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Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging | ||||||
If an emerging growth company
Page
COMPANY OVERVIEW
We
We continue to pursue our Consumer First strategy and execute against our global growth framework: 1) competing effectively on all brands and across all geographies through strong innovation, effective consumer marketing, and excellentin-store execution; 2) accelerating growth on our four differential growth platforms, which areHäagen-Dazs ice cream, snack bars,Old El Paso Mexican food, and our portfolio of natural and organic food brands; and 3) reshaping our portfolio through growth-enhancing acquisitions and divestitures. We believe executing against this growth framework should result in long-term value creation for our shareholders.
As part of our portfolio shaping strategy, in fiscal 2018, we acquired Blue Buffalo for an aggregate purchase price of $8.0 billion. We financed the transaction with a combination of $6.0 billion in debt, $1.0 billion in equity, and cash on hand. The consolidated results of Blue Buffalo are reported as our Pet operating segment on aone-month lag. In fiscal 2018, our Consolidated Statements of Earnings did not include Pet operating segment results. For further information on the acquisition of Blue Buffalo, please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.
We manage and review the financial results of our business under five operating segments: North America Retail; Convenience Stores & Foodservice; Europe & Australia; Asia & Latin America; and Pet. See Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in Item 7 of this report for a description of our segments.
We offer a variety of food products that provide great taste, nutrition, convenience, and value for consumers around the world. Our business is focused on the following large, global categories:
snacks, including grain, fruit and savory snacks, nutrition bars, and frozen hot snacks;
ready-to-eat cereal;
convenient meals, including meal kits, ethnic meals, pizza, soup, side dish mixes, frozen breakfast, and frozen entrees;
yogurt;
pet food;
super-premium ice cream;
baking mixes and ingredients; and
refrigerated and frozen dough.
Our Cereal Partners Worldwide (CPW) joint venture with Nestlé S.A. (Nestlé) competes in theready-to-eat cereal category in markets outside North America, and ourHäagen-Dazs Japan, Inc. (HDJ) joint venture competes in the super-premium ice cream category in Japan. For net sales contributed by each class of similar products, please see Note 16 to the Consolidated Financial Statements in Item 8 of this report.
Customers.Our primary customers are grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains,e-commerce
Competition.
us efficient access
to, and more informedknowledge of, variouscommodity markets, principallywheat and oats. Thisoperation holdsRESEARCH AND DEVELOPMENT
Our research and development resources are focused on new product development, product improvement, process design and improvement, packaging, and exploratory research in new business and technology areas. Research and development expenditures were $222 million in fiscal 2019 and $219 million in fiscal 2018.
TheYoplait trademark
We continue our focus on developing and marketing innovative,
our Europe & Australia and Asia & Latin America segments,International
BACKLOG
Orders are generally filled within a few days of receipt and are subject to cancellation at any time prior to shipment. The backlog of any unfilled orders as of May 26, 2019, was not material.
WORKING CAPITAL
A description of our working capital is included in the Liquidity section of MD&A in Item 7 of this report. Our product return practices are described in Note 2 to the Consolidated Financial Statements in Item 8 of this report.
EMPLOYEES
As of May 26, 2019, we had approximately 40,000 full- and part-time employees.
workforce extends to the workers and communities in our supply chain.
We believe that respectfor human rights is fundamental toRichard C. Allendorf29, 2022.
Jodi Benson, age 54, is Chief Innovation, Technology and Quality Officer. Ms. Benson joined General Mills in 2001 from The Pillsbury Company. She held a
William W. Bishop, Jr., age 48, is Group President, Pet. Mr. Bishop joined General Mills from Blue Buffalo in April 2018. Prior to joining General Mills, Mr. Bishop served as Chief Executive Officer of Blue Buffalo since January 2017. From 2003 until January 2017, Mr. Bishop served as Chief Operating Officer of Blue Buffalo and was named President in 2012. Heco-founded Blue Buffalo in 2002. He was named to his present position in April 2018.
John R. Church,age 53, is Chief Supply Chain Officer and Global Business Solutions Officer. Mr. Church joined General Mills in 1988 as a Product Developer in the Big G cereals division and held various positions before becoming 2017,
Jeffrey L. HarmeningFebruary 2020.
Donal L. Mulligan
Jon J. Nudi, age 49, is Group President, North America Retail. Mr. Nudi joined General Mills in
President, President, U.S. Retail Sales
in 2007, Senior VicePresident, President, Consumer FoodsSales Division in 2010,Ivan Pollard, December 2021.
Bethany Quam, age 48, is Group President, Europe & Australia. Ms. Quam joined
October 2019.
Jacqueline Williams-RollJuly 2021.
product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, convenient ordering and delivery to the consumer, and the ability to identify and satisfy consumer preferences. If our large competitors were to seek an advantage through pricing or promotional changes, we could choose to do the same, which could adversely affect our margins and profitability. If we did not do the same, our revenues and market share could be adversely affected. Our market share and revenue growth could also be adversely impacted if we are not successful in introducing innovative products in response to changing consumer demands or by new product introductions of our competitors. If we are unable to build and sustain brand equity by offering recognizably superior product quality, we may be unable to maintain premium pricing over generic and private label products.
The principal raw materials that we use are commodities that experience price volatility caused by external conditions such as weather, product scarcity, limited sources of supply, commodity market fluctuations, currency fluctuations, trade tariffs, and changes in governmental agricultural and energy policies and regulations.COVID-19
Volatility
We utilize derivatives to manage price risk for someprofitability could be adversely
If we are not efficient in our production, our profitability
difficult
Concernsconsolidated
Wethe
If our products become adulterated, misbranded, or mislabeled, we might need to recall those items and may
We may be unable to anticipate changes in consumer preferences and trends, which may result in decreased demand for our products.
Our success depends in part on our ability to anticipate the tastes, eating habits, and purchasing behaviors of consumers and to offer products that appeal to their preferences in channels where they shop. Consumer preferences and category-level consumption may change from time to time and can be affected by a number of different trends and other factors. If we fail to anticipate, identify or react to these changes and trends, such as adapting to emerginge-commerce channels, or to introduce new and improved products on a timely basis, we may experience reduced demand for our products, which would in turn cause our revenues and profitability to suffer. Similarly, demand for our products could be affected by consumer concerns regarding the health effects of ingredients such as sodium, trans fats, genetically modified organisms, sugar, processed wheat, or other product ingredients or attributes.
We may be unable to grow our market share or add products that are in faster growing and more profitable categories.
The food industry’s growth potential is constrained by population growth. Our success depends in part on our ability to grow our business faster than populations are growing in the markets that we serve. One way to achieve that growth is to enhance our portfolio by adding innovative new products in faster growing and more profitable categories. Our future results will also depend on our ability to increase market share in our existing product categories. If we do not succeed in developing innovative products for new and existing categories, our growth and profitability could be adversely affected.
Economic downturns could limit consumer demand for our products.
The willingness of consumers to purchase our products depends in part on local economic conditions. In periods of economic uncertainty, consumers may purchase more generic, private label, and other economy brands and may forego certain purchases altogether. In those circumstances, we could experience a reduction in sales of higher margin products or a shift in our product mix to lower margin offerings. In addition, as a result of economic conditions or competitive actions, we may be unable to raise our prices sufficiently to protect margins. Consumers may also reduce the amount of food that they consume away from home at customers that purchase products from our Convenience Stores & Foodservice segment. Any of these events could have an adverse effect on our results of operations.
Our results may be negatively impacted if consumers do not maintain their favorable perception of our brands.
Maintaining and continually enhancing the value of our many iconic brands is critical to the success of our business. The value of our brands is based in large part on the degree to which consumers react and respond positively to these brands. Brand value could diminish significantly due to a number of factors, including consumer perception that we have acted in an irresponsible manner, adverse publicity about our products, our failure to maintain the quality of our products, the failure of our products to deliver consistently positive consumer experiences, concerns about food safety, or our products becoming unavailable to consumers. Consumer demand for our products may also be impacted by changes in the level of advertising or promotional support. The use of social and digital media by consumers, us, and third parties increases the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands, or our products on social or digital media could seriously damage our brands and reputation. If we do not maintain the favorable perception of our brands, our business results could be negatively impacted.
Our international operations are subject to political and economic risks.
