filings.toolsItem 2. Management’s Discussion and Analysis
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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
are
focused
on
delivering
remarkable
experiences across our leading food brands, resulting in sustainable improvement
in volume growth and market share trends over time.
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
Second Quarter Results
In
the
second
quarter
of
fiscal
2025,
net
sales
increased
percent
and
organic
net
sales
increased
percent
compared
to
the
same
period last
year.
Operating profit
increased 33
percent to
$1,078 million,
primarily driven
by a
goodwill impairment
charge recorded
in
fiscal
2024
and
lower
restructuring
charges,
lower
input
costs,
a
favorable
change
in
the
mark-to-market
valuation
of
certain
commodity
positions
and
grain
inventories,
and
an
increase
in
contributions
from
volume growth,
partially
offset
by an
increase
in
selling, general
and administrative
(SG&A) expenses
and unfavorable
net price
realization and
mix. Operating
profit margin
of 20.6
percent
increased
basis
points.
Adjusted
operating
profit
of
$1,064
million
increased
percent
on
a
constant-currency
basis,
primarily driven
by lower
input costs
and an
increase in
contributions
from volume
growth, partially
offset by
an increase
in SG&A
expenses and
unfavorable net
price realization
and mix.
Adjusted operating
profit margin
increased 100
basis points
to 20.3
percent.
Diluted earnings
per share
of $1.42
increased 39
percent in
the second
quarter of
fiscal 2025.
Adjusted diluted
earnings per
share of
$1.40
increased
percent
on
a
constant-currency
basis
compared
to
the
second
quarter
of
fiscal
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 second quarter
of fiscal 2025 follows:
Quarter Ended Nov. 24,
2024
In millions,
except per share
Quarter Ended
Nov. 24, 2024 vs.
Nov. 26, 2023
Percent
of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
5,240.1
%
Operating profit
1,077.9
%
20.6
%
Net earnings attributable to General Mills
795.7
%
Diluted earnings per share
$
1.42
%
Organic net sales growth rate (a)
%
Adjusted operating profit (a)
1,064.0
%
20.3
%
%
Adjusted diluted earnings per share (a)
$
1.40
%
%
(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
Nov. 24, 2024
Nov. 24, 2024 vs.
Nov. 26, 2023
Nov. 26, 2023
Net sales (in millions)
$
5,240.1
%
$
5,139.4
Contributions from volume growth (a)
pts
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
second quarter of fiscal
2025 increased 2 percent
compared to the same
period in fiscal 2024,
driven by an increase
in
contributions from volume growth, partially offset by
unfavorable net price realization and mix.
Components of organic net sales growth are shown in the following
table:
Quarter Ended Nov. 24, 2024 vs.
Quarter Ended Nov. 26, 2023
Contributions from organic volume growth (a)
pts
Organic net price realization and mix
(1)
pt
Organic net sales growth
pt
Foreign currency exchange
Flat
Acquisitions
Flat
Net sales growth
pts
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
Organic
net sales
increased 1
percent in
the second
quarter of
fiscal 2025
compared to
the same
period in
fiscal 2024,
driven by
an
increase in contributions from organic volume growth,
partially offset by unfavorable organic net price realization
and mix.
Cost of sales
decreased $64 million to $3,309
million in the second quarter
of fiscal 2025 compared
to the same period
in fiscal 2024.
The decrease
was primarily
driven by
an $87 million
decrease attributable
to product
rate and
mix, partially
offset by
an $85
million
increase
attributable
to
volume.
We
recorded
a
$29 million
net
decrease
in
cost
of
sales
related
to
the
mark-to-market
valuation
of
certain commodity
positions and
grain inventories
in the
second quarter
of fiscal
2025, compared
to a
$25 million net
increase in
the
second
quarter
of fiscal
We
recorded
$8
million
of
restructuring
charges
in
the
second
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
$22 million
to
$852 million
in
the
second
quarter
of
fiscal
2025,
compared
to
the
same
period
in
fiscal
2024,
primarily driven by an increase in
certain compensation and benefits expenses
and the addition of a pet food business
in Europe.
SG&A expenses as a percent
of net sales in the
second quarter of fiscal 2025
increased 10 basis points compared
to the second quarter
of fiscal 2024.
Restructuring, impairment, and other exit costs
totaled $1 million in the second quarter of
fiscal 2025,
compared to $124 million in
the
same
period
last
year.
