0001193125-21-279392.txt : 20210922 0001193125-21-279392.hdr.sgml : 20210922 20210922160625 ACCESSION NUMBER: 0001193125-21-279392 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20210829 FILED AS OF DATE: 20210922 DATE AS OF CHANGE: 20210922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MILLS INC CENTRAL INDEX KEY: 0000040704 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 410274440 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01185 FILM NUMBER: 211269684 BUSINESS ADDRESS: STREET 1: NUMBER ONE GENERAL MILLS BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55426 BUSINESS PHONE: (763) 764-7600 MAIL ADDRESS: STREET 1: P O BOX 1113 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 10-Q 1 d174441d10q.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 29, 2021

 

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

 

Commission file number: 001-01185

________________

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

41-0274440

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

Number One General Mills Boulevard

 

Minneapolis, Minnesota

55426

(Address of principal executive offices)

(Zip Code)

 

 

 

(763)764-7600

(Registrant’s telephone number, including area code)

 

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

 

 

 

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $.10 par value

 

GIS

 

New York Stock Exchange

1.000% Notes due 2023

 

GIS23A

 

New York Stock Exchange

0.450% Notes due 2026

 

GIS26

 

New York Stock Exchange

1.500% Notes due 2027

 

GIS27

 

New York Stock Exchange

 

 

 

________________

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

Yes No

 

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

 

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

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 14, 2021: 605,692,452 (excluding 148,920,876 shares held in the treasury).

 


 

General Mills, Inc.

 

Table of Contents

 

 

Page

PART I – Financial Information

 

Item 1. Financial Statements

 

Consolidated Statements of Earnings for the quarters ended August 29, 2021 and August 30, 2020

4

Consolidated Statements of Comprehensive Income for the quarters ended August 29, 2021 and August 30, 2020

5

Consolidated Balance Sheets as of August 29, 2021 and May 30, 2021

6

Consolidated Statements of Total Equity and Redeemable Interest for the quarters ended August 29, 2021 and August 30, 2020

7

Consolidated Statements of Cash Flows for the quarters ended August 29, 2021 and August 30, 2020

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk

34

Item 4. Controls and Procedures

35

PART II – Other Information

 

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

35

Item 6. Exhibits

36

Signatures

37

 

3


 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

 

 

 

 

 

 

 

Quarter Ended

 

Aug. 29, 2021

 

Aug. 30, 2020

Net sales

$

4,539.9

 

$

4,364.0

Cost of sales

 

2,942.5

 

 

2,773.6

Selling, general, and administrative expenses

 

757.4

 

 

736.2

Restructuring, impairment, and other exit costs (recoveries)

 

(4.3)

 

 

0.5

Operating profit

 

844.3

 

 

853.7

Benefit plan non-service income

 

(29.6)

 

 

(33.3)

Interest, net

 

95.9

 

 

111.1

Earnings before income taxes and after-tax earnings from

joint ventures

 

778.0

 

 

775.9

Income taxes

 

168.9

 

 

170.8

After-tax earnings from joint ventures

 

29.1

 

 

41.3

Net earnings, including earnings attributable to redeemable

and noncontrolling interests

 

638.2

 

 

646.4

Net earnings attributable to redeemable and

noncontrolling interests

 

11.2

 

 

7.5

Net earnings attributable to General Mills

$

627.0

 

$

638.9

Earnings per share – basic

$

1.03

 

$

1.04

Earnings per share – diluted

$

1.02

 

$

1.03

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4


 

 

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

 

 

 

 

 

 

Quarter Ended

 

Aug. 29, 2021

 

Aug. 30, 2020

Net earnings, including earnings attributable to

redeemable and noncontrolling interests

$

638.2

 

$

646.4

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

Foreign currency translation

 

(23.9)

 

 

66.2

Other fair value changes:

 

 

 

 

 

Hedge derivatives

 

1.7

 

 

(12.1)

Reclassification to earnings:

 

 

 

 

 