In fiscal 2019, 26 percent of our consolidated net sales were generated outside of the United States. We are accordingly subject to a number of risks relating to doing business internationally, any of which could significantly harm our business. These risks include:
political and economic instability;
exchange controls and currency exchange rates;
tariffs on products and ingredients that we import and export;
nationalization of operations;
compliance with anti-corruption regulations;
uncertainty relating to the United Kingdom’s planned exit from the European Union;
foreign tax treaties and policies; and
restriction on the transfer of funds to and from foreign countries, including potentially negative tax consequences.
Our financial performance on a U.S. dollar denominated basis is subject to fluctuations in currency exchange rates. These fluctuations could cause material variations in our results of operations. Our principal exposures are to the Australian dollar, Brazilian real, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen, Mexican peso, and Swiss franc. From time to time, we enter into agreements that are intended to reduce the effects of our exposure to currency fluctuations, but these agreements may not be effective in significantly reducing our exposure.
New regulations or regulatory-based claims could adversely
affect our business.We are subject
our
principal ingredientand energycosts, includinggrains (oats,wheat, and●
From time
access to capital and as counterparties to our derivative
contracts.Our business operations
Information technology serves an important role in the efficient and effective operation of our business. We rely on information technology networks and systems, including the internet, to process, transmit, and store electronic information to manage a variety of business processes and to comply with regulatory, legal, and tax requirements. Our information technology systems and infrastructure are critical to effectively manage our key business processes including digital marketing, order entry and fulfillment, supply chain management, finance, administration, and other business processes. These technologies enable internal and external communication among our locations, employees, suppliers, customers, and others and include the receipt and storage of personal information about our employees, consumers, and proprietary business information. Our information technology systems, some of which are dependent on services provided by third parties, may be vulnerable to damage, interruption, or shutdown due to any number of causes such as catastrophic events, natural disasters, fires, power outages, systems failures, telecommunications failures, security breaches, computer viruses, hackers, employee error or malfeasance, and other causes. Increased cyber-security threats pose a potential risk to the security and viability of our information technology systems, as well as the confidentiality, integrity, and availability of the data stored on those systems. The failure of our information technology systems to perform as we anticipate could disrupt our business and result in transaction errors, processing inefficiencies, data loss, legal claims or proceedings, regulatory penalties, and the loss of sales and customers. Any interruption of our information technology systems could have operational, reputational, legal, and financial impacts that may have a material adverse effect on our business.
A change in the assumptions regarding the future performance of our businesses or a different weighted-average cost of capital used to value our reporting units or our indefinite-lived intangible assets could negatively affect our consolidated results of operations and net worth.
We may fail to realize all of the anticipated benefits of the Blue Buffalo acquisition or those benefits may take longer to realize than expected.
Our ability to realize the anticipated benefits of the Blue Buffalo acquisition will depend, to a large extent, on our ability to integrate Blue Buffalo, which is a complex, costly, and time-consuming process. We had not operated in the pet food sector prior to the acquisition of Blue Buffalo and our lack of experience in this sector may hinder our ability to manage Blue Buffalo successfully following the acquisition.
The integration process may disrupt our business and, if implemented ineffectively, could restrict the realization of the full expected benefits. The failure to meet the challenges involved in the integration process and to realize the anticipated benefits of the Blue Buffalo acquisition could cause an interruption of, or a loss of momentum in, our operations and could adversely affect our business, financial condition, and results of operations.
In addition, the integration of Blue Buffalo may result in material unanticipated problems, expenses, liabilities, competitive responses, and loss of customers and other business relationships. Additional integration challenges include:
diversion of management’s attention to integration matters;
difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from the acquisition;
difficulties in the integration of operations and systems;
difficulties in conforming standards, controls, procedures, and accounting and other policies, business cultures, and compensation structures;
difficulties in the assimilation of employees;
challenges in keeping existing customers and obtaining new customers;
difficulties in building and operating new and existing manufacturing facilities;
challenges in attracting and retaining key personnel;
the impact of potential liabilities we may be inheriting from Blue Buffalo; and
coordinating a geographically dispersed organization.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues, and diversion of management’s time and energy, which could adversely affect our business, financial condition, and results of operations and result in us becoming subject to litigation. In addition, even if Blue Buffalo is integrated successfully, the full anticipated benefits of the acquisition may not be realized, including the synergies, cost savings or sales or growth opportunities that are anticipated. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration process. All of these factors could cause reductions in our earnings per share and decrease or delay the expected accretive effect of the acquisition. As a result, it cannot be assured that the Blue Buffalo acquisition will result in the realization of the full or any anticipated benefits.
Blue Buffalo may underperform relative to our expectations.
The business, prospects, and financial performance of Blue Buffalo are subject to certain risks and uncertainties. We may not be able to maintain the growth rate, levels of revenue, earnings, or operating efficiency that we and Blue Buffalo have achieved or might achieve separately. Our failure to do so could have a material adverse effect on our financial condition and results of operations. When we acquired Blue Buffalo in fiscal 2018, we recorded significant brand intangible and goodwill assets at fair value based on, among other things, our projections of Blue Buffalo’s financial performance. Our failure to meet or exceed our projections could have a material adverse effect on our financial condition and results of operations, including a material impairment to our intangible assets.
Our failure to successfully integrate other acquisitions into our existing operations could adversely affect our financial results.
From time to time, we evaluate potential acquisitions or joint ventures that would further our strategic objectives. Our success depends, in part, upon our ability to integrate acquired and existing operations. If we are unable to successfully integrate acquisitions, our financial results could suffer. Additional potential risks associated with acquisitions include additional debt leverage, the loss of key employees and customers of the acquired business, the assumption of unknown liabilities, the inherent risk associated with entering a geographic area or line of business in which we have no or limited prior experience, failure to achieve anticipated synergies, and the impairment of goodwill or other acquisition-related intangible assets.
Convenience Stores & Foodservice
Europe & Australia
Asia & Latin America
Pet
operate
numerousgrainelevatorsintheUnitedStatesinsupportofourdomesticmanufacturingactivities.We| Period | Total Number of Shares | Average Price Paid Per Share | Total Number of Shares Purchased as | Maximum Number of Shares that may yet be Purchased Under the Program (b) | ||||||||||||
February 25, 2019- |
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March 31, 2019 | 250 | $ | 47.22 | 250 | 39,498,616 | |||||||||||
April 1, 2019- | ||||||||||||||||
April 28, 2019 | 8,032 | 50.99 | 8,032 | 39,490,584 | ||||||||||||
April 29, 2109- | ||||||||||||||||
May 26, 2019 | - | - | - | 39,490,584 | ||||||||||||
Total | 8,282 | $ | 50.88 | 8,282 | 39,490,584 | |||||||||||
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In Millions, Except Per Share Data, Percentages and Ratios | Fiscal Year | |||||||||||||||||||
| 2019 (a) | 2018 | 2017 | 2016 | 2015 (b) | ||||||||||||||||
Operating data: | ||||||||||||||||||||
Net sales | $ | 16,865.2 | $ | 15,740.4 | $ | 15,619.8 | $ | 16,563.1 | $ | 17,630.3 | ||||||||||
Gross margin (c) (d) | 5,756.8 | 5,435.6 | 5,567.8 | 5,843.3 | 5,967.8 | |||||||||||||||
Selling, general, and administrative expenses (d) | 2,935.8 | 2,850.1 | 2,888.8 | 3,141.4 | 3,389.9 | |||||||||||||||
Operating profit (d) | 2,515.9 | 2,419.9 | �� | 2,492.1 | 2,719.1 | 2,071.8 | ||||||||||||||
Net earnings attributable to General Mills | 1,752.7 | 2,131.0 | 1,657.5 | 1,697.4 | 1,221.3 | |||||||||||||||
Advertising and media expense | 601.6 | 575.9 | 623.8 | 754.4 | 823.1 | |||||||||||||||
Research and development expense | 221.9 | 219.1 | 218.2 | 222.1 | 229.4 | |||||||||||||||
Average shares outstanding: | ||||||||||||||||||||
Diluted | 605.4 | 585.7 | 598.0 | 611.9 | 618.8 | |||||||||||||||
Earnings per share: | ||||||||||||||||||||
Diluted | $ | 2.90 | $ | 3.64 | $ | 2.77 | $ | 2.77 | $ | 1.97 | ||||||||||
Adjusted diluted (c) (e) | $ | 3.22 | $ | 3.11 | $ | 3.08 | $ | 2.92 | $ | 2.86 | ||||||||||
Operating ratios: | ||||||||||||||||||||
Gross margin as a percentage of net sales (d) | 34.1% | 34.5% | 35.6% | 35.3% | 33.8% | |||||||||||||||
Selling, general, and administrative expenses as a percentage of net sales (d) | 17.4% | 18.1% | 18.5% | 19.0% | 19.2% | |||||||||||||||
Operating profit as a percentage of net sales (d) | 14.9% | 15.4% | 16.0% | 16.4% | 11.8% | |||||||||||||||
Adjusted operating profit as a percentage of net sales (c) (d) (e) | 16.9% | 16.6% | 17.6% | 16.8% | 15.7% | |||||||||||||||
Effective income tax rate | 17.7% | 2.7% | 28.8% | 31.4% | 33.3% | |||||||||||||||
Balance sheet data: | ||||||||||||||||||||
Land, buildings, and equipment | $ | 3,787.2 | $ | 4,047.2 | $ | 3,687.7 | $ | 3,743.6 | $ | 3,783.3 | ||||||||||
Total assets | 30,111.2 | 30,624.0 | 21,812.6 | 21,712.3 | 21,832.0 | |||||||||||||||
Long-term debt, excluding current portion | 11,624.8 | 12,668.7 | 7,642.9 | 7,057.7 | 7,575.3 | |||||||||||||||
Total debt (c) | 14,490.0 | 15,818.6 | 9,481.7 | 8,430.9 | 9,191.5 | |||||||||||||||
Cash flow data: | ||||||||||||||||||||
Net cash provided by operating activities (f) | $ | 2,807.0 | $ | 2,841.0 | $ | 2,415.2 | $ | 2,764.2 | $ | 2,648.5 | ||||||||||
Capital expenditures | 537.6 | 622.7 | 684.4 | 729.3 | 712.4 | |||||||||||||||
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Free cash flow (c) | 2,269.4 | 2,218.3 | 1,730.8 | 2,034.9 | 1,936.1 | |||||||||||||||
Share data: | ||||||||||||||||||||
Cash dividends per common share | $ | 1.96 | $ | 1.96 | $ | 1.92 | $ | 1.78 | $ | 1.67 | ||||||||||
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over time.