We
recorded
$1
million
of
charges
in
the
second
quarter
of
fiscal
2025
related
to
actions
previously
announced compared
to $6 million in
the same period
last year.
In the second
quarter of fiscal 2024,
we recorded a $117
million non-
cash
goodwill
impairment
charge
related
to
our
Latin
America
reporting
unit
(please
refer
to
Note
to
the
Consolidated
Financial
Statements in Part I, Item 1 of this report).
Benefit plan non-service income
totaled $14 million in the second quarter
of fiscal 2025, compared to $20
million in the same period
last year, primarily reflecting higher
amortization of losses and interest costs.
Interest, net
for the second quarter of fiscal 2025
totaled $125 million, up $7 million from the second quarter
of fiscal 2024, primarily
driven by higher average long-term debt levels.
The
effective tax rate
for the second quarter
of fiscal 2025 was 20.1
percent compared to 19.0
percent for the second
quarter of fiscal
- The
1.1 percentage
point increase was
primarily due
to certain nonrecurring
discrete tax benefits
in the second
quarter of
fiscal
2024, partially
offset by
favorable earnings
mix by
jurisdiction in
the second
quarter of
fiscal 2025.
Our effective
tax rate
excluding
certain
items
affecting
comparability
was
20.1
percent
in
the
second
quarter
of
fiscal
2025,
compared
to
20.8
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
0.7 percentage point decrease was primarily due to favorable earnings
mix by jurisdiction in the second quarter of fiscal 2025.
After-tax earnings from
joint ventures
for the second quarter
of fiscal 2025
increased to $30 million compared
to $24 million in the
same
period
in
fiscal
2024,
primarily
due
to
lower
input
costs
and
favorable
net
price
realization
and
mix
at
Cereal
Partners
Worldwide
(CPW), partially
offset
by
higher SG&A
expenses and
a decrease
in volume
at CPW
and
higher
input costs
at Häagen-
Dazs
Japan,
Inc.
(HDJ).
On
a
constant-currency
basis,
after-tax
earnings
from
joint
ventures
increased
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 Nov. 24, 2024 vs.
Quarter Ended Nov. 26, 2023
CPW
HDJ
Total
Contributions from volume growth (a)
(2)
pts
Flat
Net price realization and mix
pts
pt
Net sales growth in constant currency
pts
pt
pt
Foreign currency exchange
pt
pt
pt
Net sales growth
pts
pts
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
23 million
in the
second quarter
of fiscal
2025 from
the same
period a
year ago
primarily due to share repurchases, partially offset by option
exercises.
Six-Month Results
In
the
six-month
period
ended
November
24,
2024,
net
sales
and
organic
net
sales
essentially
matched
the
same
period
last
year.
Operating profit increased 10 percent
to $1,909 million, primarily driven
by a goodwill impairment charge
recorded in fiscal 2024 and
lower
restructuring charges
,
lower input
costs, and
an increase
in contributions
from volume
growth, partially
offset
by unfavorable
net price
realization and
mix and
an increase
in SG&A
expenses. Operating
profit margin
of 18.9
percent increased
160 basis
points
compared to
the same
period last
year.
Adjusted operating
profit of
$1,929 million
increased 2
percent on
a constant-currency
basis,
primarily driven
by lower
input costs
and an
increase in
contributions from
volume growth,
partially offset
by unfavorable
net price
realization
and mix
and an
increase in
SG&A expenses
.
Adjusted operating
profit margin
increased 30
basis points
to 19.1
percent.
Diluted
earnings
per
share
of
$2.45
increased
percent
in
the
six-month
period
ended
November
24,
2024,
and
adjusted
diluted
earnings
per
share of
$2.47
increased
percent
on
a
constant-currency
basis compared
to
the
same
period
last year
(see the
“Non-
GAAP Measures” section below for a description of our use of measures
not defined by GAAP).
A summary of our consolidated financial results for the six-month period
ended November 24, 2024, follows:
Six-Month Period Ended Nov.
24, 2024
In millions,
except per share
Six-Month Period
Ended Nov. 24,
2024 vs. Nov. 26,
2023
Percent of Net
Sales
Constant-
Currency
Growth (a)
Net sales
$
10,088.2
Flat
Operating profit
1,909.4
%
18.9
%
Net earnings attributable to General Mills
1,375.6
%
Diluted earnings per share
$
2.45
%
Organic net sales growth rate (a)
Flat
Adjusted operating profit (a)
1,929.3
%
19.1
%
%
Adjusted diluted earnings per share (a)
$
2.47
%
%
(a)
See the “Non-GAAP Measures” section below for our use of measures not defined by GAAP.