Hedge derivatives

 

10.6

 

 

(1.7)

Amortization of losses and prior service costs

 

8.4

 

 

19.5

Other comprehensive (loss) income, net of tax

 

(3.2)

 

 

71.9

Total comprehensive income

 

635.0

 

 

718.3

Comprehensive (loss) income attributable to

redeemable and noncontrolling interests

 

(23.5)

 

 

73.7

Comprehensive income attributable to General Mills

$

658.5

 

$

644.6

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

5


 

 

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)

 

Aug. 29, 2021

 

May 30, 2021

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

710.6

 

$

1,505.2

Receivables

 

1,691.7

 

 

1,638.5

Inventories

 

1,935.2

 

 

1,820.5

Prepaid expenses and other current assets

 

734.3

 

 

790.3

Assets held for sale

 

1,248.4

 

 

-

Total current assets

 

6,320.2

 

 

5,754.5

Land, buildings, and equipment

 

3,343.2

 

 

3,606.8

Goodwill

 

14,549.9

 

 

14,062.4

Other intangible assets

 

6,831.0

 

 

7,150.6

Other assets

 

1,287.9

 

 

1,267.6

Total assets

$

32,332.2

 

$

31,841.9

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

3,288.0

 

$

3,653.5

Current portion of long-term debt

 

1,590.5

 

 

2,463.8

Notes payable

 

1,035.5

 

 

361.3

Other current liabilities

 

1,673.9

 

 

1,787.2

Liabilities held for sale

 

547.5

 

 

-

Total current liabilities

 

8,135.4

 

 

8,265.8

Long-term debt

 

10,326.9

 

 

9,786.9

Deferred income taxes

 

2,076.0

 

 

2,118.4

Other liabilities

 

1,224.1

 

 

1,292.7

Total liabilities

 

21,762.4

 

 

21,463.8

Redeemable interest

 

584.0

 

 

604.9

Stockholders' equity:

 

 

 

 

 

Common stock, 754.6 shares issued, $0.10 par value

 

75.5

 

 

75.5

Additional paid-in capital

 

1,345.0

 

 

1,365.5

Retained earnings

 

17,384.5

 

 

17,069.8

Common stock in treasury, at cost, shares of 148.3 and 146.9

 

(6,715.0)

 

 

(6,611.2)

Accumulated other comprehensive loss

 

(2,397.7)

 

 

(2,429.2)

Total stockholders' equity

 

9,692.3

 

 

9,470.4

Noncontrolling interests

 

293.5

 

 

302.8

Total equity

 

9,985.8

 

 

9,773.2

Total liabilities and equity

$

32,332.2

 

$

31,841.9

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

6


 

 

Consolidated Statements of Total Equity and Redeemable Interest

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Aug. 29, 2021

 

Aug. 30, 2020

 

Shares

 

Amount

 

Shares

 

Amount

Total equity, beginning balance

 

 

$

9,773.2

 

 

 

$

8,349.5

Common stock, 1 billion shares authorized, $0.10 par value

754.6

 

 

75.5

 

754.6

 

 

75.5

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

1,365.5

 

 

 

 

1,348.6

Stock compensation plans

 

 

 

9.1

 

 

 

 

23.6

Unearned compensation related to stock unit awards

 

 

 

(68.3)

 

 

 

 

(74.9)

Earned compensation

 

 

 

33.1

 

 

 

 

28.2

Decrease in redemption value of

redeemable interest

 

 

 

5.6

 

 

 

 

10.0

Ending balance

 

 

 

1,345.0

 

 

 

 

1,335.5

Retained earnings:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

17,069.8

 

 

 

 

15,982.1

Comprehensive income

 

 

 

627.0

 

 

 

 

638.9

Cash dividends declared ($0.51 and $0.49 per share)

 

 

 

(312.3)

 

 

 

 

(302.8)

Adoption of current expected credit loss

accounting requirements

 

 

 

-

 

 

 

 

(5.7)

Ending balance

 

 

