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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 FEBRUARY 27, 2022

 

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

 

Commission file number: 001-01185

________________

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

 

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

0.125% Notes due 2025

 

GIS25A

 

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 March 14, 2022: 602,212,031 (excluding 152,401,297 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 and nine-month periods ended February 27, 2022 and February 28, 2021

4

Consolidated Statements of Comprehensive Income for the quarters and nine-month periods ended February 27, 2022 and February 28, 2021

5

Consolidated Balance Sheets as of February 27, 2022 and May 30, 2021

6

Consolidated Statements of Total Equity and Redeemable Interest for the quarters and nine-month periods ended February 27, 2022 and February 28, 2021

7

Consolidated Statements of Cash Flows for the nine-month periods ended February 27, 2022 and February 28, 2021

9

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

22

Item 3. Quantitative and Qualitative Disclosures About Market Risk

40

Item 4. Controls and Procedures

41

PART II – Other Information

 

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

41

Item 6. Exhibits

42

Signatures

43

 

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

 

Nine-Month Period Ended

 

Feb. 27, 2022

 

Feb. 28, 2021

 

 

Feb. 27, 2022

 

Feb. 28, 2021

Net sales

$

4,537.7

 

$

4,520.0

 

$

14,101.6

 

$

13,603.4

Cost of sales

 

3,134.0

 

 

2,966.1

 

 

9,469.3

 

 

8,738.0

Selling, general, and administrative expenses

 

751.4

 

 

716.3

 

 

2,337.6

 

 

2,256.6

Divestitures gain

 

(170.1)

 

 

-

 

 

(170.1)

 

 

-

Restructuring, impairment, and other exit costs

 

7.1

 

 

11.0

 

 

5.1

 

 

11.9

Operating profit

 

815.3

 

 

826.6

 

 

2,459.7

 

 

2,596.9

Benefit plan non-service income

 

(27.1)

 

 

(33.4)

 

 

(84.4)

 

 

(99.6)

Interest, net

 

86.5

 

 

106.0

 

 

275.1

 

 

317.7

Earnings before income taxes and after-tax earnings from

joint ventures

 

755.9

 

 

754.0

 

 

2,269.0

 

 

2,378.8

Income taxes

 

123.2

 

 

162.0

 

 

451.8

 

 

522.2

After-tax earnings from joint ventures

 

29.9

 

 

11.8

 

 

92.0

 

 

89.5

Net earnings, including earnings attributable to redeemable

and noncontrolling interests

 

662.6

 

 

603.8

 

 

1,909.2

 

 

1,946.1

Net earnings attributable to redeemable and

noncontrolling interests

 

2.3

 

 

8.1

 

 

24.7

 

 

23.1

Net earnings attributable to General Mills

$

660.3

 

$

595.7

 

$

1,884.5

 

$

1,923.0

Earnings per share – basic

$

1.09

 

$

0.97

 

$

3.10

 

$

3.13

Earnings per share – diluted

$

1.08

 

$

0.96

 

$

3.07

 

$

3.10

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

4


 

 

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine-Month Period Ended

 

Feb. 27, 2022

 

Feb. 28, 2021

 

Feb. 27, 2022

 

Feb. 28, 2021

Net earnings, including earnings attributable to

redeemable and noncontrolling interests

$

662.6

 

$

603.8

 

$

1,909.2

 

$

1,946.1

Other comprehensive (loss) income, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(122.5)

 

 

12.5

 

 

(184.9)

 

 

102.4

Other fair value changes:

 

 

 

 

 

 

 

 

 

 

 

Hedge derivatives

 

(30.8)

 

 

0.1

 

 

(10.4)

 

 

(10.1)

Reclassification to earnings:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

342.2

 

 

-

 

 

342.2

 

 

-

Amortization of losses and prior service costs

 

22.3

 

 

19.8

 

 

53.5

 

 

59.1

Hedge derivatives

 

