General Mills 10-Q 2022-02-27

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 27, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission file number: 001-01185

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

(763)764-7600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Number of shares of Common Stock outstanding as of March 14, 2022: 602,212,031 (excluding 152,401,297 shares held in the treasury).

General Mills, Inc.

Table of Contents

Showing the first 8K of 75K characters. Open the full section

INTRODUCTION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year ended May 30, 2021 for important background regarding, among other things, our key business drivers. Significant trademarks and service marks used in our business are set forth in italics herein. Certain terms used throughout this report are defined in the “Glossary” section below.

As the COVID-19 pandemic continues, we expect the largest factors impacting our fiscal 2022 performance will be the relative balance of at-home versus away-from-home consumer food demand and the elevated cost environment, including input cost inflation and costs related to supply chain disruption, all of which remain uncertain. We expect at-home food volume will decline year over year across most of our core markets, though will remain above pre-pandemic levels. Conversely, we expect away-from-home food volume to continue to recover, though not fully to pre-pandemic levels. Additionally, we expect increased net price realization across all food channels throughout our core markets, in response to significant input cost inflation. We will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations.

CONSOLIDATED RESULTS OF OPERATIONS

Third Quarter Results

In the third quarter of fiscal 2022, net sales essentially matched the same period last year, and organic net sales increased 4 percent compared to the same period last year. Operating profit decreased 1 percent to $815 million, primarily driven by higher input costs, an unfavorable change to the mark-to-market valuation of certain commodity positions and grain inventories, volume declines, and lower net corporate investment activity, partially offset by favorable net price realization and mix and gains on divestitures. Operating profit margin of 18.0 percent decreased 30 basis points. Adjusted operating profit of $676 million decreased 6 percent on a constant-currency basis, primarily driven by higher input costs and volume declines, partially offset by favorable net price realization and mix, and a decrease in certain selling, general, and administrative (SG&A) expenses. Adjusted operating profit margin decreased 90 basis points to 14.9 percent. Diluted earnings per share of $1.08 increased 13 percent in the third quarter of fiscal 2022. Adjusted diluted earnings per share of $0.84 increased 2 percent on a constant-currency basis compared to the third quarter of fiscal 2021. See the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP.

A summary of our consolidated financial results for the third quarter of fiscal 2022 follows:

Consolidated net sales were as follows:

Net sales in the third quarter of fiscal 2022 matched the same period in fiscal 2021, driven by favorable net price realization and mix, offset by a decrease in contributions from volume growth.

Components of organic net sales growth are shown in the following table:

Organic net sales increased 4 percent in the third quarter of fiscal 2022 as favorable organic net price realization and mix was partially offset by a decrease in contributions from organic volume growth.

Cost of sales increased $168 million to $3,134 million in the third quarter of fiscal 2022 compared to the same period in fiscal 2021. The increase was primarily driven by a $406 million increase attributable to product rate and mix partially offset by a $315 million decrease attributable to lower volume. We recorded a $20 million net increase in cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories in the third quarter of fiscal 2022 compared to a $56 million net decrease in the third quarter of fiscal 2021. In addition, we recorded $2 million of restructuring charges in cost of sales in the third quarter of fiscal 2022 compared to $1 million in the third quarter of fiscal 2021 (please refer to Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this report).

SG&A expenses increased $35 million to $751 million in the third quarter of fiscal 2022, compared to the same period in fiscal 2021, primarily driven by lower net corporate investment activity. SG&A expenses as a percent of net sales in the third quarter of fiscal 2022 increased 70 basis points compared to the third quarter of fiscal 2021.

During the third quarter of fiscal 2022, we recorded a $170 million divestitures gain related to the sale of our interests in Yoplait SAS, Yoplait Marques SNC and Liberté Marques Sàrl, and a European dough business (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).

Restructuring, impairment, and other exit costs totaled $7 million in the third quarter of fiscal 2022, compared to $11 million in the same period last year (please refer to Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this report).

Benefit plan non-service income totaled $27 million in the third quarter of fiscal 2022, compared to $33 million in the same period last year, primarily reflecting higher amortization of losses.

Interest, net for the third quarter of fiscal 2022 totaled $86 million, down $20 million from the third quarter of fiscal 2021, primarily driven by lower average long-term debt levels.

The effective tax rate for the third quarter of fiscal 2022 was 16.3 percent compared to 21.5 percent in the same period last year. The 5.2 percentage point decrease was primarily due to certain non-taxable components of the divestitures gains and favorable changes in earnings mix by jurisdiction, partially offset by certain discrete tax benefits recorded in the third quarter of fiscal 2021. Our effective tax rate excluding certain item

Showing the first 8K of 78K characters. Open the full section

The estimated maximum potential value-at-risk arising from a one-day loss in fair value for our interest rate, foreign exchange, commodity, and equity market-risk-sensitive instruments outstanding as of February 27, 2022, was as follows:

For additional information, see Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended May 30, 2021.

We, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of February 27, 2022, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the quarter ended February 27, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth information with respect to shares of our common stock that we purchased during the quarter ended February 27, 2022:

(a)The total number of shares purchased includes shares of common stock withheld for the payment of withholding taxes upon the distribution of deferred option units.

(b)On May 6, 2014, our Board of Directors approved an authorization for the repurchase of up to 100,000,000 shares of our common stock. Purchases can be made in the open market or in privately negotiated transactions, including the use of call options and other derivative instruments, Rule 10b5-1 trading plans, and accelerated repurchase programs. The Board did not specify an expiration date for the authorization.

PART II. OTHER INFORMATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.