FinanceLooker

Excrept from filing document 2022-02-27

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
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
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
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
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
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
Our annual goodwill and indefinite lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2022 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
The organizational changes also resulted in changes in certain reporting units one level below the segment level and were considered a triggering event that required a goodwill impairment test during the third quarter of fiscal 2022 We determined there was no impairment of the goodwill of the impacted reporting units as their related fair values were substantially in excess of the carrying values
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
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 February 27 2022 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 February 27 2022 1 382 8 million of our total accounts payable were payable to suppliers who utilize these third party services As of February 28 2021 1 420 3 million of our total accounts payable were payable to suppliers who utilize these third party services
The fair values and carrying amounts of long term debt including the current portion were 11 841 5 million and 11 545 4 million respectively as of February 27 2022 The fair value of long term debt was estimated using market quotations and discounted cash flows based on our current incremental borrowing rates for similar types of instruments Long term debt is a Level 2 liability in the fair value hierarchy
In the 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
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 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 Please see Note 2 to the Consolidated Financial Statements
Up to the date of the divestiture Sodiaal held the remaining interests in each of the entities On the acquisition date we recorded the fair value of Sodiaal s 49 percent euro denominated interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets Sodiaal had the right to put all or a portion of its redeemable interest to us at fair value until the divestiture closed in the third quarter of fiscal 2022 In connection with the divestiture cumulative adjustments made to the redeemable interest related to the fair value put feature were reversed against additional paid in capital where changes in the redemption amount were historically recorded and the resulting carrying value of the noncontrolling interests were included in the calculation of the gain on divestiture
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
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
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
During the first quarter of fiscal 2022 the Brazilian tax authority Secretaria da Receita Federal do Brasil RFB concluded audits of our 2016 through 2018 tax return years These audits included a review of our determinations of amortization of certain goodwill arising from the acquisition of Yoki Alimentos S A The RFB has proposed adjustments that effectively eliminate the goodwill amortization benefits related to this transaction The RFB had previously proposed adjustments related to the goodwill amortization associated with our 2012 through 2015 tax return years We believe we have meritorious defenses and intend to continue to contest the disallowance for all years
During fiscal 2020 we received notice from the tax authorities of the State of São Paulo Brazil regarding our compliance with its state sales tax requirements As a result we have been assessed additional state sales taxes interest and penalties We believe that we have meritorious defenses against this claim and will vigorously defend our position As of February 27 2022 we are unable to estimate any possible loss and have not recorded a loss contingency for this matter
We operate in the packaged foods industry In the third quarter of fiscal 2022 we completed a new organization structure to streamline our global operations This global reorganization required us to reevaluate our operating segments Under our new organization structure our chief operating decision maker assesses performance and makes decisions about resources to be allocated to our operating segments as follows North America Retail International Pet and North America Foodservice
Our North America Retail operating segment includes convenience store businesses from our former Convenience Stores Foodservice segment Within our North America Retail operating segment our former U S Cereal operating unit and U S Yogurt operating unit have been combined into the U S Morning Foods operating unit Additionally the U S Meals Baking Solutions operating unit combines the former U S Meals Baking operating unit with certain businesses from the U S Snacks operating unit The Canada operating unit excludes Canada foodservice businesses which are now included in our North America Foodservice operating segment The resulting North America Foodservice operating segment exclusively includes our foodservice business Our International operating segment combines our former Europe Australia and Asia Latin America operating segments Our Pet operating segment is unchanged
Our North America Retail operating segment reflects business with a wide variety of grocery stores mass merchandisers membership stores natural food chains drug dollar and discount chains convenience stores and e commerce grocery providers Our product categories in this business segment include ready to eat cereals refrigerated yogurt soup meal kits refrigerated and frozen dough products dessert and baking mixes frozen pizza and pizza snacks snack bars fruit snacks savory snacks and a wide variety of organic products including ready to eat cereal frozen and shelf stable vegetables meal kits fruit snacks snack bars and refrigerated yogurt