low single-digit
mid single-digit●
high single-digit●
●
●
In fiscal 2019customers and consumers.
We successfully transitioned Blue Buffalo into the General Mills portfolio in fiscal 2019, achieving our goals of double-digit pro forma growth in net sales and segment operating profit excluding the impact of purchase accounting. The combination of record-level Holistic Margin Management (HMM) savings, increased benefits from net price realization and mix, and strong cost management drove growth in constant-currency adjusted operating profit and adjusted diluted EPS ahead of our initial targets. Finally, we continued to maintain a disciplined focus on cash, resulting in another year of strong free cash flow conversion.
Accelerate strategy.
Net cash provided by operations totaled $2.8 billion A
A detailed review of our fiscal 2019 performance compared to fiscal 2018 appears below in
which
is incorporatedOur key full-year fiscal 20202023 targets are
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Constant-currency adjusted
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In fiscal 2019, organic
| Fiscal 2019 | In millions, except per share | Fiscal 2019 vs. Fiscal 2018 | Percent of Net Sales | Constant- Currency Growth (a) | ||||||||||||
Net sales | $ | 16,865.2 | 7 % | 9 % | ||||||||||||
Operating profit | 2,515.9 | 4 % | 14.9 % | |||||||||||||
Net earnings attributable to General Mills | 1,752.7 | (18) % | ||||||||||||||
Diluted EPS | $ | 2.90 | (20) % | |||||||||||||
Organic net sales growth rate (a) | Flat | |||||||||||||||
Adjusted operating profit (a) | 2,858.0 | 9 % | 16.9 % | 10 % | ||||||||||||
Adjusted diluted EPS (a) | $ | 3.22 | 4 % | 4 % | ||||||||||||
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| Fiscal 2019 | Fiscal 2019 vs. Fiscal 2018 | Fiscal 2018 | ||||||||||
Net sales (in millions) | $ | 16,865.2 | 7 % | $ | 15,740.4 | |||||||
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Contributions from volume growth (a) | 5 pts | |||||||||||
Net price realization and mix | 4 pts | |||||||||||
Foreign currency exchange | (2)pts | |||||||||||
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The 7 percent increase in net
growth.
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sales compared to $14 million in fiscal 2018. We also recorded $1 million of restructuring initiative project-related costs in cost of sales in fiscal 2019 compared to $11 million in fiscal 2018 (please see Note 4 to the Consolidated Financial Statements in Item 8 of this report for additional information).
Selling, general 2021.
Divestitures loss totaled $30 million in fiscal 2019. In fiscal 2019, we sold our La Salteña fresh pasta and refrigerated doughLaticínios Carolina business in Argentina, and recorded apre-tax loss of $35 million. We also sold our yogurt business in China and simultaneously entered into a new Yoplait license agreement with the purchaser for their use of theYoplait brand. We recorded apre-tax gain of $5 million.
Brazil.
2021. In fiscal 2019,2022,
In addition, in fiscal 2019, we2022.
Charges associated with our restructuring initiatives recognized in fiscal 2019 consisted of the following:
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In fiscal 2019, we approved restructuring actions to drive efficiencies in targeted areas of our global supply chain. In connection with these actions we recorded $80 million of restructuring charges, consisting of $23 million of severance expense and $57 million of other costs, primarily asset write-offs. Four of our operating segments were affected by these actions including $54 million related to our North America Retail segment, $13 million related to our Asia & Latin America segment, $12 million related to our Europe & Australia segment, and $1 million related to our Pet segment. We expect these actions to be completed by the end of fiscal 2022.
We spent $49 million of cash related to restructuring initiatives in fiscal 2019.
Please see Note 4 to the
Interest, netfor fiscal 2019 totaled $522 million, $148 million higher than fiscal 2018, primarily driven by higher debt levels due to financing for the Blue Buffalo acquisition.
Oureffective tax ratefor fiscal 2019 was 17.7 percent compared to 2.7 percent in fiscal 2018. The 15.0 percentage point increase reflects the lower statutory rate in fiscal 2019 being more than offset by the impact of theone-time, provisional net benefit of $524 million recorded in fiscal 2018 related to the TCJA. Our adjusted effective tax rate was 21.8 percent in fiscal 2019 compared to 25.7 percent in fiscal 2018 (see the“Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP). operating
The TCJAresulting North
After-tax earnings from joint venturesdecreased $13 million to $72 million in fiscal 2019 compared to fiscal 2018, primarily driven by our $11 millionafter-tax share of restructuring charges at CPW, and lower net sales and higher input costs for HDJ. On a constant-currency basis,after-tax earnings from joint ventures decreased 14 percent, including the CPW restructuring charge (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:
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Average diluted shares outstandingincreased by 20 million in fiscal 2019 from fiscal 2018 due to the impact of the fiscal 2018 share issuance to partially fund the acquisition of Blue Buffalo and option exercises.
RESULTS OF SEGMENT OPERATIONS
The following tables provide
the dollar amount and percentageof net sales and operatingprofit from each segment forfiscal| Fiscal Year | ||||||||||||||||
| 2019 | 2018 | |||||||||||||||
| In Millions | Dollars | Percent of Total | Dollars | Percent of Total | ||||||||||||
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Net Sales | ||||||||||||||||
North America Retail | $ | 9,925.2 | 59% | $ | 10,115.4 | 64% | ||||||||||
Convenience Stores & Foodservice | 1,969.1 | 12 | 1,930.2 | 12 | ||||||||||||
Europe & Australia | 1,886.7 | 11 | 1,984.6 | 13 | ||||||||||||
Asia & Latin America | 1,653.3 | 10 | 1,710.2 | 11 | ||||||||||||
Pet | 1,430.9 | 8 | - | - | ||||||||||||
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Total | $ | 16,865.2 | 100% | $ | 15,740.4 | 100% | ||||||||||
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Segment Operating Profit | ||||||||||||||||
North America Retail | $ | 2,277.2 | 72% | $ | 2,217.4 | 80% | ||||||||||
Convenience Stores & Foodservice | 419.5 | 13 | 392.6 | 14 | ||||||||||||
Europe & Australia | 123.3 | 4 | 142.1 | 5 | ||||||||||||
Asia & Latin America | 72.4 | 2 | 39.6 | 1 | ||||||||||||
Pet | 268.4 | 9 | - | - | ||||||||||||
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Total | $ | 3,160.8 | 100% | $ | 2,791.7 | 100% | ||||||||||
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| Fiscal 2019 | Fiscal 2019 vs. 2018 Percentage Change | Fiscal 2018 | ||||||||||
Net sales (in millions) | $ | 9,925.2 | (2) % | $ | 10,115.4 | |||||||
Contributions from volume growth (a) | (3)pts | |||||||||||
Net price realization and mix | 2 pts | |||||||||||
Foreign currency exchange | (1)pt | |||||||||||
Fiscal 2022 Fiscal 2022 vs. 2021 Percentage Change Fiscal 2021 Net sales (in millions) $ 11,572.0 3 % $ 11,250.0 Contributions from volume growth (a) (6) pts Net price realization and mix 9 pts Foreign currency exchange Flat Note: Table maynot foot due to rounding. (a) Measured |
The 2 percent decrease in tons based on the stated weight of our product shipments.