Consolidated
net sales
were as follows:
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024 vs.
Nov. 26, 2023
Nov. 26, 2023
Net sales (in millions)
$
10,088.2
Flat
$
10,044.1
Contributions from volume growth (a)
pt
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 for the six-month period ended November 24, 2024, essentially matched
the same period in fiscal 2024.
Components of organic net sales growth are shown in the following
table:
Six-Month Period Ended Nov.
24, 2024 vs.
Six-Month Period Ended Nov.
26, 2023
Contributions from organic volume growth (a)
pt
Organic net price realization and mix
(1)
pt
Organic net sales growth
Flat
Foreign currency exchange
Flat
Acquisitions
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.
Organic net sales in the six-month period ended
November 24, 2024, essentially matched the same period in fiscal 2024.
Cost
of
sales
decreased
$39 million
to
$6,468
million
in
the
six-month
period
ended
November
24,
2024,
compared
to
the
same
period in fiscal 2024. The decrease
was primarily driven by a
$133
million decline attributable to product
rate and mix, partially offset
by a $92
million increase attributable
to volume. We
recorded a $1 million
net decrease in
cost of sales
related to the
mark-to-market
valuation
of
certain
commodity
positions
and
grain
inventories
in
the
six-month
period
ended
November
24,
2024,
compared
to
a
$20 million
net
decrease
in
the
six-month
period
ended
November
26,
In
addition,
we
recorded
$1
million
of
restructuring
charges in
cost of
sales in
the six-month
period ended
November 24,
2024, compared
to $17
million of
restructuring charges
and $1
million
of
restructuring
initiative
project-related
costs
in
cost
of
sales
in
the
same
period
last
year
(please
refer
to
Note
to
the
Consolidated Financial Statements in Part I, Item 1 of this report).
SG&A expenses
increased $37
million to
$1,707 million in
the six-month
period ended
November
24, 2024,
compared to
the same
period
in fiscal
2024,
primarily
driven
by an
increase
in certain
compensation
and benefits
expenses
and
the addition
of
a pet
food
business in
Europe.
SG&A expenses
as a
percent of
net sales
increased 30
basis points
in the
six-month period
ended November
24,
2024, compared to the same period of fiscal 2024.
Restructuring, impairment, and
other exit costs
totaled $3 million in
the six-month period ended
November 24, 2024, compared
to
$125 million in the same
period last year.
We recorded
$3 million of charges
related to actions previously
announced in the six-month
period
ended
November
24, 2024,
compared
to $8
million
in
the
same period
last year.
In
fiscal 2024,
we recorded
a $117
million
non-cash goodwill impairment charge
related to our Latin America
reporting unit (please refer
to Note 3 to the
Consolidated Financial
Statements in Part I, Item 1 of this report).
Benefit plan non-service
income
totaled $28 million
in the six-month
period ended November
24, 2024, compared
to $37 million
in
the same period last year, primarily reflecting
higher amortization of losses and interest costs.
Interest, net
for the six-month
period ended November
24, 2024, increased
$13 million to $248
million compared to
the same period
of fiscal 2024, primarily driven by higher average long-term debt levels.
The
effective
tax rate
for
the six-month
period ended
November
24, 2024,
was 20.9
percent compared
to 20.0
percent in
the same
period
last
year.
The
0.9
percentage
point
increase
was
primarily
due
to
certain
nonrecurring
discrete
tax
benefits
in
fiscal
2024,
partially
offset
by
favorable
earnings
mix
by
jurisdiction
in
fiscal
Our
effective
tax
rate
excluding
certain
items
affecting
comparability was
20.9
percent in
the six-month
period ended
November 24,
2024, compared
to 21.0
percent in
the same
period last
year
(see
the
“Non-GAAP
Measures”
section
below
for
a
description
of
our
use
of
measures
not
defined
by
GAAP).
The
0.1
percentage
point
decrease
was
primarily
due
to
favorable
earnings
mix
by
jurisdiction
in
fiscal
2025,
partially
offset
by
certain
nonrecurring discrete tax benefits in fiscal 2024.
After-tax
earnings from
joint ventures
increased
to $49 million
for the
six-month period
ended November
24, 2024,
compared to
$48 million in
the same period
in fiscal 2024,
primarily due
to lower
input costs
and favorable
net price
realization and
mix at
CPW,
partially
offset
by higher
SG&A expenses
and
a decrease
in volume
at CPW.
