GENERAL MILLS, INC. INTRODUCTION
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year endedMay 31, 2020 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 factor impacting our fiscal 2021 performance will be the relative balance of at-home versus away-from-home consumer food demand. At-home food demand has remained elevated relative to pre-pandemic levels, though it has moderated from the fourth quarter of fiscal 2020. We will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations.
CONSOLIDATED RESULTS OF OPERATIONS
Third Quarter Results In the third quarter of fiscal 2021, net sales increased 8 percent compared to the same period last year. Organic net sales increased 7 percent compared to the same period last year. Operating profit margin of 18.3 percent increased 270 basis points, primarily driven by favorable net price realization and mix, a favorable change to the mark-to-market valuation of certain commodity positions and grain inventories, favorable net corporate investment activity, and a larger increase in net sales as compared to the increase in selling, general, and administrative (SG&A) expenses, partially offset by higher input costs. Adjusted operating profit margin decreased 30 basis points to 15.8 percent compared to the same period last year, primarily driven by higher input costs, partially offset by favorable net price realization and mix and a larger increase in net sales as compared to the increase in SG&A expenses. Diluted earnings per share of$0.96 increased 30 percent in the third quarter of fiscal 2021. Adjusted diluted earnings per share of$0.82 increased 6 percent on a constant-currency basis compared to the third quarter of fiscal 2020. See the "Non-GAAP Measures" section below for a description of our use of measures not defined by GAAP. A summary of our consolidated financial results for the third quarter of fiscal 2021 follows: Quarter Ended In millions, Feb. 28, 2021 Percent except per vs. Feb. 23, of Net Quarter Ended Feb. 28, 2021 share 2020 Sales Constant-Currency Growth (a) Net sales$ 4,520.0 8 % Operating profit 826.6 27 %
18.3 %
Net earnings attributable to
$ 0.96 30 %
Organic net sales growth rate (a) 7 %
Adjusted operating profit (a) 715.6 6 % 15.8 % 5 %
Adjusted diluted earnings per share (a) $ 0.82 6 % 6 %
(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
Consolidated net sales were as follows:
Quarter Ended
Feb. 28, 2021
vs
Feb. 28, 2021 Feb. 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 4,520.0 8% $ 4,180.3
Contributions from volume growth (a) 5 pts
Net price realization and mix 3 pts
Foreign currency exchange 1 pt
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
The 8 percent increase in net sales in the third quarter of fiscal 2021 reflects
an increase in contributions from volume growth, favorable net price realization
and mix, and favorable foreign currency exchange.
20
--------------------------------------------------------------------------------Components of organic net sales growth are shown in the following table:
Quarter EndedFeb. 28, 2021 vs Quarter EndedFeb. 23, 2020 Contributions from organic volume growth (a) 5
pts
Organic net price realization and mix 3 pts Organic net sales growth 7 pts Foreign currency exchange 1 pt Net sales growth 8 pts Note: Table may not foot due to rounding. (a) Measured in tons based on the stated weight of our product shipments.
Organic net sales increased 7 percent in the third quarter of fiscal 2021 primarily driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix.
Cost of sales increased$189 million to$2,966 million in the third quarter of fiscal 2021 compared to the same period in fiscal 2020. The increase was primarily driven by a$135 million increase attributable to product rate and mix and a$125 million increase due to higher volume. We recorded a$56 million net decrease in cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories in the third quarter of fiscal 2021 compared to a net increase of$9 million in the third quarter of fiscal 2020. In addition, we recorded$1 million of restructuring charges in cost of sales in the third quarter of fiscal 2021 compared to$7 million in the third quarter of fiscal 2020 (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report). SG&A expenses decreased$30 million to$716 million in the third quarter of fiscal 2021 compared to the same period in fiscal 2020, primarily reflecting favorable net corporate investment activity, partially offset by higher administrative expenses and increased media and advertising expenses. SG&A expenses as a percent of net sales in the third quarter of fiscal 2021 decreased 210 basis points compared to the third quarter of fiscal 2020. Restructuring, impairment, and other exit costs totaled$11 million in the third quarter of fiscal 2021, primarily related toAsia &Latin America route-to-market and supply chain optimization actions. We recorded$6 million of charges in the same period last year related to restructuring actions previously announced (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).
Benefit plan non-service income totaled
Interest, net for the third quarter of fiscal 2021 totaled
The effective tax rate for the third quarter of fiscal 2021 was 21.5 percent
compared to 20.7 percent for the third quarter of fiscal 2020. The 0.8
percentage point increase was primarily due to certain nonrecurring discrete tax
benefits in the third quarter of fiscal 2020, partially offset by favorable
changes in earnings mix by jurisdiction in fiscal 2021. Our adjusted effective
tax rate was 21.6 percent in the third quarter of fiscal 2021 compared to 21.0
percent in the same period last year (see the "Non-GAAP Measures" section below
for a description of our use of measures not defined by GAAP). The 0.6
percentage point increase was primarily due to certain nonrecurring discrete tax
benefits in fiscal 2020, partially offset by favorable changes in the earnings
mix by jurisdiction in fiscal 2021.
21
--------------------------------------------------------------------------------
After-tax earnings from joint ventures for the third quarter of fiscal 2021
increased to $12 million compared to $11 million in the same period in fiscal
2020, primarily driven by higher net sales at Cereal Partners Worldwide (CPW)
and Haagen-Dazs Japan, Inc. (HDJ), partially offset by higher SG&A expenses at
CPW and HDJ. On a constant-currency basis, after-tax earnings from joint
ventures were flat (see the "Non-GAAP Measures" section below for a description
of our use of measures not defined by GAAP). The components of our joint
ventures' net sales growth are shown in the following table:
Quarter Ended Feb. 28, 2021 vs
Quarter Ended Feb. 23, 2020 CPW HDJ Total
Contributions from volume growth (a) 6 pts (1) pt Net price realization and mix Flat 3 pts Net sales growth in constant currency 5 pts 1 pt 4 pts Foreign currency exchange 1 pt 5 pts 2 pts Net sales growth 6 pts 6 pts 6 pts Note: Table may not foot due to rounding. (a) Measured in tons based on the stated weight of our product shipments.
