0.1
Cash and accruals
295.1
0.2
-
295.3
133.6
0.3
-
133.9
Fair value measurement of pension
plan assets
$
2,269.6
$
2,350.6
$
34.4
$
4,654.6
$
2,875.5
$
2,166.0
$
66.4
$
5,107.9
Assets measured at net asset value (e)
1,124.0
1,402.4
Total pension plan
assets
$
5,778.6
$
6,510.3
Fair value measurement of
postretirement benefit plan assets:
Fixed income (b)
$
113.3
$
-
$
-
$
113.3
$
120.8
$
-
$
-
$
120.8
Cash and accruals
2.5
-
-
2.5
6.6
-
-
6.6
Fair value measurement of
postretirement benefit
plan assets
$
115.8
$
-
$
-
$
115.8
$
127.4
$
-
$
-
$
127.4
Assets measured at net asset value (e)
340.2
351.8
Total postretirement
benefit
plan assets
$
456.0
$
479.2
(a)
Primarily
publicly
traded
common
stock
for
purposes
of
total
return
and
to
maintain
equity
exposure
consistent
with
policy
allocations. Investments
include: United States
and international
public equity
securities, mutual funds,
and equity futures
valued
at closing prices from national exchanges, commingled funds valued
at fair value using the unit values provided by the investment
managers,
and certain
private equity
securities valued
using
a matrix
of pricing
inputs reflecting
assumptions
based on
the best
information available.
(b)
Primarily government
and corporate
debt securities
and futures
for purposes
of total
return, managing
fixed income
exposure to
policy allocations, and
duration targets. Investments
include: fixed income
securities and bond
futures generally valued
at closing
prices from
national exchanges,
fixed income
pricing models,
and independent
financial analysts;
and fixed
income commingled
funds valued at unit values provided by the investment managers, which
are based on the fair value of the underlying investments.
(c)
Publicly
traded
common
stocks
in
energy,
real
estate,
and
infrastructure
for
the
purpose
of
total
return.
Investments
include:
energy,
real
estate,
and
infrastructure
securities
generally
valued
at
closing
prices
from
national
exchanges,
and
commingled
funds valued at unit values provided by the investment managers, which
are based on the fair value of the underlying investments.
(d)
Insurance and
annuity contracts
to provide
a stable
stream of
income for
pension retirees.
Fair values
are based
on the
fair value
of the underlying investments and contract fair values established by the providers
.
(e)
Primarily limited
partnerships, trust-owned
life insurance,
common collective
trusts, and
certain private
equity securities
that are
measured at fair value using
the net asset value per
share (or its equivalent) practical
expedient and have not
been classified in the
fair value hierarchy.
There were
no
transfers into
or out
of level
3 investments
in fiscal
During fiscal
2022, the
inclusion of
non-observable inputs
into the pricing of certain private equity securities resulted in the transfer of $
66.3
million into level 3 investments.
Expected Rate of Return on Plan Assets
Our expected
rate of return
on plan assets
is determined
by our asset
allocation, our
historical long-term
investment performance,
our
estimate of future long-term returns
by asset class (using input from
our actuaries, investment services,
and investment managers), and
long-term inflation
assumptions. We
review this assumption
annually for
each plan; however,
our annual
investment performance
for
one particular year does not, by itself, significantly influence our evaluation.
Weighted-average
asset allocations for our defined benefit pension and other postretirement benefit plans are
as follows:
Defined Benefit Pension Plans
Other Postretirement Benefit Plans
Fiscal Year
Fiscal Year
2023
2022
2023
2022
Asset category:
United States equities
8.3
%
12.1
%
28.6
%
27.9
%
International equities
4.8
7.8
13.4
13.5
Private equities
10.6
10.4
14.5
15.2
Fixed income
65.1
58.3
43.5
43.4
Real assets
11.2
11.4
-
-
Total
100.0
%
100.0
%
100.0
%
100.0
%
The investment
objective for
our defined
benefit pension
and other
postretirement benefit
plans is
to secure
the benefit
obligations to
participants
at
a
reasonable
cost
to
us.