On
a constant
-currency
basis, after-tax
earnings
from
joint ventures increased
5 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:
Six-Month Period Ended Nov.
24, 2024 vs.
Six-Month Period Ended Nov.
26, 2023
CPW
HDJ
Total
Contributions from volume growth (a)
(2)
pts
Flat
Net price realization and mix
pts
Flat
Net sales growth in constant currency
pt
Flat
pt
Foreign currency exchange
(2)
pts
(3)
pts
(2)
pts
Net sales growth
(1)
pt
(3)
pts
(1)
pt
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
25 million
in
the
six-month
period
ended
November
24,
2024,
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 16 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
Six-Month Period Ended
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Net sales (in millions)
$
3,321.5
Flat
$
3,305.0
$
6,338.1
(1)
%
$
6,378.0
Contributions from volume growth (a)
(1)
pt
(2)
pts
Net price realization and mix
pt
pt
Foreign currency exchange
Flat
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North America Retail net sales in the second quarter of fiscal 2025 essentially matched
the same period in fiscal 2024.
North America
Retail net
sales decreased
1 percent
in the
six-month period
ended November
24, 2024,
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
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024
Contributions from organic volume growth (a)
(1)
pt
(2)
pts
Organic net price realization and mix
pt
pt
Organic net sales growth
pt
Flat
Foreign currency exchange
Flat
Flat
Net sales growth
Flat
(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 Retail
organic net
sales increased 1
percent in the
second quarter of
fiscal 2025,
compared to the
same period in
fiscal
2024,
driven by
favorable organic
net price
realization and
mix,
partially offset
by a
decrease in
contributions from
organic
volume
growth.
North
America
Retail organic
net sales
for
the six-month
period ended
November 24,
2024,
essentially matched
the same
period in
fiscal 2024.
North America Retail net sales percentage change by operating unit are shown
in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024
U.S. Snacks
%
(2)
%
U.S. Morning Foods
%
%
U.S. Meals & Baking Solutions
(1)
%
Flat
Canada (a)
(4)
%
(1)
%
Total
Flat
(1)
%
(a)
On a constant-currency basis, Canada
net sales decreased 4 percent
in the second quarter of
fiscal 2025 and increased 1
percent in
the six-month
period ended
November 24,
2024, compared
to the
same periods
in fiscal
See the
“Non-GAAP Measures”
section below for our use of this measure not defined by GAAP.
Segment
operating
profit
of
$862 million
in
the
second
quarter
of
fiscal
2025
essentially
matched
the
same
period
in
fiscal
Segment
operating
profit
on
a
constant-currency
basis
in
the
second
quarter
of
fiscal
2025
essentially
matched
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
percent
to
$1,608 million
in
the
six-month
period
ended
November
24,
2024,
compared
to
$1,658 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
percent
on
a
constant-
currency basis
in the
six-month period
ended November
24, 2024,
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
Six-Month Period Ended
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Net sales (in millions)
$
690.6
%
$
683.1
$
1,407.6
%
$
1,398.9
Contributions from volume growth (a)
pts
pts
Net price realization and mix
(4)
pts
(5)
pts
Foreign currency exchange
Flat
(1)
pt
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
International net
sales increased
1 percent
in the second
quarter of fiscal
2025, compared
to the same
period in
fiscal 2024, driven
by
an increase in contributions from volume growth, partially offset
by unfavorable net price realization and mix.
International net
sales increased
1 percent
in the
six-month period
ended November
24, 2024,
compared to
the same
period in
fiscal
2024,
driven
by
an
increase
in
contributions
from
volume
growth,
partially
offset
by
unfavorable
net
price
realization
and
mix
and
unfavorable foreign currency exchange.
The components of International organic net sales growth
are shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024
Contributions from organic volume growth (a)
pts
pts
Organic net price realization and mix
(5)
pts
(6)
pts
Organic net sales growth
(3)
pts
(2)
pts
Foreign currency exchange
Flat
(1)
pt
Acquisition (b)
pts
pts
Net sales growth
pt
pt
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
3 percent
in the
second 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.