Our International operating segment consists of retail and foodservice businesses outside of the United States and Canada Our product categories include super premium ice cream and frozen desserts meal kits refrigerated and frozen dough products salty snacks snack bars dessert and baking mixes and shelf stable vegetables We also sell super premium ice cream and frozen desserts directly to consumers through owned retail shops Our International segment also includes products manufactured in the United States for export mainly to Caribbean and Latin American markets as well as products we manufacture for sale to our international joint ventures Revenues from export activities and franchise fees are reported in the region or country where the end customer or franchisee is located
Our Pet operating segment includes pet food products sold primarily in the United States and Canada in national pet superstore chains e commerce retailers grocery stores regional pet store chains mass merchandisers and veterinary clinics and hospitals Our product categories include dog and cat food dry foods wet foods and treats made with whole meats fruits vegetables and other high quality natural ingredients Our tailored pet product offerings address specific dietary lifestyle and life stage needs and span different product types diet types breed sizes for dogs lifestages flavors product functions and textures and cuts for wet foods
Our North America Foodservice segment consists of foodservice businesses in the United States and Canada Our major product categories in our North America Foodservice operating segment are ready to eat cereals snacks refrigerated yogurt frozen meals unbaked and fully baked frozen dough products baking mixes and bakery flour Many products we sell are branded to the consumer and nearly all are branded to our customers We sell to distributors and operators in many customer channels including foodservice vending and supermarket bakeries
Operating profit for these segments excludes unallocated corporate items gain or loss on divestitures and restructuring impairment and other exit costs Unallocated corporate items include corporate overhead expenses variances to planned North American employee benefits and incentives certain charitable contributions restructuring initiative project related costs and other items that are not part of our measurement of segment operating performance These include gains and losses arising from the revaluation of certain grain inventories and gains and losses from mark to market valuation of certain commodity positions until passed back to our operating segments These items affecting operating profit are centrally managed at the corporate level and are excluded from the measure of segment profitability reviewed by executive management Under our supply chain organization our manufacturing warehouse and distribution activities are substantially integrated across our operations in order to maximize efficiency and productivity As a result fixed assets and depreciation and amortization expenses are neither maintained nor available by operating segment
This Management s Discussion and Analysis of Financial Condition and Results of Operations MD A should be read in conjunction with the MD A included in our Annual Report on Form 10 K for the fiscal year ended May 30 2021 for important background regarding among other things our key business drivers Significant trademarks and service marks used in our business are set forth in italics herein Certain terms used throughout this report are defined in the Glossary section below
As the COVID 19 pandemic continues we expect the largest factors impacting our fiscal 2022 performance will be the relative balance of at home versus away from home consumer food demand and the elevated cost environment including input cost inflation and costs related to supply chain disruption all of which remain uncertain We expect at home food volume will decline year over year across most of our core markets though will remain above pre pandemic levels Conversely we expect away from home food volume to continue to recover though not fully to pre pandemic levels Additionally we expect increased net price realization across all food channels throughout our core markets in response to significant input cost inflation We will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations
In the third quarter of fiscal 2022 net sales essentially matched the same period last year and organic net sales increased 4 percent compared to the same period last year Operating profit decreased 1 percent to 815 million primarily driven by higher input costs an unfavorable change to the mark to market valuation of certain commodity positions and grain inventories volume declines and lower net corporate investment activity partially offset by favorable net price realization and mix and gains on divestitures Operating profit margin of 18 0 percent decreased 30 basis points Adjusted operating profit of 676 million decreased 6 percent on a constant currency basis primarily driven by higher input costs and volume declines partially offset by favorable net price realization and mix and a decrease in certain selling general and administrative SG A expenses Adjusted operating profit margin decreased 90 basis points to 14 9 percent Diluted earnings per share of 1 08 increased 13 percent in the third quarter of fiscal 2022 Adjusted diluted earnings per share of 0 84 increased 2 percent on a constant currency basis compared to the third quarter of fiscal 2021 See the Non GAAP Measures section below for a description of our use of measures not defined by GAAP