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Fiscal 2022 vs. 2021 Percentage Change Contributions from organic volume growth (a) (6) pts Organic net price realization and mix 9 pts Organic | ||||
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North America Retail organic net sales decreased 1growth
growth.
| In Millions | | Fiscal 2019 | | | Fiscal 2019 vs. 2018 Percentage Change | | | Fiscal 2018 |
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U.S. Meals & Baking | $ 3,839.8 | (1)% | $ 3,865.7 | |||||||||
U.S. Cereal | 2,255.4 | Flat | 2,251.8 | |||||||||
U.S. Snacks | 2,060.9 | (4)% | 2,140.5 | |||||||||
U.S. Yogurt and Other | 906.7 | (2)% | 927.4 | |||||||||
Canada (a) | 862.4 | (7)% | 930.0 | |||||||||
Total | $ 9,925.2 | (2)% | $ 10,115.4 |
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Segment
CONVENIENCE STORES &
Convenience Stores &bakeries.
| Fiscal 2019 | Fiscal 2019 vs. 2018 Percentage Change | Fiscal 2018 | ||||||||||
Net sales (in millions) | $ | 1,969.1 | 2 % | $ | 1,930.2 | |||||||
Contributions from volume growth (a) | (2)pts | |||||||||||
Net price realization and mix | 4 pts | |||||||||||
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Convenience Stores & Foodservice netFiscal 2022
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Segment operating profit increased 7
EUROPE & AUSTRALIA SEGMENT
Our Europe & Australia
Europe & Australia net sales were as follows:
| Fiscal 2019 | Fiscal 2019 vs. 2018 Percentage Change | Fiscal 2018 | ||||||||||
Net sales (in millions) | $ | 1,886.7 | (5) % | $ | 1,984.6 | |||||||
Contributions from volume growth (a) | (3)pts | |||||||||||
Net price realization and mix | 2 pts | |||||||||||
Foreign currency exchange | (4)pts | |||||||||||
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The 5 percent decrease in Europe & Australia net sales in fiscal 2019 was driven by unfavorable foreign currency exchange and lower contributions from volume growth, partially offset by favorable net price realization and mix.
The components of Europe & Australia organic net sales growth are shown in the following table:
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The 1 percent decrease in Europe & Australia organic net sales growth in fiscal 2019 was driven by a decrease in contributions from organic volume growth partially offset by favorable organic net price realization and mix.
Segment operating profit decreased 13 percent to $123 million in fiscal 2019, compared to $142 million in the same period of fiscal 2018 primarily driven by lower contributions from volume growth and higher input costs, including currency-driven inflation on imported products in certain markets, partially offset by lower SG&A expenses. Segment operating profit decreased 8 percent on a constant-currency basis in fiscal 2019 compared to fiscal 2018 (see the“Non-GAAP Measures” section below for our use of this measure not
ASIA & LATIN AMERICA SEGMENT
Our Asia & Latin America
Asia & Latin America net sales were as follows:
| Fiscal 2019 | Fiscal 2019 vs. 2018 Percentage Change | Fiscal 2018 | ||||||||||
Net sales (in millions) | $ | 1,653.3 | (3)% | $ | 1,710.2 | |||||||
Contributions from volume growth (a) | 1 pt | |||||||||||
Net price realization and mix | 3 pts | |||||||||||
Foreign currency exchange | (7)pts | |||||||||||
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Asia & Latin America net sales decreased 3Green Giant business.
The components of Asia & Latin America organic net sales growth are shown in the following table:
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The 6 percent increase in Asia & Latin America organic net sales
Segment operating profit increased 83 percent to $72
products in certain markets. Segment operating profit increased 71 percent on a constant-currency basis
PET SEGMENT
Our Pet operating segment includes pet food products sold primarily $42 million.
Pet net sales were as follows:
| Fiscal | ||||||||
| 2019 | 2018 | |||||||
Net sales (in millions) | $ | 1,430.9 | $ | - | ||||
Pet net sales and segment operating profit in fiscal 2019 totaled $1,431 million and $268 million, respectively. Pet operating profit includes a $53 million purchase accounting adjustment related to inventory acquired and $13 million of amortization of the customer list intangible asset.
UNALLOCATED CORPORATE ITEMS
Unallocated corporate items include corporate overhead expenses, variances to planned domestic employee benefits and incentives, contributions to the General Mills Foundation, asset and liability remeasurement impact of hyperinflationary economies, restructuring initiative project-related costs, and other items
In
IMPACT OF INFLATION
We experienced input cost inflation of 4 percent in fiscal 2019 and 4 percent in fiscal 2018, primarily on commodity inputs. We expect input cost inflation of approximately 4 percent in fiscal 2020. We attempt to minimize the effects of inflation through HMM, planning, and operating practices. Our risk management practices are discussed in Item 7A of this report.
LIQUIDITY
The primary source of our liquidity is cash flow from operations. Over the most recenttwo-year period, our operations have generated $5.6 billion in cash. A substantial portion of this operating cash flow has been returned to shareholders through share repurchases and dividends. We also use cash from operations to fund our capital expenditures and acquisitions. We typically use a combination of cash, notes payable, and long-term debt, and occasionally issue shares of stock, to finance significant acquisitions.
As of May 26, 2019, we had $399 million of cash and cash equivalents held in foreign jurisdictions. As a result of the TCJA, the historic undistributed earnings of our foreign subsidiaries were taxed in the U.S. via theone-time repatriation tax in fiscal 2018. We havere-evaluated our assertion and have concluded that although earnings prior to fiscal 2018 will remain permanently reinvested, we will no longer make a permanent reinvestment assertion beginning with our fiscal 2018 earnings. As part of the accounting for the TCJA, we recorded local country withholding taxes related to certain entities from which we began repatriating undistributed earnings and will continue to record local country withholding taxes on all future earnings. As a result of the transition tax, 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 (please see Note 14 to the Consolidated Financial Statements in Item 8 of this report for additional information).
Cash Flows from Operations
| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
| ||||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 1,786.2 | $ | 2,163.0 | ||||
Depreciation and amortization | 620.1 | 618.8 | ||||||
After-tax earnings from joint ventures | (72.0) | (84.7 | ) | |||||
Distributions of earnings from joint ventures | 86.7 | 113.2 | ||||||
Stock-based compensation | 84.9 | 77.0 | ||||||
Deferred income taxes | 93.5 | (504.3 | ) | |||||
Pension and other postretirement benefit plan contributions | (28.8) | (31.8 | ) | |||||
Pension and other postretirement benefit plan costs | 6.1 | 4.6 | ||||||
Divestitures loss | 30.0 | - | ||||||
Restructuring, impairment, and other exit costs | 235.7 | 126.0 | ||||||
Changes in current assets and liabilities, excluding the effects of acquisitions and divestitures | (7.5) | 542.1 | ||||||
Other, net | (27.9) | (182.9 | ) | |||||
| ||||||||
Net cash provided by operating activities | $ | 2,807.0 | $ | 2,841.0 | ||||
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During fiscal 2019, cash provided by operations was $2,807 million compared to $2,841 million in the same period last year. The $34 million decrease was primarily driven by a $377 million decrease in net earnings and a $550 million change in current assets and liabilities, partially offset by a $598 million change in deferred income taxes. The $550 million change in current assets and liabilities was primarily driven by a $413 million change in the timing of accounts payable, including the impact of longer payment terms implemented in prior fiscal years. The change in deferred income taxes was primarily related to the $638 million provisional benefit from revaluing our net U.S. deferred tax liabilities to reflect the new U.S. corporate tax rate as a result of the TCJA in fiscal 2018.