 

17,384.5

 

 

 

 

16,312.5

Common stock in treasury:

 

 

 

 

 

 

 

 

 

Beginning balance

(146.9)

 

 

(6,611.2)

 

(144.8)

 

 

(6,433.3)

Shares purchased

(2.5)

 

 

(150.1)

 

-

 

 

-

Stock compensation plans

1.1

 

 

46.3

 

1.5

 

 

63.1

Ending balance

(148.3)

 

 

(6,715.0)

 

(143.3)

 

 

(6,370.2)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

(2,429.2)

 

 

 

 

(2,914.4)

Comprehensive income

 

 

 

31.5

 

 

 

 

5.7

Ending balance

 

 

 

(2,397.7)

 

 

 

 

(2,908.7)

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

302.8

 

 

 

 

291.0

Comprehensive (loss) income

 

 

 

(8.2)

 

 

 

 

23.4

Distributions to noncontrolling interest holders

 

 

 

(1.1)

 

 

 

 

(1.1)

Ending balance

 

 

 

293.5

 

 

 

 

313.3

Total equity, ending balance

 

 

$

9,985.8

 

 

 

$

8,757.9

Redeemable interest:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

$

604.9

 

 

 

$

544.6

Comprehensive (loss) income

 

 

 

(15.3)

 

 

 

 

50.3

Decrease in redemption value of

redeemable interest

 

 

 

(5.6)

 

 

 

 

(10.0)

Ending balance

 

 

$

584.0

 

 

 

$

584.9

See accompanying notes to consolidated financial statements.

7


 

 

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

Quarter Ended

 

Aug. 29, 2021

 

Aug. 30, 2020

Cash Flows - Operating Activities

 

 

 

 

 

Net earnings, including earnings attributable to redeemable and noncontrolling interests

$

638.2

 

$

646.4

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

145.8

 

 

146.1

After-tax earnings from joint ventures

 

(29.1)

 

 

(41.3)

Distributions of earnings from joint ventures

 

22.6

 

 

19.9

Stock-based compensation

 

26.8

 

 

28.3

Deferred income taxes

 

19.6

 

 

23.0

Pension and other postretirement benefit plan contributions

 

(5.4)

 

 

(5.6)

Pension and other postretirement benefit plan costs

 

(7.2)

 

 

(8.6)

Restructuring, impairment, and other exit costs

 

(19.5)

 

 

(2.7)

Changes in current assets and liabilities, excluding the effects of acquisition

 

(389.5)

 

 

(157.8)

Other, net

 

(32.5)

 

 

(64.1)

Net cash provided by operating activities

 

369.8

 

 

583.6

Cash Flows - Investing Activities

 

 

 

 

 

Purchases of land, buildings, and equipment

 

(104.0)

 

 

(117.0)

Acquisition

 

(1,198.6)

 

 

-

Investments in affiliates, net

 

5.7

 

 

(0.7)

Proceeds from disposal of land, buildings, and equipment

 

0.3

 

 

0.3

Other, net

 

(1.3)

 

 

(5.6)

Net cash used by investing activities

 

(1,297.9)

 

 

(123.0)

Cash Flows - Financing Activities

 

 

 

 

 

Change in notes payable

 

698.7

 

 

(120.9)

Issuance of long-term debt

 

582.2

 

 

595.2

Payment of long-term debt

 

(612.1)

 

 

(555.1)

Proceeds from common stock issued on exercised options

 

7.9

 

 

30.0

Purchases of common stock for treasury

 

(150.1)

 

 

-

Dividends paid

 

(312.3)

 

 

(302.8)

Distributions to noncontrolling and redeemable interest holders

 

(1.1)

 

 

(1.1)

Other, net

 

(18.2)

 

 

(18.0)

Net cash provided (used) by financing activities

 

195.0

 

 

(372.7)

Effect of exchange rate changes on cash and cash equivalents

 

(18.1)

 

 

31.0

(Decrease) increase in cash and cash equivalents

 