Cost of sales increased 168 million to 3 134 million in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 The increase was primarily driven by a 406 million increase attributable to product rate and mix partially offset by a 315 million decrease attributable to lower volume We recorded a 20 million net increase in cost of sales related to the mark to market valuation of certain commodity positions and grain inventories in the third quarter of fiscal 2022 compared to a 56 million net decrease in the third quarter of fiscal 2021 In addition we recorded 2 million of restructuring charges in cost of sales in the third quarter of fiscal 2022 compared to 1 million in the third quarter of fiscal 2021 please refer to Note 3 to the Consolidated Financial Statements in Part I Item 1 of this report
SG A expenses increased 35 million to 751 million in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 primarily driven by lower net corporate investment activity SG A expenses as a percent of net sales in the third quarter of fiscal 2022 increased 70 basis points compared to the third quarter of fiscal 2021
During the third quarter of fiscal 2022 we recorded a 170 million divestitures gain related to the sale of our interests in Yoplait SAS Yoplait Marques SNC and Liberté Marques Sàrl and a European dough business please refer to Note 2 to the Consolidated Financial Statements in Part I Item 1 of this report
The effective tax rate for the third quarter of fiscal 2022 was 16 3 percent compared to 21 5 percent in the same period last year The 5 2 percentage point decrease was primarily due to certain non taxable components of the divestitures gains and favorable changes in earnings mix by jurisdiction partially offset by certain discrete tax benefits recorded in the third quarter of fiscal 2021 Our effective tax rate excluding certain items affecting comparability was 21 0 percent in the third quarter of fiscal 2022 compared to 21 6 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 6 percentage point decrease was primarily due to favorable changes in earnings mix by jurisdiction partially offset by certain discrete tax benefits recorded in the third quarter of fiscal 2021
After tax earnings from joint ventures for the third quarter of fiscal 2022 increased to 30 million compared to 12 million in the same period in fiscal 2021 primarily driven by lower SG A expenses at Cereal Partners Worldwide CPW On a constant currency basis after tax earnings from joint ventures increased 167 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
In the nine month period ended February 27 2022 net sales and organic net sales increased 4 percent compared to the same period last year Operating profit decreased 5 percent to 2 460 million primarily driven by higher input costs an unfavorable change to the mark to market valuation of certain commodity positions and grain inventories lower net corporate investment activity and higher transaction and integration costs partially offset by favorable net price realization and mix and gains on divestitures Operating profit margin of 17 4 percent decreased 170 basis points Adjusted operating profit of 2 317 million decreased 5 percent on a constant currency basis primarily driven by higher input costs and volume declines partially offset by favorable net price realization and mix and a decrease in certain SG A expenses Adjusted operating profit margin decreased 130 basis points to 16 4 percent Diluted earnings per share of 3 07 decreased 1 percent in the nine month period ended February 27 2022 and adjusted diluted earnings per share of 2 82 decreased 2 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
Cost of sales increased 731 million to 9 469 million in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 The increase was driven by a 964 million increase attributable to product rate and mix partially offset by a 336 million decrease due to lower volume We recorded a 16 million net decrease in cost of sales related to the mark to market valuation of certain commodity positions and grain inventories in the nine month period ended February 27 2022 compared to a 118 million net decrease in the nine month period ended February 28 2021 In addition we recorded 3 million of restructuring charges in cost of sales in the nine month period ended February 27 2022 compared to 2 million of restructuring charges in the same period last year please refer to Note 3 to the Consolidated Financial Statements in Part I Item 1 of this report
SG A expenses increased 81 million to 2 338 million in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 primarily driven by lower net corporate investment activity higher transaction costs and acquisition integration costs partially offset by a non income tax recovery recorded in the nine month period ended February 27 2022 SG A expenses as a percent of net sales were unchanged in the nine month period ended February 27 2022 compared to the same period of fiscal 2021
During the nine month period ended February 27 2022 we recorded a 170 million divestitures gain related to the sale of our interests in Yoplait SAS Yoplait Marques SNC and Liberté Marques Sàrl and a European dough business please refer to Note 2 to the Consolidated Financial Statements in Part I Item 1 of this report
The effective tax rate for the nine month period ended February 27 2022 was 19 9 percent compared to 22 0 percent in the same period last year The 2 1 percentage point decrease was primarily due to certain non taxable components of the divestitures gains and favorable changes in earnings mix by jurisdiction in fiscal 2022 partially offset by certain discrete benefits in the nine month period ended February 28 2021 Our effective tax rate excluding certain items affecting comparability was 21 7 percent in the nine month period ended February 27 2022 compared to 21 9 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 2 percentage point decrease is primarily due to favorable changes in earnings mix by jurisdiction in fiscal 2022 partially offset by certain discrete benefits in the nine month period ended February 28 2021