We strive to grow core working capital at or below the rate of growth in our net sales. For fiscal 2019, core working capital decreased 34 percent, compared to a net sales increase of 7 percent. As of May 26, 2019, our core working capital balance totaled $385 million, down 34 percent versus last year, this is primarily driven by continued benefits from our payment terms extension program and lower inventory balances. In fiscal 2018, core working capital decreased 27 percent, compared to a net sales increase of 1 percent.
Cash Flows from Investing Activities
| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
| ||||||||
Purchases of land, buildings, and equipment | $ | (537.6) | $ | (622.7) | ||||
Acquisitions, net of cash acquired | - | (8,035.8) | ||||||
Investments in affiliates, net | 0.1 | (17.3) | ||||||
Proceeds from disposal of land, buildings, and equipment | 14.3 | 1.4 | ||||||
Proceeds from divestitures | 26.4 | - | ||||||
Other, net | (59.7) | (11.0) | ||||||
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Net cash used by investing activities | $ | (556.5) | $ | (8,685.4) | ||||
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In fiscal 2019, we used $556 million of cash through investing activities compared to $8.7 billion in fiscal 2018. This decrease was primarily driven by the acquisition of Blue Buffalo for an aggregate purchase price of $8.0 billion, including $103 million of consideration for net debt repaid, in fiscal 2018. We invested $538 million in land, buildings, and equipment in fiscal 2019, $85 million less than fiscal 2018.
We expect capital expenditures to be approximately 3.5 percent of reported net sales in fiscal 2020. These expenditures will fund initiatives that are expected to fuel growth, support innovative products, and continue HMM initiatives throughout the supply chain.
Cash Flows from Financing Activities
| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
| ||||||||
Change in notes payable | $ | (66.3) | $ | 327.5 | ||||
Issuance of long-term debt | 339.1 | 6,550.0 | ||||||
Payment of long-term debt | (1,493.8) | (600.1) | ||||||
Proceeds from common stock issued on exercised options | 241.4 | 99.3 | ||||||
Proceeds from common stock issued | - | 969.9 | ||||||
Purchases of common stock for treasury | (1.1) | (601.6) | ||||||
Dividends paid | (1,181.7) | (1,139.7) | ||||||
Investments in redeemable interest | 55.7 | - | ||||||
Distributions to noncontrolling and redeemable interest holders | (38.5) | (51.8) | ||||||
Other, net | (31.2) | (108.0) | ||||||
| ||||||||
Net cash (used) provided by financing activities | $ | (2,176.4) | $ | 5,445.5 | ||||
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Financing activities used $2.2 billion of cash in fiscal 2019 compared to providing $5.4 billion in fiscal 2018. We had $1.2 billion of net debt repayments in fiscal 2019 compared to $6.3 billion of net debt issuances in fiscal 2018, which partially funded the acquisition of Blue Buffalo. For more information on our debt issuances and payments, please refer to Note 8 to the Consolidated Financial Statements in Item 8 of this report.
During fiscal 2019, we received $241 million of net proceeds from common stock issued on exercised options compared to $99$74 million in fiscal 2018. 2021.
Share repurchases in fiscal 2019 were insignificant. for
per share.
| Fiscal Year | ||||||||
| Inflow (Outflow), in Millions | 2019 | 2018 | ||||||
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Investments in affiliates, net | $ | (0.1) | $ (17.3) | |||||
Dividends received | 86.7 | 113.2 | ||||||
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CAPITAL RESOURCES
Total capital consisted of the following:
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
| ||||||||
Notes payable | $ | 1,468.7 | $ | 1,549.8 | ||||
Current portion of long-term debt | 1,396.5 | 1,600.1 | ||||||
Long-term debt | 11,624.8 | 12,668.7 | ||||||
| ||||||||
Total debt | 14,490.0 | 15,818.6 | ||||||
Redeemable interest | 551.7 | 776.2 | ||||||
Noncontrolling interests | 313.2 | 351.3 | ||||||
Stockholders’ equity | 7,054.5 | 6,141.1 | ||||||
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Total capital | $ | 22,409.4 | $ | 23,087.2 | ||||
| ||||||||
| In Billions | Facility Amount | Borrowed Amount | ||||||
| ||||||||
Credit facility expiring: | ||||||||
May 2022 | $ | 2.7 | $ | - | ||||
June 2019 | 0.2 | - | ||||||
| ||||||||
Total committed credit facilities | 2.9 | - | ||||||
Uncommitted credit facilities | 0.7 | 0.2 | ||||||
| ||||||||
Total committed and uncommitted credit facilities | $ | 3.6 | $ | 0.2 | ||||
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29, 2022:
Certain of our long-term debt agreements, our credit facilities, and our noncontrolling interests contain restrictive covenants. As of May 26, 2019, we were in compliance with all of these covenants.
Certain
ofourlong-termdebtagreements,ourcreditfacilities,andournoncontrollinginterestscontainrestrictivecovenants.AsofWe 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
During the second quarter of fiscal 2019, Sodiaal invested $56 million in Yoplait SAS.
The third-party holder of the
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
As of May 26, 2019, we have issued guarantees and comfort letters of $682 million for the debt and other obligations of consolidated subsidiaries, and guarantees and comfort letters of $134 million for the debt and other obligations ofnon-consolidated affiliates, mainly CPW. In addition,off-balance sheet arrangements are generally limited to the future payments undernon-cancelable operating leases, which totaled $483 million as of May 26, 2019.
As of May 26, 2019, we invested in four variable interest entities (VIEs). None of our VIEs are material to our results of operations, financial condition, or liquidity as of and for the fiscal year ended May 26, 2019.
Our defined benefit plans in the United States are subject to the requirements of the Pension Protection Act (PPA). In the future, the PPA may require us to make additional contributions to our domestic plans. We do not expect to be required to make any contributions in fiscal 2020.
The following table summarizes our future estimated cash payments under existing contractual obligations, including payments due by period:
| Payments Due by Fiscal Year | ||||||||||||||||||||
| In Millions | Total | 2020 | 2021 -22 | 2023 -24 | 2025 and Thereafter | |||||||||||||||
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Long-term debt (a) | $ | 13,093.0 | $ | 1,396.3 | $ | 3,338.4 | $ | 2,810.2 | $ | 5,548.1 | ||||||||||
Accrued interest | 92.6 | 92.6 | - | - | - | |||||||||||||||
Operating leases (b) | 482.6 | 120.0 | 186.7 | 112.9 | 63.0 | |||||||||||||||
Capital leases | 0.3 | 0.2 | 0.1 | - | - | |||||||||||||||
Purchase obligations (c) | 2,961.8 | 2,605.1 | 321.9 | 27.6 | 7.2 | |||||||||||||||
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Total contractual obligations | 16,630.3 | 4,214.2 | 3,847.1 | 2,950.7 | 5,618.3 | |||||||||||||||
Other long-term obligations (d) | 1,302.4 | - | - | - | - | |||||||||||||||
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Total long-term obligations | $ | 17,932.7 | $ | 4,214.2 | $ | 3,847.1 | $ | 2,950.7 | $ | 5,618.3 | ||||||||||
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SIGNIFICANTCRITICAL ACCOUNTING ESTIMATES
Revenue Recognition
Our revenues are reported net plans
Valuationof Long-Lived Assets
| In Millions | Impairment Charge | Fair Value as of Nov. 25, 2018 | ||||||
Progresso | $ | 132.1 | $ | 330.0 | ||||
Food Should Taste Good | 45.1 | - | ||||||
Mountain High | 15.4 | - | ||||||
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Total | $ | 192.6 | $ | 330.0 | ||||
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Significant assumptions used in that assessment included our long-range cash flow projections for the businesses, royalty rates, weighted-average cost of capital rates, and tax rates.