Our
goal
is
to
optimize
the
long-term
return
on
plan
assets
at
a
moderate
level
of
risk.
The
defined benefit
pension plan
and other postretirement
benefit plan
portfolios are
broadly diversified
across asset
classes. Within
asset
classes,
the
portfolios
are
further
diversified
across
investment
styles
and
investment
organizations.
For
the
U.S.
defined
benefit
pension
plans,
the
long-term
investment
policy
allocation
is:
percent
to
equities
in
the
United
States;
percent
to
international
equities;
percent to private equities;
percent to fixed income; and
percent to real assets (real estate,
energy,
and infrastructure).
For other U.S. postretirement benefit plans, the long-term investment
policy allocations are:
percent to equities in the United States;
percent to international equities;
percent to total private equities; and
percent to fixed income.
The actual allocations to these
asset classes may vary tactically around the long-term policy allocations based
on relative market valuations.
Contributions and Future Benefit Payments
We
do
no
t
expect
to
be
required
to
make
contributions
to
our
defined
benefit
pension,
other
postretirement
benefit,
and
postemployment benefit
plans in
fiscal 2024.
Actual fiscal
2024 contributions
could exceed
our current
projections, as
influenced by
our decision
to undertake
discretionary funding
of our benefit
trusts and
future changes
in regulatory
requirements. Estimated
benefit
payments, which reflect expected future service, as appropriate, are
expected to be paid from fiscal 2024 to fiscal 2033 as follows:
In Millions
Defined Benefit
Pension Plans
Other
Postretirement
Benefit Plans
Gross Payments
Postemployment
Benefit Plans
Fiscal 2024
$
351.4
$
38.6
$
27.1
Fiscal 2025
357.6
37.5
20.0
Fiscal 2026
364.6
36.6
18.6
Fiscal 2027
371.6
36.1
16.7
Fiscal 2028
378.9
34.9
15.4
Fiscal 2029-2033
1,977.5
158.8
64.4
Defined Contribution Plans
The
General
Mills
Savings
Plan
is
a
defined
contribution
plan
that
covers
domestic
salaried,
hourly,
nonunion,
and
certain
union
employees.
This plan
is a
401(k)
savings plan
that includes
a number
of investment
funds, including
a Company
stock fund
and an
Employee Stock
Ownership Plan
(ESOP). We
sponsor another
money purchase
plan for
certain domestic
hourly employees
with net
assets of $
19.2
million as of May 28, 2023, and $
20.6
million as of May 29, 2022. We
also sponsor defined contribution plans in many
of
our
foreign
locations.
Our
total
recognized
expense
related
to
defined
contribution
plans
was
$
97.2
million
in
fiscal
2023,
$
90.1
million in fiscal 2022, and $
76.1
million in fiscal 2021.
We
match a
percentage of
employee contributions
to the
General Mills
Savings Plan.
The Company
match is
directed to
investment
options
of
the
participant’s
choosing.
The
number
of
shares
of
our
common
stock
allocated
to
participants
in
the
ESOP
was
3.7
million as
of May
28, 2023,
and
4.0
million as
of May
29, 2022.
The ESOP’s
only assets
are our
common stock
and temporary
cash
balances.
The Company stock fund and the ESOP collectively held $
498.7
million and $
443.8
million of Company common stock as of May 28,
2023, and May 29, 2022, respectively.