After tax earnings from joint ventures increased to 92 million for the nine month period ended February 27 2022 compared to 90 million in the same period in fiscal 2021 primarily driven by lower SG A expenses at CPW and higher net sales at HDJ partially offset by higher input costs and lower net sales 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
In the third quarter of fiscal 2022 we announced a new organization structure to streamline our global operations As a result of this global reorganization beginning in the third quarter of fiscal 2022 we are reporting results for our four operating segments as follows North America Retail International Pet and North America Foodservice We have restated our net sales by segment and segment operating profit amounts to reflect our new operating segments These segment changes had no effect on previously reported consolidated net sales operating profit net earnings attributable to General Mills or earnings per share Please refer to Note 17 of the Consolidated Financial Statements in Part I Item 1 of this report for a description of our operating segments
Our North America Retail operating segment includes convenience store businesses from our former Convenience Stores Foodservice segment Within our North America Retail operating segment our former U S Cereal operating unit and U S Yogurt operating unit have been combined into the U S Morning Foods operating unit Additionally the U S Meals Baking Solutions operating unit combines the former U S Meals Baking operating unit with certain businesses from the U S Snacks operating unit The Canada operating unit excludes Canada foodservice businesses which are now included in our North America Foodservice operating segment The resulting North America Foodservice operating segment exclusively includes our foodservice businesses Our International operating segment combines our former Europe Australia and Asia Latin America operating segments Our Pet operating segment is unchanged
a On a constant currency basis Canada net sales decreased 2 percent in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 On a constant currency basis Canada net sales increased 1 percent for the nine month period ended February 27 2022 compared to the same period in fiscal 2021 See the Non GAAP Measures section below for our use of this measure not defined by GAAP
Segment operating profit decreased 3 percent to 612 million in the third quarter of fiscal 2022 compared to 629 million in the same period in fiscal 2021 primarily driven by higher input costs and a decrease in contributions from volume growth partially offset by favorable net price realization and mix and a decrease in SG A expenses Segment operating profit decreased 3 percent on a constant currency basis in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
Segment operating profit decreased 7 percent to 1 936 million in the nine month period ended February 27 2022 compared to 2 077 million in the same period in fiscal 2021 primarily driven by higher input costs and a decrease in contributions from volume growth partially offset by favorable net price realization and mix and a decrease in SG A expenses Segment operating profit decreased 7 percent on a constant currency basis in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
International net sales decreased 23 percent in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 driven by a decrease in contributions from volume growth including the impact of volume declines from divestitures and unfavorable foreign currency exchange partially offset by favorable net price realization and mix
International net sales decreased 5 percent in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 driven by a decrease in contributions from volume growth including the impact of volume declines from divestitures partially offset by favorable net price realization and mix and favorable foreign currency exchange
Segment operating profit decreased 13 percent to 36 million in the third quarter of fiscal 2022 from 41 million in the same period in fiscal 2021 primarily driven by higher input costs and a decrease in contributions from volume growth including the impact of volume declines from divestitures partially offset by favorable net price realization and mix and a decrease in SG A expenses Segment operating profit decreased 16 percent on a constant currency basis in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
Segment operating profit decreased 14 percent to 156 million in the nine month period ended February 27 2022 compared to 181 million in the same period in fiscal 2021 primarily driven by higher input costs and a decrease in contributions from volume growth including the impact of volume declines from divestitures partially offset by favorable net price realization and mix a decrease in SG A expenses and favorable foreign currency exchange Segment operating profit decreased 18 percent on a constant currency basis in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
Pet net sales increased 30 percent during the third quarter of fiscal 2022 compared to the same period in fiscal 2021 driven by favorable net price realization and mix and an increase in contributions from volume growth including incremental volume from the acquisition of the Tyson Foods pet treats business
Pet net sales increased 28 percent in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 driven by favorable net price realization and mix and an increase in contributions from volume growth including incremental volume from the acquisition of the Tyson Foods pet treats business