Average diluted shares outstanding increased by 7 million in the third quarter of fiscal 2021 from the same period a year ago primarily due to option exercises.
Nine-Month Results In the nine-month period endedFebruary 28, 2021 , net sales and organic net sales increased 8 percent compared to the same period last year. Operating profit margin of 19.1 percent increased 220 basis points, primarily driven by favorable net price realization and mix, a favorable change to the mark-to-market valuation of certain commodity positions and grain inventories, favorable net corporate investment activity, and a larger increase in net sales as compared to the increase in SG&A expenses, partially offset by higher input costs. Adjusted operating profit margin increased 50 basis points to 17.7 percent, primarily driven by favorable net price realization and mix and a larger increase in net sales as compared to the increase in SG&A expenses, partially offset by higher input costs. Diluted earnings per share of$3.10 increased 22 percent in the nine-month period endedFebruary 28, 2021 , and adjusted diluted earnings per share of$2.88 increased 14 percent on a constant-currency basis compared to the same period last year (see the "Non-GAAP Measures" section below for a description of our use of measures not defined by GAAP).
A summary of our consolidated financial results for the nine-month period ended
Nine-Month
Period Ended
Feb. 28, 2021
Nine-Month Period Ended Feb. 28, In millions, vs. Feb. 23, Percent of Net Constant-Currency
2021 except per share 2020 Sales Growth (a)
Net sales $ 13,603.4 8 %
Operating profit 2,596.9 22 % 19.1 %
Net earnings attributable to
General Mills 1,923.0 24 %
Diluted earnings per share $ 3.10 22 %
Organic net sales growth rate
(a) 8 %
Adjusted operating profit (a) 2,413.6 11 % 17.7 % 11 %
Adjusted diluted earnings per
share (a) $ 2.88 15 % 14 %(a) See the "Non-GAAP Measures" section below for our use of measures not defined by GAAP.
22
--------------------------------------------------------------------------------
Consolidated net sales were as follows:
Nine-Month Period Ended
Feb. 28,
2021 vs Feb.
Feb. 28, 2021 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 13,603.4 8 % $ 12,603.6
Contributions from volume growth (a) 5 pts
Net price realization and mix 3 pts
Foreign currency exchange Flat
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
The 8 percent increase in net sales for the nine-month period ended February 28,
2021 , reflects an increase in contributions from volume growth and favorable net
price realization and mix.
Components of organic net sales growth are shown in the following table:
Nine-Month Period EndedFeb. 28, 2021 vs. Nine-Month Period EndedFeb. 23, 2020 Contributions from organic volume growth (a) 5 pts Organic net price realization and mix 3 pts Organic net sales growth 8 pts Foreign currency exchange Flat Net sales growth 8 pts
Note: Table may not foot due to rounding
(a)Measured in tons based on the stated weight of our product shipments.
Organic net sales increased 8 percent in the nine-month period endedFebruary 28, 2021 , driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix. Cost of sales increased$496 million to$8,738 million in the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020. The increase was driven by a$423 million increase due to higher volume and a$215 million increase attributable to product rate and mix. We recorded a$118 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 endedFebruary 28, 2021 , compared to a net increase of$1 million in the nine-month period endedFebruary 23, 2020 . In addition, we recorded$2 million of restructuring charges in cost of sales in the nine-month period endedFebruary 28, 2021 , compared to$24 million of restructuring charges and$1 million of restructuring initiative project-related costs in the same period last year (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report). SG&A expenses increased$32 million to$2,257 million in the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020, primarily reflecting higher media and advertising expenses, increased administrative expenses, and increased other consumer-related expenses, partially offset by favorable net corporate investment activity. SG&A expenses as a percent of net sales in the nine-month period endedFebruary 28, 2021 , decreased 100 basis points compared to the same period of fiscal 2020. Restructuring, impairment, and other exit costs totaled$12 million in the nine-month period endedFebruary 28, 2021 , compared to$13 million in the same period last year. We recorded restructuring charges of$11 million in the nine-month period endedFebruary 28, 2021 , related toAsia &Latin America route-to-market and supply chain optimization actions (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report). Benefit plan non-service income totaled$100 million in the nine-month period endedFebruary 28, 2021 , compared to$91 million in the same period last year, primarily reflecting lower interest costs, partially offset by lower expected returns on plan assets. Interest, net for the nine-month period endedFebruary 28, 2021 , decreased$30 million to$318 million compared to the same period of fiscal 2020, primarily driven by lower rates and lower average debt balances. The effective tax rate for the nine-month period endedFebruary 28, 2021 , was 22.0 percent compared to 18.3 percent for the same period last year. The 3.7 percentage point increase was primarily due to the net benefit related to the reorganization of certain wholly owned subsidiaries and certain nonrecurring discrete tax benefits in fiscal 2020, partially offset by favorable changes in earnings mix by jurisdiction in fiscal 2021. Our adjusted effective tax rate was 21.9 percent in the nine-month period endedFebruary 28, 2021 , 23 -------------------------------------------------------------------------------- compared to 21.3 percent in the same period of fiscal 2020 (see the "Non-GAAP Measures" section below for a description of our use of measures not defined by GAAP). The 0.6 percentage point increase was primarily due to certain nonrecurring discrete tax benefits in fiscal 2020, partially offset by favorable changes in the earnings mix by jurisdiction in fiscal 2021. After-tax earnings from joint ventures increased to$90 million for the nine-month period endedFebruary 28, 2021 compared to$58 million in the same period in fiscal 2020, primarily driven by higher net sales at CPW and HDJ. On a constant-currency basis, after-tax earnings from joint ventures increased 54 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: Nine-Month Period EndingFeb. 28, 2021 vs. Nine-Month Period Ended Feb. 23, 2020 CPW HDJ
Total
Contributions from volume growth (a) 6 pts Flat Net price realization and mix 1 pt 4
pts
Net sales growth in constant currency 7 pts 4 pts 7 pts Foreign currency exchange (1) pt 3 pts Flat Net sales growth 6 pts 7 pts 6 pts Note: Table may not foot due to rounding (a) Measured in tons based on the stated weight of our product shipments.