(751.2)

 

 

118.9

Cash and cash equivalents - beginning of year

 

1,505.2

 

 

1,677.8

Cash and cash equivalents - end of period (includes $43.4 million of cash classified as
held for sale as of August 29, 2021)

$

754.0

 

$

1,796.7

Cash Flow from changes in current assets and liabilities, excluding the effects of acquisition:

 

 

 

 

 

Receivables

$

(145.3)

 

$

7.2

Inventories

 

(116.1)

 

 

(158.6)

Prepaid expenses and other current assets

 

39.0

 

 

88.2

Accounts payable

 

(214.9)

 

 

(45.9)

Other current liabilities

 

47.8

 

 

(48.7)

Changes in current assets and liabilities

$

(389.5)

 

$

(157.8)

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

8


 

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) Background

 

The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions and any noncontrolling and redeemable interests’ share of those transactions. Operating results for the quarter ended August 29, 2021, are not necessarily indicative of the results that may be expected for the fiscal year ending May 29, 2022.

 

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 30, 2021. 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 first quarter of fiscal 2022, we acquired the Tyson Foods’ pet treats business for $1.2 billion in cash. We financed the transaction with a combination of cash on hand and short-term debt. We consolidated the Tyson Foods’ pet treats business into our Consolidated Balance Sheets and recorded goodwill of $759.4 million, indefinite-lived intangible assets for the Nudges, Top Chews and True Chews brands totaling $330.0 million in aggregate, and a finite-lived customer relationship asset of $40.0 million. The goodwill is included in the Pet reporting unit and is deductible for tax purposes. The pro forma effects of this acquisition were not material. We have conducted a preliminary assessment of the fair value of the acquired assets and liabilities of the Tyson Foods’ pet treats business. The consolidated results of the Tyson Foods’ pet treats business are reported in our Pet operating segment on a one-month lag. Accordingly, our Consolidated Statements of Earnings include one month of operating results for the acquired business for the quarter ended August 29, 2021.

 

During the first quarter of fiscal 2022, we entered into a definitive agreement to sell our 51 percent controlling interest in Yoplait SAS, and our 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl to Sodiaal International (Sodiaal) in exchange for full ownership of the Canadian Yoplait business, a reduced royalty rate for the use of Yoplait and Liberté brands in the United States and Canada, and cash. This transaction is expected to be completed by the end of calendar year 2021. We have classified all Yoplait SAS, Yoplait Marques SNC and Liberté Marques Sàrl assets and liabilities as held for sale in our Consolidated Balance Sheets as of August 29, 2021.

 

9


 

The components of assets held for sale and liabilities held for sale are as follows:

In Millions

Aug. 29, 2021

Cash and cash equivalents

$

43.4

Receivables

 

110.3

Inventories

 

28.2

Prepaid expenses and other current assets

 

18.8

Land, buildings, and equipment

 

168.9

Goodwill

 

226.7

Other intangible assets

 

647.6

Other assets

 

4.5

Assets held for sale

$

1,248.4

 

 

 

Accounts payable

$

92.2

Current portion of long-term debt

 

59.0

Notes payable

 

191.8

Other current liabilities

 

110.0

Deferred income taxes

 

81.1

Other liabilities

 

13.4

Liabilities held for sale

$

547.5

 

(3) Restructuring, Impairment, and Other Exit Costs

 

During the first quarter of fiscal 2022, we did not undertake any new restructuring actions. We recorded a $4.1 million net recovery of restructuring charges in the first quarter of fiscal 2022 and $1.0 million of restructuring charges in the first quarter of fiscal 2021 for previously announced restructuring actions. Certain actions are subject to union negotiations and works counsel consultations, where required. We expect these actions to be completed by the end of fiscal 2023.

 

We paid net $15.4 million of cash in the first quarter of fiscal 2022 related to restructuring actions previously announced. We paid net $3.7 million of cash in the same period of fiscal 2021.