International organic net
sales decreased 2 percent
in the six-month period
ended November 24, 2024,
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
percent
to
$24
million
in
the
second
quarter
of
fiscal
2025,
compared
to
$35 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. Segment operating
profit decreased 45
percent on a
constant-currency basis in
the second 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
percent
to
$45 million
in
the
six-month
period
ended
November
24,
2024,
compared
to
$85 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 56 percent
on a constant-currency
basis in the six-month
period ended November
24, 2024, 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
Six-Month Period Ended
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Net sales (in millions)
$
595.8
%
$
569.3
$
1,171.9
%
$
1,149.2
Contributions from volume growth (a)
pts
pts
Net price realization and mix
(5)
pts
(4)
pts
Foreign currency exchange
Flat
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North
America
Pet
net
sales
increased
percent
in
the
second
quarter
of
fiscal
2025,
compared
to
the
same
period
in
fiscal
2024,
driven by an increase in contributions from volume growth, partially offset
by unfavorable net price realization and mix.
North America
Pet net
sales increased
2 percent
in the
six-month period
ended November
24, 2024,
compared to
the same
period in
fiscal 2024, driven by an increase in contributions from volume growth,
partially offset by unfavorable net price realization and mix.
The components of North America Pet organic net sales growth are
shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024
Contributions from organic volume growth (a)
pts
pts
Organic net price realization and mix
(5)
pts
(4)
pts
Organic net sales growth
pts
pts
Foreign currency exchange
Flat
Flat
Net sales growth
pts
pts
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
increased 5
percent in
the second
quarter of
fiscal 2025,
compared to
the same
period in
fiscal
2024, driven by
an increase in
contributions from organic
volume growth, partially
offset by
unfavorable organic
net price realization
and mix.
North
America
Pet organic
net sales
increased
2 percent
in
the
six-month
period
ended November
24, 2024,
compared
to
the same
period in
fiscal 2024,
driven by
an increase
in contributions
from organic
volume growth,
partially offset
by unfavorable
organic net
price realization and mix.
Segment operating
profit increased
36 percent
to $139
million in
the second
quarter of
fiscal 2025,
compared
to $102 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,
including
increased
media
and
advertising
expenses.
Segment operating profit
increased 36 percent on
a constant-currency basis in the
second 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
increased
percent
to
$259 million
in
the
six-month
period
ended
November
24,
2024,
compared
to
$214 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,
including
increased
media
and
advertising
expenses.
Segment
operating
profit
increased
percent
on
a
constant-currency
basis
in
the
six-month
period
ended
November
24,
2024,
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
Six-Month Period Ended
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Nov. 24,
2024
Nov. 24, 2024 vs
Nov. 26, 2023
Nov. 26,
2023
Net sales (in millions)
$
630.0
%
$
582.0
$
1,166.2
%
$
1,118.0
Contributions from volume growth (a)
pts
pts
Net price realization and mix
pts
pt
Foreign currency exchange
Flat
Flat
Note: Table may
not foot due to rounding.
(a)
Measured in tons based on the stated weight of our product shipments.
North America
Foodservice net
sales increased
8 percent
in the
second quarter
of fiscal
2025,
compared to
the same
period in
fiscal
2024, driven by an increase in contributions from volume growth and favorable
net price realization and mix.
North
America Foodservice
net sales
increased
4 percent
in the
six-month period
ended November
24, 2024,
compared to
the same
period in fiscal 2024, driven by an increase in contributions from volume growth
and favorable net price realization and mix.
The components of North America Foodservice organic
net sales growth are shown in the following table:
Quarter Ended
Six-Month Period Ended
Nov. 24, 2024
Nov. 24, 2024
Contributions from organic volume growth (a)
pts
pts
Organic net price realization and mix
pts
pt
Organic net sales growth
pts
pts
Foreign currency exchange
Flat
Flat
Net sales growth
pts
pts
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
increased 8 percent
in the second
quarter of fiscal 2025
,
compared to the
same period in
fiscal 2024,
driven by an increase in contributions from organic volume growth
and favorable organic net price realization and mix.
North America Foodservice
organic net sales
increased 4 percent
in the six-month
period ended November
24, 2024, compared
to the
same
period
in
fiscal
2024,
driven
by
an
increase
in
contributions
from
organic
volume
growth
and
favorable
organic
net
price
realization and mix.
