filings.toolsGeneral Mills 10-Q 2024-08-25
Filed 2024-09-18. 7 sections, 103K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark One)
☑
QUARTERLY
REPORT
PURSUANT
TO
SECTION
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
FOR THE QUARTERLY
PERIOD ENDED
AUGUST 25, 2024
☐
TRANSITION
REPORT
PURSUANT
TO
SECTION
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
FOR THE TRANSITION PERIOD FROM
TO
Commission file number:
001-01185
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware
41-0274440
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
Number One General Mills Boulevard
Minneapolis
,
Minnesota
55426
(Address of principal executive offices)
(Zip Code)
(763)
764-7600
(Registrant’s telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange
on which registered
Common Stock, $.10 par value
GIS
New York Stock Exchange
0.125% Notes due 2025
GIS 25A
New York Stock Exchange
0.450% Notes due 2026
GIS 26
New York Stock Exchange
1.500% Notes due 2027
GIS 27
New York Stock Exchange
3.907% Notes due 2029
GIS 29
New York Stock Exchange
3.650% Notes due 2030
GIS 30A
New York Stock Exchange
3.850% Notes due 2034
GIS 34
New York Stock Exchange
Indicate
by
check
mark
whether
the
registrant
(1)
has
filed
all
reports
required
to
be
filed
by
Section
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 (§
232.405 of this chapter) 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,
a
smaller
reporting
company,
or
an
emerging
growth
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer,”
“smaller
reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If
an
emerging
growth
company,
indicate
by
check
mark
if
the
registrant
has
elected
not
to
use
the
extended
transition
period
for
complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☑
Number of
shares of
Common Stock
outstanding
as of
September 11,
2024:
555,158,898
(excluding
199,454,430
shares held
in the
treasury).
General Mills, Inc.
Table of Contents
Page
PART I – Financial Information
Consolidated Statements of Earnings for the quarters ended August 25, 2024 and August 27, 2023
Consolidated Balance Sheets as of August 25, 2024 and May 26, 2024
Consolidated Statements of Total Equity for the quarters ended August 25, 2024 and August 27, 2023
Consolidated Statements of Cash Flows for the quarters ended August 25, 2024 and August 27, 2023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
PART
I.
FINANCIAL INFORMATION
Item 1. Financial Statements.
Financial Statements.
Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Net sales
$
4,848.1
$
4,904.7
Cost of sales
3,159.3
3,134.2
Selling, general, and administrative expenses
855.1
839.3
Restructuring, impairment, and other exit costs
2.2
1.2
Operating profit
831.5
930.0
Benefit plan non-service income
(13.9)
(17.0)
Interest, net
123.6
117.0
Earnings before income taxes and after-tax earnings
from joint ventures
721.8
830.0
Income taxes
157.4
173.2
After-tax earnings from joint ventures
19.2
23.5
Net earnings, including earnings attributable to noncontrolling interests
583.6
680.3
Net earnings attributable to noncontrolling interests
3.7
6.8
Net earnings attributable to General Mills
$
579.9
$
673.5
Earnings per share – basic
$
1.03
$
1.15
Earnings per share – diluted
$
1.03
$
1.14
See accompanying notes to consolidated financial statements.
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Net earnings, including earnings attributable to
noncontrolling interests
$
583.6
$
680.3
Other comprehensive (loss) income, net of tax:
Foreign currency translation
(61.9)
(18.1)
Other fair value changes:
Hedge derivatives
(6.0)
(2.3)
Reclassification to earnings:
Hedge derivatives
-
0.2
Amortization of losses and prior service costs
11.6
9.1
Other comprehensive loss, net of tax
(56.3)
(11.1)
Total comprehensive
income
527.3
669.2
Comprehensive income attributable to noncontrolling
interests
4.2
6.9
Comprehensive income attributable to General Mills
$
523.1
$
662.3
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
(In Millions, Except Par Value)
Aug. 25, 2024
May 26, 2024
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
468.1
$
418.0
Receivables
1,843.8
1,696.2
Inventories
1,996.4
1,898.2
Prepaid expenses and other current assets
505.3
568.5
Total current
assets
4,813.6
4,580.9
Land, buildings, and equipment
3,776.3
3,863.9
Goodwill
14,787.7
14,750.7
Other intangible assets
6,982.8
6,979.9
Other assets
1,408.8
1,294.5
Total assets
$
31,769.2
$
31,469.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,823.4
$
3,987.8
Current portion of long-term debt
1,640.0
1,614.1
Notes payable
249.1
11.8
Other current liabilities
1,576.9
1,419.4
Total current
liabilities
7,289.4
7,033.1
Long-term debt
11,431.3
11,304.2
Deferred income taxes
2,195.3
2,200.6
Other liabilities
1,326.6
1,283.5
Total liabilities
22,242.6
21,821.4
Stockholders’ equity:
Common stock,
754.6
shares issued, $
0.10
par value
75.5
75.5
Additional paid-in capital
1,164.6
1,227.0
Retained earnings
21,213.9
20,971.8
Common stock in treasury,
at cost, shares of
198.8
and
195.5
(10,601.9)
(10,357.9)
Accumulated other comprehensive loss
(2,576.5)
(2,519.7)
Total stockholders’
equity
9,275.6
9,396.7
Noncontrolling interests
251.0
251.8
Total equity
9,526.6
9,648.5
Total liabilities and equity
$
31,769.2
$
31,469.9
See accompanying notes to consolidated financial statements.
Consolidated Statements of Total
Equity
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions, Except per Share Data)
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Shares
Amount
Shares
Amount
Total equity,
beginning balance
$
9,648.5
$
10,700.0
Common stock,
billion shares authorized, $
0.10
par value
754.6
75.5
754.6
75.5
Additional paid-in capital:
Beginning balance
1,227.0
1,222.4
Stock compensation plans
(5.2)
7.3
Unearned compensation related to stock unit awards
(77.1)
(79.4)
Earned compensation
19.9
35.4
Ending balance
1,164.6
1,185.7
Retained earnings:
Beginning balance
20,971.8
19,838.6
Net earnings attributable to General Mills
579.9
673.5
Cash dividends declared ($
0.60
and $
0.59
per share)
(337.8)
(348.5)
Ending balance
21,213.9
20,163.6
Common stock in treasury:
Beginning balance
(195.5)
(10,357.9)
(168.0)
(8,410.0)
Shares purchased, including excise tax of $
2.2
and
$
4.2
million
(4.5)
(302.2)
(6.4)
(504.7)
Stock compensation plans
1.2
58.2
1.0
40.4
Ending balance
(198.8)
(10,601.9)
(173.4)
(8,874.3)
Accumulated other comprehensive loss:
Beginning balance
(2,519.7)
(2,276.9)
Comprehensive loss
(56.8)
(11.2)
Ending balance
(2,576.5)
(2,288.1)
Noncontrolling interests:
Beginning balance
251.8
250.4
Comprehensive income
4.2
6.9
Distributions to noncontrolling interest holders
(5.0)
(4.3)
Ending balance
251.0
253.0
Total equity,
ending balance
$
9,526.6
$
10,515.4
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Cash Flows - Operating Activities
Net earnings, including earnings attributable to noncontrolling interests
$
583.6
$
680.3
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization
139.6
137.2
After-tax earnings from joint ventures
(19.2)
(23.5)
Distributions of earnings from joint ventures
23.1
15.8
Stock-based compensation
20.3
35.3
Deferred income taxes
16.2
(14.5)
Pension and other postretirement benefit plan contributions
(7.5)
(7.4)
Pension and other postretirement benefit plan costs
(3.2)
(5.3)
Restructuring, impairment, and other exit costs
0.2
2.4
Changes in current assets and liabilities, excluding the effects of
acquisitions and divestitures
(107.6)
(457.4)
Other, net
(21.3)
15.2
Net cash provided by operating activities
624.2
378.1
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
(140.3)
(141.7)
Acquisition, net of cash acquired
(7.7)
-
Proceeds from disposal of land, buildings, and equipment
0.6
-
Other, net
(0.6)
6.2
Net cash used by investing activities
(148.0)
(135.5)
Cash Flows - Financing Activities
Change in notes payable
238.0
551.8
Proceeds from common stock issued on exercised options
9.4
4.5
Purchases of common stock for treasury
(300.0)
(500.5)
Dividends paid
(337.8)
(348.5)
Distributions to noncontrolling interest holders
(5.0)
(4.3)
Other, net
(34.0)
(37.2)
Net cash used by financing activities
(429.4)
(334.2)
Effect of exchange rate changes on cash and cash equivalents
3.3
(3.0)
Increase (decrease) in cash and cash equivalents
50.1
(94.6)
Cash and cash equivalents - beginning of year
418.0
585.5
Cash and cash equivalents - end of period
$
468.1
$
490.9
Cash Flow from changes in current assets and liabilities, excluding the effects
of
acquisitions and divestitures:
Receivables
$
(145.6)
$
(104.4)
Inventories
(95.7)
(54.3)
Prepaid expenses and other current assets
59.7
140.9
Accounts payable
(76.4)
(443.8)
Other current liabilities
150.4
4.2
Changes in current assets and liabilities
$
(107.6)
$
(457.4)
See accompanying notes to consolidated financial statements.
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
(1) Background
The accompanying
Consolidated Financial
Statements of
General Mills,
Inc. (we,
us, our,
General Mills,
or the Company)
have been
prepared in
accordance with
accounting principles
generally accepted
in the
United States
(GAAP) for
interim financial
information
and with
the rules
and regulations
for reporting
on Form
10-Q. Accordingly,
they do
not include
certain information
and disclosures
required
for
comprehensive
financial
statements.
In
the
opinion
of
management,
all
adjustments
considered
necessary
for
a
fair
presentation have
been included
and are
of a
normal recurring
nature, including
the elimination
of all
intercompany transactions
and
any
noncontrolling
interests’
share
of
those
transactions.
Operating
results
for
the
fiscal
quarter
ended
August
25,
2024,
are
not
necessarily indicative of the results that may be expected for the fiscal year ending
May 25, 2025.
These
statements
should
be
read
in
conjunction
with
the
Consolidated
Financial
Statements
and
footnotes
included
in
our
Annual
Report on Form
10-K for the fiscal
year ended May
26, 2024. The
accounting policies used
in preparing these
Consolidated Financial
Statements are the same as those described in Note 2 to the Consolidated Financial
Statements in that Form 10-K.