NOTE 15. INCOME TAXES
The
components
of
earnings
before
income
taxes
and
after-tax
earnings
from
joint
ventures
and
the
corresponding
income
taxes
thereon are as follows:
Fiscal Year
In Millions
2023
2022
2021
Earnings before income taxes and after-tax earnings
from joint ventures:
United States
$
2,740.5
$
2,652.3
$
2,567.1
Foreign
400.0
557.3
290.3
Total earnings
before income taxes and after-tax earnings from joint ventures
$
3,140.5
$
3,209.6
$
2,857.4
Income taxes:
Currently payable:
Federal
$
487.1
$
384.2
$
369.8
State and local
82.2
60.8
47.5
Foreign
65.1
79.1
93.0
Total current
634.4
524.1
510.3
Deferred:
Federal
9.6
75.0
117.9
State and local
(8.1)
18.3
13.6
Foreign
(23.7)
(31.1)
(12.7)
Total deferred
(22.2)
62.2
118.8
Total income
taxes
$
612.2
$
586.3
$
629.1
The following table reconciles the United States statutory income tax rate
with our effective income tax rate:
Fiscal Year
2023
2022
2021
United States statutory rate
21.0
%
21.0
%
21.0
%
State and local income taxes, net of federal tax benefits
1.5
2.1
1.7
Foreign rate differences
(1.0)
(1.1)
0.3
Stock based compensation
(1.0)
(0.6)
(0.4)
Capital loss (a)
-
(1.7)
-
Divestitures, net
(0.8)
(1.2)
-
Other, net
(0.2)
(0.2)
(0.6)
Effective income tax rate
19.5
%
18.3
%
22.0
%
(a)
During fiscal
2022, we
released a
$
50.7
million valuation
allowance associated
with our capital
loss carryforward
expected to
be
used against divestiture gains.
The tax effects of temporary differences that
give rise to deferred tax assets and liabilities are as follows:
In Millions
May 28, 2023
May 29, 2022
Accrued liabilities
$
51.2
$
46.2
Compensation and employee benefits
143.7
146.7
Pension
43.7
1.5
Tax credit carryforwards
38.7
34.9
Stock, partnership, and miscellaneous investments
2.4
17.9
Capitalized research and development
83.7
-
Capital losses
76.2
61.9
Net operating losses
221.3
178.0
Other
99.4
96.3
Gross deferred tax assets
760.3
583.4
Valuation
allowance
259.2
185.1
Net deferred tax assets
501.1
398.3
Brands
1,417.2
1,415.2
Fixed assets
402.7
392.6
Intangible assets
213.1
201.0
Tax lease transactions
8.5
14.9
Inventories
47.1
27.1
Stock, partnership, and miscellaneous investments
369.0
357.7
Unrealized hedges
34.3
98.7
Other
120.1
109.4
Gross deferred tax liabilities
2,612.0
2,616.6
Net deferred tax liability
$
2,110.9
$
2,218.3
We
have established a
valuation allowance against
certain of the
categories of deferred
tax assets described
above as current
evidence
does
not
suggest
we
will
realize
sufficient
taxable
income
of
the
appropriate
character
(e.g.,
ordinary
income
versus
capital
gain
income) within the carryforward period to allow us to realize these deferred tax
benefits.
Information about our valuation allowance follows:
In Millions
May 28, 2023
Pillsbury acquisition losses
$
106.2
State and foreign loss carryforwards
27.1
Capital loss carryforwards
75.7
Other
50.2
Total
$
259.2
As of May 28, 2023, we believe it is more-likely-than-not that the remainder
of our deferred tax assets are realizable.
Information about our tax loss carryforwards follows
:
In Millions
May 28, 2023
Foreign loss carryforwards
$
202.0
Federal operating loss carryforwards
10.2
State operating loss carryforwards
9.0
Total tax loss carryforwards
$
221.2
Our foreign loss carryforwards expire as follows:
In Millions
May 28, 2023
Expire in fiscal 2024 and 2025
$
0.5
Expire in fiscal 2026 and beyond
15.0
Do not expire (a)
186.5
Total foreign loss carryforwards
$
202.0
(a)
Approximately
$
million
of
our
foreign
loss
carryforwards
are
held
in
Brazil
for
which
we
have
not
recorded
a
valuation
allowance.
On August
16, 2022,
the Inflation
Reduction Act
(IRA) was
signed into
law.
The IRA
introduces
a Corporate
Alternative Minimum
Tax
beginning
in
our
fiscal
2024
and
an
excise
tax
on
the
repurchase
of
corporate
stock
starting
after
January
1,
We
do
not
currently expect the IRA
to have a material impact
on our financial results, including
our annual estimated effective
tax rate, or on our
liquidity.
The amount
of excise
tax on
the repurchase
of corporate
stock was
immaterial in
fiscal 2023.
We
will continue
to monitor
and assess the impact the IRA may have on our business and financial results.