 

Restructuring charges are recorded in our Consolidated Statements of Earnings as follows:

 

 

Quarter Ended

In Millions

Aug. 29, 2021

 

Aug. 30, 2020

Restructuring, impairment, and other exit costs (recoveries)

$

(4.3)

 

$

0.5

Cost of sales

 

0.2

 

 

0.5

Total restructuring charges (recoveries)

$

(4.1)

 

$

1.0

 

The roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows:

In Millions

Total

Reserve balance as of May 30, 2021

$

148.8

Fiscal 2022 charges, including foreign currency translation

 

0.1

Utilized in fiscal 2022

 

(13.5)

Reserve balance as of August 29, 2021

$

135.4

 

The reserve balance primarily consists of expected severance payments associated with restructuring actions.

 

The charges recognized in the roll forward of our reserves for restructuring and other exit costs do not include items charged directly to expense (e.g., asset impairment charges, accelerated depreciation, the gain or loss on the sale of restructured assets, and the write-off of spare parts) and other periodic exit costs are recognized as incurred, as those items are not reflected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets.

 

10


 

(4) Goodwill and Other Intangible Assets

 

The components of goodwill and other intangible assets are as follows:

 

In Millions

Aug. 29, 2021

 

May 30, 2021

Goodwill

$

14,549.9

 

$

14,062.4

Other intangible assets:

 

 

 

 

 

Intangible assets not subject to amortization:

 

 

 

 

 

Brands and other indefinite-lived intangibles

 

6,541.7

 

 

6,628.1

Intangible assets subject to amortization:

 

 

 

 

 

Franchise agreements, customer relationships, and other finite-lived intangibles

 

403.1

 

 

823.4

Less accumulated amortization

 

(113.8)

 

 

(300.9)

Intangible assets subject to amortization, net

 

289.3

 

 

522.5

Other intangible assets

 

6,831.0

 

 

7,150.6

Total

$

21,380.9

 

$

21,213.0

 

 

Based on the carrying value of finite-lived intangible assets as of August 29, 2021, annual amortization expense for each of the next five fiscal years is estimated to be approximately $20 million.

 

The changes in the carrying amount of goodwill during the first quarter of fiscal 2022 were as follows:

 

In Millions

 

North America Retail

 

Pet

 

Convenience Stores & Foodservice

 

Europe & Australia

 

Asia & Latin America

 

Joint Ventures

 

Total

Balance as of May 30, 2021

 

$

6,419.3

 

$

5,300.5

 

$

918.8

 

$

765.5

 

$

212.7

 

$

445.6

 

$

14,062.4

Acquisition

 

 

-

 

 

759.4

 

 

-

 

 

-

 

 

-

 

 

-

 

 

759.4

Reclassified to assets held

for sale

 

 

-

 

 

-

 

 

-

 

 

(214.5)

 

 

(12.2)

 

 

-

 

 

(226.7)

Other activity, primarily

foreign currency translation

 

 

(5.4)

 

 

-

 

 

-

 

 

(24.6)

 

 

(0.7)

 

 

(14.5)

 

 

(45.2)

Balance as of Aug. 29, 2021

 

$

6,413.9

 

$

6,059.9

 

$

918.8

 

$

526.4

 

$

199.8

 

$

431.1

 

$

14,549.9

The changes in the carrying amount of other intangible assets during the first quarter of fiscal 2022 were as follows:

In Millions

 

 

Total

Balance as of May 30, 2021

 

$

7,150.6

Acquisition

 

 

370.0

Reclassified to assets held for sale

 

 

(647.6)

Other activity, primarily foreign currency translation

 

 

(42.0)

Balance as of Aug. 29, 2021

 

$

6,831.0

 

 

Our annual goodwill and indefinite-lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2021, and we determined there was no impairment of our intangible assets as their related fair values were substantially in excess of the carrying values.

 

While having significant coverage as of our fiscal 2021 assessment date, the Europe & Australia reporting unit and the Progresso, Green Giant, and EPIC brand intangible assets had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.