Average diluted shares outstanding increased by 8 million in the nine-month
period ended
SEGMENT OPERATING RESULTS Our businesses are organized into five operating segments: North America Retail;Europe &Australia ; Pet;Asia &Latin America ; and Convenience Stores & Foodservice. Please refer to Note 15 of the Consolidated Financial Statements in Part I, Item 1 of this report for a description of our operating segments.
North America Retail Segment Results
North America Retail net sales were as follows:
Quarter Ended Nine-Month Period Ended
Feb. 28, Feb. 28,
2021 vs Feb. 2021 vs Feb.
Feb. 28, 2021 23, 2020 Feb. 23, 2020 Feb. 28, 2021 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 2,726.8 9 % $ 2,501.9 $ 8,355.3 11 % $ 7,554.1
Contributions from
volume growth (a) 9 pts 12 pts
Net price realization
and mix Flat (1) pt
Foreign currency
exchange Flat Flat
Note: Table may not foot due to rounding.
(a)Measured in tons based on the stated weight of our product shipments.
North America Retail net sales increased 9 percent in the third quarter of fiscal 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from volume growth.
North America Retail net sales increased 11 percent in the nine-month period endedFebruary 28, 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from volume growth, partially offset by unfavorable net price realization and mix. 24 -------------------------------------------------------------------------------- The components of North America Retail organic net sales growth are shown in the following table: Quarter Ended Nine-Month Period Ended Feb. 28, 2021 Feb. 28, 2021 Contributions from organic volume growth (a) 9 pts 12 pts Organic net price realization and mix Flat (1) pt Organic net sales growth 9 pts 11 pts Foreign currency exchange Flat Flat Net sales growth 9 pts 11 pts
Note: Table may not foot due to rounding.
(a)Measured in tons based on the stated weight of our product shipments.
North America Retail organic net sales increased 9 percent in the third quarter of fiscal 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from organic volume growth. North America Retail organic net sales increased 11 percent in the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020, driven by an increase in contributions from organic volume growth, partially offset by unfavorable organic net price realization and mix. North America Retail net sales percentage change by operating unit are shown in the following table: Quarter Ended Nine-Month Period Ended Feb. 28, 2021 Feb. 28, 2021 U.S. Meals & Baking 15 % 21 % U.S. Cereal 9 8 Canada (a) 13 8 U.S. Snacks (3) (2) U.S. Yogurt and Other 3 4 Total 9 % 11 % (a)On a constant-currency basis,Canada net sales increased 9 percent for the third quarter of fiscal 2021 and increased 7 percent for the nine-month period endedFebruary 28, 2021 , compared to the same periods in fiscal 2020. See the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP. Segment operating profit increased 14 percent to$606 million in the third quarter of fiscal 2021 compared to$532 million in the same period in fiscal 2020, primarily driven by an increase in contributions from volume growth, partially offset by higher input costs. Segment operating profit increased 14 percent on a constant-currency basis in the third quarter of fiscal 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). Segment operating profit increased 15 percent to$2,003 million in the nine-month period endedFebruary 28, 2021 from$1,734 million in the same period in fiscal 2020, primarily driven by an increase in contributions from volume growth and lower input costs, partially offset by unfavorable net price realization and mix and higher SG&A expenses, including increased media and advertising expenses. Segment operating profit increased 15 percent on a constant-currency basis in the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). 25 --------------------------------------------------------------------------------
Quarter Ended Nine-Month Period Ended
Feb. 28,
Feb. 28, 2021 vs 2021 vs Feb.
Feb. 28, 2021 Feb. 23, 2020 Feb. 23,
2020
15 % $
421.9
2 pts Flat
Net price realization and
mix 4 pts 4 pts
Foreign currency exchange 9 pts 6 pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
Europe & Australia net sales increased 15 percent in the third quarter of fiscal
2021 compared to the same period in fiscal 2020, driven by favorable foreign
currency exchange, favorable net price realization and mix, and an increase in
contributions from volume growth.
The components ofEurope &Australia organic net sales growth are shown in the following table: Quarter Ended Nine-Month Period Ended Feb. 28, 2021 Feb. 28, 2021 Contributions from organic volume growth (a) 2 pts 1 pt Organic net price realization and mix 4 pts 5 pts Organic net sales growth 7 pts 5 pts Foreign currency exchange 9 pts 6 pts Divestiture (1) pt (1) pt Net sales growth 15 pts 10 pts
Note: Table may not foot due to rounding.
(a)Measured in tons based on the stated weight of our product shipments.
Segment operating profit increased 33 percent to$29 million in the third quarter of fiscal 2021 from$22 million in the same period in fiscal 2020, primarily driven by favorable net price realization and mix, an increase in contributions from volume growth, and lower SG&A expenses, partially offset by higher input costs. Segment operating profit increased 24 percent on a constant-currency basis in the third quarter of fiscal 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). Segment operating profit increased 46 percent to$118 million in the nine-month period endedFebruary 28, 2021 , from$81 million in the same period in fiscal 2020, primarily driven by favorable net price realization and mix, partially offset by higher input costs. Segment operating profit increased 40 percent on a constant-currency basis in the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). 26 --------------------------------------------------------------------------------
Pet Segment Results
Pet net sales were as follows:
Quarter Ended Nine-Month Period Ended
Feb. 28, Feb. 28,
2021 vs Feb. 2021 vs Feb.
Feb. 28, 2021 23, 2020 Feb. 23, 2020 Feb. 28, 2021 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 436.3 14 % $ 383.5 $ 1,288.0 13 % $ 1,140.0
Contributions from volume
growth (a) 16 pts 14 pts
Net price realization and
mix (3) pts (1) pt
Foreign currency exchange Flat Flat
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
Pet net sales increased 14 percent during the third quarter of fiscal 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from volume growth, partially offset by unfavorable net price realization and mix.