On
March
11,
2021,
the
American
Rescue
Plan
Act
(ARPA)
was
signed
into
law.
The
ARPA
includes
a
provision
expanding
the
limitations on
the deductibility
of certain
executive employee
compensation beginning
in our fiscal
- We
do not
currently expect
the ARPA to have
a material impact on our financial results, including our annual estimated effective
tax rate, or on our liquidity.
As of
May 28,
2023, we
have
no
t recognized
a deferred
tax liability
for unremitted
earnings of
approximately $
2.3
billion from
our
foreign operations
because we
currently believe
our subsidiaries
have invested
the undistributed
earnings indefinitely
or the
earnings
will be remitted
in a tax-neutral
transaction. It
is not practicable
for us to
determine the amount
of unrecognized
tax expense on
these
reinvested earnings.
Deferred taxes
are recorded
for earnings
of our
foreign operations
when we
determine that
such earnings
are no
longer indefinitely reinvested. All
earnings prior to fiscal 2018
remain permanently reinvested. Earnings
from fiscal 2018 and later
are
not permanently reinvested and local country withholding taxes are
recorded on earnings each year.
We are
subject to federal income
taxes in the United States
as well as various state, local,
and foreign jurisdictions. A
number of years
may elapse before an uncertain tax position is audited and finally resolved.
While it is often difficult to predict the final outcome or the
timing
of
resolution
of
any
particular
uncertain
tax
position,
we
believe
that
our
liabilities
for
income
taxes
reflect
the
most
likely
outcome.
We
adjust
these
liabilities,
as
well
as
the
related
interest,
in
light
of
changing
facts
and
circumstances.
Settlement
of
any
particular position would usually require the use of cash.
The number
of years
with open
tax audits
varies depending
on the
tax jurisdiction.
Our major
taxing jurisdiction
is the
United States
(federal and state). Various
tax examinations by United States state taxing
authorities could be conducted for any
open tax year,
which
vary by jurisdiction, but are generally from
to
years.
The Internal
Revenue
Service (IRS)
is currently
auditing
our federal
tax returns
for
fiscal
2018 and 2019
. Several
state and
foreign
examinations are currently in
progress. We
do not expect these examinations
to result in a material
impact on our results
of operations
or financial position. We
have effectively settled all issues with the IRS for fiscal years
2015 and prior.
The Brazilian
tax authority,
Secretaria da
Receita Federal
do Brasil (RFB),
has 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.
We
apply a more-likely-than-not
threshold to the
recognition and derecognition
of uncertain tax
positions. Accordingly,
we recognize
the amount of
tax benefit that
has a greater
than 50 percent
likelihood of being
ultimately realized upon
settlement. Future changes
in
judgment related to the expected ultimate resolution of uncertain tax positions
will affect earnings in the period of such change.
The following table sets forth
changes in our total gross
unrecognized tax benefit liabilities,
excluding accrued interest,
for fiscal 2023
and
fiscal
Approximately
$
million
of
this
total
in
fiscal
2023
represents
the
amount
that,
if
recognized,
would
affect
our
effective income tax rate in future periods.
This amount differs from the gross unrecognized
tax benefits presented in the table because
certain
portions of
the liabilities
below
would
impact deferred
taxes if
recognized.
We
also would
record a
decrease
in U.S.
federal
income taxes upon recognition of the state tax benefits included therein.
Fiscal Year
In Millions
2023
2022
Balance, beginning of year
$
160.9
$
145.3
Tax positions related
to current year:
Additions
29.9
21.6
Tax positions related
to prior years:
Additions
2.9
10.4
Reductions
(0.9)
(5.5)
Settlements
(4.7)
(2.4)
Lapses in statutes of limitations
(6.9)
(8.5)
Balance, end of year
$
181.2
$
160.9
As of
May 28,
2023, we do
no
t expect
to pay unrecognized
tax benefit
liabilities and
accrued interest
within the
next 12
months. We
are not
able to
reasonably estimate
the timing
of future
cash flows
beyond 12
months due
to uncertainties
in the
timing of
tax audit
outcomes. Our unrecognized tax benefit liability was classified in other
liabilities.