Segment
operating
profit
increased 24
percent
to $118
million
in
the second
quarter
of fiscal
2025,
compared
to $96
million
in
the
same period in
fiscal 2024, primarily
driven by favorable
net price realization
and mix. Segment
operating profit increased
24 percent
on a
constant-currency
basis in
the second
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
increased
percent
to
$190 million
in
the
six-month
period
ended
November
24,
2024,
compared
to
$155 million in
the same
period in
fiscal 2024,
primarily driven
by favorable
net price
realization and
mix. Segment
operating profit
increased 23 percent
on a constant-currency
basis in the
six-month period ended
November 24, 2024,
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 $65 million
in the second
quarter of fiscal
2025, compared
to $157 million
in the same period
in fiscal
- In
the second
quarter of
fiscal 2025,
we recorded
a $29
million net
decrease in
expense related
to the
mark-to-market
valuation of
certain commodity
positions and grain
inventories, compared
to a $25
million net increase
in expense in
the same period
last year.
We
recorded $3 million
of net losses related
to valuation adjustments
on certain corporate
investments in the
second quarter
of fiscal
2025,
compared to
$20 million
of net
losses related
to valuation
adjustments of
certain corporate
investments in
the second
quarter
of
fiscal
In
addition,
we
recorded
$9
million
of
transaction
costs
related
to
the
definitive
agreement
to
acquire
Whitebridge
Pet
Brands’
North
American
premium
cat
feeding
and
pet
treating
business
(Whitebridge
Pet
Brands
acquisition)
and
definitive
agreements to
sell our
North American
yogurt businesses
in the
second
quarter of
fiscal 2025,
compared to
$1 million
of
transaction costs
in the same period
last year.
We
recorded $8 million
of restructuring charge
s
in the second
quarter of fiscal
In
addition, we recorded $2 million of integration costs related
to the acquisition of a pet food business in Europe in the
second quarter of
fiscal 2025.
Unallocated corporate
expenses totaled
$189 million in
the six-month period
ended November 24,
2024, compared to
$244 million in
the same
period in
fiscal 2024.
In the
six-month period
ended November
24, 2024,
we recorded
a $1 million
net decrease
in expense
related to the
mark-to-market valuation
of certain commodity
positions and grain
inventories, compared
to a $20
million net decrease
in
expense
in
the
same
period
last year.
We
recorded
$4 million
of
net
losses related
to
valuation
adjustments
on
certain
corporate
investments in the six-month period
ended November 24, 2024, compared
to $22 million of net losses
related to valuation adjustments
and
the
loss
on
sale
of
certain
corporate
investments
in
the
same
period
in
fiscal
In
addition,
we
recorded
$1
million
of
restructuring charges
and an immaterial
amount of restructuring
initiative project-related
costs in cost of
sales in the
six-month period
ended November
24, 2024,
compared to
$17 million
of restructuring
charges and
$1 million
of restructuring
initiative project-related
costs in cost
of sales in
the same
period last year.
Compensation expense
related to stock-based
payments decreased
in the six-month
period ended November
24, 2024, compared to
the same period in
fiscal 2024. In the
six-month period ended November
24, 2024, we
recorded $9
million of
transaction costs
related to
the definitive
agreement for
the Whitebridge
Pet Brands
acquisition and
definitive
agreements to sell our North American
yogurt businesses, compared to $1 million
of transaction costs in the same period
last year.
We
recorded
$4
million
of
integration
costs
related
to
the
acquisition
of
a
pet
food
business
in
Europe
in
the
six-month
period
ended
November 24, 2024.
LIQUIDITY
AND CAPITAL
RESOURCES
During the
six-month period
ended November
24, 2024,
cash provided by
operations was
$1,775 million compared
to $1,496 million
in the same period
last year.
The $279 million increase
was primarily driven by
a $338 million change
in current assets and
liabilities.
The
$338
million
change
in
current
assets
and
liabilities
was
primarily
driven
by
a
$596
million
change
in
the
timing
of
accounts
payable,
partially offset
by a
$183 million
change in
inventories due
to higher
inventory levels
and a
$126
million change
in prepaid
expenses and other current assets primarily driven by changes in certain
marketable securities.
Cash used by
investing activities during
the six-month period
ended November 24,
2024, was $306 million
compared to $316 million
for the same period in
fiscal 2024. 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
In
addition,
we spent
$301 million
on purchases
of land,
buildings, and
equipment in
the six-month
period ended
November 24,
2024,
compared to $294 million in the same period last year.
Cash
generated
by
financing
activities
during
the
six-month
period
ended
November
24,
2024,
was
$422
million
compared
to
$1,174 million of
cash used
by financing
activities in
the same
period in
fiscal 2024.
We
had $1,754
million of
net debt issuances
in
the six-month
period ended
November 24,
2024, compared
to $867
million of
net debt
issuances in
the same
period a
year ago.