 

11


 

(5) Inventories

 

The components of inventories were as follows:

 

In Millions

Aug. 29, 2021

 

May 30, 2021

Raw materials and packaging

$

425.1

 

$

411.9

Finished goods

 

1,640.5

 

 

1,506.9

Grain

 

128.0

 

 

111.2

Excess of FIFO over LIFO cost

 

(258.4)

 

 

(209.5)

Total

$

1,935.2

 

$

1,820.5

 

In addition, we had $28.2 million of inventories classified as held for sale as of August 29, 2021.

 

(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 29, 2021, and August 30, 2020, included:

 

 

Quarter Ended

In Millions

Aug. 29, 2021

 

Aug. 30, 2020

Net gain on mark-to-market valuation of certain commodity positions

$

30.4

 

$

10.4

Net (gain) loss on commodity positions reclassified from unallocated corporate items to segment

operating profit

 

(34.7)

 

 

12.0

Net mark-to-market revaluation of certain grain inventories

 

28.4

 

 

(6.0)

Net mark-to-market valuation of certain commodity positions recognized in unallocated

corporate items

$

24.1

 

$

16.4

 

As of August 29, 2021, the net notional value of commodity derivatives was $359.9 million, of which $57.9 million related to energy inputs and $302.0 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

 

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 29, 2021 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. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of August 29, 2021, $1,312.8 million of our total accounts payable were payable to suppliers who utilize

12


 

these third party services. As of August 30, 2020, $1,337.1 million of our accounts payable were payable to suppliers who utilize these third-party services.

 

(7) Debt

 

The components of notes payable were as follows:

 

In Millions

Aug. 29, 2021

 

May 30, 2021

U.S. commercial paper

$

730.0

 

$

-

Financial institutions

 

305.5

 

 

361.3

Total

$

1,035.5

 

$

361.3

 

In addition, we had $191.8 million of notes payable classified as held for sale as of August 29, 2021.

 

To ensure availability of funds, we maintain bank credit lines and have commercial paper programs available to us in the United States and Europe. We also have committed and asset-backed credit lines that support our foreign operations.

 

The following table details the fee-paid committed and uncommitted credit lines we had available as of August 29, 2021:

 

In Billions

Facility

Amount

 

Borrowed Amount

Credit facility expiring:

 

 

 

 

 

April 2026

$

2.7

 

$

-

September 2022

 

0.2

 

 

0.2

Total committed credit facilities

 

2.9

 

 

0.2

Uncommitted credit facilities

 

0.6

 

 

0.3

Total committed and uncommitted credit facilities

$

3.5

 

$

0.5

 

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 29, 2021.

 

Long-Term Debt

 

The fair values and carrying amounts of long-term debt, including the current portion, were $12,982.6 million and $11,917.4 million, respectively, as of August 29, 2021. 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 addition, we had $59.0 million of debt classified as held for sale as of August 29, 2021.

 

In the first quarter of fiscal 2022, we issued €500.0 million of floating-rate notes due July 27, 2023. We used the net proceeds to repay €500.0 million of 0.0 percent fixed-rate notes due August 21, 2021.

 

In the first quarter of fiscal 2022, we repaid €200.0 million of 2.2 percent fixed-rate notes due June 24, 2021 using proceeds from the issuance of €50.0 million of 2.2 percent fixed-rate notes due November 29, 2021 and borrowings under a committed credit facility.

 

Subsequent to the end of the first quarter of fiscal 2022, we gave notice that we will redeem in full $1,000.0 million of 3.15 percent fixed-rate notes due December 15, 2021. The notes will be redeemed on October 14, 2021.

 

In the fourth quarter of fiscal 2021, we repaid $600.0 million of 3.2 percent fixed-rate notes and $850.0 million of floating-rate notes with cash on hand.