30.2

 

 

5.4

 

 

34.4

 

 

4.7

Other comprehensive income, net of tax

 

241.4

 

 

37.8

 

 

234.8

 

 

156.1

Total comprehensive income

 

904.0

 

 

641.6

 

 

2,144.0

 

 

2,102.2

Comprehensive income (loss) attributable to

redeemable and noncontrolling interests

 

2.3

 

 

21.0

 

 

(47.0)

 

 

107.5

Comprehensive income attributable to General Mills

$

901.7

 

$

620.6

 

$

2,191.0

 

$

1,994.7

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

5


 

 

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)

 

Feb. 27, 2022

 

May 30, 2021

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

844.4

 

$

1,505.2

Receivables

 

1,750.4

 

 

1,638.5

Inventories

 

1,710.0

 

 

1,820.5

Prepaid expenses and other current assets

 

723.8

 

 

790.3

Total current assets

 

5,028.6

 

 

5,754.5

Land, buildings, and equipment

 

3,287.9

 

 

3,606.8

Goodwill

 

14,546.7

 

 

14,062.4

Other intangible assets

 

7,010.9

 

 

7,150.6

Other assets

 

1,269.7

 

 

1,267.6

Total assets

$

31,143.8

 

$

31,841.9

LIABILITIES AND EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

3,474.6

 

$

3,653.5

Current portion of long-term debt

 

600.7

 

 

2,463.8

Notes payable

 

724.3

 

 

361.3

Other current liabilities

 

2,039.4

 

 

1,787.2

Total current liabilities

 

6,839.0

 

 

8,265.8

Long-term debt

 

10,944.7

 

 

9,786.9

Deferred income taxes

 

2,166.0

 

 

2,118.4

Other liabilities

 

1,118.4

 

 

1,292.7

Total liabilities

 

21,068.1

 

 

21,463.8

Redeemable interest

 

-

 

 

604.9

Stockholders' equity:

 

 

 

 

 

Common stock, 754.6 shares issued, $0.10 par value

 

75.5

 

 

75.5

Additional paid-in capital

 

1,162.3

 

 

1,365.5

Retained earnings

 

17,713.1

 

 

17,069.8

Common stock in treasury, at cost, shares of 152.4 and 146.9

 

(7,015.3)

 

 

(6,611.2)

Accumulated other comprehensive loss

 

(2,122.7)

 

 

(2,429.2)

Total stockholders' equity

 

9,812.9

 

 

9,470.4

Noncontrolling interests

 

262.8

 

 

302.8

Total equity

 

10,075.7

 

 

9,773.2

Total liabilities and equity

$

31,143.8

 

$

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

 

Feb. 27, 2022

 

Feb. 28, 2021

 

Shares

 

Amount

 

Shares

 

Amount

Total equity, beginning balance

 

 

$

9,804.7

 

 

 

$

8,852.6

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

754.6

 

 

75.5

 

754.6

 

 

75.5

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

1,365.1

 

 

 

 

1,333.3

Stock compensation plans

 

 

 

11.5

 

 

 

 

(8.3)

Unearned compensation related to stock unit awards

 

 

 

(19.1)

 

 

 

 

(0.5)

Earned compensation

 

 

 

31.7

 

 

 

 

20.7

Decrease in redemption value of

redeemable interest

 

 

 

-

 

 

 

 

8.6

Reversal of cumulative redeemable interest value

adjustments

 

 

 

(207.4)

 

 

 

 

-

Acquisition of noncontrolling interest

 

 

 

(19.5)

 

 

 

 

-

Ending balance

 

 

 

1,162.3

 

 

 

 

1,353.8

Retained earnings:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

17,363.2

 

 

 

 

16,374.2

Net earnings attributable to General Mills

 

 

 

660.3

 

 

 

 

595.7

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

 

 

 

(310.4)

 

 

 

 

(314.9)

Ending balance

 

 

 