Segment operating profit increased 8 percent to 111 million in the third quarter of fiscal 2022 compared to 102 million in the same period in fiscal 2021 primarily driven by favorable net price realization and mix and an increase in contributions from volume growth including incremental volume from the acquisition of the Tyson Foods pet treats business partially offset by higher input costs and an increase in SG A expenses Segment operating profit increased 8 percent on a constant currency basis in the third quarter of fiscal 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
Segment operating profit increased 15 percent to 357 million in the nine month period ended February 27 2022 compared to 312 million in the same period in fiscal 2021 primarily driven by favorable net price realization and mix and an increase in contributions from volume growth including incremental volume from the acquisition of the Tyson Foods pet treats business partially offset by higher input costs an increase in SG A expenses and a one time inventory adjustment and other acquisition related expenses of 12 million related to the acquired pet treat business Segment operating profit increased 15 percent on a constant currency basis in the nine month period ended February 27 2022 compared to the same period in fiscal 2021 see the Non GAAP Measures section below for our use of this measure not defined by GAAP
Segment operating profit increased 27 percent to 175 million in the nine month period ended February 27 2022 compared to 138 million in the same period in fiscal 2021 primarily driven by favorable net price realization and mix and an increase in contributions from volume growth partially offset by higher input costs
Unallocated corporate expense totaled 141 million in the third quarter of fiscal 2022 compared to 24 million of income in the same period in fiscal 2021 We recorded a 20 million net increase in expense related to the mark to market valuation of certain commodity positions and grain inventories in the third quarter of fiscal 2022 compared to a 56 million net decrease in expense in the same period last year We recorded 11 million of net gains related to the sale of certain corporate investments and valuation adjustments in the third quarter of fiscal 2022 compared to 59 million in the third quarter of fiscal 2021 In the third quarter of fiscal 2022 we recorded 4 million of integration costs related to our acquisition of Tyson Foods pet treats business and 9 million of transaction costs related to the sale of our interests in Yoplait SAS Yoplait Marques SNC and Liberté Marques Sàrl and a European dough business We recorded 2 million of restructuring charges in cost of sales in the third quarter of fiscal 2022 compared to 1 million in the same period last year We also recorded an 8 million favorable adjustment related to a product recall in our international Green Giant business in the third quarter of fiscal 2021
Unallocated corporate expense totaled 329 million in the nine month period ended February 27 2022 compared to 98 million in the same period last year We recorded a 16 million net decrease in expense related to the mark to market valuation of certain commodity positions and grain inventories in the nine month period ended February 27 2022 compared to a 118 million net decrease in expense in the same period last year We recorded 21 million of net gains related to the sale of corporate investments and valuation adjustments in the nine month period ended February 27 2022 compared to 78 million in the same period last year In the nine month period ended February 27 2022 we recorded 20 million of integration costs related to our acquisition of Tyson Foods pet treats business and 57 million of transaction costs related to the sale of our interests in Yoplait SAS Yoplait Marques SNC and Liberté Marques Sàrl and a European dough business In addition we recorded a 20 million recovery related to a Brazil indirect tax item and a 13 million insurance recovery in the nine month period ended February 27 2022 We also recorded 3 million of restructuring charges in costs of sales compared to 2 million in the same period last year
During the nine month period ended February 27 2022 cash provided by operations was 2 228 million compared to 2 208 million in the same period last year The 20 million increase was primarily driven by a 237 million change in current assets and liabilities partially offset by 170 million in divestitures gain and a 37 million decrease in net earnings The 237 million change in current assets and liabilities is primarily driven by a 405 million change in inventories partially offset by a 169 million change in accounts payable
Cash used by investing activities during the nine month period ended February 27 2022 was 1 462 million compared to 332 million for the same period in fiscal 2021 In the first quarter of fiscal 2022 we acquired the Tyson Foods pet treats business for an aggregate purchase price of 1 2 billion During the third quarter of fiscal 2022 we sold our interests in Yoplait SAS Yoplait Marques SNC and Liberté Marques Sàrl for cash proceeds of 17 million net of cash divested as part of the sale We also completed the sale of a European dough business in the third quarter of fiscal 2022 for cash proceeds of 29 million In addition we spent 351 million on purchases of land buildings and equipment in the first nine months of fiscal 2022 compared to 346 million in the same period last year
Cash used by financing activities during the nine month period ended February 27 2022 was 1 398 million compared to 853 million used in the same period in fiscal 2021 We had 128 million of net debt issuances in the nine month period ended February 27 2022 compared to 321 million of net debt issuances in the same period a year ago We paid 934 million of dividends in the nine month period ended February 27 2022 compared to 932 million in the same period last year We also purchased 550 million of shares of common stock in the nine month period ended February 27 2022