Our Latin America reporting unit and theYokibrand intangible asset had
| In Millions | Carrying Value of Intangible Asset | Excess Fair Value as of Fiscal 2019 Test Date | ||||||
| ||||||||
Latin America | $ | 209.0 | 7% | |||||
Yoki | $ | 49.1 | 10% | |||||
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While having significant coverage as of our fiscal 2019 assessment date, thePillsbury brand intangible asset and U.S. Yogurt reporting unit had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.
Redeemable Interest
In fiscal 2019, we adjusted the redemption value of Sodiaal’s redeemable interest in Yoplait SAS based on a discounted cash flow model. The significant assumptions used to estimate the redemption value include projected revenue growth and profitability from our long-range plan, capital spending, depreciation and taxes, foreign currency exchange rates, and a discount rate. As of May 26, 2019, the redemption value of the redeemable interest was $552 million.
Stock-based Compensation
The valuation of stock options is a significant accounting estimate that requires us to use judgments and assumptions that are likely to have a material impact on our financial statements. Annually, we make predictive assumptions regarding future stock price volatility, employee exercise behavior, dividend yield, and the forfeiture rate. For more information on these assumptions, pleaseNorth America
report for additional
information on our operating segments.| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
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Estimated fair values of stock options granted | $ | 5.35 | $ | 6.18 | $ | 8.80 | ||||||
Assumptions: | ||||||||||||
Risk-free interest rate | 2.9 % | 2.2 % | 1.7 % | |||||||||
Expected term | 8.5 years | 8.2 years | 8.5 years | |||||||||
Expected volatility | 16.3 % | 15.8 % | 17.8 % | |||||||||
Dividend yield | 4.3 % | 3.6 % | 2.9 % | |||||||||
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Any corporate
income taxbenefit realizedupon exerciseor vestingof anaward inexcess ofthat previouslyrecognizedin earnings29, 2022.
Lowering the expected long-term rate of returnreturns primarily on fixed income investments.
year-to-year expense volatility.
TheDefined Benefit Pension Plans | Other Benefit Plans | Postemployment Benefit Plans | ||||||||||
| ||||||||||||
Effective rate for fiscal 2020 service costs | 4.17 | % | 4.04 | % | 3.51% | |||||||
Effective rate for fiscal 2020 interest costs | 3.45 | % | 3.28 | % | 2.84% | |||||||
Obligations as of May 31, 2019 | 3.91 | % | 3.79 | % | 3.10% | |||||||
Effective rate for fiscal 2019 service costs | 4.34 | % | 4.27 | % | 3.99% | |||||||
Effective rate for fiscal 2019 interest costs | 3.92 | % | 3.80 | % | 3.37% | |||||||
Obligations as of May 31, 2018 | 4.20 | % | 4.17 | % | 3.60% | |||||||
Effective rate for fiscal 2018 service costs | 4.37 | % | 4.27 | % | 3.54% | |||||||
Effective rate for fiscal 2018 interest costs | 3.45 | % | 3.24 | % | 2.67% | |||||||
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A one percentage point change Any
| In Millions | One Percentage Point Increase | One Percentage Point Decrease | ||||||
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Effect on the aggregate of the service and interest cost components in fiscal 2020 | $ | 1.4 | $ | (1.3) | ||||
Effect on the other post retirement accumulated benefit obligation as of May 26, 2019 | 43.5 | (40.3) | ||||||
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Any arising health care claims cost-related experience gain or loss is recognized in the
In February 2016,
We are in the process of implementing lease accounting software, developing a centralized business process, and implementing corresponding controls. We have substantially completed our analysis of the impact of this standard on our lease portfolio. We will adopt this guidance in the first quarter of fiscal 2020 using the cumulative effect adjustment approach and electing certain practical expedients permitted under the transition guidance, including not reassessing whether existing contracts contain leases and carrying forward the historical
classification of those leases. In addition, we will also elect to not recognize leases with an initial term of 12 months or less on our Consolidated Balance Sheets. We do not expect the effectsloss related to the Consolidated Financial Statements to be pervasive. We estimate that we will record right of use assets and related liabilities of approximately $400 to $500 million, subject to the completion sale
NON-GAAP MEASURES
We have includedreport.
For eachItem 8 of thesenon-GAAP financial measures, we are providing below a reconciliation of the differences between thenon-GAAP measurethis report.
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 theyear-to-year assessment of operating results.
previously announced restructuringactions.
Net Sales
Net salesrates.
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Fiscal Year
| Fiscal Year | ||||||||||||||||||||||||
| Per Share Data | 2019 | 2018 | 2019 vs. 2018 Change | 2017 | 2016 | 2015 | ||||||||||||||||||
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Diluted earnings per share, as reported | $ | 2.90 | $ | 3.64 | (20) % | $ | 2.77 | $ | 2.77 | $ | 1.97 | |||||||||||||
Net tax benefit (a) | (0.01 | ) | (0.89) | - | - | - | ||||||||||||||||||
Tax items (a) | (0.12 | ) | 0.07 | - | - | 0.13 | ||||||||||||||||||
Mark-to-market effects (b) | 0.05 | (0.04) | (0.01) | (0.07) | 0.09 | |||||||||||||||||||
Divestitures loss (gain) (c) | 0.03 | - | 0.01 | (0.10) | - | |||||||||||||||||||
Acquisition transaction and integration costs (c) | 0.03 | 0.10 | - | - | 0.02 | |||||||||||||||||||
Restructuring charges (d) | 0.10 | 0.11 | 0.26 | 0.26 | 0.35 | |||||||||||||||||||
Project-related costs (d) | - | 0.01 | 0.05 | 0.06 | 0.01 | |||||||||||||||||||
Asset impairments (d) | 0.26 | 0.11 | - | - | 0.28 | |||||||||||||||||||
Investment valuation adjustments (e) | (0.03 | ) | - | - | - | - | ||||||||||||||||||
CPW restructuring charges (f) | 0.02 | - | - | - | - | |||||||||||||||||||
Legal recovery (g) | (0.01 | ) | - | - | - | - | ||||||||||||||||||
Venezuela currency devaluation | - | - | - | - | 0.01 | |||||||||||||||||||
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Adjusted diluted earnings per share | $ | 3.22 | $ | 3.11 | 4 % | $ | 3.08 | $ | 2.92 | $ | 2.86 | |||||||||||||
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Adjusted diluted earnings per share growth, on a constant-currency basis | 4 % | |||||||||||||||||||||||
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Constant-currencyAfter-Tax
before Net Interest, Income Taxes,
Depreciation and Amortization (EBITDA) Ratiocalculation of the net debt-to-adjusted EBITDAratio are as follows:
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Net Sales Growth Rate for Canada Operating Unit on a Constant-currency Basis
We believe this measure of our Canada operating unit net sales provides useful information to investors because it provides transparencythe reconciling items, please refer 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 onyear-to-year comparability given volatility in foreign currency exchange markets.
Net sales growth rates for our Canada operating unit on a constant-currency basis are calculated as follows:
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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 onyear-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:
| Fiscal 2019 | ||||||||||||
Percentage Change in as Reported | Impact of Foreign Currency Exchange | Percentage Change in Operating Profit on Constant-Currency Basis | ||||||||||
| ||||||||||||
North America Retail | 3 % | Flat | 3 % | |||||||||
Europe & Australia | (13) | (5) pts | (8) | |||||||||
Asia & Latin America | 83 % | 12 pts | 71 % | |||||||||
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Adjusted Effective Income Tax Rates
We believe this measure provides useful information to investors because it presents the adjusted effective income tax rate on a comparable year-to-year basis.