Certain terms used throughout this report are defined in the “Glossary” section below.
(2) Acquisition and Divestiture
During the fourth quarter
of fiscal 2024, we acquired
a pet food business in Europe,
for a purchase price of $
434.1
million, net of cash
acquired.
During
the
first
quarter
of
fiscal
2025,
we
paid
$
7.7
million
related
to
a
purchase
price
holdback
after
certain
closing
conditions
were
met.
We
financed
the
transaction
with
cash
on
hand.
We
consolidated
the
business
into
our
Consolidated
Balance
Sheets
and
recorded
goodwill
of
$
317.7
million,
an
indefinite-lived
brand
intangible
asset
of
$
118.4
million
and
a
finite-lived
customer
relationship
asset
of
$
14.2
million.
The
goodwill
is
included
in
the
International
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 business
and we
are continuing
our review
of 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
those
items.
The
consolidated
results
are
reported
in
our
International operating segment on a one-month lag beginning in fiscal 2025.
On
September
12,
2024,
subsequent
to
the
end
of
the
first
quarter
of
fiscal
2025,
we
entered
into
definitive
agreements
to
sell
our
North
American
Yogurt
businesses
to
affiliates
of
Groupe
Lactalis
S.A.
(Lactalis)
and
Sodiaal
International
(Sodiaal)
for
approximately
$
2.1
billion.
We
expect
to
close
these
divestitures
in
calendar
year
2025,
subject
to
regulatory
approvals
and
other
customary closing conditions.
(3) Restructuring, Impairment, and Other Exit Costs
In
the
first
quarter
of
fiscal
2025,
we
did
not
undertake
any
new
restructuring
actions.
We
recorded
$
2.9
million
of
restructuring
charges
in
the
first
quarter
of
fiscal
2025
and
$
9.8
million
of
restructuring
charges
in
the
first
quarter
of
fiscal
2024
related
to
restructuring actions previously announced.
We expect these actions to
be completed by the end of fiscal 2026.
We
paid net $
2.7
million of cash in
the first quarter
of fiscal 2025
related to restructuring
actions. We
paid net $
7.4
million of cash
in
the same period of fiscal 2024.
Restructuring and impairment charges and project-related
costs are recorded in our Consolidated Statements of Earnings as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Restructuring, impairment, and other exit costs
$
2.2
$
1.2
Cost of sales
0.7
8.6
Total restructuring
charges
$
2.9
$
9.8
Project-related costs classified in cost of sales
$
0.1
$
0.8
(4) Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets are as follows:
In Millions
Aug. 25, 2024
May 26, 2024
Goodwill
$
14,787.7
$
14,750.7
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles
6,735.9
6,728.6
Intangible assets subject to amortization:
Customer relationships and other finite-lived intangibles
402.9
402.2
Less accumulated amortization
(156.0)
(150.9)
Intangible assets subject to amortization, net
246.9
251.3
Other intangible assets
6,982.8
6,979.9
Total
$
21,770.5
$
21,730.6
Based on
the carrying
value of
finite-lived intangible
assets as
of August
25, 2024,
annual amortization
expense for
each of
the next
five fiscal years is estimated to be approximately $
million.
The changes in the carrying amount of goodwill during the first quarter of fiscal 2025
were as follows:
In Millions
North
America
Retail
North
America
Pet
North
America
Foodservice
International
(a)
Corporate
and Joint
Ventures
Total
Balance as of May 26, 2024
$
6,541.9
$
6,062.8
$
805.5
$
917.1
$
423.4
$
14,750.7
Other activity, primarily
foreign currency translation
1.4
-
-
23.0
12.6
37.0
Balance as of Aug. 25, 2024
$
6,543.3
$
6,062.8
$
805.5
$
940.1
$
436.0
$
14,787.7
(a)
The carrying amounts of goodwill within the International segment as of
May 26, 2024, and August 25, 2024, were net of
accumulated impairment losses of $
117.1
million.
The changes in the carrying amount of other intangible assets during the first quarter
of fiscal 2025 were as follows:
In Millions
Total
Balance as of May 26, 2024
$
6,979.9
Foreign currency translation, net of amortization
2.9
Balance as of Aug. 25, 2024
$
6,982.8
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal 2024. As a
result of lower future profitability
projections for our Latin
America reporting unit, we
determined that the
fair value
of the
reporting
unit was
less than
its book
value
and
recorded a
$
117.1
million non-cash
goodwill
impairment
charge.
In addition,
during the
fourth quarter
of fiscal
2024, we
executed our
fiscal 2025
planning process
and preliminary
long-range planning
process,
which resulted in
lower future sales and
profitability projections for
the businesses supporting
our
Top
Chews
,
True Chews
, and
EPIC
brand intangible assets.
As a result of
this triggering event,
we performed an
interim impairment assessment
of these assets
as of May
26, 2024,
and determined
that the
fair value
of these
brand intangible
assets no
longer exceeded
the carrying
values of
the respective
assets, resulting in $
103.1
million of non-cash impairment charges.
We recorded
impairment charges in restructuring,
impairment, and
other exit
costs in
our Consolidated
Statements of
Earnings. Our
estimates of
the fair
values were
determined based
on a
discounted
cash flow model
using inputs which
included our long-range
cash flow projections
for the businesses,
royalty rates, weighted
-average
cost of capital rates, and tax rates. These fair values are Level 3 assets in the fair value hierarchy.
All other intangible
asset 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 2024
assessment date,
the
Progresso
,
Nudges
, and
True
Chews
brand intangible assets had risk of decreasing coverage. We
will continue to monitor these businesses for potential impairment.
(5) Inventories
The components of inventories were as follows:
In Millions
Aug. 25, 2024
May 26, 2024
Finished goods
$
1,975.1
$
1,827.7
Raw materials and packaging
488.4
500.5
Grain
79.3
111.1
Excess of FIFO over LIFO cost
(546.4)
(541.1)
Total
$
1,996.4
$
1,898.2
(6) Risk Management Activities
Many commodities we
use in the
production and distribution
of our products
are exposed to
market price risks.
We
utilize derivatives
to manage price risk for our principal
ingredients and energy costs, including
grains (oats, wheat, and corn), oils
(principally soybean),
dairy products, natural
gas, and diesel fuel.
Our primary objective
when entering into
these derivative contracts
is to achieve
certainty
with
regard
to
the
future
price
of
commodities
purchased
for
use
in
our
supply
chain.
We
manage
our
exposures
through
a
combination of purchase orders, long-term
contracts with suppliers, exchange-traded
futures and options, and over-the-counter
options
and swaps.
We
offset
our exposures
based on
current and
projected market
conditions and
generally seek
to acquire
the inputs
at as
close as possible to or below our planned cost.
We
use derivatives
to manage
our exposure
to changes
in commodity
prices. We
do not
perform the
assessments required
to achieve
hedge
accounting
for
commodity
derivative
positions.
Accordingly,
the
changes
in
the
values
of
these
derivatives
are
recorded
currently in cost of sales in our Consolidated Statements of Earnings.
Although we do
not meet the
criteria for
cash flow hedge
accounting, we believe
that these instruments
are effective
in achieving our
objective of providing certainty
in the future price of commodities purchased
for use in our supply chain.
Accordingly, for
purposes of
measuring
segment
operating
performance,
these
gains
and
losses
are
reported
in
unallocated
corporate
items
outside
of
segment
operating results
until such time
that the exposure
we are managing
affects earnings.
At that time,
we reclassify
the gain or
loss from
unallocated
corporate
items
to
segment
operating
profit,
allowing
our
operating
segments
to
realize
the
economic
effects
of
the
derivative without experiencing any resulting mark-to-market volatility,
which remains in unallocated corporate items.
Unallocated corporate items for the quarters ended August 25, 2024, and
August 27, 2023, included:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Net (loss) gain on mark-to-market valuation of certain
commodity positions
$
(37.7)
$
28.4
Net loss on commodity positions reclassified from
unallocated corporate items to segment operating profit
17.2
3.2
Net mark-to-market revaluation of certain grain inventories
(8.3)
13.3
Net mark-to-market valuation of certain commodity
positions recognized in unallocated corporate items
$
(28.8)
$
44.9
As
of
August
25,
2024,
the
net
notional
value
of
commodity
derivatives
was
$
233.4
million,
of
which
$
118.6
million
related
to
agricultural inputs and $
114.8
million related to energy inputs. These contracts relate to inputs
that generally will be utilized within the
next
months.
We
also have
net investments
in foreign
subsidiaries that
are denominated
in euros.
As of
August 25,
2024, we
hedged a
portion
of
these investments with €
3,979.4
million of euro-denominated bonds.
The
fair
values
of
the
derivative
positions
used
in
our
risk
management
activities
and
other
assets
recorded
at
fair
value
were
not
material as of
August 25, 2024,
and were Level
1 or Level
2 assets and
liabilities in the
fair value
hierarchy.
We
did not significantly
change our valuation techniques from prior periods.
We
offer
certain
suppliers
access
to
third-party
services
that
allow
them
to
view
our
scheduled
payments
online.
The
third-party
services also
allow suppliers
to finance
advances on
our scheduled
payments at
the sole
discretion of
the supplier
and the third
party.
We
have no
economic interest
in these
financing arrangements
and no
direct relationship
with the
suppliers, the
third parties,
or any
financial institutions
concerning these
services, including
not providing
any form
of guarantee
and not
pledging assets
as security
to
the third
parties or
financial institutions.
All of
our accounts
payable remain
as obligations
to our
suppliers as
stated in
our supplier
agreements. As
of August
25, 2024,
$
1,421.6
million of
our total
accounts payable
were payable
to suppliers
who utilize
these third-
party services.
As of
May 26,
2024, $
1,404.4
million of
our total
accounts payable
were payable
to suppliers
who utilize
these third-
party services.
(7) Debt
The components of notes payable were as follows:
Aug. 25, 2024
May 26, 2024
In Millions
Notes Payable
Weighted-
Average
Interest Rate
Notes Payable
Weighted-
Average
Interest Rate
U.S. commercial paper
$
205.0
5.4
%
$
-
-
%
Financial institutions
44.1
7.7
11.8
8.8
Total
$
249.1
5.8
%
$
11.8
8.8
%
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 August 25, 2024:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.7
-
Total committed
and uncommitted credit facilities
$
3.4
$
-
The
credit
facilities
contain
covenants,
including
a
requirement
to
maintain
a
fixed
charge
coverage
ratio
of
at
least
2.5
times.