17,713.1

 

 

 

 

16,655.0

Common stock in treasury:

 

 

 

 

 

 

 

 

 

Beginning balance

(151.4)

 

 

(6,915.2)

 

(143.2)

 

 

(6,365.4)

Shares purchased

(2.6)

 

 

(175.5)

 

-

 

 

(0.5)

Stock compensation plans

1.6

 

 

75.4

 

0.4

 

 

14.6

Ending balance

(152.4)

 

 

(7,015.3)

 

(142.8)

 

 

(6,351.3)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

(2,364.1)

 

 

 

 

(2,867.6)

Other comprehensive income

 

 

 

241.4

 

 

 

 

24.9

Ending balance

 

 

 

(2,122.7)

 

 

 

 

(2,842.7)

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

280.2

 

 

 

 

302.6

Comprehensive income

 

 

 

2.3

 

 

 

 

3.7

Distributions to noncontrolling interest holders

 

 

 

(108.3)

 

 

 

 

(8.7)

Reclassification from redeemable interest

 

 

 

561.6

 

 

 

 

-

Reversal of cumulative redeemable interest value

adjustments

 

 

 

207.4

 

 

 

 

-

Divestiture

 

 

 

(680.4)

 

 

 

 

-

Ending balance

 

 

 

262.8

 

 

 

 

297.6

Total equity, ending balance

 

 

$

10,075.7

 

 

 

$

9,187.9

Redeemable interest:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

$

561.6

 

 

 

$

587.7

Comprehensive income

 

 

 

-

 

 

 

 

17.3

Decrease in redemption value of

redeemable interest

 

 

 

-

 

 

 

 

(8.6)

Distributions to redeemable interest holder

 

 

 

-

 

 

 

 

(0.4)

Reclassification to noncontrolling interest

 

 

 

(561.6)

 

 

 

 

-

Ending balance

 

 

$

-

 

 

 

$

596.0

See accompanying notes to consolidated financial statements.

7


 

Consolidated Statements of Total Equity and Redeemable Interest

GENERAL MILLS, INC. AND SUBSIDIARIES

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

 

 

 

 

 

 

 

 

 

 

 

Nine-Month Period Ended

 

Feb. 27, 2022

 

Feb. 28, 2021

 

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

 

 

 

15.5

 

 

 

 

12.9

Unearned compensation related to stock unit awards

 

 

 

(91.3)

 

 

 

 

(78.2)

Earned compensation

 

 

 

85.4

 

 

 

 

68.9

Decrease in redemption value of

redeemable interest

 

 

 

14.1

 

 

 

 

1.6

Reversal of cumulative redeemable interest value

adjustments

 

 

 

(207.4)

 

 

 

 

-

Acquisition of noncontrolling interest

 

 

 

(19.5)

 

 

 

 

-

Ending balance

 

 

 

1,162.3

 

 

 

 

1,353.8

Retained earnings:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

17,069.8

 

 

 

 

15,982.1

Net earnings attributable to General Mills

 

 

 

1,884.5

 

 

 

 

1,923.0

Cash dividends declared ($2.04 and $2.02 per share)

 

 

 

(1,241.2)

 

 

 

 

(1,244.4)

Adoption of current expected credit loss accounting

requirements

 

 

 

-

 

 

 

 

(5.7)

Ending balance

 

 

 

17,713.1

 

 

 

 

16,655.0

Common stock in treasury:

 

 

 

 

 

 

 

 

 

Beginning balance

(146.9)

 

 

(6,611.2)

 

(144.8)

 

 

(6,433.3)

Shares purchased

(8.8)

 

 

(550.5)

 

-

 

 

(0.6)

Stock compensation plans

3.3

 

 

146.4

 

2.0

 

 

82.6

Ending balance

(152.4)

 

 

(7,015.3)

 

(142.8)

 

 

(6,351.3)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

(2,429.2)

 

 

 

 

(2,914.4)