We
paid $600 million for purchases
of common stock for
treasury in the six-month period
ended November 24, 2024, compared
to $1,302
million in the
same period in fiscal
In addition, we paid
$676 million of dividends
in the six-month period
ended November 24,
2024,
compared to $691 million in the same period last year.
As of
November
24,
2024, we
had
$442 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 November 24, 2024:
In Billions
Facility
Amount
Borrowed
Amount
Committed credit facility expiring October 2029
$
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
November 24, 2024, we were in compliance with all of these covenants.
We
have $1,822
million of
long-term debt
maturing in
the next
12 months
that is
classified as
current, including
$800 million
of 4.0
percent fixed-rate notes
due April 17,
2025, €500 million
of 0.125 percent
fixed-rate notes due
November 15,
2025, and $500
million
of 5.241
percent fixed-rate
notes due
November 18,
- 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
November 24,
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
2025,
and
we
determined
there
was
no
impairment
of
our
intangible
assets
as
their
related
fair
values
were
substantially
in
excess of the
carrying values,
except for
the
Uncle Toby’s
brand intangible
asset. In addition,
while having
significant coverage
as of
our
fiscal
2025
assessment
date,
the
Progresso
,
Nudges,
True
Chews,
and
Kitano
brand
intangible
assets
had
risk
of
decreasing
coverage. We will continue
to monitor these businesses for potential impairment.
RECENTLY
ISSUED ACCOUNTING PRONOUNCEMENTS
In November 2024, the Financial Accounting
Standards Board (FASB
)
issued Accounting Standards Update (ASU)
2024-03 requiring
additional income
statement disclosures.
The ASU
requires the
disaggregation
of specific
categories of
expenses underlying
the line
items presented
on the
income statement.
Additionally,
the ASU
requires enhanced
disclosure of
selling expenses.
The requirements
of the ASU are effective for annual periods beginning
after December 15, 2026, and interim periods within fiscal years
beginning after
December
15,
For
us,
annual
reporting
requirements
will
be
effective
for
our
fiscal
2028
Form
10-K
and
interim
reporting
requirements will be
effective beginning
with our first
quarter of 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 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
FASB
issued
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 2026.
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 Form 10-K
and interim reporting requirements
will be effective
beginning with our first
quarter of fiscal
- 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.
Transaction costs
Fiscal 2025 transaction
costs related to
the definitive agreement
for the Whitebridge
Pet Brands acquisition
and definitive agreements
to
sell
our
North
American
yogurt
businesses.
Immaterial
transaction
costs
incurred
in
fiscal
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.
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.
Goodwill impairment
Non-cash
goodwill
impairment
charge
related
to
our
Latin
America
reporting
unit
in
fiscal
Please
see
Note
to
the
Consolidated Financial Statements in Part I, Item 1 of this report.
Product recall
Costs related to the fiscal 2023 voluntary recall of certain international
Häagen-Dazs
ice cream products recorded in fiscal 2024.
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
Nov. 24, 2024
Nov. 26, 2023
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
1,077.9
20.6
%
$
811.8
15.8
%
Transaction costs
8.9
0.2
%
0.6
-
%
Restructuring charges
1.3
-
%
14.8
0.3
%
Acquisition integration costs
2.3
-
%
-
-
%
Investment activity, net
2.8
0.1
%
19.6
0.4
%
Mark-to-market effects
(29.4)
(0.6)
%
25.1
0.5
%
Project-related costs
0.1
-
%
0.3
-
%
Goodwill impairment
-
-
%
117.1
2.3
%
Product recall
-
-
%
0.2
-
%
Adjusted operating profit
$
1,064.0
20.3
%
$
989.4
19.3
%
Six-Month Period Ended
Nov. 24, 2024
Nov. 26, 2023
In Millions
Value
Percent of
Net Sales
Value
Percent of
Net Sales
Operating profit as reported
$
1,909.4
18.9
%
$
1,741.8
17.3
%
Transaction costs
8.9
0.1
%
0.6
-
%
Restructuring charges
4.2
-
%
24.6
0.2
%
Acquisition integration costs
3.9
-
%
0.2
-
%
Investment activity, net
3.2
-
%
22.5
0.2
%
Mark-to-market effects
(0.6)
-
%
(19.8)
(0.2)
%
Project-related costs
0.2
-
%
1.1
-
%
Goodwill impairment
-
-
%
117.1
1.2
%
Product recall
-
-
%
0.4
-
%
Adjusted operating profit
$
1,929.3
19.1
%
$
1,888.4
18.8
%
Note: Tables
may not foot due to rounding.