Pet net sales increased 13 percent during the nine-month period endedFebruary 28, 2021 , compared to the same period in fiscal 2020, driven by an increase in contributions from volume growth, partially offset by unfavorable net price realization and mix. The components of Pet organic net sales growth are shown in the following table: Quarter Ended Nine-Month Period Ended Feb. 28, 2021 Feb. 28, 2021 Contributions from organic volume growth (a) 16 pts 14 pts Organic net price realization and mix (3) pts (1) pt Organic net sales growth 14 pts 13 pts Foreign currency exchange Flat Flat Net sales growth 14 pts 13 pts Note: Table may not foot due to rounding. (a) Measured in tons based on the stated weight of our product shipments. Segment operating profit increased 9 percent to$102 million in the third quarter of fiscal 2021 compared to$94 million in the same period in fiscal 2020, primarily driven by an increase in contributions from volume growth, partially offset by unfavorable net price realization and mix, higher input costs, and higher SG&A expenses. Segment operating profit increased 9 percent on a constant-currency basis in the third quarter of fiscal 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). Segment operating profit increased 22 percent to$312 million in the nine-month period endedFebruary 28, 2021 compared to$256 million in the same period in fiscal 2020, primarily driven by an increase in contributions from volume growth and lower input costs, partially offset by higher SG&A expenses, including increased media and advertising expenses, and unfavorable net price realization and mix. Segment operating profit increased 22 percent on a constant-currency basis in the nine-month period endedFebruary 28, 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). 27 --------------------------------------------------------------------------------
Quarter Ended Nine-Month Period Ended
Feb. 28, 2021 vs Feb. 28, 2021 vs
Feb. 28, 2021 Feb. 23, 2020 Feb. 23, 2020 Feb. 28, 2021 Feb. 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 455.6 12 % $ 408.2 $ 1,268.3 8 % $ 1,177.3
Contributions from volume
growth (a) 9 pts 12 pts
Net price realization and
mix 5 pts 1 pt
Foreign currency exchange (3) pts (6) pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
Asia & Latin America net sales increased 12 percent in the third quarter of
fiscal 2021 compared to the same period in fiscal 2020, driven by an increase in
contributions from volume growth and favorable net price realization and mix,
partially offset by unfavorable foreign currency exchange.
The components ofAsia &Latin America organic net sales growth are shown in the following table: Nine-Month Period Quarter Ended Ended Feb. 28, 2021 Feb. 28, 2021 Contributions from organic volume growth (a) 9 pts 12 pts Organic net price realization and mix 5 pts 1 pt Organic net sales growth 14 pts 13 pts Foreign currency exchange (3) pts (6) pts Net sales growth 12 pts 8 pts
Note: Table may not foot due to rounding.
(a)Measured in tons based on the stated weight of our product shipments.
Asia &Latin America organic net sales increased 14 percent in the third quarter of fiscal 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix.Asia &Latin America organic net sales increased 13 percent in the nine-month period endedFebruary 28, 2021 compared to the same period in fiscal 2020, driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix. Segment operating profit increased 48 percent to$12 million in the third quarter of fiscal 2021 from$8 million in the same period in fiscal 2020, primarily driven by favorable net price realization and mix and an increase in contributions from volume growth, partially offset by higher input costs. Segment operating profit increased 18 percent on a constant-currency basis in the third quarter of fiscal 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP). 28
-------------------------------------------------------------------------------- Segment operating profit increased 47 percent to$62 million in the nine-month period endedFebruary 28, 2021 , compared to$43 million in the same period in fiscal 2020, primarily driven by an increase in contributions from volume growth, favorable net price realization and mix, and favorable foreign currency exchange, partially offset by higher input costs and higher SG&A expenses, including increased media and advertising expenses. Segment operating profit increased 24 percent on a constant-currency basis in the nine-month period endedFebruary 28, 2021 compared to the same period in fiscal 2020 (see the "Non-GAAP Measures" section below for our use of this measure not defined by GAAP).
Convenience Stores & Foodservice Segment Results
Convenience Stores & Foodservice net sales were as follows:
Quarter Ended Nine-Month Period Ended
Feb. 28, Feb. 28,
2021 vs Feb. 2021 vs Feb.
Feb. 28, 2021 23, 2020 Feb. 23, 2020 Feb. 28, 2021 23, 2020 Feb. 23, 2020
Net sales (in millions) $ 417.1 (10) % $ 464.8 $ 1,249.2 (12) % $ 1,423.3
Contributions from volume
growth (a) (7) pts (9) pts
Net price realization and
mix (3) pts (3) pts
Note: Table may not foot due to rounding.
(a) Measured in tons based on the stated weight of our product shipments.
Convenience Stores & Foodservice net sales decreased 10 percent in the third
quarter of fiscal 2021 compared to the same period in fiscal 2020, driven by a
decrease in contributions from volume growth and unfavorable net price
realization and mix.
Convenience Stores & Foodservice net sales decreased 12 percent in the
nine-month period ended February 28, 2021 , compared to the same period in fiscal
2020, driven by a decrease in contributions from volume growth and unfavorable
net price realization and mix.
The components of Convenience Stores & Foodservice organic net sales growth are shown in the following table:
Quarter Ended Nine-Month Period Ended
Feb. 28, 2021 Feb. 28, 2021
Contributions from organic volume growth (a) (7) pts (9) pts
Organic net price realization and mix (3) pts (3) pts
Organic net sales growth (10) pts (12) pts
Net sales growth (10) pts (12) pts
Note: Table may not foot due to rounding.
(a)Measured in tons based on the stated weight of our product shipments.