Other comprehensive income

 

 

 

306.5

 

 

 

 

71.7

Ending balance

 

 

 

(2,122.7)

 

 

 

 

(2,842.7)

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

302.8

 

 

 

 

291.0

Comprehensive (loss) income

 

 

 

(17.8)

 

 

 

 

31.8

Distributions to noncontrolling interest holders

 

 

 

(110.8)

 

 

 

 

(25.2)

Reclassification from redeemable interest

 

 

 

561.6

 

 

 

 

-

Reversal of cumulative redeemable interest value

adjustments

 

 

 

207.4

 

 

 

 

-

Divestiture

 

 

 

(680.4)

 

 

 

 

-

Ending balance

 

 

 

262.8

 

 

 

 

297.6

Total equity, ending balance

 

 

$

10,075.7

 

 

 

$

9,187.9

Redeemable interest:

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

$

604.9

 

 

 

$

544.6

Comprehensive (loss) income

 

 

 

(29.2)

 

 

 

 

75.7

Decrease in redemption value of

redeemable interest

 

 

 

(14.1)

 

 

 

 

(1.6)

Distributions to redeemable interest holder

 

 

 

-

 

 

 

 

(22.7)

Reclassification to noncontrolling interest

 

 

 

(561.6)

 

 

 

 

-

Ending balance

 

 

$

-

 

 

 

$

596.0

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

8


 

 

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

Nine-Month Period Ended

 

Feb. 27, 2022

 

Feb. 28, 2021

Cash Flows - Operating Activities

 

 

 

 

 

Net earnings, including earnings attributable to redeemable and noncontrolling interests

$

1,909.2

 

$

1,946.1

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

 

 

 

 

 

Depreciation and amortization

 

430.6

 

 

454.5

After-tax earnings from joint ventures

 

(92.0)

 

 

(89.5)

Distributions of earnings from joint ventures

 

49.0

 

 

41.9

Stock-based compensation

 

80.3

 

 

69.5

Deferred income taxes

 

81.3

 

 

110.9

Pension and other postretirement benefit plan contributions

 

(20.7)

 

 

(25.7)

Pension and other postretirement benefit plan costs

 

(10.6)

 

 

(25.5)

Divestitures gain

 

(170.1)

 

 

-

Restructuring, impairment, and other exit costs

 

(62.5)

 

 

5.7

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

 

91.5

 

 

(145.4)

Other, net

 

(57.9)

 

 

(134.6)

Net cash provided by operating activities

 

2,228.1

 

 

2,207.9

Cash Flows - Investing Activities

 

 

 

 

 

Purchases of land, buildings, and equipment

 

(350.6)

 

 

(346.4)

Acquisition

 

(1,201.3)

 

 

-

Proceeds from divestitures, net of cash divested

 

46.1

 

 

-

Investments in affiliates, net

 

30.1

 

 

18.1

Proceeds from disposal of land, buildings, and equipment

 

1.6

 

 

1.8

Other, net

 

12.3

 

 

(5.5)

Net cash used by investing activities

 

(1,461.8)

 

 

(332.0)

Cash Flows - Financing Activities

 

 

 

 

 

Change in notes payable

 

471.5

 

 

(96.9)

Issuance of long-term debt

 

1,935.2

 

 

1,576.5

Payment of long-term debt

 

(2,278.2)

 

 

(1,159.0)

Debt exchange participation incentive cash payment

 

-

 

 

(201.4)

Proceeds from common stock issued on exercised options

 

96.2

 

 

39.4

Purchases of common stock for treasury

 

(550.5)

 

 

(0.6)

Dividends paid

 

(934.1)

 

 

(932.4)

Distributions to noncontrolling and redeemable interest holders

 

(110.8)

 

 

(47.9)

Other, net

 

(26.8)

 

 

(30.4)

Net cash used by financing activities

 

(1,397.5)

 

 

(852.7)