We
were in compliance with all credit facility covenants as of August 25, 2024.
Long-Term
Debt
The fair values
and carrying
amounts of long-term
debt, including
the current portion,
were $
12,653.5
million and $
13,071.3
million,
respectively,
as
of
August
25,
The
fair
value
of
long-term
debt
was
estimated
using
market
quotations
and
discounted
cash
flows based
on our
current incremental
borrowing rates
for similar
types of
instruments. Long
-term debt
is a
Level 2
liability in
the
fair value hierarchy.
In the
fourth quarter
of fiscal 2024,
we issued €
500.0
million of
3.65
percent fixed-rate
notes due
October 23, 2030
. We
used the
net
proceeds for general corporate purposes.
In
the fourth
quarter
of fiscal
2024,
we issued
€
500.0
million
of
3.85
percent
fixed-rate notes
due
April 23, 2034
.
We
used
the net
proceeds for general corporate purposes.
In
the
third
quarter of
fiscal
2024,
we
issued
$
500.0
million
of
4.7
percent
fixed-rate
notes due
January 30, 2027
. We
used
the
net
proceeds to repay $
500.0
million of
3.65
percent fixed-rate notes due
February 15, 2024
.
In the second
quarter of fiscal 2024,
we issued €
250.0
million of floating-rate
notes due
November 8, 2024
. We
used the net proceeds
to repay €
250.0
million of floating-rate notes due
November 10, 2023
.
In the
second quarter
of fiscal
2024, we
issued $
500.0
million of
5.5
percent fixed-rate
notes due
October 17, 2028
. We
used the
net
proceeds to repay $
400.0
million of floating-rate notes due
October 17, 2023
, and for general corporate purposes.
In the first
quarter of fiscal
2024, we issued
€
500.0
million of floating-rate
notes due
November 8, 2024
. We
used the net proceeds
to
repay €
500.0
million of floating-rate notes due
July 27, 2023
.
Certain
of
our
long-term
debt
agreements
contain
restrictive
covenants.
As of August 25, 2024, we were in compliance with all of
these covenants.
(8) Noncontrolling Interests
The
third-party
holder
of
the
General
Mills
Cereals,
LLC
(GMC)
Class A
Interests
receives
quarterly
preferred
distributions
from
available net
income based
on the application
of a
floating preferred
return rate
to the
holder’s capital
account balance
established in
the
most
recent
mark-to-market
valuation
(currently
$
251.5
million).
On
June
1,
2024,
the
floating
preferred
return
rate
on
GMC’s
Class A Interests was reset to 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.
Our noncontrolling interests contain restrictive covenants. As of August 25, 2024, we were in compliance with all of these covenants.
(9) Stockholders’ Equity
The following tables provide details of total comprehensive income:
Quarter Ended
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
General Mills
Noncontrolling
Interests
General Mills
Noncontrolling
Interests
In Millions
Pretax
Tax
Net
Net
Pretax
Tax
Net
Net
Net earnings, including earnings
attributable to noncontrolling interests
$
579.9
$
3.7
$
673.5
$
6.8
Other comprehensive (loss) income:
Foreign currency translation
$
(93.9)
$
31.5
(62.4)
0.5
$
(22.0)
$
3.8
(18.2)
0.1
Other fair value changes:
Hedge derivatives
(7.5)
1.5
(6.0)
-
(2.7)
0.4
(2.3)
-
Reclassification to earnings:
Hedge derivatives (a)
(0.4)
0.4
-
-
(1.3)
1.5
0.2
-
Amortization of losses and
prior service costs (b)
14.5
(2.9)
11.6
-
11.5
(2.4)
9.1
-
Other comprehensive (loss) income
$
(87.3)
$
30.5
(56.8)
0.5
$
(14.5)
$
3.3
(11.2)
0.1
Total comprehensive income
$
523.1
$
4.2
$
662.3
$
6.9
(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.
Accumulated other comprehensive loss balances, net of tax effects,
were as follows:
In Millions
Aug. 25, 2024
May 26, 2024
Foreign currency translation adjustments
$
(857.7)
$
(795.3)
Unrealized (loss) gain from hedge derivatives
(5.8)
0.2
Pension, other postretirement, and postemployment benefits:
Net actuarial loss
(1,790.8)
(1,806.3)
Prior service credits
77.8
81.7
Accumulated other comprehensive loss
$
(2,576.5)
$
(2,519.7)
(10) Stock Plans
We
have various
stock-based compensation
programs under
which awards,
including stock
options, restricted
stock, restricted
stock
units, and performance
awards, may be granted
to employees and non-employee
directors. These programs
and related accounting
are
described in Note
12 to the
Consolidated Financial
Statements included
in our Annual
Report on Form
10-K for the
fiscal year ended
May 26, 2024.
Compensation expense related to stock-based payments recognized
in the Consolidated Statements of Earnings was as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Compensation expense related to stock-based payments
$
20.3
$
35.3
Windfall tax benefits from stock-based payments
in income tax expense in our Consolidated Statements of Earnings were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Windfall tax benefits from stock-based payments
$
2.8
$
8.4
As
of
August
25,
2024,
unrecognized
compensation
expense
related
to
non-vested
stock
options,
restricted
stock
units,
and
performance share units was $
185.9
million. This expense will be recognized over
months, on average.
Net cash proceeds from the exercise of stock options
less shares used for withholding taxes and the intrinsic
value of options exercised
were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Net cash proceeds
$
9.4
$
4.5
Intrinsic value of options exercised
$
1.9
$
2.1
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 method of selecting the other valuation assumptions
is explained in Note 12 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year
ended May 26, 2024.
The
estimated
fair
values
of
stock
options
granted
and
the
assumptions
used
for
the
Black-Scholes
option-pricing
model
were
as
follows:
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Estimated fair values of stock options granted
$
13.20
$
17.47
Assumptions:
Risk-free interest rate
4.5
%
4.0
%
Expected term
8.5
years
8.5
years
Expected volatility
21.6
%
21.4
%
Dividend yield
3.8
%
2.8
%
The total grant date fair value of restricted stock unit awards that vested during
the period was as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Total grant date fair
value
$
90.8
$
104.8
(11) Earnings Per Share
Basic and diluted earnings per share (EPS) were calculated using the following:
Quarter Ended
In Millions, Except per Share Data
Aug. 25, 2024
Aug. 27, 2023
Net earnings attributable to General Mills
$
579.9
$
673.5
Average number
of common shares – basic EPS
560.5
586.3
Incremental share effect from: (a)
Stock options
1.5
2.8
Restricted stock units and performance share units
1.8
2.3
Average number
of common shares – diluted EPS
563.8
591.4
Earnings per share – basic
$
1.03
$
1.15
Earnings per share – diluted
$
1.03
$
1.14
(a)
Incremental
shares
from
stock
options,
restricted
stock
units,
and
performance
share
units
are
computed
by
the
treasury
stock
method
. Stock options, restricted stock
units, and performance share
units excluded from our
computation of diluted EPS because
they were not dilutive were as follows
:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Anti-dilutive stock options, restricted stock units, and
performance share units
4.4
1.6
(12) Share Repurchases
Share repurchases were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Shares of common stock
4.5
6.4
Aggregate purchase price
$
302.2
$
504.7
(13) Statements of Cash Flows
Our Consolidated Statements of Cash Flows include the following:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Net cash interest payments
$
83.7
$
83.9
Net income tax payments
$
18.7
$
13.7
(14) Retirement and Postemployment Benefits
Components of net periodic benefit expense (income) are as follows:
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
Quarter Ended
Quarter Ended
Quarter Ended
In Millions
Aug. 25,
2024
Aug. 27,
2023
Aug. 25,
2024
Aug. 27,
2023
Aug. 25,
2024
Aug. 27,
2023
Service cost
$
13.0
$
14.2
$
1.1
$
1.2
$
1.8
$
1.8
Interest cost
76.7
74.2
5.3
5.3
1.0
1.0
Expected return on plan assets
(105.0)
(102.9)
(9.0)
(8.7)
-
-
Amortization of losses (gains)
25.1
21.5
(5.2)
(5.1)
0.1
-
Amortization of prior service costs (credits)
0.3
0.4
(5.5)
(5.4)
(0.3)
0.1
Other adjustments
-
-
-
-
2.6
2.6
Net expense (income)
$
10.1
$
7.4
$
(13.3)
$
(12.7)
$
5.2
$
5.5
(15) Income Taxes
During the
second quarter
of fiscal
2024, we
received a
notice of
proposed adjustment
from the
Internal Revenue
Service associated
with a capital loss
from fiscal 2019.
We
believe that we
have meritorious defenses
against this assessment
and will vigorously
defend
our
position. We
do
not
expect
the
resolution
of
the
proposed
adjustment
to
have
a
material
impact
on
our
financial
position
or
liquidity.
In
December
2021,
the
Organization
for
Economic
Cooperation
and
Development
(OECD)
established
a
framework,
referred
to
as
Pillar
2,
designed
to
ensure
large
multinational
enterprises
pay
a
minimum
percent
level
of
tax
on
the
income
arising
in
each
jurisdiction
in
which
they
operate.
Numerous
countries
have
already
enacted
the
OECD
model
rules
effective
for
taxable
years
beginning
after
December
31,
2023,
which
for
us
is
fiscal
There
was
no
material
impact
on
our
consolidated
financial
statements.
Several
other
countries
have
enacted
or
drafted
legislation
that
is
not
yet
effective
for
us,
and
we
do
not
expect
this
legislation
to
have
a
material
impact
on
our
consolidated
financial
statements.
We
will
continue
to monitor
for
new
legislation
and
guidance and evaluate potential impact on our consolidated financial
statements.
(16) Contingencies
During
fiscal
2020,
we
received
notice
from
the
tax
authorities of
the
State of
São
Paulo,
Brazil
regarding
our
compliance
with
its
state sales tax requirements.
As a result, we
have been assessed additional
state sales taxes, interest,
and penalties. We
believe that we
have meritorious defenses against this claim and will vigorously defend
our position. As of August 25, 2024, we are unable to estimate
any possible loss and have not recorded a loss contingency for this matter.