Segment operating profit decreased 31 percent to
Segment operating profit decreased 29 percent to$212 million in the nine-month period endedFebruary 28, 2021 , compared to$298 million in the same period in fiscal 2020, primarily driven by unfavorable net price realization and mix, a decrease in contributions from volume growth, and higher input costs. UNALLOCATED CORPORATE ITEMS Unallocated corporate items totaled$24 million of income in the third quarter of fiscal 2021 compared to expense of$92 million in the same period in fiscal 2020. We recorded a$56 million net decrease in expense related to the mark-to-market valuation of certain commodity positions and grain inventories in the third quarter of fiscal 2021 compared to a$9 million net increase in expense in the same period last year. We recorded$59 million of net gains related to valuation adjustments and the gain on sale of certain corporate investments in the third quarter of fiscal 2021 compared to$3 million of losses related to valuation adjustments in the third quarter of fiscal 2020. We recorded$1 million of restructuring charges in cost of sales in the third quarter of fiscal 2021 compared to$7 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$98 million in the nine-month period endedFebruary 28, 2021 , compared to$275 million in the same period last year. We recorded a$118 million net decrease in expense related to the mark-to-market valuation of certain 29
-------------------------------------------------------------------------------- commodity positions and grain inventories in the nine-month period endedFebruary 28, 2021 , compared to a$1 million net increase in expense in the same period last year. We recorded$78 million of net gains related to valuation adjustments and the gain on sale of certain corporate investments in the nine-month period endedFebruary 28, 2021 , compared to$7 million of net losses related to valuation adjustments and the loss on sale of certain corporate investments in the same period last year. In the nine-month period endedFebruary 28, 2021 , we recorded$2 million of restructuring charges in cost of sales, compared to$24 million of restructuring charges and$1 million of restructuring initiative project-related costs in cost of sales in the same period last year. LIQUIDITY During the nine-month period endedFebruary 28, 2021 , cash provided by operations was$2,208 million compared to$2,160 million in the same period last year. The$48 million increase was primarily driven by a$362 million increase in net earnings and a$109 million change in deferred income taxes, partially offset by a$237 million change in current assets and liabilities and a$140 million change in other non-cash items in net earnings, including$77 million of gains related to valuation adjustments on certain corporate investments. The$237 million change in current assets and liabilities was primarily driven by a$305 million change in inventories, partially offset by an$88 million change in other current liabilities primarily driven by changes in trade promotion accruals. Cash used by investing activities during the nine-month period endedFebruary 28, 2021 , was$332 million compared to$305 million for the same period in fiscal 2020. Investments of$346 million in land, buildings, and equipment in the nine-month period endedFebruary 28, 2021 , increased by$77 million compared to the same period a year ago. Cash used by financing activities during the nine-month period endedFebruary 28, 2021 , was$853 million compared to$1,691 million in the same period in fiscal 2020. We had$321 million of net debt issuances in the nine-month period endedFebruary 28, 2021 , compared to$812 million of net debt repayments in the same period a year ago. We paid$932 million of dividends in the nine-month period endedFebruary 28, 2021 , compared to$895 million in the same period last year. In addition, we paid a participation incentive of$201 million related to a debt exchange in the nine-month period endedFebruary 28, 2021 .
Our sources of liquidity were not materially impacted by the COVID-19 pandemic.
As ofFebruary 28, 2021 , we had$853 million of cash and cash equivalents held in foreign jurisdictions. In anticipation of repatriating funds from foreign jurisdictions, we record local country withholding taxes on our international earnings, as applicable. As such, we may repatriate our cash and cash equivalents held by our foreign subsidiaries without such funds being subject to furtherU.S. income tax liability. Earnings prior to fiscal 2018 from our foreign subsidiaries remain permanently reinvested in those jurisdictions. CAPITAL RESOURCES
Our capital structure was as follows:
In Millions Feb. 28, 2021 May 31, 2020 Notes payable $ 184.6$ 279.0 Current portion of long-term debt 3,899.8 2,331.5 Long-term debt 9,766.6 10,929.0 Total debt 13,851.0 13,539.5 Redeemable interest 596.0 544.6 Noncontrolling interests 297.6 291.0 Stockholders' equity 8,890.3 8,058.5 Total capital$ 23,634.9 $ 22,433.6
The following table details the fee-paid committed and uncommitted credit lines
we had available as of
Facility
In Billions Amount Borrowed Amount
Credit facility expiring:
May 2022 $ 2.7 $ -
September 2022 0.2 0.1
Total committed credit facilities 2.9 0.1
Uncommitted credit facilities 0.6
0.1
Total committed and uncommitted credit facilities$ 3.5 $ 0.2 30
-------------------------------------------------------------------------------- We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl.Sodiaal International (Sodiaal) holds the remaining interests in each of these entities. We consolidate these entities into our consolidated financial statements. We record Sodiaal's 50 percent interests in Yoplait Marques SNC and Liberté Marques Sàrl as noncontrolling interests, and its 49 percent 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 beforeDecember 2024 . As ofFebruary 28, 2021 , the redemption value of the redeemable interest was$596 million , which approximates its fair value. OnMarch 23, 2021 , subsequent to the end of the third quarter of fiscal 2021, we entered into a non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business to Sodiaal. As part of the proposed transaction, we would obtain Sodiaal's 49 percent ownership interest in our Canadian yogurt business, making the Canadian yogurt business a wholly owned subsidiary. The proposed transaction is expected to close in fiscal 2022, subject to labor consultations, regulatory filings, and other customary closing conditions. The third-party holder of theGeneral 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 ). OnJune 1, 2018 , the floating preferred return rate on GMC's Class A Interests was reset to the sum of three-month LIBOR plus 142.5 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. To ensure availability of funds, we maintain bank credit lines and have commercial paper programs available to us inthe United States andEurope . In response to uncertainty surrounding the availability and cost of commercial paper borrowings as a result of the COVID-19 pandemic, we issued$750 million of fixed-rate notes inApril 2020 and reduced our borrowings under commercial paper programs. As the COVID-19 pandemic evolves, we will continue to evaluate its impact to our sources of liquidity. We also have uncommitted and asset-backed credit lines that support our foreign operations.