Adjusted effective income tax rates are calculated as follows:
| Fiscal Year Ended | ||||||||||||||||||||||||||||||||||||||||
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | ||||||||||||||||||||||||||||||||||||
| In Millions | Pretax Earnings (a) | Income Taxes | Pretax Earnings (a) | Income Taxes | Pretax Earnings (a) | Income Taxes | Pretax Earnings (a) | Income Taxes | Pretax Earnings (a) | Income Taxes | ||||||||||||||||||||||||||||||
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As reported | $ | 2,082.0 | $ | 367.8 | $ | 2,135.6 | $ | 57.3 | $ | 2,271.3 | $ | 655.2 | $ | 2,403.6 | $ | 755.2 | $ | 1,761.9 | $ | 586.8 | ||||||||||||||||||||
Net tax benefit (b) | - | 7.2 | - | 523.5 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Tax items (b) | - | 72.9 | - | (40.9) | - | - | - | - | - | (78.6) | ||||||||||||||||||||||||||||||
Mark-to-market effects (c) | 36.0 | 8.3 | (32.1 | ) | (10.0) | (13.9 | ) | (5.1) | (62.8 | ) | (23.2) | 89.7 | 33.2 | |||||||||||||||||||||||||||
Divestitures loss (gain) (d) | 30.0 | 13.6 | - | - | 13.5 | 4.3 | (148.2 | ) | (82.2) | - | - | |||||||||||||||||||||||||||||
Acquisition transaction and integration costs (d) | 25.6 | 5.9 | 83.9 | 25.4 | - | - | - | - | 16.0 | 5.6 | ||||||||||||||||||||||||||||||
Restructuring charges (e) | 77.6 | 14.6 | 82.7 | 21.4 | 224.1 | 70.2 | 229.8 | 69.0 | 343.5 | 125.8 | ||||||||||||||||||||||||||||||
Project-related costs (e) | 1.3 | 0.2 | 11.3 | 3.3 | 43.9 | 15.7 | 57.5 | 20.7 | 13.2 | 4.9 | ||||||||||||||||||||||||||||||
Asset impairments (e) | 207.4 | 47.7 | 96.9 | 32.0 | - | - | - | - | 260.0 | 83.1 | ||||||||||||||||||||||||||||||
Hyperinflationary accounting (f) | 3.2 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Investment valuation adjustments (g) | (22.8 | ) | (5.2) | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Legal recovery (h) | (16.2 | ) | (5.4) | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Venezuela currency devaluation | - | - | - | - | - | - | - | - | 8.0 | - | ||||||||||||||||||||||||||||||
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As adjusted | $ | 2,424.1 | $ | 527.6 | $ | 2,378.3 | $ | 612.0 | $ | 2,538.9 | $ | 740.3 | $ | 2,479.9 | $ | 739.5 | $ | 2,492.3 | $ | 760.8 | ||||||||||||||||||||
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Effective tax rate: | ||||||||||||||||||||||||||||||||||||||||
As reported | 17.7% | 2.7% | 28.8% | 31.4% | 33.3% | |||||||||||||||||||||||||||||||||||
As adjusted | 21.8% | 25.7% | 29.2% | 29.8% | 30.5% | |||||||||||||||||||||||||||||||||||
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Sum of adjustments to income taxes | $ | 159.8 | $ | 554.7 | $ | 85.1 | $ | (15.7) | $ | 174.0 | ||||||||||||||||||||||||||||||
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Average number of common shares - diluted EPS | 605.4 | 585.7 | 598.0 | 611.9 | 618.8 | |||||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||||||
Impact of income tax adjustments on Adjusted diluted EPS | $ | (0.26) | $ | (0.95) | $ | (0.14) | $ | 0.03 | $ | (0.28) | ||||||||||||||||||||||||||||||
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Operating profit as reported Mark-to-market effects (a) Divestitures loss (gain) (b) Acquisition transaction and integration costs (b) Restructuring charges (c) Project-related costs (c) Asset impairments (c) Hyperinflationary accounting (d) Investment valuation adjustments (e) Legal recovery (f) Venezuela currency devaluation Adjusted operating profit Fiscal Year Fiscal Year Percent of Net Sales 2019 2018 2017 2016 2015 $ 2,515.9 14.9 % $ 2,419.9 15.4 % $ 2,492.1 16.0 % $ 2,719.1 16.4 % $ 2,071.8 11.8 % 36.0 0.2 % (32.1 ) (0.2)% (13.9 ) (0.1)% (62.8 ) (0.4)% 89.7 0.5 % 30.0 0.2 % - - % 6.5 - % (148.2 ) (0.9)% - - % 25.6 0.1 % 34.0 0.2 % - - % - - % 16.0 0.1 % 77.6 0.5 % 82.7 0.5 % 221.9 1.4 % 209.3 1.3% 305.7 1.7 % 1.3 - % 11.3 0.1 % 43.9 0.3 % 57.5 0.4% 13.2 0.1 % 207.4 1.2 % 96.9 0.6 % - - % - - % 260.0 1.5 % 3.2 - % - - % - - % - - % - - % (22.8 ) (0.1)% - - % - - % - - % - - % (16.2 ) (0.1)% - - % - - % - - % - - % - - % - - % - - % - - % 8.0 - % $ 2,858.0 16.9 % $ 2,612.7 16.6 % $ 2,750.5 17.6 % $ 2,774.9 16.8 % $ 2,764.4 15.7 % (a)See Note 7 to the Consolidated Financial Statements in Item 8 of this report.(b)See Note 3 to the Consolidated Financial Statements in Item 8 of this report.(c)See Note 4 to the Consolidated Financial Statements in Item 8 of this report.(d)Impact of hyperinflationary accounting for our Argentina subsidiary, which was sold in the third quarter of fiscal 2019.(e)Valuation gains on certain corporate investments.(f)Legal recovery related to our Yoplait SAS subsidiary.Operating Profit operating profit
Rate
Our adjusted operating profitmarkets.
| Fiscal Year | ||||||||||||
| 2019 | 2018 | Change | ||||||||||
Operating profit as reported | $ | 2,515.9 | $ | 2,419.9 | 4 % | |||||||
Mark-to-market effects (a) | 36.0 | (32.1 | ) | |||||||||
Divestitures loss (b) | 30.0 | - | ||||||||||
Acquisition transaction and integration costs (b) | 25.6 | 34.0 | ||||||||||
Restructuring charges (c) | 77.6 | 82.7 | ||||||||||
Project-related costs (c) | 1.3 | 11.3 | ||||||||||
Asset impairments (c) | 207.4 | 96.9 | ||||||||||
Hyperinflationary accounting (d) | 3.2 | - | ||||||||||
Investment valuation adjustments (e) | (22.8 | ) | - | |||||||||
Legal recovery (f) | (16.2 | ) | - | |||||||||
| ||||||||||||
Adjusted operating profit | $ | 2,858.0 | $ | 2,612.7 | 9 % | |||||||
| ||||||||||||
Foreign currency exchange impact | (1) pt | |||||||||||
| ||||||||||||
Adjusted operating profit growth, on a constant-currency basis | 10 % | |||||||||||
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Fiscal 2022 Percentage change in |
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NetDebt-to-Adjusted Earnings before Net Interest, Income Taxes, Depreciation and Amortization (EBITDA) Ratio
We believe that this measure provides useful information to investors because it is an indicator of our ability to incur additional debt and to service our existing debt. The reconciliation of adjusted EBITDA to net earnings attributable to General Mills on a pro forma basis, its GAAP equivalent, as well as the calculation of the netdebt-to-adjusted EBITDA ratio are as follows:
| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
Total debt (a) | $ | 14,490.0 | $ | 15,818.6 | ||||
Cash | 450.0 | 399.0 | ||||||
| ||||||||
Net debt | $ | 14,040.0 | $ | 15,419.6 | ||||
| ||||||||
Net earnings attributable to General Mills, as reported (b) | $ | 1,752.7 | $ | 2,252.4 | ||||
Net earnings attributable to redeemable and noncontrolling interests | 33.5 | 32.0 | ||||||
After-tax earnings from joint ventures | (72.0 | ) | (84.7 | ) | ||||
Income taxes | 367.8 | 104.3 | ||||||
| ||||||||
Earnings before income taxes andafter-tax earnings from joint ventures | 2,082.0 | 2,304.0 | ||||||
Interest, net | 521.8 | 527.8 | ||||||
Depreciation and amortization | 620.1 | 642.6 | ||||||
| ||||||||
EBITDA | 3,223.9 | 3,474.4 | ||||||
Asset impairments (c) | 207.4 | 96.9 | ||||||
Restructuring charges (c) | 77.6 | 82.7 | ||||||
Project-related costs (c) | 1.3 | 11.3 | ||||||
Mark-to-market effects (d) | 36.0 | (32.1 | ) | |||||
Divestitures loss (e) | 30.0 | - | ||||||
Acquisition integration costs (e) | 25.6 | - | ||||||
Investment valuation adjustments (f) | (22.8 | ) | - | |||||
Legal recovery (g) | (16.2 | ) | - | |||||
Hyperinflationary accounting (h) | 3.2 | - | ||||||
| ||||||||
Adjusted EBITDA | $ | 3,566.0 | $ | 3,633.2 | ||||
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Netdebt-to-adjusted EBITDA ratio | 3.9 | 4.2 | ||||||
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Forward-Looking Financial Measures
Our fiscal 2020 outlook for organic net sales growth and adjusted operating profit and adjusted diluted EPS arenon-GAAP financial measures that exclude, or have otherwise been adjusted for, items impacting comparability, including the effectas reported
perception
Item 7A Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk stemming from changes in interest and foreign exchange rates and commodity and equity prices. Changes in these factors could cause fluctuations in our earnings and cash flows. In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under established policies that place clear controls on these activities. The counterparties in these transactions are generally highly rated institutions. We establish credit limits for each counterparty. Our hedging transactions include but are not limited to a variety of derivative financial instruments. For information on interest rate, foreign exchange, commodity price, and equity instrument risk, please see Note 7 to the Consolidated Financial Statements in Item
VALUE AT RISK
The estimates in the table below are intended to measure the maximum potential fair value we could lose in one day from adverse changes in market interest rates, foreign exchange rates, commodity prices, and equity prices under normal market conditions. A Monte Carlovalue-at-risk (VAR) methodology was used to quantify the market risk for our exposures. The models assumed normal market conditions and used a 95 percent confidence level.