 

In the third quarter of fiscal 2021, we completed an offer to exchange certain series of outstanding notes for a combination of newly issued notes and cash. Holders exchanged $603.9 million of notes previously issued with rates between 4.15 percent and 5.4 percent for $605.2 million of newly issued 3.0 percent fixed-rate notes due February 1, 2051 and $201.4 million of cash, representing a participation incentive.

 

In the second quarter of fiscal 2021, we issued €500.0 million principal amount of 0.0 percent fixed-rate notes due November 16, 2021. We used the net proceeds to repay €200.0 million of 0.0 percent fixed-rate notes and for general corporate purposes.

13


 

 

In the first quarter of fiscal 2021, we issued €500.0 million principal amount of 0.0 percent fixed-rate notes due August 21, 2021. We used the net proceeds, together with cash on hand, to repay €500.0 million of 2.1 percent fixed-rate notes.

 

Certain of our long-term debt agreements contain restrictive covenants. As of August 29, 2021, we were in compliance with all of these covenants.

 

(8) Redeemable and Noncontrolling Interests

 

We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal holds the remaining interests in each of the entities. On the acquisition date, we recorded the $904.4 million fair value of Sodiaal’s 49 percent euro-denominated interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. We adjust the value of the redeemable interest through additional paid-in capital on our Consolidated Balance Sheets quarterly to the redeemable interest’s redemption value, which approximates its fair value. Yoplait SAS pays dividends annually if it meets certain financial metrics set forth in its shareholders’ agreement. As of August 29, 2021, the redemption value of the euro-denominated redeemable interest was $584.0 million.

 

A subsidiary of Yoplait SAS has an exclusive milk supply agreement for its European operations with Sodiaal through May 31, 2022. Net purchases totaled $50.1 million for the quarter ended August 29, 2021, and $47.8 million for the quarter ended August 30, 2020.

 

On the acquisition dates, we recorded the $281.4 million fair value of Sodiaal’s 50 percent euro-denominated interest in Yoplait Marques SNC and 50 percent Canadian dollar-denominated interest in Liberté Marques Sàrl as noncontrolling interests on our Consolidated Balance Sheets. Yoplait Marques SNC earns a royalty stream through a licensing agreement with Yoplait SAS for the rights to Yoplait and related trademarks. Liberté Marques Sàrl earns a royalty stream through licensing agreements with certain Yoplait group companies for the rights to Liberté and related trademarks. These entities pay dividends annually based on their available cash as of their fiscal year end.

 

During the first quarter of fiscal 2022, we entered into a definitive agreement to sell our 51 percent controlling interest in Yoplait SAS, and our 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl to Sodiaal. Please see Note 2 to the Consolidated Financial Statements.

 

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, 2021, the floating preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 160 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 29, 2021, 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. 29, 2021

 

Aug. 30, 2020

 

 

General Mills

 

Noncontrolling Interests

 

Redeemable Interest

 

General Mills

 

Noncontrolling Interests

 

Redeemable Interest

In Millions

 

Pretax

 

Tax

 

Net

 

Net

 

Net

 

Pretax

 

Tax

 

Net

 

Net

 

Net

Net earnings, including earnings

attributable to redeemable and

noncontrolling interests

 

 

 

 

$

627.0

$

3.0

 

8.2

 

 

 

 

$

638.9

$

0.1

$

7.4

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

$

(11.9)

$

22.7

 

10.8

 

(11.2)

 

(23.5)

$

(48.1)

$

47.8

 

(0.3)

 

23.3

 

43.2

Other fair value changes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge derivatives

 

2.8

 

(1.0)

 

1.8

 

-

 

(0.1)

 

(15.5)

 

3.7

 

(11.8)

 

-

 

(0.3)

Reclassification to earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hedge derivatives (a)

 

12.0

 

(1.5)

 

10.5

 

-

 

0.1

 

(2.1)

 

0.4

 

(1.7)

 

-

 

-

Amortization of losses and

prior service costs (b)

 

10.8

 

(2.4)

 

8.4

 

-

 

-

 

25.3

 

(5.8)

 

19.5

 

-

 

-

Other comprehensive income (loss)

$

13.7

$

17.8

 

31.5

 

(11.2)

 

(23.5)

$

(40.4)

$

46.1

 

5.7

 

23.3

 

42.9

Total comprehensive income (loss)

 

 

 

 

$

658.5

$

(8.2)

$

(15.3)

 

 

 

 

$

644.6

$

23.4

$

50.3

(a)Loss (gain) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange contracts.