Certain of our long-term debt agreements, our credit facilities, and our
noncontrolling interests contain restrictive covenants. As of
We have$3,900 million of long-term debt maturing in the next 12 months that is classified as current, including$850 million of floating-rate notes dueApril 2021 ,$600 million of 3.2 percent notes dueApril 2021 , €200 million of 2.2 percent fixed-rate notes dueJune 2021 , €500 million of 0.0 percent fixed-rate notes dueAugust 2021 , €500 million of 0.0 percent fixed-rate notes dueNovember 2021 , and$1 billion of 3.15 percent fixed-rate notes dueDecember 2021 . 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.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
There were no material changes outside the ordinary course of our business in our contractual obligations or off-balance sheet arrangements during the third quarter of fiscal 2021.
SIGNIFICANT ACCOUNTING ESTIMATES
Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year endedMay 31, 2020 . The accounting policies used in preparing our interim fiscal 2021 Consolidated Financial Statements are the same as those described in our Form 10-K with the exception of the new accounting requirements adopted in the first quarter of fiscal 2021 related to the measurement of credit losses on financial instruments, including trade receivables. Please see Note 1 to the Consolidated Financial Statements in Part I, Item 1 of this report for additional information. 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 ofFebruary 28, 2021 , are the same as those described in our Annual Report on Form 10-K for the fiscal year endedMay 31, 2020 . 31
-------------------------------------------------------------------------------- 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, theEurope &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.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
InMarch 2020 , theFinancial 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 includingMarch 12, 2020 , or any date thereafter, throughDecember 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. NON-GAAP MEASURES We have included in this report measures of financial performance that are not defined by GAAP. We believe that these measures provide useful information to investors, and include these measures in other communications to investors. For each of these non-GAAP financial measures, we are providing below a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure, an explanation of why we believe the non-GAAP measure provides useful information to investors, and any additional material purposes for which our management or Board of Directors uses the non-GAAP measure. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.
Several measures below are presented on an adjusted basis. The adjustments are either items resulting from infrequently occurring events or items that, in management's judgment, significantly affect the year-to-year assessment of operating results.
Organic Net Sales Growth Rates
We provide organic net sales growth rates for our consolidated net sales and
segment net sales. This measure is used in reporting to our Board of Directors
and executive management and as a component of the measurement of our
performance for incentive compensation purposes. We believe that organic net
sales growth rates provide useful information to investors because they provide
transparency to underlying performance in our net sales by excluding the effect
that foreign currency exchange rate fluctuations, acquisitions, divestitures,
and a 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.
32
--------------------------------------------------------------------------------
Adjusted Operating Profit as a Percent of
We believe this measure provides useful information to investors because it is important for assessing our operating profit margin on a comparable basis.
Our adjusted operating profit margins are calculated as follows:
Quarter Ended
Feb. 28, 2021 Feb. 23, 2020
Percent of Percent of
In Millions Value Net Sales Value Net Sales
Operating profit as reported $ 826.6 18.3 % $ 650.8 15.6 %
Mark-to-market effects (a) (55.7) (1.2) % 8.6 0.2 %
Investment activity, net (b) (59.3) (1.3) % 3.0 0.1 %
Restructuring charges (c) 11.7 0.3 % 12.4 0.3 %
Project-related costs (c) - - % 0.4 - %
Product recall adjustment (d) (7.8) (0.2) % - - %
Adjusted operating profit $ 715.6 15.8 % $ 675.1 16.1 %
Nine-Month Period Ended
Feb. 28, 2021 Feb. 23, 2020
Percent of Percent of
In Millions Value Net Sales Value Net Sales
Operating profit as reported $ 2,596.9 19.1 % $ 2,124.4 16.9 %
Mark-to-market effects (a) (118.0) (0.9) % 1.0 - %
Investment activity, net (b) (78.3) (0.6) % 6.7 0.1 %
Restructuring charges (c) 13.6 0.1 % 37.2 0.3 %
Project-related costs (c) - - % 1.1 - %
Product recall adjustment, net (d) (0.7) - % - - %
Adjusted operating profit $ 2,413.6 17.7 % $ 2,170.3 17.2 %
Note: Table may not foot due to rounding.
(a) Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 5 to the Consolidated Financial Statements in Part I, Item 1 of this report. (b) Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. (c) Restructuring charges forAsia &Latin America route-to-market and supply chain optimization actions and previously announced restructuring actions in fiscal 2021. Restructuring and project-related charges for previously announced restructuring actions in fiscal 2020. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
(d) Net product recall adjustment related to our international Green Giant business.
33
--------------------------------------------------------------------------------Adjusted Operating Profit Growth on a Constant-currency Basis
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.
Our adjusted operating profit growth on a constant-currency basis is calculated
as follows:
Quarter Ended Nine-Month Period Ended
Feb. 28, 2021 Feb. 23, 2020 Change Feb. 28, 2021 Feb. 23, 2020 Change
Operating profit as
reported $ 826.6 $ 650.8 27 % $ 2,596.9 $ 2,124.4 22 %
Mark-to-market
effects (a) (55.7) 8.6 (118.0) 1.0
Investment activity,
net (b) (59.3) 3.0 (78.3) 6.7
Restructuring charges
(c) 11.7 12.4 13.6 37.2
Project-related costs
(c) - 0.4 - 1.1
Product recall
adjustment, net (d) (7.8) - (0.7) -
Adjusted operating
profit $ 715.6 $ 675.1 6 % $ 2,413.6 $ 2,170.3 11 %
Foreign currency
exchange impact 1 pt 1 pt
Adjusted operating
profit growth,
on a
constant-currency
basis 5 % 11 %
Note: Table may not foot due to rounding.
(a) Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 5 to the Consolidated Financial Statements in Part I, Item 1 of this report. (b) Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. (c) Restructuring charges forAsia &Latin America route-to-market and supply chain optimization actions and previously announced restructuring actions in fiscal 2021. Restructuring and project-related charges for previously announced restructuring actions in fiscal 2020. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
(d) Net product recall adjustment related to our international Green Giant business.