As of February 27 2022 we had 802 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 Furthermore 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 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 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
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
We have 601 million of long term debt maturing in the next 12 months that is classified as current including 500 million of 2 60 percent notes to be redeemed on October 12 2022 and 100 million of 7 47 percent fixed rate notes due October 15 2022 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
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 30 2021 The accounting policies used in preparing our interim fiscal 2022 Consolidated Financial Statements are the same as those described in our Form 10 K
Our significant 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 redeemable interest stock based compensation 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 February 27 2022 are the same as those described in our Annual Report on Form 10 K for the fiscal year ended May 30 2021
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
With the organizational change we also reassessed our reporting units one level below the segment level We considered the new organization structure to be a triggering event that required a subsequent goodwill impairment test of certain reporting units during the third quarter of fiscal 2022 We determined there was no impairment of the goodwill of the impacted reporting units as their related fair values were substantially in excess of the carrying values
Our annual goodwill and indefinite lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2022 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 March 2020 the Financial Accounting Standards Board FASB issued optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform The new standard provides expedients and exceptions to existing accounting requirements for contract modifications and hedge accounting related to transitioning from discontinued reference rates such as LIBOR to alternative reference rates if certain criteria are met The new accounting requirements can be applied as of the beginning of the interim period including March 12 2020 or any date thereafter through December 31 2022 We are in the process of reviewing our contracts and arrangements that will be affected by a discontinued reference rate and are analyzing the impact of this guidance on our results of operations and financial position
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
Restructuring charges for International supply chain optimization actions and previously announced restructuring actions in fiscal 2022 Restructuring charges for previously announced restructuring actions in fiscal 2021 Please see Note 3 to the Consolidated Financial Statements in Part I Item 1 of this report
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 53rd 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
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 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
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
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
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
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
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
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
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
Variable interest entities VIEs A legal structure that is used for business purposes that either 1 does not have equity investors that have voting rights and share in all the entity s profits and losses or 2 has equity investors that do not provide sufficient financial resources to support the entity s activities
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 wish to caution you not to place undue reliance on any such forward looking statements
Our future results could be affected by a variety of factors such as the impact of the COVID 19 pandemic on our business suppliers consumers customers and employees disruptions or inefficiencies in the supply chain including any impact of the COVID 19 pandemic 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 significant 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
We under the supervision and with the participation of our management including our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a 15 e under the Securities Exchange Act of 1934 Based on our evaluation our Chief Executive Officer and Chief Financial Officer have concluded that as of February 27 2022 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is 1 recorded processed summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and 2 accumulated and communicated to our management including our Chief Executive Officer and Chief Financial Officer in a manner that allows timely decisions regarding required disclosure
b On May 6 2014 our Board of Directors approved an authorization for the repurchase of up to 100 000 000 shares of our common stock Purchases can be made in the open market or in privately negotiated transactions including the use of call options and other derivative instruments Rule 10b5 1 trading plans and accelerated repurchase programs The Board did not specify an expiration date for the authorization
Financial Statements from the Quarterly Report on Form 10 Q of the Company for the quarter ended February 27 2022 formatted in Inline Extensible Business Reporting Language i Consolidated Statements of Earnings ii Consolidated Statements of Comprehensive Income iii Consolidated Balance Sheets iv Consolidated Statements of Total Equity and Redeemable Interest v Consolidated Statements of Cash Flows and vi Notes to Consolidated Financial Statements

Company Name	GENERAL MILLS INC Vist SEC web-site
Category	GRAIN MILL PRODUCTS
Trading Symbol	GIS