(b)Loss reclassified from AOCI into earnings is reported in benefit plan non-service income.

 

14


 

Accumulated other comprehensive loss balances, net of tax effects, were as follows:

 

In Millions

Aug. 29, 2021

 

May 30, 2021

Foreign currency translation adjustments

$

(819.4)

 

$

(830.2)

Unrealized loss from:

 

 

 

 

 

Hedge derivatives

 

(6.2)

 

 

(18.5)

Pension, other postretirement, and postemployment benefits:

 

 

 

 

 

Net actuarial loss

 

(1,693.0)

 

 

(1,718.4)

Prior service credits

 

120.9

 

 

137.9

Accumulated other comprehensive loss

$

(2,397.7)

 

$

(2,429.2)

 

(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 30, 2021.

 

Compensation expense related to stock-based payments recognized in the Consolidated Statements of Earnings was as follows:

 

 

Quarter Ended

In Millions

Aug. 29, 2021

 

Aug. 30, 2020

Compensation expense related to stock-based payments

$

33.6

 

$

28.3

 

 

 

 

 

 

Compensation expense related to stock-based payments recognized in the Consolidated Statements of Earnings includes amounts recognized in restructuring, impairment, and other exit costs in fiscal 2022.

 

Windfall tax benefits from stock-based payments in income tax expense in our Consolidated Statements of Earnings were as follows:

 

 

Quarter Ended

In Millions

Aug. 29, 2021

 

Aug. 30, 2020

Windfall tax benefits from stock-based payments

$

4.7

 

$

6.2

 

 

 

 

 

 

As of August 29, 2021, unrecognized compensation expense related to non-vested stock options, restricted stock units, and performance share units was $150.6 million. This expense will be recognized over 26 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. 29, 2021

 

Aug. 30, 2020

Net cash proceeds

$

7.9

 

$

30.0

Intrinsic value of options exercised

$

5.1

 

$

18.7

 

We estimate the fair value of each stock option on the grant date using a Black-Scholes option-pricing model. Black-Scholes option-pricing models require us to make predictive assumptions regarding future stock price volatility, employee exercise behavior, and dividend yield. We estimate our future stock price volatility using the historical volatility over the expected term of the option, excluding time periods of volatility we believe a marketplace participant would exclude in estimating our stock price volatility. We also have considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially those with tenors of greater than 6 months, is insufficient to provide a reliable measure of expected volatility. Our method of selecting the other valuation assumptions is explained in Note 12 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 30, 2021.

 

15


 

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. 29, 2021

Aug. 30, 2020

Estimated fair values of stock options granted

$

8.77

 

$

8.03

 

Assumptions:

 

 

 

 

 

 

Risk-free interest rate

 

1.5

%

 

0.7

%

Expected term

 

8.5

years

 

8.5

years

Expected volatility

 

20.2

%

 

19.5

%

Dividend yield

 

3.4

%

 

3.3

%

 

The total grant date fair value of restricted stock unit awards that vested during the period was as follows:

 

 

Quarter Ended

In Millions

Aug. 29, 2021

 

Aug. 30, 2020

Total grant date fair value

$

69.5

 

$

62.0

 

(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. 29, 2021

 

Aug. 30, 2020

Net earnings attributable to General Mills

$

627.0

 

$

638.9

Average number of common shares - basic EPS

 

610.4

 

 

614.1

Incremental share effect from: (a)

 

 

 

 

 

Stock options

 

2.1

 

 

3.2

Restricted stock units and performance share units

 

2.3