34
--------------------------------------------------------------------------------Adjusted Diluted EPS and Related Constant-currency Growth Rate
This measure is used in reporting to our Board of Directors and executive management. We believe that this measure provides useful information to investors because it is the profitability measure we use to evaluate earnings performance on a comparable year-to-year basis.
The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted EPS and the related constant-currency growth rate follows:
Quarter Ended Nine-Month Period Ended
Per Share Data Feb. 28, 2021 Feb. 23, 2020 Change Feb. 28, 2021 Feb. 23, 2020 Change
Diluted earnings per
share,
as reported $ 0.96 $ 0.74 30 % $ 3.10 $ 2.54 22 %
Mark-to-market effects
(a) (0.07) 0.01 (0.15) -
Investment activity,
net (b) (0.08) - (0.10) -
Restructuring charges
(c) 0.02 0.02 0.02 0.05
Product recall
adjustment, net (d) (0.01) - - -
Tax item (e) - - - (0.09)
CPW restructuring
charges (f) - 0.01 - 0.01
Adjusted diluted
earnings per share $ 0.82 $ 0.77 6 % $ 2.88 $ 2.51 15 %
Foreign currency
exchange impact Flat 1 pt
Adjusted diluted
earnings
per share growth, on a
constant-currency basis 6 % 14 %
Note: Table may not foot due to rounding.
(a) Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 5 to the Consolidated Financial Statements in Part I, Item 1 of this report. (b) Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. (c) Restructuring charges forAsia &Latin America route-to-market and supply chain optimization actions and previously announced restructuring actions in fiscal 2021. Restructuring charges for previously announced restructuring actions in fiscal 2020. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
(d) Net product recall adjustment related to our international Green Giant business.
(e) Discrete tax benefit related to the reorganization of certain wholly owned subsidiaries. Please see Note 13 to the Consolidated Financial Statement in Part I, Item 1 of this report.
(f) CPW restructuring charges related to previously announced restructuring actions.
See our reconciliation below of the effective income tax rate as reported to the adjusted effective income tax rate for the tax impact of each item affecting comparability.
Constant-currency After-tax Earnings from Joint Ventures Growth Rates
We believe that this measure provides useful information to investors because it
provides transparency to underlying performance of our joint ventures by
excluding the effect that foreign currency exchange rate fluctuations have on
year-to-year comparability given volatility in foreign currency exchange
markets.
After-tax earnings from joint ventures growth rate on a constant-currency basis
is calculated as follows:
Impact of
Percentage Change in Foreign Percentage Change in After-Tax
After-Tax Earnings from Joint Currency Earnings from Joint Ventures
Ventures as Reported Exchange on Constant-Currency BasisQuarter Ended Feb. 28, 2021 9 % 9 pts Flat Nine-Month Period Ended Feb. 28, 2021 56 % 2 pts 54 % Note: Table may not foot due to rounding.
Net Sales Growth Rates for Our Canada Operating Unit on Constant-currency Basis
We believe that this measure of ourCanada operating unit net sales provides useful information to investors because it provides transparency to the underlying performance for theCanada operating unit within ourNorth America Retail segment by excluding the 35 --------------------------------------------------------------------------------
effect that foreign currency exchange rate fluctuations have on year-to-year comparability given volatility in foreign currency exchange markets.
Net sales growth rates for our
Impact of
Percentage Change in Foreign Percentage Change in
Net Sales Currency Net Sales on Constant-
as Reported Exchange Currency Basis
Quarter Ended Feb. 28,
2021 13 % 4 pts 9 %
Nine-Month Period Ended
Feb. 28, 2021 8 % 1 pt 7 %
Note: Table may not foot
due to rounding.
Constant-currency Segment Operating Profit Growth Rates
We believe that this measure provides useful information to investors because it
provides transparency to underlying performance of our segments by excluding the
effect that foreign currency exchange rate fluctuations have on year-to-year
comparability given volatility in foreign currency exchange markets.
Our segments' operating profit growth rates on a constant-currency basis are
calculated as follows:
Quarter Ended Feb. 28, 2021
Percentage Change in Impact of ForeignPercentage Change in Operating
Operating Profit Currency Profit on Constant-Currency
as Reported Exchange Basis
North America Retail 14 % Flat 14 %
Europe & Australia 33 % 9 pts 24 %
Pet 9 % Flat 9 %
Asia & Latin America 48 % 31 pts 18 %
Nine-Month Period Ended Feb. 28, 2021
Percentage Change in Impact of ForeignPercentage Change in Operating
Operating Profit Currency Profit on Constant-Currency
as Reported Exchange Basis
North America Retail 15 % Flat 15 %
Europe & Australia 46 % 6 pts 40 %
Pet 22 % Flat 22 %
Asia & Latin America 47 % 23 pts 24 %Note: Tables may not foot due to rounding.
36
--------------------------------------------------------------------------------
Adjusted Effective Income Tax Rate
We believe this measure provides useful information to investors because it presents the adjusted effective income tax rate on a comparable year-to-year basis.
Adjusted effective income tax rates are calculated as follows:
Quarter Ended Nine-Month Period Ended
Feb. 28, 2021 Feb. 23, 2020 Feb. 28, 2021 Feb. 23, 2020
In Millions Pretax Pretax
(Except Per Share Pretax Income Pretax Income Earnings Income Earnings Income
Data) Earnings (a) Taxes Earnings (a) Taxes (a) Taxes (a) Taxes
As reported $ 754.0 $ 162.0 $ 571.3 $ 118.2 $ 2,378.8 $ 522.2 $ 1,867.2 $ 340.9
Mark-to-market
effects (b) (55.7) (12.8) 8.6 1.9 (118.0) (27.1) 1.0 0.2
Investment activity,
net (c) (59.3) (11.7) 3.0 0.7 (78.3) (16.1) 6.7 5.1
Restructuring charges
(d) 11.7 2.0 12.4 3.7 13.6 2.5 37.2 8.0
Project-related costs
(d) - - 0.4 0.1 - - 1.1 0.2
Product recall
adjustment, net (e) (7.8) (0.9) - - (0.7) (0.1) - -
Tax item (f) - - - - - - - 53.1
As adjusted $ 643.1 $ 138.6 $ 595.6 $ 124.8 $ 2,195.5 $ 481.4 $ 1,913.1 $ 407.6
Effective tax rate:
As reported 21.5% 20.7% 22.0% 18.3%
As adjusted 21.6% 21.0% 21.9% 21.3%
Sum of adjustment to
income taxes $ (23.4) $ 6.4 $ (40.8) $ 66.6
Average number of
common
shares - diluted EPS 619.4 612.8 619.6 612.1
Impact of income tax
adjustments
on adjusted diluted
EPS $ (0.03) $ 0.01 $ (0.06) $ 0.11 Note: Table may not foot due to rounding.