(17) Business Segment and Geographic Information
We
operate
in
the
packaged
foods
industry.
Our
operating
segments
are
as
follows:
North
America
Retail,
International,
North
America Pet,
and North
America Foodservice.
In the
first quarter
of fiscal
2025, we
renamed the
Pet segment
to the
North America
Pet segment to reflect that
pet food results outside
North America are recorded
in the International segment.
There were no changes to
the
composition
of
our
reportable
segments
or
information
reviewed
by
our
chief
operating
decision
maker
and
no
impact
on
our
historical segment operating results.
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,
shelf-stable
vegetables,
and
pet
food
products.
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 North
America 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, life-stages,
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.
Results from
certain businesses
managed by
our Gold
Medal Ventures
entity are
included within
corporate and
other net
sales and
unallocated corporate
items within
operating
profit. Unallocated
corporate items
also include
corporate overhead
expenses,
variances
to
planned
North
American
employee
benefits
and
incentives,
certain
charitable
contributions,
restructuring
initiative
project-related
costs,
gains
and
losses
on
corporate
investments,
and
other
items
that
are
not
part
of
our
measurement
of
segment operating performance.
These include gains and
losses arising from the
revaluation of certain grain
inventories and gains
and
losses
from
mark-to-market
valuation
of
certain
commodity
positions
until
passed
back
to
our
operating
segments.
These
items
affecting
operating
profit
are
centrally
managed
at
the
corporate
level
and
are
excluded
from
the
measure
of
segment
profitability
reviewed
by executive
management.
Under our
supply chain
organization,
our manufacturing,
warehouse,
and distribution
activities
are
substantially
integrated
across
our
operations
in
order
to
maximize
efficiency
and
productivity.
As
a
result,
fixed
assets
and
depreciation and amortization expenses are neither maintained nor available
by operating segment.
Our operating segment results were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Net sales:
North America Retail
$
3,016.6
$
3,073.0
International
717.0
715.8
North America Pet
576.1
579.9
North America Foodservice
536.2
536.0
Total segment net
sales
$
4,845.9
$
4,904.7
Corporate and other
2.2
-
Total net sales
$
4,848.1
$
4,904.7
Operating profit:
North America Retail
$
745.7
$
798.2
International
20.9
50.0
North America Pet
119.4
111.2
North America Foodservice
71.5
59.1
Total segment operating
profit
$
957.5
$
1,018.5
Unallocated corporate items
123.8
87.3
Restructuring, impairment, and other exit costs
2.2
1.2
Operating profit
$
831.5
$
930.0
Net sales for our North America Retail operating units were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
U.S. Meals & Baking Solutions
$
946.3
$
941.9
U.S. Snacks
910.5
954.5
U.S. Morning Foods
902.9
927.8
Canada
256.9
248.8
Total
$
3,016.6
$
3,073.0
Net sales by class of similar products were as follows:
Quarter Ended
In Millions
Aug. 25, 2024
Aug. 27, 2023
Snacks
$
1,106.8
$
1,136.7
Cereal
793.1
817.9
Convenient meals
678.9
665.5
Pet
604.6
579.9
Dough
517.8
534.9
Baking mixes and ingredients
457.1
466.5
Yogurt
371.9
368.4
Super-premium ice cream
212.9
224.0
Other
105.0
110.9
Total
$
4,848.1
$
4,904.7
Item 2. Management’s Discussion and Analysis
Management’s Discussion and Analysis
of Financial Condition and Results of Operations.
INTRODUCTION
This
Management’s
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
(MD&A)
should
be
read
in
conjunction
with
the
MD&A
included
in
our
Annual
Report
on
Form
10-K
for
the
fiscal
year
ended
May
26,
2024,
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.
Our
key
priorities
in
fiscal
2025
are
to
accelerate
our
organic
net
sales
growth,
create
fuel
for
investment,
and
drive
strong
cash
generation.
Amid
a
continued
uncertain
macroeconomic
backdrop
for
consumers,
we
expect
volume
trends
in
our
categories
will
gradually improve
over the
course of
the year,
though full-year
category dollar
growth is expected
to be below
our long-term
growth
projections. We
expect to increase
our organic
net sales growth
by delivering remarkable
experiences across
our leading
food brands,
resulting
in
improved
household
penetration
and
stronger
market
share
trends
versus
the
prior
year.
Our
fiscal
2025
plan
calls
for
product
news
and
innovation
focused
on
taste,
health,
convenience,
and
value,
supported
with
strong
brand
campaigns
and
omnichannel visibility.
We
expect to
generate higher
levels of Holistic
Margin Management
(HMM) cost savings
to more
than offset
input
cost inflation
in fiscal
- We
expect to
reinvest in
the business,
including plans
for increased
brand-building
investment
in
fiscal 2025 to drive improved volume performance.
CONSOLIDATED
RESULTS
OF OPERATIONS
First Quarter Results
In the first quarter
of fiscal 2025, net
sales and organic
net sales decreased 1
percent compared to the
same period last year.
Operating
profit
decreased
percent
to
$832
million,
primarily
driven
by
an
unfavorable
change
in
the
mark-to-market
valuation
of
certain
commodity
positions
and
grain
inventories,
unfavorable
net
price
realization
and
mix,
and
an
increase
in
selling,
general
and
administrative
(SG&A)
expenses, partially
offset
by lower
input
costs. Operating
profit margin
of 17.2
percent decreased
basis
points.
Adjusted
operating profit
of $865
million
decreased 4
percent on
a constant-currency
basis, primarily
driven by
unfavorable
net
price
realization
and
mix
and
an
increase
in
SG&A
expenses,
partially
offset
by
lower
input
costs.
Adjusted
operating
profit
margin decreased 50
basis points to 17.8
percent. Diluted earnings per
share of $1.03 decreased 10
percent in the first
quarter of fiscal
Adjusted diluted
earnings per
share of
$1.07 decreased
2 percent
on a
constant-currency basis
compared to
the first
quarter of
fiscal 2024.
See the “Non-GAAP Measures” section below for a description of our use of measures not
defined by GAAP.
A summary of our consolidated financial results for the first quarter of
fiscal 2025 follows:
Quarter Ended Aug. 25, 2024
In millions,
except per share
Quarter Ended
Aug. 25, 2024 vs.
Aug. 27, 2023
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
4,848.1
(1)
%
Operating profit
831.5
(11)
%
17.2
%
Net earnings attributable to General Mills
579.9
(14)
%
Diluted earnings per share
$
1.03
(10)
%
Organic net sales growth rate (a)
(1)
%
Adjusted operating profit (a)
865.3
(4)
%
17.8
%
(4)
%
Adjusted diluted earnings per share (a)
$
1.07
(2)
%
(2)
%
(a)
See the “Non-GAAP Measures” section below for our use of measures not defined by
GAAP.
Consolidated
net sales
were as follows:
Quarter Ended
Aug. 25, 2024
Aug. 25, 2024 vs.
Aug. 27, 2023
Aug. 27, 2023
Net sales (in millions)
$
4,848.1
(1)
%
$
4,904.7
Contributions from volume growth (a)
Flat
Net price realization and mix
(1)
pt
Foreign currency exchange
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Net sales in
the first quarter
of fiscal 2025
decreased 1 percent
compared to the
same period in
fiscal 2024, driven
by unfavorable net
price realization and mix.
Components of organic net sales growth are shown in the following
table:
Quarter Ended Aug. 25, 2024 vs.
Quarter Ended Aug. 27, 2023
Contributions from organic volume growth (a)
Flat
Organic net price realization and mix
(1)
pt
Organic net sales growth
(1)
pt
Foreign currency exchange
Flat
Acquisition
Flat
Net sales growth
(1)
pt
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Organic
net
sales
decreased
percent
in
the
first
quarter
of
fiscal
2025
compared
to
the
same
period
in
fiscal
2024,
driven
by
unfavorable organic net price realization and mix.
Cost of
sales
increased $25
million to
$3,159 million
in the
first quarter
of fiscal
2025 compared
to the
same period
in fiscal
The increase included a
$7 million increase attributable
to volume and a $47
million decrease attributable to product
rate and mix. We
recorded a
$29 million net
increase in
cost of
sales related
to the
mark-to-market valuation
of certain
commodity positions
and grain
inventories
in
the
first
quarter
of
fiscal
2025,
compared
to
a
$45 million
net
decrease
in
the
first
quarter
of
fiscal
We
also
recorded $1
million of
restructuring charges
in the first
quarter of
fiscal 2025
compared to
$9 million
of restructuring
charges and
$1
million of
restructuring initiative
project-related
costs in
cost of
sales in
the first
quarter of
fiscal 2024
(please refer
to Note
3 to
the
Consolidated Financial Statements in Part I, Item 1 of this report).
SG&A expenses
increased $16 million
to $855 million in
the first quarter
of fiscal 2025,
compared to the
same period in
fiscal 2024,
primarily driven
by increased
media and
advertising expenses.
SG&A expenses
as a
percent of
net sales
in the
first quarter
of fiscal
2025 increased 50 basis points compared to the first quarter of fiscal 2024.
Restructuring, impairment,
and other exit
costs
totaled $2 million
in the first
quarter of fiscal
2025,
compared to $1
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 $14 million
in the
first quarter
of fiscal
2025, compared
to $17 million
in the
same period
last year, primarily reflecting higher
amortization of losses.
Interest,
net
for
the
first
quarter
of
fiscal
2025
totaled
$124 million,
up
$7 million
from
the
first
quarter
of
fiscal
2024,
primarily
driven by higher average long-term debt levels.
The
effective tax rate
for the first quarter of fiscal
2025 was 21.8 percent compared
to 20.9 percent for the first
quarter of fiscal 2024.
The
0.9
percentage
point
increase
was
primarily
due
to
certain
nonrecurring
discrete
tax benefits
in
the
first
quarter
of fiscal
2024,
partially
offset
by
favorable
earnings
mix
by
jurisdiction
in the
first
quarter
of
fiscal
Our
effective
tax
rate
excluding
certain
items affecting comparability was
21.9 percent in the first quarter
of fiscal 2025, compared to 21.1 percent
in the same period last year
(see the
“Non-GAAP Measures”
section below
for a
description of
our use
of measures
not defined
by GAAP).