We
report
accrued
interest
and
penalties
related
to
unrecognized
tax
benefit
liabilities
in
income
tax
expense.
For
fiscal
2023,
we
recognized $
4.7
million of tax-related
net interest and
penalties, and had
$
32.4
million of accrued
interest and penalties
as of May 28,
- For
fiscal 2022,
we recognized
$
2.0
million of
tax-related net
interest and
penalties, and
had $
26.6
million of
accrued interest
and penalties as of May 29, 2022.
NOTE 16. COMMITMENTS AND CONTINGENCIES
As
of
May
28,
2023,
we
have
issued
guarantees
and
comfort
letters
of
$
149.9
million
for
the
debt
and
other
obligations
of
non-
consolidated affiliates, mainly CPW.
Off-balance sheet arrangements were not material as of
May 28, 2023.
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
May 28, 2023
, we
are unable
to estimate
any possible loss and have not recorded a loss contingency for this matter.
NOTE 17. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
We
operate
in
the
packaged
foods
industry.
In
fiscal
2022,
we
completed
a
new
organization
structure
to
streamline
our
global
operations.
This
global
reorganization
required
us
to
reevaluate
our
operating
segments.
Under
our
new
organization
structure,
our
chief operating decision maker assesses performance
and makes decisions about resources to be allocated to
our operating segments as
follows: North America Retail, International, Pet, and North America Foodservice.
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 and snack bars.
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.
Our operating segment results were as follows:
Fiscal Year
In Millions
2023
2022
2021
Net sales:
North America Retail
$
12,659.9
$
11,572.0
$
11,250.0
International
2,769.5
3,315.7
3,656.8
Pet
2,473.3
2,259.4
1,732.4
North America Foodservice
2,191.5
1,845.7
1,487.8
Total
$
20,094.2
$
18,992.8
$
18,127.0
Operating profit:
North America Retail
$
3,181.3
$
2,699.7
$
2,725.9
International
161.8
232.0
236.6
Pet
445.5
470.6
415.0
North America Foodservice
290.0
255.5
203.3
Total segment operating
profit
$
4,078.6
$
3,657.8
$
3,580.8
Unallocated corporate items
1,033.2
402.6
212.1
Divestitures (gain) loss, net
(444.6)
(194.1)
53.5
Restructuring, impairment, and other exit costs (recoveries)
56.2
(26.5)
170.4
Operating profit
$
3,433.8
$
3,475.8
$
3,144.8
Net sales for our North America Retail operating units were as follows:
Fiscal Year
In Millions
2023
2022
2021
U.S. Meals & Baking Solutions
$
4,426.3
$
4,023.8
$
4,042.2
U.S. Morning Foods
3,620.1
3,370.9
3,314.0
U.S. Snacks
3,611.0
3,191.4
2,940.5
Canada
1,002.5
985.9
953.3
Total
$
12,659.9
$
11,572.0
$
11,250.0
Net sales by class of similar products were as follows:
Fiscal Year
In Millions
2023
2022
2021
Snacks
$
4,431.5
$
3,960.9
$
3,574.2
Cereal
3,209.5
2,998.1
2,868.9
Convenient meals
2,961.6
2,988.5
3,030.2
Pet
2,476.0
2,260.1
1,732.4
Dough
2,390.5
1,986.3
1,866.1
Baking mixes and ingredients
2,037.3
1,843.6
1,695.5
Yogurt
1,472.9
1,714.9
2,074.8
Super-premium ice cream
703.7
782.2
819.7
Other
411.2
458.2
465.2
Total
$
20,094.2
$
18,992.8
$
18,127.0
The following tables provide financial information by geographic area:
Fiscal Year
In Millions
2023
2022
2021
Net sales:
United States
$
16,322.2
$
14,691.2
$
13,496.9
Non-United States
3,772.0
4,301.6
4,630.1
Total
$
20,094.2
$
18,992.8
$
18,127.0
In Millions
May 28, 2023
May 29, 2022
Cash and cash equivalents:
United States
$
204.2
$
46.0
Non-United States
381.3
523.4
Total
$
585.5
$
569.4
In Millions
May 28, 2023
May 29, 2022
Land, buildings, and equipment:
United States
$
2,920.5
$
2,675.2
Non-United States
715.7
718.6
Total
$
3,636.2
$
3,393.8
NOTE 18. SUPPLEMENTAL
INFORMATION
The components of certain Consolidated Balance Sheets accounts are
as follows:
In Millions
May 28, 2023
May 29, 2022
Receivables:
Customers
$
1,710.1
$
1,720.4
Less allowance for doubtful accounts
(26.9)
(28.3)
Total
$
1,683.2
$
1,692.1
In Millions
May 28, 2023
May 29, 2022
Inventories:
Finished goods
$
2,066.9
$
1,634.7
Raw materials and packaging
572.2
532.0
Grain
133.8
164.0
Excess of FIFO over LIFO cost (a)
(600.9)
(463.4)
Total
$
2,172.0
$
1,867.3
(a)
Inventories
of
$
1,477.5
million
as
of
May
28,
2023,
and
$
1,127.1
million
as
of
May
29,
2022,
were
valued
at
LIFO.