Effect of exchange rate changes on cash and cash equivalents

 

(29.6)

 

 

53.2

(Decrease) increase in cash and cash equivalents

 

(660.8)

 

 

1,076.4

Cash and cash equivalents - beginning of year

 

1,505.2

 

 

1,677.8

Cash and cash equivalents - end of period

$

844.4

 

$

2,754.2

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

acquisition and divestitures:

 

 

 

 

 

Receivables

$

(214.5)

 

$

(119.2)

Inventories

 

102.5

 

 

(302.2)

Prepaid expenses and other current assets

 

41.5

 

 

58.8

Accounts payable

 

(14.0)

 

 

154.7

Other current liabilities

 

176.0

 

 

62.5

Changes in current assets and liabilities

$

91.5

 

$

(145.4)

See accompanying notes to consolidated financial statements.

 

 

 

 

 

9


 

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 February 27, 2022, 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 Divestitures

During the third quarter of fiscal 2022, we completed the sale of our interests in Yoplait SAS, Yoplait Marques SNC and Liberté Marques Sàrl to Sodiaal International (Sodiaal) in exchange for Sodiaal’s interest in our Canadian yogurt business, a modified agreement for the use of Yoplait and Liberté brands in the United States and Canada, and cash. We recorded a net pre-tax gain of $148.8 million on the sale of these businesses during the third quarter of fiscal 2022. These transactions are subject to sale price adjustments in future periods that could impact the net pre-tax gain recorded.

 

During the second quarter of fiscal 2022, we entered into definitive agreements to sell our European dough businesses. During the third quarter of fiscal 2022, we recorded a net pre-tax gain on sale of $21.3 million related to certain of these agreements and the remaining transactions are expected to close by the end of fiscal 2022, subject to appropriate labor consultations, regulatory approvals, and other customary closing conditions. The associated assets and liabilities have an immaterial impact on the presentation of our Consolidated Balance Sheets as of February 27, 2022.

 

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. The consolidated results of the Tyson Foods’ pet treat business are reported in our Pet operating segment on a one-month lag. Accordingly, our Consolidated Statements of Earnings include seven months of operating results for the acquired business for the nine-month period ended February 27, 2022. In the third quarter of fiscal 2022, we recorded a purchase price adjustment that resulted in a $2.9 million increase to goodwill.

 

(3) Restructuring, Impairment, and Other Exit Costs

 

Restructuring charges were as follows:

 

 

Quarter Ended

 

Nine-Month Period Ended

In Millions

Feb. 27, 2022

 

Feb. 28, 2021

 

Feb. 27, 2022

 

Feb. 28, 2021

International manufacturing and logistics operations

$

1.7

 

$

-

 

$

14.3

 

$

-

Charges (recoveries) associated with restructuring actions

previously announced

 

7.6

 

 

11.7

 

 

(6.4)

 

 

13.6

Total restructuring charges

$

9.3

 

$

11.7

 

$

7.9

 

$

13.6

 

In the third quarter of fiscal 2022, we did not undertake any new restructuring actions. We recorded $1.7 million of restructuring charges in the third quarter of fiscal 2022 and $14.3 million of restructuring charges in the nine-month period ended February 27, 2022, related to the restructuring actions in the International segment to drive efficiencies in manufacturing and logistics operations approved in the second quarter of fiscal 2022. We recorded $7.6 million of restructuring charges in the third quarter of fiscal 2022 and a $6.4 million net recovery of restructuring charges in the nine-month period ended February 27, 2022, related to restructuring actions

10


 

previously announced. We recorded $11.7 million of restructuring charges in the third quarter of fiscal 2021 and $13.6 million of restructuring charges in the nine-month period ended February 28, 2021, related to restructuring actions previously announced. The charges associated with restructuring actions previously announced primarily related to actions designed to better align our organizational structure and resources with strategic initiatives and drive efficiencies in manufacturing and logistics operations. We expect these actions to be completed by the end of fiscal 2024. Certain actions are subject to union negotiations and works counsel consultations, where required.