The 0.8
percentage
point
increase
was
primarily
due
to
certain
nonrecurring
discrete
tax
benefits
in
the
first
quarter
of
fiscal
2024,
partially
offset
by
favorable earnings mix by jurisdiction in the first quarter of fiscal 2025.
After-tax earnings
from
joint ventures
for the
first quarter
of fiscal
2025
decreased to
$19 million compared
to $24 million
in the
same period in fiscal 2024, primarily
due to favorable discrete tax items
in the first quarter of fiscal 2024,
higher SG&A expenses, and
a
decrease
in
volume
at
Cereal
Partners
Worldwide
(CPW),
partially
offset
by
favorable
net
price
realization
and
mix at
CPW
and
lower
SG&A
expenses
at
Häagen-Dazs
Japan,
Inc.
(HDJ).
On
a
constant-currency
basis,
after-tax
earnings
from
joint
ventures
decreased 14 percent (see the “Non-GAAP Measures” section below for
a description of our use of measures not defined by GAAP).
The components of our joint ventures’ net sales growth are shown in the following
table:
Quarter Ended Aug. 25, 2024 vs.
Quarter Ended Aug. 27, 2023
CPW
HDJ
Total
Contributions from volume growth (a)
(2)
pts
pt
Net price realization and mix
pts
(1)
pt
Net sales growth in constant currency
pt
Flat
pt
Foreign currency exchange
(4)
pts
(8)
pts
(5)
pts
Net sales growth
(4)
pts
(8)
pts
(4)
pts
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Average
diluted
shares
outstanding
decreased
by
million
in
the
first
quarter
of
fiscal
2025
from
the
same
period
a
year
ago
primarily due to share repurchases, partially offset by option
exercises.
SEGMENT OPERATING
RESULTS
Our
businesses
are
organized
into
four
operating
segments:
North
America
Retail,
International,
North
America
Pet,
and
North
America Foodservice. Please refer
to Note 17 of the
Consolidated Financial Statements in
Part I, Item 1 of
this report for a description
of our operating segments.
North America Retail Segment Results
North America Retail net sales were as follows:
Quarter Ended
Aug. 25,
2024
Aug. 25, 2024 vs
Aug. 27, 2023
Aug. 27,
2023
Net sales (in millions)
$
3,016.6
(2)
%
$
3,073.0
Contributions from volume growth (a)
(3)
pts
Net price realization and mix
pt
Foreign currency exchange
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North
America
Retail
net
sales
decreased
percent
in
the
first
quarter
of
fiscal
2025
compared
to
the
same
period
in
fiscal
2024,
driven by a decrease in contributions from volume growth, partially offset
by favorable net price realization and mix.
The components of North America Retail organic net
sales growth are shown in the following table:
Quarter Ended
Aug. 25, 2024
Contributions from organic volume growth (a)
(3)
pts
Organic net price realization and mix
pt
Organic net sales growth
(2)
pts
Foreign currency exchange
Flat
Net sales growth
(2)
pts
Note: Table may
not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
North
America
Retail organic
net sales
decreased
2 percent
in the
first quarter
of fiscal
2025
compared to
the same
period in
fiscal
2024, driven by a decrease
in contributions from organic
volume growth, partially offset
by favorable organic net
price realization and
mix.
North America Retail net sales percentage change by operating unit are shown
in the following table:
Quarter Ended
Aug. 25, 2024
U.S. Snacks
(5)
%
U.S. Morning Foods
(3)
%
Canada (a)
%
U.S. Meals & Baking Solutions
Flat
Total
(2)
%
(a)
On a constant-currency
basis, Canada net
sales increased 6 percent
in the first quarter
of fiscal 2025 compared
to the same period
in fiscal 2024. See the “Non-GAAP Measures” section below for our use of
this measure not defined by GAAP.
Segment operating
profit decreased 7
percent to $746 million
in the first quarter
of fiscal 2025,
compared to $798 million
in the same
period in
fiscal 2024,
primarily driven
by higher
input costs
and a
decrease in
contributions from
volume growth,
partially offset
by
favorable net
price realization
and mix.
Segment operating
profit decreased
6 percent
on a constant
-currency basis
in the
first quarter
of fiscal 2025,
compared to the
same period in
fiscal 2024 (see
the “Non-GAAP
Measures” section below
for our use
of this measure
not defined by GAAP).
International Segment Results
International net sales were as follows:
Quarter Ended
Aug. 25,
2024
Aug. 25, 2024 vs
Aug. 27, 2023
Aug. 27,
2023
Net sales (in millions)
$
717.0
Flat
$
715.8
Contributions from volume growth (a)
pts
Net price realization and mix
(6)
pts
Foreign currency exchange
(2)
pts
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
International net sales in the first quarter of fiscal 2025 essentially matched
the same period in fiscal 2024.
The components of International organic net sales growth
are shown in the following table:
Quarter Ended
Aug. 25, 2024
Contributions from organic volume growth (a)
pts
Organic net price realization and mix
(7)
pts
Organic net sales growth
(1)
pt
Foreign currency exchange
(2)
pts
Acquisition (b)
pts
Net sales growth
Flat
Note: Table may
not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
(b) Acquisition of a pet food business in Europe in fiscal 2024. Please see Note 2 to
the Consolidated Financial Statements in Part I,
Item 1 of this report.
International
organic
net
sales
decreased
percent
in
the
first
quarter
of
fiscal
2025,
compared
to
the
same
period
in
fiscal
2024,
driven
by
unfavorable
organic
net
price
realization
and
mix,
partially
offset
by
an
increase
in
contributions
from
organic
volume
growth.
Segment operating
profit decreased
58 percent
to $21 million
in the
first quarter
of fiscal
2025, compared
to $50 million
in the
same
period
in
fiscal
2024,
primarily
driven
by unfavorable
net price
realization
and
mix
and higher
SG&A
expenses,
partially
offset
by
lower input
costs and an
increase in contributions
from volume growth.
Segment operating
profit decreased 64
percent on a
constant-
currency basis
in the first
quarter of
fiscal 2025,
compared to
the same
period in
fiscal 2024 (see
the “Non-GAAP
Measures” section
below for our use of this measure not defined by GAAP).
North America Pet Segment Results
North America Pet net sales were as follows:
Quarter Ended
Aug. 25,
2024
Aug. 25, 2024 vs
Aug. 27, 2023
Aug. 27,
2023
Net sales (in millions)
$
576.1
(1)
%
$
579.9
Contributions from volume growth (a)
pts
Net price realization and mix
(3)
pts
Foreign currency exchange
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North America Pet
net sales decreased
1 percent in
the first quarter
of fiscal 2025,
compared to the
same period in
fiscal 2024, driven
by unfavorable net price realization and mix, partially offset by
an increase in contributions from volume growth.
The components of North America Pet organic net sales growth are
shown in the following table:
Quarter Ended
Aug. 25, 2024
Contributions from organic volume growth (a)
pts
Organic net price realization and mix
(3)
pts
Organic net sales growth
(1)
pt
Foreign currency exchange
Flat
Net sales growth
(1)
pt
Note: Table may
not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
North America Pet organic
net sales decreased 1 percent
in the first quarter of fiscal 2025, compared
to the same period in fiscal
2024,
driven
by
unfavorable
organic
net
price
realization
and
mix,
partially
offset
by
an
increase
in
contributions
from
organic
volume
growth.
Segment operating
profit increased 7
percent to $119
million in the
first quarter of
fiscal 2025,
compared to $111
million in the
same
period in
fiscal 2024,
primarily driven
by lower
input costs
and an
increase in
contributions from
volume growth,
partially offset
by
unfavorable
net
price
realization
and
mix
and
higher
SG&A expenses
.
Segment
operating
profit
increased
percent
on
a
constant-
currency basis
in the first
quarter of
fiscal 2025,
compared to
the same
period in
fiscal 2024 (see
the “Non-GAAP
Measures” section
below for our use of this measure not defined by GAAP).
North America Foodservice Segment Results
North America Foodservice net sales were as follows:
Quarter Ended
Aug. 25,
2024
Aug. 25, 2024 vs
Aug. 27, 2023
Aug. 27,
2023
Net sales (in millions)
$
536.2
Flat
$
536.0
Contributions from volume growth (a)
Flat
Net price realization and mix
Flat
Foreign currency exchange
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North America Foodservice net sales in the first quarter of fiscal 2025 essentially
matched the same period in fiscal 2024.
The components of North America Foodservice organic
net sales growth are shown in the following table:
Quarter Ended
Aug. 25, 2024
Contributions from organic volume growth (a)
Flat
Organic net price realization and mix
Flat
Organic net sales growth
Flat
Foreign currency exchange
Flat
Net sales growth
Flat
Note: Table may
not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
North America Foodservice organic net sales in the
first quarter of fiscal 2025 essentially matched the same period in fiscal 2024.
Segment operating
profit increased
21 percent
to $72
million in
the first
quarter of
fiscal 2025,
compared to
$59 million in
the same
period
in
fiscal
2024,
primarily
driven
by
lower
input
costs.
Segment
operating
profit
increased
percent
on
a
constant-currency
basis in the first
quarter of fiscal
2025,
compared to the
same period in
fiscal 2024 (see
the “Non-GAAP Measures”
section below for
our use of this measure not defined by GAAP).
UNALLOCATED
CORPORATE
ITEMS
Unallocated corporate
expenses totaled $124
million in the
first quarter
of fiscal 2025,
compared to
$87 million in the
same period
in
fiscal
In
the
first
quarter
of
fiscal
2025,
we
recorded
a
$29 million
net
increase
in
expense
related
to
the
mark-to-market
valuation of certain
commodity positions and
grain inventories, compared
to a $45 million
net decrease in
expense in the
same period
last year.
Certain compensation
and benefits
expenses decreased
in the
first quarter
of fiscal
2025
compared to
the same
period last
year.
We
recorded
$1
million
of
restructuring
charges
in
cost
of
sales in
the
first quarter
of
fiscal
2025,
compared
to $9
million
of
restructuring
charges
in
cost
of
sales
in
the
same
period
last
year.
We
recorded
$3 million
of
net
losses
related
to
valuation
adjustments on certain corporate investments
in the first quarter of fiscal 2024.
In addition, we recorded $2 million
of integration costs
in the first quarter of fiscal 2025 related to our acquisition of a pet food business in
Europe in fiscal 2024.