The
difference between replacement
cost and the stated LIFO
inventory value is not materially
different from the reserve
for the LIFO
valuation method.
In Millions
May 28, 2023
May 29, 2022
Prepaid expenses and other current assets:
Marketable investments
$
117.2
$
249.8
Other receivables
285.7
182.8
Prepaid expenses
244.4
213.5
Derivative receivables
45.1
86.1
Grain contracts
2.3
28.7
Miscellaneous
41.0
41.2
Total
$
735.7
$
802.1
In Millions
May 28, 2023
May 29, 2022
Assets held for sale:
Goodwill
$
-
$
130.0
Inventories
-
22.9
Equipment
-
6.0
Total
$
-
$
158.9
In Millions
May 28, 2023
May 29, 2022
Land, buildings, and equipment:
Equipment
$
6,672.2
$
6,491.7
Buildings
2,569.3
2,444.8
Construction in progress
746.7
492.8
Capitalized software
514.8
717.8
Land
56.5
55.1
Equipment under finance lease
9.8
7.8
Buildings under finance lease
0.3
0.3
Total land, buildings,
and equipment
10,569.6
10,210.3
Less accumulated depreciation
(6,933.4)
(6,816.5)
Total
$
3,636.2
$
3,393.8
In Millions
May 28, 2023
May 29, 2022
Other assets:
Investments in and advances to joint ventures
$
462.0
$
513.8
Right of use operating lease assets
340.0
336.8
Pension assets
51.8
52.6
Life insurance
15.8
17.5
Miscellaneous
290.7
307.4
Total
$
1,160.3
$
1,228.1
In Millions
May 28, 2023
May 29, 2022
Other current liabilities:
Accrued trade and consumer promotions
$
454.3
$
474.4
Accrued payroll
426.6
435.6
Current portion of operating lease liabilities
101.9
106.7
Accrued interest, including interest rate swaps
83.1
70.1
Accrued taxes
80.9
31.4
Restructuring and other exit costs reserve
47.7
36.8
Derivative payable, primarily commodity-related
34.0
19.9
Dividends payable
23.1
25.3
Grain contracts
11.8
3.0
Miscellaneous
337.3
348.8
Total
$
1,600.7
$
1,552.0
In Millions
May 28, 2023
May 29, 2022
Other non-current liabilities:
Accrued compensation and benefits, including obligations for underfunded
other
postretirement benefit and postemployment benefit plans
$
509.6
$
360.8
Non-current portion of operating lease liabilities
257.0
248.3
Accrued taxes
245.1
233.0
Miscellaneous
128.3
87.0
Total
$
1,140.0
$
929.1
Certain Consolidated Statements of Earnings amounts are as follows:
Fiscal Year
In Millions
2023
2022
2021
Depreciation and amortization
$
546.6
$
570.3
$
601.3
Research and development expense
257.6
243.1
239.3
Advertising and media expense (including production and
communication costs)
810.0
690.1
736.3
The components of interest, net are as follows:
Fiscal Year
Expense (Income), in Millions
2023
2022
2021
Interest expense
$
400.5
$
387.2
$
430.9
Capitalized interest
(4.4)
(3.8)
(3.2)
Interest income
(14.0)
(3.8)
(7.4)
Interest, net
$
382.1
$
379.6
$
420.3
Certain Consolidated Statements of Cash Flows amounts are as follows:
Fiscal Year
In Millions
2023
2022
2021
Cash interest payments
$
337.1
$
357.8
$
412.5
Cash paid for income taxes
682.6
545.3
636.1
NOTE 19. QUARTERLY
DATA
(UNAUDITED)
Summarized quarterly data for fiscal 2023 and fiscal 2022 follows:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
In Millions, Except Per