For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.
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
Six-Month Period Ended
Nov. 24, 2024
Nov. 26, 2023
Change
Nov. 24, 2024
Nov. 26, 2023
Change
Operating profit as reported
$
1,077.9
$
811.8
%
$
1,909.4
$
1,741.8
%
Transaction costs
8.9
0.6
8.9
0.6
Restructuring charges
1.3
14.8
4.2
24.6
Acquisition integration costs
2.3
-
3.9
0.2
Investment activity, net
2.8
19.6
3.2
22.5
Mark-to-market effects
(29.4)
25.1
(0.6)
(19.8)
Project-related costs
0.1
0.3
0.2
1.1
Goodwill impairment
-
117.1
-
117.1
Product recall
-
0.2
-
0.4
Adjusted operating profit
$
1,064.0
$
989.4
%
$
1,929.3
$
1,888.4
%
Foreign currency exchange impact
Flat
Flat
Adjusted operating profit growth,
on a constant-currency basis
%
%
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
Six-Month Period Ended
Per Share Data
Nov. 24, 2024
Nov. 26, 2023
Change
Nov. 24, 2024
Nov. 26, 2023
Change
Diluted earnings per share, as reported
$
1.42
$
1.02
%
$
2.45
$
2.16
%
Transaction costs
0.01
-
0.01
-
Restructuring charges
0.01
0.02
0.01
0.03
Acquisition integration costs
0.01
-
0.01
-
Goodwill impairment
-
0.14
-
0.14
Mark-to-market effects
(0.04)
0.03
-
(0.03)
Investment activity, net
-
0.03
-
0.03
Adjusted diluted earnings per share
$
1.40
$
1.25
%
$
2.47
$
2.34
%
Foreign currency exchange impact
Flat
Flat
Adjusted diluted earnings per share
growth, on a constant-currency basis
%
%
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 Nov. 24,
2024
%
pts
%
Six-Month Period Ended Nov.
24, 2024
%
(1)
pt
%
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 Nov. 24,
2024
(4)
%
Flat
(4)
%
Six-Month Period Ended Nov.
24, 2024
(1)
%
(2)
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 Nov. 24, 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
Flat
Flat
Flat
International
(31)
%
pts
(45)
%
North America Pet
%
Flat
%
North America Foodservice
%
Flat
%
Six-Month Period Ended Nov.
24, 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
(3)
%
Flat
(3)
%
International
(47)
%
pts
(56)
%
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
Six-Month Period Ended
Nov. 24, 2024
Nov. 26, 2023
Nov. 24, 2024
Nov. 26, 2023
In Millions
(Except Per Share Data)
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
Pretax
Earnings
(a)
Income
Taxes
As reported
$
967.1
$
194.8
$
714.1
$
136.0
$
1,688.9
$
352.2
$
1,544.1
$
309.2
Transaction costs
8.9
2.0
0.6
-
8.9
2.0
0.6
-
Restructuring charges
1.3
0.3
14.8
4.5
4.2
1.0
24.6
9.2
Acquisition integration costs
2.3
0.5
-
-
3.9
0.9
0.2
0.1
Investment activity, net
2.8
0.6
19.6
4.2
3.2
0.7
22.5
5.2
Mark-to-market effects
(29.4)
(6.7)
25.1
5.7
(0.6)
(0.1)
(19.8)
(4.6)
Project-related costs
0.1
0.1
0.3
0.1
0.2
0.1
1.1
0.4
Goodwill impairment
-
-
117.1
34.7
-
-
117.1
34.7
Product recall
-
-
0.2
-
-
-
0.4
0.1
As adjusted
$
953.2
$
191.6
$
891.7
$
185.2
$
1,708.8
$
356.9
$
1,690.8
$
354.2
Effective tax rate:
As reported
20.1%
19.0%
20.9%
20.0%
As adjusted
20.1%
20.8%
20.9%
21.0%
Sum of adjustments to income taxes
$
(3.2)
$
49.4
$
4.6
$
45.1
Average number
of common
shares - diluted EPS
560.4
583.4
562.2
587.4
Impact of income tax adjustments
on adjusted diluted EPS
$
0.01
$
(0.08)
$
(0.01)
$
(0.08)
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.
Previous: Item 1. Financial Statements. · Next: Item 3. Quantitative and Qualitative Disclosures About Market Risk.