LIQUIDITY
AND CAPITAL
RESOURCES
During the first quarter of
fiscal 2025,
cash provided by operations was $624 million
compared to $378 million in the same
period last
year.
The $246
million increase
was primarily
driven by
a $350
million
change in
current assets
and
liabilities, partially
offset
by a
$97 million
decrease in
net earnings.
The $350
million change
in current
assets and
liabilities is
primarily
driven by
a $367
million
change in the timing of accounts payable.
Cash used by investing activities during the first quarter
of fiscal 2025 was $148 million compared to $136 million
for the same period
in
fiscal
During
the
first quarter
of
fiscal
2025,
we
paid
$8
million
related
to
a purchase
price
holdback
after certain
closing
conditions
were met
for the
acquisition of
a pet
food business
in Europe
in the
fourth
quarter of
fiscal 2024.
In addition,
during the
first quarter
of fiscal
2025, we
spent $140
million on
purchases of
land, buildings,
and equipment
in the
first quarter
of fiscal
2025,
compared to $142 million in the same period last year.
Cash used by financing
activities during the first
quarter of fiscal 2025
was $429 million compared
to $334 million in the same
period
in
fiscal
We
had
$238
million
of
net
debt
issuances
in
the
first
quarter
of
fiscal
2025,
compared
to
$552
million
of net
debt
issuances in the same period
a year ago. We
paid $300 million for purchases
of common stock for
treasury in the first quarter
of fiscal
2025,
compared to $500 million in the
same period in fiscal 2024. In
addition, we paid $338 million of dividends
in the first quarter of
fiscal 2025, compared to $348 million in the same period last year.
As of August
25, 2024, we had
$414 million of cash
and cash equivalents
in foreign jurisdictions. In
anticipation of repatriating
funds
from foreign
jurisdictions, we
record local
country withholding
taxes on
our international
earnings, as
applicable. We
may repatriate
our
cash
and
cash
equivalents
held
by
our
foreign
subsidiaries
without
such
funds
being
subject
to
further
U.S.
income
tax
liability. Earnings
prior to fiscal 2018 from our foreign subsidiaries remain permanently reinvested in
those jurisdictions.
The following table details the fee-paid committed and uncommitted credit
lines we had available as of August 25, 2024:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring April 2026
$
2.7
$
-
Uncommitted credit facilities
0.7
-
Total committed
and uncommitted credit facilities
$
3.4
$
-
To ensure availability
of funds, we maintain bank credit lines and have commercial paper programs
available to us in the United States
and Europe.
Certain
of
our
long-term
debt
agreements,
our
credit
facilities,
and
our
noncontrolling
interests
contain
restrictive
covenants.
As
of
August 25, 2024, we were in compliance with all of these covenants.
We
have
$1,640
million
of
long-term
debt
maturing
in
the
next
months
that
is
classified
as
current,
including
€750
million
of
floating-rate notes
due November
8, 2024,
and $800
million of
4.0 percent
fixed-rate notes
due April
17, 2025.
We
believe that
cash
flows from
operations, together
with available
short-
and long-term
debt financing,
will be adequate
to meet
our liquidity
and capital
needs for at least the next 12 months.
The
third-party
holder
of
the
General
Mills
Cereals,
LLC
(GMC)
Class A
Interests
receives
quarterly
preferred
distributions
from
available net
income based
on the application
of a
floating preferred
return rate
to the
holder’s capital
account balance
established in
the most recent mark-to-market valuation
(currently $252 million). On June 1, 2024,
the floating preferred return rate on GMC’s
Class
A Interests was reset to the
sum of the three-month Term
SOFR plus 261 basis points.
The preferred return rate is adjusted
every three
years through a negotiated agreement with the Class A Interest holder
or through a remarketing auction.
We
have an option
to purchase the
Class A Interests for
consideration equal to
the then current
capital account value,
plus any unpaid
preferred return
and the
prescribed make-whole
amount. If
we purchase
these interests,
any change
in the
third-party holder’s
capital
account
from
its
original
value
will
be
charged
directly
to
retained
earnings
and
will
increase
or
decrease
the
net
earnings
used
to
calculate EPS in that period.
CRITICAL ACCOUNTING ESTIMATES
Our significant accounting policies are described in Note 2
to the Consolidated Financial Statements included in
our Annual Report on
Form
10-K for
the fiscal
year ended
May 26,
- The
accounting policies
used in
preparing our
interim fiscal
2025 Consolidated
Financial Statements are the
same as those described
in our Form 10-K.
Please see Note 1 to
the Consolidated Financial Statements
in
Part I, Item 1 of this report for additional information.
Our
critical
accounting
estimates
are
those
that
have
meaningful
impact
on
the
reporting
of
our
financial
condition
and
results
of
operations.
These estimates
include
our accounting
for revenue
recognition,
valuation of
long-lived
assets, intangible
assets, income
taxes,
and
defined
benefit
pension,
other
postretirement
benefit,
and
postemployment
benefit
plans.
The
assumptions
and
methodologies
used
in
the
determination
of
those
estimates
as
of
August
25,
2024,
are
the
same
as
those
described
in
our
Annual
Report on Form 10-K for the fiscal year ended May 26, 2024.
Our
annual
goodwill
and
indefinite-lived
intangible
assets
impairment
test
was
performed
on
the
first
day
of
the
second
quarter
of
fiscal 2024. As a
result of lower future profitability
projections for our Latin
America reporting unit, we
determined that the
fair value
of
the
reporting
unit
was
less
than
its
book
value
and
recorded
a
$117
million
non-cash
goodwill
impairment
charge.
In
addition,
during the
fourth quarter
of fiscal
2024, we
executed our
fiscal 2025
planning process
and preliminary
long-range planning
process,
which resulted in
lower future sales and
profitability projections for
the businesses supporting
our
Top
Chews
,
True Chews
, and
EPIC
brand intangible assets.
As a result of
this triggering event,
we performed an
interim impairment assessment
of these assets
as of May
26, 2024,
and determined
that the
fair value
of these
brand intangible
assets no
longer exceeded
the carrying
values of
the respective
assets, resulting
in $103
million of
non-cash impairment
charges. We
recorded impairment
charges in
restructuring, impairment,
and
other exit
costs in
our Consolidated
Statements of
Earnings. Our
estimates of
the fair
values were
determined based
on a
discounted
cash flow model
using inputs which
included our long-range
cash flow projections
for the businesses,
royalty rates, weighted
-average
cost of capital rates, and tax rates. The fair values
are Level 3 assets in the fair value hierarchy.
All other intangible
asset 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 2024
assessment date,
the
Progresso
,
Nudges
, and
True
Chews
brand intangible assets had risk of decreasing coverage. We
will continue to monitor these businesses for potential impairment.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2024, the Securities
and Exchange Commission (SEC)
issued final rules on the
enhancement and standardization
of climate-
related disclosures. The rules require
disclosure of, among other things:
material climate-related risks; activities
to mitigate or adapt
to
such
risks;
governance
and
management
of
such
risks;
and
material
greenhouse
gas
(GHG)
emissions
from
operations
owned
or
controlled
(Scope
and/or
indirect
emissions
from
purchased
energy
consumed
in
operations
(Scope
2).
Additionally,
the
rules
require disclosure
in the
notes to
the financial
statements of
the effects
of severe
weather events
and other
natural conditions,
subject
to
certain
materiality
thresholds.
The
SEC
has
issued
a
stay
on
the
final
rules
due
to
litigation
and
the
effective
date
is
delayed
indefinitely. We
are in the process of analyzing the impact of the rules on our disclosures.
In December 2023, the
Financial Accounting Standards Board
(FASB) issued
Accounting Standards Update (ASU)
2023-09 requiring
enhanced
income
tax
disclosures.
The
ASU
requires
disclosure
of
specific
categories
and
disaggregation
of
information
in
the
rate
reconciliation table. The
ASU also requires
disclosure of disaggregated
information related to
income taxes paid,
income or loss
from
continuing
operations
before
income
tax
expense
or
benefit,
and
income
tax
expense
or
benefit
from
continuing
operations.
The
requirements
of
the
ASU
are
effective
for
annual
periods
beginning
after
December
15,
2024,
which
for
us
is
fiscal
Early
adoption is permitted
and the amendments
should be applied
on a prospective
basis. Retrospective application
is permitted. We
are in
the process of analyzing the impact of the ASU on our related disclosures.
In
November
2023,
the
FASB
issued
ASU
2023-07
requiring
enhanced
segment
disclosures.
The
ASU
requires
disclosure
of
significant
segment
expenses
regularly
provided
to
the
chief
operating
decision
maker
(CODM)
included
within
segment
operating
profit
or
loss.
Additionally,
the
ASU
requires
a
description
of
how
the
CODM
utilizes
segment
operating
profit
or
loss
to
assess
segment performance.
The requirements
of the
ASU are effective
for annual
periods beginning
after December
15, 2023,
and interim
periods within
fiscal years
beginning after
December 15,
- For
us, annual
reporting requirements
will be
effective for
our fiscal
2025 and
interim reporting
requirements will
be effective
beginning with
our first
quarter of
fiscal 2026.
Early adoption
is permitted
and retrospective
application is
required
for all
periods presented.
We
are in
the process
of analyzing
the impact
of the
ASU on
our
related disclosures.
NON-GAAP MEASURES
We
have
included
in
this
report
measures
of
financial
performance
that
are not
defined
by
GAAP.
We
believe
that
these
measures
provide useful information to investors, and include these measures in other
communications to investors.
For each
of these
non-GAAP financial
measures, we
are providing
below a
reconciliation of
the differences
between the
non-GAAP
measure and the most
directly comparable GAAP measure,
an explanation of why
we believe the non-GAAP
measure provides useful
information to
investors, and
any additional
material purposes
for which
our management
or Board
of Directors
uses the
non-GAAP
measure. These non-GAAP measures should be viewed in addition to, and not
in lieu of, the comparable GAAP measure.
Significant Items Impacting Comparability
Several
measures
below
are
presented
on
an
adjusted
basis.
The
adjustments
are
either
items
resulting
from
infrequently
occurring
events or items that, in management’s
judgment, significantly affect the year-to-year
assessment of operating results.
The following are descriptions of significant items impacting comparability
of our results.
Mark-to-market effects
Net
mark-to-market
valuation
of
certain
commodity
positions
recognized
in
unallocated
corporate
items.