Share Amounts
2023
2022
2023
2022
2023
2022
2023
2022
Net sales
$
4,717.6
$
4,539.9
$
5,220.7
$
5,024.0
$
5,125.9
$
4,537.7
$
5,030.0
$
4,891.2
Gross margin
1,447.7
1,597.4
1,705.1
1,631.2
1,664.8
1,403.7
1,728.2
1,769.9
Net earnings attributable to
General Mills
820.0
627.0
605.9
597.2
553.1
660.3
614.9
822.8
EPS:
Basic
$
1.37
$
1.03
$
1.01
$
0.98
$
0.94
$
1.09
$
1.04
$
1.36
Diluted
$
1.35
$
1.02
$
1.01
$
0.97
$
0.92
$
1.08
$
1.03
$
1.36
In the fourth
quarter fiscal 2023,
we approved restructuring
actions to enhance
the efficiency
of our global
supply chain structure
and
recorded $
36.2
million of
charges. We
also approved
restructuring actions
in our International
segment to
optimize our
Häagen-Dazs
shops network
and recorded
$
6.4
million of
charges.
In addition,
we recorded
a net
recovery of
$
11.8
million related
to a
voluntary
recall of certain international
H
ä
agen-Dazs
ice cream products as a result of an insurance recovery.
In the fourth
quarter of fiscal 2022,
we recorded an additional
gain on the
sale of our interests in
Yoplait
SAS, Yoplait
Marques SNC,
and Liberté
Marques Sàrl
of $
14.9
million and
an additional
gain on
the sale
of our
European dough
businesses of
$
9.2
million. We
also recorded
$
16.0
million of
transaction costs
primarily
related to
the sale
of our
interests in
Yoplait
SAS, Yoplait
Marques SNC,
and
Liberté
Marques
Sàrl,
the sale
of
our
European
dough
businesses,
the
definitive
agreements
to
sell our
Helper
main meals
and
Suddenly
Salad
side
dishes
business,
and
the
definitive
agreement
to
acquire
TNT
Crust.
We
also
recorded
a
$
34.0
million
loss
associated
with
the
valuation
of
a
corporate
investment.
In
addition,
we
recorded
a
$
34.0
million
reduction
to
our
restructuring
reserve.
Glossary
AOCI.
Accumulated other comprehensive income (loss).
Adjusted diluted EPS.
Diluted EPS adjusted for certain items affecting year-to-year
comparability.
Adjusted operating profit.
Operating profit adjusted for certain items affecting year-to-year
comparability.
Adjusted
operating
profit
margin.
Operating
profit
adjusted
for
certain
items
affecting
year-to-year
comparability,
divided by
net
sales.
Constant currency.
Financial results
translated
to United
States dollars
using constant
foreign currency
exchange rates
based on
the
rates
in
effect
for
the
comparable
prior-year
period
.
To
present
this
information,
current
period
results
for
entities
reporting
in
currencies other
than United
States dollars
are translated
into United
States dollars
at the
average exchange
rates in
effect during
the
corresponding
period
of
the
prior
fiscal
year,
rather
than
the
actual
average
exchange
rates
in
effect
during
the
current
fiscal
year
.
Therefore,
the
foreign
currency
impact
is
equal
to
current
year
results
in
local
currencies
multiplied
by
the
change
in
the
average
foreign currency exchange rate between the current fiscal period and the
corresponding period of the prior fiscal year.
Core working capital.
Accounts receivable plus inventories less accounts payable, all as of the last day of our
fiscal year.