 

In the third quarter of fiscal 2022, we decreased the estimate of expected restructuring charges that we expect to incur related to actions designed to better align our organizational structure and resources with strategic initiatives to approximately $150 million to $160 million, of which approximately $120 million to $130 million will be cash. These charges are expected to consist primarily of severance and other benefits costs and other charges, including consulting and professional fees, contract termination costs, and fixed asset write-offs.

 

We paid net $70.4 million of cash in the nine-month period ended February 27, 2022, related to restructuring actions previously announced. We paid net $7.9 million of cash in the same period of fiscal 2021.

 

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

 

 

Quarter Ended

 

Nine-Month Period Ended

In Millions

Feb. 27, 2022

 

Feb. 28, 2021

 

Feb. 27, 2022

 

Feb. 28, 2021

Restructuring, impairment, and other exit costs

$

7.1

 

$

11.0

 

$

5.1

 

$

11.9

Cost of sales

 

2.2

 

 

0.7

 

 

2.8

 

 

1.7

Total restructuring charges

$

9.3

 

$

11.7

 

$

7.9

 

$

13.6

 

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

 

1.4

Utilized in fiscal 2022

 

(61.4)

Reserve balance as of Feb. 27, 2022

$

88.8

 

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.

 

(4) Goodwill and Other Intangible Assets

 

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

 

In Millions

Feb. 27, 2022

 

May 30, 2021

Goodwill

$

14,546.7

 

$

14,062.4

Other intangible assets:

 

 

 

 

 

Intangible assets not subject to amortization:

 

 

 

 

 

Brands and other indefinite-lived intangibles

 

6,731.2

 

 

6,628.1

Intangible assets subject to amortization:

 

 

 

 

 

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

 

403.3

 

 

823.4

Less accumulated amortization

 

(123.6)

 

 

(300.9)

Intangible assets subject to amortization, net

 

279.7

 

 

522.5

Other intangible assets

 

7,010.9

 

 

7,150.6

Total

$

21,557.6

 

$

21,213.0

 

 

Based on the carrying value of finite-lived intangible assets as of February 27, 2022, annual amortization expense for each of the next five fiscal years is estimated to be approximately $20 million.

 

11


 

During the third quarter of fiscal 2022, we changed our organizational and management structure to streamline our global operations. As a result of these changes, we reassessed our operating segments as well as our reporting units. Under our new organizational structure, our chief operating decision maker assesses performance and makes decisions about resources to be allocated to our segments at the North America Retail, International, Pet, and North America Foodservice operating segment level. See Note 17 for additional information on our operating segments.

 

The changes in the carrying amount of goodwill during the nine-month period ended February 27, 2022, were as follows:

 

In Millions

 

North America Retail

 

Pet

 

North America Foodservice

 

International

 

Joint Ventures

 

Total

Balance as of May 30, 2021

 

$

6,689.3

 

$

5,300.5

 

$

648.8

 

$

978.2

 

$

445.6

 

$

14,062.4

Acquisition

 

 

-

 

 

762.3

 

 

-

 

 

-

 

 

-

 

 

762.3

Divestitures

 

 

-

 

 

-

 

 

-

 

 

(198.8)

 

 

-

 

 

(198.8)

Other activity, primarily

foreign currency translation

 

 

(6.3)

 

 

-

 

 

-

 

 

(39.1)

 

 

(33.8)

 

 

(79.2)

Balance as of Feb. 27, 2022

 

$

6,683.0

 

$

6,062.8

 

$

648.8

 

$

740.3

 

$

411.8

 

$

14,546.7

 

The changes in the carrying amount of other intangible assets during the nine-month period ended February 27, 2022, were as follows:

<

In Millions

 

 

Total

Balance as of May 30, 2021

 

$

7,150.6

Acquisition