Please
see
Note
to
the
Consolidated Financial Statements in Part I, Item 1 of this report.
Restructuring charges and project-related costs
Restructuring charges and
project-related costs related to previously
announced restructuring actions recorded
in fiscal 2025 and fiscal
- Please see Note 3 to the Consolidated Financial Statements in Part I, Item 1
of this report.
Acquisition integration costs
Integration
costs
related
to
the
acquisition
of
a
pet
food
business
in
Europe
recorded
in
fiscal
Integration
costs
primarily
resulting from the acquisition of TNT Crust recorded in fiscal 2024.
Please see Note 2 to the Consolidated Financial Statements in Part
I, Item 1 of this report.
Investment activity, net
Valuation
adjustments of certain corporate investments in fiscal 2025 and fiscal 2024.
Product recall
Costs related to the fiscal 2023 voluntary recall of certain international
Häagen-Dazs
ice cream products.
Organic Net Sales Growth Rates
We
provide organic
net sales
growth rates
for our
consolidated net
sales and
segment net
sales. This
measure is
used in
reporting to
our
Board
of
Directors
and
executive
management
and
as
a
component
of
the
measurement
of
our
performance
for
incentive
compensation purposes.
We
believe that
organic net
sales growth
rates provide
useful information
to investors
because they
provide
transparency
to
underlying
performance
in
our
net
sales
by
excluding
the
effect
that
foreign
currency
exchange
rate
fluctuations,
acquisitions, divestitures,
and a 53
rd
week, when applicable,
have on year-to-year comparability.
A reconciliation of
these measures to
reported net
sales growth
rates, the
relevant GAAP
measures, are
included in
our Consolidated
Results of
Operations and
Results of
Segment Operations discussions in the MD&A above.
Adjusted Operating Profit as a Percent of Net Sales (Adjusted Operating
Profit Margin)
We believe
this measure provides useful information
to investors because it is important
for assessing our operating profit margin
on a
comparable basis.
Our adjusted operating profit margins are calculated as follows:
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
831.5
17.2
%
$
930.0
19.0
%
Mark-to-market effects
28.8
0.6
%
(44.9)
(0.9)
%
Restructuring charges
2.9
0.1
%
9.8
0.2
%
Acquisition integration costs
1.6
-
%
0.2
-
%
Investment activity, net
0.4
-
%
2.9
0.1
%
Project-related costs
0.1
-
%
0.8
-
%
Product recall
-
-
%
0.2
-
%
Adjusted operating profit
$
865.3
17.8
%
$
899.0
18.3
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
Adjusted Operating Profit and Related Constant-currency Growth Rate
This measure is used in reporting
to our Board of Directors and
executive management and as a
component of the measurement of
our
performance for
incentive compensation purposes.
We
believe that
this measure provides
useful information
to investors because
it is
the
operating
profit
measure
we
use
to
evaluate
operating
profit
performance
on
a
comparable
year-to-year
basis.
Additionally,
the
measure
is
evaluated
on
a
constant-currency
basis
by
excluding
the
effect
that
foreign
currency
exchange
rate
fluctuations
have
on
year-to-year comparability given the volatility in foreign
currency exchange rates.
Our adjusted operating profit growth on a constant-currency basis is calculated
as follows:
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
Change
Operating profit as reported
$
831.5
$
930.0
(11)
%
Mark-to-market effects
28.8
(44.9)
Restructuring charges
2.9
9.8
Acquisition integration costs
1.6
0.2
Investment activity, net
0.4
2.9
Project-related costs
0.1
0.8
Product recall
-
0.2
Adjusted operating profit
$
865.3
$
899.0
(4)
%
Foreign currency exchange impact
Flat
Adjusted operating profit growth, on a constant-currency basis
(4)
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
Adjusted Diluted EPS and Related Constant-currency Growth Rate
This measure
is used in
reporting to
our Board of
Directors and executive
management. We
believe that
this measure provides
useful
information to
investors because it
is the profitability
measure we use
to evaluate earnings
performance on
a comparable year-to-year
basis.
The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted
EPS and the related constant-currency growth rates follows:
Quarter Ended
Per Share Data
Aug. 25, 2024
Aug. 27, 2023
Change
Diluted earnings per share, as reported
$
1.03
$
1.14
(10)
%
Mark-to-market effects
0.04
(0.06)
Restructuring charges
-
0.01
Adjusted diluted earnings per share
$
1.07
$
1.09
(2)
%
Foreign currency exchange impact
Flat
Adjusted diluted earnings per share growth, on a constant-currency
basis
(2)
%
Note: Table may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
See our reconciliation
below of the effective
income tax rate as
reported to the adjusted
effective income tax
rate for the tax
impact of
each item affecting comparability.
Constant-currency After-tax Earnings from Joint Ventures
Growth Rates
We
believe that
this measure
provides useful
information to
investors because
it provides
transparency to
underlying performance
of
our joint
ventures by
excluding the
effect
that foreign
currency exchange
rate fluctuations
have on
year-to-year
comparability given
volatility in foreign currency exchange markets.
After-tax earnings from joint ventures growth rates on a constant-currency
basis are calculated as follows:
Percentage Change in
After-Tax
Earnings from Joint
Ventures
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in After-Tax
Earnings from Joint Ventures
on Constant-Currency Basis
Quarter Ended Aug. 25, 2024
(18)
%
(4)
pts
(14)
%
Note: Table may not foot due to rounding.
Net Sales Growth Rates for Our Canada Operating Unit on Constant-currency
Basis
We
believe
that
this
measure
of
our
Canada
operating
unit
net
sales
provides
useful
information
to
investors
because
it
provides
transparency to
the underlying
performance for
the Canada operating
unit within our
North America Retail
segment by
excluding the
effect
that
foreign
currency
exchange
rate
fluctuations
have
on
year-to-year
comparability
given
volatility
in
foreign
currency
exchange markets.
Net sales growth rates for our Canada operating unit on a constant-currency
basis are calculated as follows:
Percentage Change in
Net Sales
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in
Net Sales on Constant-
Currency Basis
Quarter Ended Aug. 25, 2024
%
(3)
pts
%
Note: Table may not foot due to rounding.
Constant-currency Segment Operating Profit Growth Rates
We
believe that
this measure
provides useful
information to
investors because
it provides
transparency to
underlying performance
of
our
segments
by
excluding
the
effect
that
foreign
currency
exchange
rate
fluctuations
have
on
year-to-year
comparability
given
volatility in foreign currency exchange markets.
Our segments’ operating profit growth rates on a constant-currency
basis are calculated as follows:
Quarter Ended Aug. 25, 2024
Percentage Change in
Operating Profit
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in Operating
Profit on Constant-Currency
Basis
North America Retail
(7)
%
Flat
(6)
%
International
(58)
%
pts
(64)
%
North America Pet
%
Flat
%
North America Foodservice
%
Flat
%
Note: Table may not foot due to rounding.
Adjusted Effective Income Tax
Rates
We
believe
this
measure
provides
useful
information
to
investors
because
it
presents
the
adjusted
effective
income
tax
rate
on
a
comparable year-to-year basis.
Adjusted effective income tax rates are calculated as follows:
Quarter Ended
Aug. 25, 2024
Aug. 27, 2023
In Millions
(Except Per Share Data)
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
As reported
$
721.8
$
157.4
$
830.0
$
173.2
Mark-to-market effects
28.8
6.6
(44.9)
(10.3)
Restructuring charges
2.9
0.7
9.8
4.7
Acquisition integration costs
1.6
0.4
0.2
0.1
Investment activity, net
0.4
0.1
2.9
1.0
Project-related costs
0.1
-
0.8
0.3
Product recall
-
-
0.2
0.1
As adjusted
$
755.6
$
165.3
$
799.1
$
169.0
Effective tax rate:
As reported
21.8%
20.9%
As adjusted
21.9%
21.1%
Sum of adjustments to income taxes
$
7.8
$
(4.3)
Average number
of common shares - diluted EPS
563.8
591.4
Impact of income tax adjustments on adjusted diluted EPS
$
(0.01)
$
0.01
Note: Table may not foot due to rounding.
(a)
Earnings before income taxes and after-tax earnings from joint ventures.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
Glossary
AOCI
. Accumulated other comprehensive income (loss).
Adjusted diluted EPS.
Diluted EPS adjusted for certain items affecting year-to-year
comparability.
Adjusted operating profit.
Operating profit adjusted for certain items affecting year-to-year
comparability.
Adjusted operating profit
margin.
Operating profit adjusted
for certain items
affecting year-over-year
comparability,
divided by net
sales.
Constant currency.
Financial results
translated to
United States
dollars using
constant foreign
currency exchange
rates based
on the
rates
in
effect
for
the
comparable
prior-year
period.
To
present
this
information,
current
period
results
for
entities
reporting
in
currencies other
than United
States dollars
are translated
into United
States dollars
at the
average exchange
rates in
effect during
the
corresponding
period
of
the
prior
fiscal
year,
rather
than
the
actual
average
exchange
rates
in
effect
during
the
current
fiscal
year.
Therefore,
the
foreign
currency
impact
is
equal
to
current
year
results
in
local
currencies
multiplied
by
the
change
in
the
average
foreign currency exchange rate between the current fiscal period and the corresponding
period of the prior fiscal year.
Core working capital.
Accounts receivable plus inventories less accounts payable.
Derivatives.
Financial instruments such
as futures, swaps,
options, and forward
contracts that we
use to manage
our risk arising
from
changes in commodity prices, interest rates, foreign exchange rates, and stock
prices.
Euribor.
Euro Interbank Offered Rate.
Fair value
hierarchy.
For purposes
of fair
value measurement,
we categorize
assets and
liabilities into
one of
three levels
based on
the assumptions
(inputs) used
in valuing
the asset or
liability.
Level 1 provides
the most reliable
measure of
fair value, while
Level 3
generally requires significant management judgment. The three levels are
defined as follows:
Level 1:
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2:
Observable inputs other than quoted prices included in
Level 1, such as quoted prices for similar assets or liabilities in
active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3:
Unobservable inputs reflecting management’s
assumptions about the inputs used in pricing the asset or liability.
Free cash flow.
Net cash provided by operating activities less purchases of land, buildings, and equipment.
Generally Accepted
Accounting Principles
(GAAP).
Guidelines, procedures,
and practices
that we
are required
to use in
recording
and reporting accounting information in our financial statements.