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 equity
prices.
Earnings
before
interest,
taxes,
depreciation
and
amortization
(EBITDA
)
.
The
calculation
of earnings
before
income taxes
and
after-tax earnings from joint ventures, net interest, depreciation
and amortization.
Euribor.
European Interbank Offered Rate.
Fair value
hierarchy.
For purposes
of fair
value measurement,
we categorize
assets and
liabilities into
one of
three levels
based on
the assumptions
(inputs) used
in valuing
the asset or
liability.
Level 1 provides
the most reliable
measure of
fair value, while
Level 3
generally requires significant management judgment. The three levels
are defined as follows:
Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:
Observable inputs
other than quoted
prices included in
Level 1, such
as quoted prices
for similar assets
or liabilities
in active markets or quoted prices for identical assets or liabilities in inactive markets
.
Level 3:
Unobservable inputs reflecting management’s
assumptions about the inputs used in pricing the asset or liability.
Free cash flow.
Net cash provided by operating activities less purchases of land, buildings, and equipment
.
Free
cash
flow
conversion
rate.
Free
cash
flow
divided
by
our
net
earnings,
including
earnings
attributable
to
redeemable
and
noncontrolling interests adjusted for certain items affecting year-to-year
comparability.
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
redeemable and noncontrolling
interests and the related fair values of net assets acquired.
Gross margin.
Net sales less cost of sales.
Hedge accounting.
Accounting for qualifying
hedges that allows changes in
a hedging instrument’s
fair value to offset
corresponding
changes in
the hedged
item in
the same
reporting period
.
Hedge accounting
is permitted
for certain
hedging instruments
and hedged
items
only
if
the
hedging
relationship
is
highly
effective,
and
only
prospectively
from
the
date
a
hedging
relationship
is
formally
documented.
Holistic Margin Management
(HMM).
Company-wide initiative to
use productivity savings, mix
management,
and price realization
to offset input cost inflation, protect margins
,
and generate funds to reinvest in sales-generating activities.
Interest
bearing
instruments.
Notes
payable,
long-term
debt,
including
current
portion,
cash
and
cash
equivalents,
and
certain
interest bearing investments classified within prepaid expenses and other current
assets and other assets.
LIBOR.
London Interbank Offered Rate.
Mark-to-market.
The act of determining a value for
financial instruments, commodity contracts, and
related assets or liabilities based
on the current market price for that item.
Net debt.
Long-term debt, current portion of long-term debt, and notes payable,
less cash and cash equivalents.
Net debt-to-adjusted EBITDA ratio.
Net debt divided by Adjusted EBITDA.
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 consolidated subsidiaries held by third parties.
Notional principal amount.
The principal
amount on which fixed-rate or floating-rate interest payments are calculated
.
OCI.
Other comprehensive income (loss).
Operating
cash
flow
conversion
rate.
Net
cash
provided
by
operating
activities,
divided
by
net
earnings,
including
earnings
attributable to redeemable and noncontrolling interests.
Operating cash flow to net debt ratio.
Net debt divided by cash provided by operating activities.
Organic net
sales growth.
Net sales growth
adjusted for
foreign currency
translation, as
well as
acquisitions, divestitures,
and a
rd
week impact, when applicable.
Project-related costs.
Costs incurred related to our restructuring initiatives not included in restructuring
charges.
Redeemable
interest.
Interest
of
consolidated
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.
Secured Overnight Financing Rate.
Strategic
Revenue
Management
(SRM).
A
company-wide
capability
focused
on
generating
sustainable
benefits
from
net
price
realization
and
mix
by
identifying
and
executing
against
specific
opportunities
to
apply
tools
including
pricing,
sizing,
mix
management, and promotion optimization across each of our businesses.
Supply chain
input costs.
Costs incurred
to produce
and deliver
product,
including costs
for
ingredients
and
conversion, inventory
management, logistics, and warehousing.
Total
debt.
Notes payable and long-term debt, including current portion.
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.
Working capital.
Current assets and current liabilities, all as of the last day of our fiscal year.
ITEM 9 - Changes in and Disagreements With
Accountants on Accounting and Financial Disclosure
None.
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