(a) Earnings before income taxes and after-tax earnings from joint ventures.
(b) Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 5 to the Consolidated Financial Statements in Part I, Item 1 of this report. (c) Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. (d) Restructuring charges forAsia &Latin America route-to-market and supply chain optimization actions and previously announced restructuring actions in fiscal 2021. Restructuring and project-related charges for previously announced restructuring actions in fiscal 2020. Please see Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.
(e) Net product recall adjustment related to our international Green Giant business.
(f) Discrete tax benefit related to the reorganization of certain wholly owned
subsidiaries. Please see Note 13 to the Consolidated Financial Statements in
Part I, Item 1 of this report.
37
--------------------------------------------------------------------------------Glossary
AOCI. Accumulated other comprehensive income (loss).
Adjusted diluted EPS. Diluted EPS adjusted for certain items affecting year-to-year comparability.
Adjusted operating profit. Operating profit adjusted for certain items affecting year-to-year comparability.
Adjusted operating profit margin. Operating profit adjusted for certain items affecting year-over-year comparability, divided by net sales.
Constant currency. Financial results translated toUnited 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 thanUnited States dollars are translated intoUnited States dollars at the average exchange rates in effect during the corresponding period of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year. Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the change in the average foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.
Core working capital. Accounts receivable plus inventories less accounts payable.
COVID-19. Coronavirus disease (COVID-19) is an infectious disease caused by a
novel coronavirus. In
Derivatives. Financial instruments such as futures, swaps, options, and forward contracts that we use to manage our risk arising from changes in commodity prices, interest rates, foreign exchange rates, and stock prices.
Euribor. Euro Interbank Offered Rate.
Fair value hierarchy. For purposes of fair value measurement, we categorize assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows:
Level 1:Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets.
Level 3:Unobservable inputs reflecting management's assumptions about the inputs used in pricing the asset or liability.
Focus 6 platforms. The Focus 6 platforms for the Convenience Stores & Foodservice segment consist of cereal, yogurt, snacks, frozen meals, frozen biscuits, and frozen baked goods.
Free cash flow. Net cash provided by operating activities less purchases of land, buildings, and equipment.
Generally Accepted Accounting Principles (GAAP). Guidelines, procedures, and practices that we are required to use in recording and reporting accounting information in our financial statements.
Goodwill . The difference between the purchase price of acquired companies plus the fair value of any noncontrolling and redeemable interests and the related fair values of net assets acquired.
Gross margin. Net sales less cost of sales.
Hedge accounting. Accounting for qualifying hedges that allows changes in a
hedging instrument's fair value to offset corresponding changes in the hedged
item in the same reporting period. Hedge accounting is permitted for certain
hedging instruments and hedged items only if the hedging relationship is highly
effective, and only prospectively from the date a hedging relationship is
formally documented.
Holistic Margin Management (HMM). Company-wide initiative to use productivity
savings, mix management, and price realization to offset input cost inflation,
protect margins, and generate funds to reinvest in sales-generating activities.
38
-------------------------------------------------------------------------------- Interest bearing instruments. Notes payable, long-term debt, including current portion, cash and cash equivalents, and certain interest bearing investments classified within prepaid expenses and other current assets and other assets.
LIBOR. London Interbank Offered Rate.
Mark-to-market. The act of determining a value for financial instruments, commodity contracts, and related assets or liabilities based on the current market price for that item.
Net mark-to-market valuation of certain commodity positions. Realized and unrealized gains and losses on derivative contracts that will be allocated to segment operating profit when the exposure we are hedging affects earnings.
Net price realization. The impact of list and promoted price changes, net of trade and other price promotion costs.
Net realizable value. The estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Noncontrolling interests. Interests of subsidiaries held by third parties.
Notional amount. The amount of a position or an agreed upon amount in a derivative contract on which the value of financial instruments are calculated.
OCI. Other Comprehensive Income.
Organic net sales growth. Net sales growth adjusted for foreign currency translation, acquisitions, divestitures and a 53rd week, when applicable.
Project-related costs. Costs incurred related to our restructuring initiatives not included in restructuring charges.
Redeemable interest. Interest of subsidiaries held by a third party that can be redeemed outside of our control and therefore cannot be classified as a noncontrolling interest in equity.
Reporting unit. An operating segment or a business one level below an operating segment.
Strategic Revenue Management (SRM). A company-wide capability focused on generating sustainable benefits from net price realization and mix by identifying and executing against specific opportunities to apply tools including pricing, sizing, mix management, and promotion optimization across each of our businesses.
Supply chain input costs. Costs incurred to produce and deliver product, including costs for ingredients and conversion, inventory management, logistics, and warehousing.
Translation adjustments. The impact of the conversion of our foreign affiliates' financial statements toUnited States dollars for the purpose of consolidating our financial statements. 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.
Working capital. Current assets and current liabilities, all as of the last day of our fiscal year.
39
--------------------------------------------------------------------------------CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. We also may make written or oral forward-looking statements, including statements contained in our filings with theSecurities 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. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that could affect our financial performance and could cause our actual results in future periods to differ materially from any current opinions or statements. Our future results could be affected by a variety of factors, such as: 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, and energy; effectiveness of restructuring and cost saving initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. You should also consider the risk factors that we identify in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year endedMay 31, 2020 which could also affect our future results. We undertake no obligation to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.
© Edgar Online, source