Goodwill.
The difference
between the purchase
price of acquired
companies plus the fair
value of any noncontrolling
and redeemable
interests and the related fair values of net assets acquired.
Gross margin.
Net sales less cost of sales.
Hedge accounting.
Accounting for qualifying
hedges that allows changes in
a hedging instrument’s
fair value to offset
corresponding
changes in
the hedged
item in
the same
reporting period.
Hedge accounting
is permitted
for certain
hedging instruments
and hedged
items
only
if
the
hedging
relationship
is
highly
effective,
and
only
prospectively
from
the
date
a
hedging
relationship
is
formally
documented.
Holistic Margin Management
(HMM).
Company-wide initiative to
use productivity savings, mix
management, and price realization
to offset input cost inflation, protect margins,
and generate funds to reinvest in sales-generating activities.
Interest
bearing
instruments.
Notes
payable,
long-term
debt,
including
current
portion,
cash
and
cash
equivalents,
and
certain
interest bearing investments classified within prepaid expenses and other current
assets and other assets.
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
mark-to-market
valuation of
certain
commodity
positions.
Realized
and
unrealized
gains
and
losses on
derivative
contracts
that will be allocated to segment operating profit when the exposure we are hedging
affects earnings.
Net price realization.
The impact of list and promoted price changes, net of trade and other price
promotion costs.
Net realizable
value.
The estimated
selling price
in the
ordinary course
of business,
less reasonably
predictable costs
of completion,
disposal, and transportation.
Noncontrolling interests.
Interests of subsidiaries held by third parties.
Notional
amount.
The
amount
of
a
position
or
an
agreed
upon
amount
in
a
derivative
contract
on
which
the
value
of
financial
instruments are calculated.
OCI.
Other Comprehensive Income (Loss).
Organic net sales growth
. Net sales growth adjusted
for foreign currency translation,
acquisitions, divestitures and a
rd
fiscal week,
when applicable.
Project-related costs.
Costs incurred related to our restructuring initiatives not included in restructuring
charges.
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.
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.
CAUTIONARY STATEMENT
RELEVANT
TO FORWARD
-LOOKING INFORMATION
FOR THE PURPOSE OF “SAFE
HARBOR” PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION
REFORM ACT OF 1995
This report
contains or
incorporates by
reference
forward-looking
statements within
the meaning
of the
Private Securities
Litigation
Reform Act
of 1995
that are
based on
our current
expectations and
assumptions. We
also may
make written
or oral
forward-looking
statements,
including
statements
contained
in
our
filings
with
the
Securities
and
Exchange
Commission
and
in
our
reports
to
stockholders.
The words or
phrases “will likely
result,” “are expected
to,” “will continue,”
“is anticipated,” “estimate,”
“plan,” “project,” or
similar
expressions identify
“forward-looking statements”
within the
meaning of
the Private
Securities Litigation
Reform Act
of 1995.
Such
statements are
subject to
certain risks
and uncertainties
that could
cause actual
results to
differ
materially from
historical results
and
those currently anticipated or projected. We
caution you not to place undue reliance on any such forward-looking statements.
In connection
with the “safe
harbor” provisions
of the Private
Securities Litigation
Reform Act of
1995, we are
identifying important
factors
that could
affect
our financial
performance
and could
cause our
actual results
in future
periods
to differ
materially
from any
current opinions or statements.
Our
future
results
could
be
affected
by
a
variety
of
factors,
such
as:
disruptions
or
inefficiencies
in
the
supply
chain;
competitive
dynamics in the consumer foods
industry and the markets for
our products, including new product
introductions, advertising activities,
pricing actions, and promotional
activities of our competitors;
economic conditions, including
changes in inflation rates,
interest rates,
tax
rates,
or
the
availability
of
capital;
product
development
and
innovation;
consumer
acceptance
of
new
products
and
product
improvements;
consumer
reaction
to
pricing
actions
and
changes
in
promotion
levels;
acquisitions
or
dispositions
of
businesses
or
assets; changes in capital structure;
changes in the legal and regulatory
environment, including tax legislation, labeling
and advertising
regulations, and litigation; impairments in the carrying
value of goodwill, other intangible assets, or other long
-lived assets, or changes
in the
useful lives
of other
intangible assets;
changes in
accounting standards
and the impact
of critical
accounting estimates;
product
quality
and
safety
issues,
including
recalls
and
product
liability;
changes
in
consumer
demand
for
our
products;
effectiveness
of
advertising,
marketing,
and
promotional
programs;
changes
in
consumer
behavior,
trends,
and
preferences,
including
weight
loss
trends; consumer perception
of health-related issues,
including obesity; consolidation
in the retail environment;
changes in purchasing
and
inventory
levels
of
significant
customers;
fluctuations
in
the
cost
and
availability
of
supply
chain
resources,
including
raw
materials,
packaging,
energy,
and
transportation;
effectiveness
of
restructuring
and
cost
saving
initiatives;
volatility
in
the
market
value of
derivatives used to
manage price
risk for certain
commodities; benefit
plan expenses due
to changes
in plan asset
values and
discount rates used to determine plan liabilities; failure or
breach of our information technology systems; foreign
economic conditions,
including currency rate fluctuations; and political unrest in foreign markets
and economic uncertainty due to terrorism or war.
You
should also
consider the risk
factors that we
identify in Item
1A of Part
I of our
Annual Report on
Form 10-K for
the fiscal year
ended May 26, 2024, which could also affect our future results.
We undertake
no obligation to publicly revise any forward-looking
statements to reflect events or circumstances
after the date of those
statements or to reflect the occurrence of anticipated or unanticipated events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Quantitative and Qualitative Disclosures About Market Risk.
The
estimated
maximum
potential
value-at-risk
arising
from
a
one-day
loss
in
fair
value
for
our
interest
rate,
foreign
exchange,
commodity, and equity
market-risk-sensitive instruments outstanding as of August 25, 2024,
was as follows:
In Millions
One-day Risk
of Loss
Change During
Quarter Ended
Aug. 25, 2024
Analysis of Change
Interest rate instruments
$
$
-
Immaterial
Foreign currency instruments
Increase in exchange rate volatility
Commodity instruments
(1)
Decrease in commodity contracts
Equity instruments
-
Immaterial
For additional information, see Item 7A of Part II of our Annual Report on Form 10-K
for the fiscal year ended May 26, 2024.
Item 4. Controls and Procedures.
Controls and Procedures.
We,
under the
supervision and
with the
participation of
our management,
including our
Chief Executive
Officer and
Chief Financial
Officer,
have
evaluated
the
effectiveness
of
the design
and
operation
of
our
disclosure
controls
and
procedures
(as
defined
in
Rule
13a-15(e)
under
the
Securities
Exchange
Act
of
1934).
Based
on
our
evaluation,
our
Chief
Executive
Officer
and
Chief
Financial
Officer have
concluded that,
as of
August 25,
2024, 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
August 25,
2024, 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
August 25, 2024:
Period
Total
Number
of Shares
Purchased (a)
Average
Price Paid
Per Share
Total
Number of Shares
Purchased as Part of a Publicly
Announced Program (b)
Maximum Number of Shares
that may yet be Purchased
Under the Program (b)
May 27, 2024 -
June 30, 2024
2,015,083
$
67.21
2,015,083
53,643,914
July 1, 2024 -
July 28, 2024
1,679,017
64.81
1,679,017
51,964,897
July 29, 2024 -
August 25, 2024
839,009
69.09
839,009
51,125,888
Total
4,533,109
$
66.67
4,533,109
51,125,888
(a)
The total number
of shares purchased
includes shares of
common stock withheld
for the payment
of withholding taxes
upon the distribution
of
deferred option units.
(b)
On June
27, 2022,
our Board
of Directors approved
an authorization
for the
repurchase of
up to
100,000,000 shares of
our common stock
and
terminated the
prior authorization.
Purchases can
be made
in the
open market
or in
privately negotiated
transactions, including
the use
of call
options
and
other
derivative
instruments,
Rule
10b5-1
trading
plans,
and
accelerated
repurchase
programs.
The
Board
did
not
specify
an
expiration date for the authorization.
Item 5. Other Information.
Other Information.
Except
as
set
forth
below,
during
the
fiscal
quarter
ended
August
25,
2024,
no
director
or
officer
of
the
Company
adopted
or
terminated
a “Rule 10b5-1
trading arrangement” or
“
non-Rule
10b5-1
trading arrangement,” as
each term is defined
in Item 408(a)
of
Regulation S-K.
During
the
fiscal
quarter
ended
August
25,
2024,
Jeffrey L. Harmening
,
the
Company’s
Chairman and Chief Executive Officer
,
adopted
a
“Rule 10b5-1
trading
arrangement.”
The
trading plan,
adopted
on
July 24, 2024
, relates
to
the exercise
and sale
of up
to
57,879
shares
of
the
Company’s
common
stock
that
are
subject
to
a
company-granted
stock
option
award
that
expires
on
July
30,
- The plan is scheduled to terminate when all shares subject to the award
are exercised and sold or July 31, 2025.
PART
II. OTHER INFORMATION
Item 6. Exhibits.
Exhibits.
10.1
Form of Performance Share Unit Award Agreement
10.2
Form of Stock Option Agreement.
10.3
Form of Restricted Stock Unit Agreement.
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Financial
Statements
from
the Quarterly
Report
on Form
10-Q
of the
Company
for
the quarter
ended
August
25,
2024,
formatted
in
Inline
Extensible
Business
Reporting
Language:
(i)
Consolidated
Statements
of
Earnings;
(ii)
Consolidated
Statements
of
Comprehensive
Income,
(iii)
Consolidated
Balance
Sheets;
(iv)
Consolidated
Statements of
Total
Equity; (v)
Consolidated Statements
of Cash
Flows; and
(vi) Notes
to Consolidated
Financial
Statements.
Cover Page, formatted in Inline Extensible Business Reporting Language
and contained in Exhibit 101.
SIGNATURES
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
the
registrant
has
duly
caused
this
report
to
be
signed
on
its
behalf by the undersigned thereunto duly authorized.
GENERAL MILLS, INC.
(Registrant)
Date: September 18, 2024
/s/ Mark A. Pallot
Mark A. Pallot
Vice President, Chief Accounting
Officer
(Principal Accounting Officer and Duly Authorized
Officer)