The VAR calculation used historical interest and foreign exchange rates, and commodity and equity prices from the past year to estimate the potential volatility and correlation of these rates in the future. The market data were drawn from the RiskMetrics™ data set. The calculations are not intended to represent actual losses in fair value that we expect to incur. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, we would expect that any loss or gain in the fair value of our derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposure. The positions included in the calculations were: debt; investments; interest rate swaps; foreign exchange forwards; commodity swaps, futures, and options; and equity instruments. The calculations do not include the underlying foreign exchange and commodities or equity-related positions that are offset by these market-risk-sensitive instruments.
The table below presents the estimated maximum potential VAR arising from aone-day loss in fair value for our interest rate, foreign currency, commodity, and equity market-risk-sensitive instruments outstanding as of May 26, 2019 and May 27, 2018, and the average fair value impact during the year ended May 26, 2019.
| Fair Value Impact | ||||||||||||
| In Millions | May 26, 2019 | Average during fiscal 2019 | May 27, 2018 | |||||||||
Interest rate instruments | $ | 74.4 | $ | 46.1 | $ | 33.2 | ||||||
Foreign currency instruments | 16.8 | 19.0 | 21.3 | |||||||||
Commodity instruments | 4.1 | 2.5 | 1.9 | |||||||||
Equity instruments | 2.3 | 2.2 | 2.0 | |||||||||
| ||||||||||||
2023.
Basis for Opinions
The
accordance with generally
accepted accounting| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Net sales | $ | 16,865.2 | $ | 15,740.4 | $ | 15,619.8 | ||||||
Cost of sales | 11,108.4 | 10,304.8 | 10,052.0 | |||||||||
Selling, general, and administrative expenses | 2,935.8 | 2,850.1 | 2,888.8 | |||||||||
Divestitures loss | 30.0 | - | 6.5 | |||||||||
Restructuring, impairment, and other exit costs | 275.1 | 165.6 | 180.4 | |||||||||
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| |||||||
Operating profit | 2,515.9 | 2,419.9 | 2,492.1 | |||||||||
Benefit plannon-service income | (87.9) | (89.4) | (74.3) | |||||||||
Interest, net | 521.8 | 373.7 | 295.1 | |||||||||
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|
|
|
| |||||||
Earnings before income taxes andafter-tax earnings from joint ventures | 2,082.0 | 2,135.6 | 2,271.3 | |||||||||
Income taxes | 367.8 | 57.3 | 655.2 | |||||||||
After-tax earnings from joint ventures | 72.0 | 84.7 | 85.0 | |||||||||
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|
|
|
|
| |||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | 1,786.2 | 2,163.0 | 1,701.1 | |||||||||
Net earnings attributable to redeemable and noncontrolling interests | 33.5 | 32.0 | 43.6 | |||||||||
|
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| |||||||
Net earnings attributable to General Mills | $ | 1,752.7 | $ | 2,131.0 | $ | 1,657.5 | ||||||
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| |||||||
Earnings per share - basic | $ | 2.92 | $ | 3.69 | $ | 2.82 | ||||||
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| |||||||
Earnings per share - diluted | $ | 2.90 | $ | 3.64 | $ | 2.77 | ||||||
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| |||||||
Dividends per share | $ | 1.96 | $ | 1.96 | $ | 1.92 | ||||||
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| |||||||
| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 1,786.2 | $ | 2,163.0 | $ | 1,701.1 | ||||||
Other comprehensive income (loss), net of tax: | ||||||||||||
Foreign currency translation | (82.8) | (37.0) | 6.3 | |||||||||
Net actuarial (loss) income | (253.4) | 140.1 | 197.9 | |||||||||
Other fair value changes: | ||||||||||||
Securities | - | 1.2 | 0.8 | |||||||||
Hedge derivatives | 12.1 | (50.8) | 53.3 | |||||||||
Reclassification to earnings: | ||||||||||||
Securities | (2.0) | (5.1) | - | |||||||||
Hedge derivatives | 0.9 | 17.4 | (25.7) | |||||||||
Amortization of losses and prior service costs | 84.6 | 117.6 | 122.5 | |||||||||
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| |||||||
Other comprehensive (loss) income, net of tax | (240.6) | 183.4 | 355.1 | |||||||||
|
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|
|
| |||||||
Total comprehensive income | 1,545.6 | 2,346.4 | 2,056.2 | |||||||||
Comprehensive (loss) income attributable to redeemable and noncontrolling interests | (10.7) | 70.5 | 31.0 | |||||||||
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| |||||||
Comprehensive income attributable to General Mills | $ | 1,556.3 | $ | 2,275.9 | $ | 2,025.2 | ||||||
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| |||||||
May 26, | May 27, | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 450.0 | $ | 399.0 | ||||
Receivables | 1,679.7 | 1,684.2 | ||||||
Inventories | 1,559.3 | 1,642.2 | ||||||
Prepaid expenses and other current assets | 497.5 | 398.3 | ||||||
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| |||||
Total current assets | 4,186.5 | 4,123.7 | ||||||
Land, buildings, and equipment | 3,787.2 | 4,047.2 | ||||||
Goodwill | 13,995.8 | 14,065.0 | ||||||
Other intangible assets | 7,166.8 | 7,445.1 | ||||||
Other assets | 974.9 | 943.0 | ||||||
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| |||||
Total assets | $ | 30,111.2 | $ | 30,624.0 | ||||
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| |||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,854.1 | $ | 2,746.2 | ||||
Current portion of long-term debt | 1,396.5 | 1,600.1 | ||||||
Notes payable | 1,468.7 | 1,549.8 | ||||||
Other current liabilities | 1,367.8 | 1,445.8 | ||||||
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| |||||
Total current liabilities | 7,087.1 | 7,341.9 | ||||||
Long-term debt | 11,624.8 | 12,668.7 | ||||||
Deferred income taxes | 2,031.0 | 2,003.8 | ||||||
Other liabilities | 1,448.9 | 1,341.0 | ||||||
|
|
|
| |||||
Total liabilities | 22,191.8 | 23,355.4 | ||||||
|
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| |||||
Redeemable interest | 551.7 | 776.2 | ||||||
Stockholders’ equity: | ||||||||
Common stock, 754.6 shares issued, $0.10 par value | 75.5 | 75.5 | ||||||
Additionalpaid-in capital | 1,386.7 | 1,202.5 | ||||||
Retained earnings | 14,996.7 | 14,459.6 | ||||||
Common stock in treasury, at cost, shares of 152.7 and 161.5 | (6,779.0) | (7,167.5) | ||||||
Accumulated other comprehensive loss | (2,625.4) | (2,429.0) | ||||||
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| |||||
Total stockholders’ equity | 7,054.5 | 6,141.1 | ||||||
Noncontrolling interests | 313.2 | 351.3 | ||||||
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| |||||
Total equity | 7,367.7 | 6,492.4 | ||||||
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| |||||
Total liabilities and equity | $ | 30,111.2 | $ | 30,624.0 | ||||
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| |||||
| $.10 Par Value Common Stock
(One Billion Shares Authorized) | ||||||||||||||||||||||||||||||||||||||||
| Issued | Treasury | |||||||||||||||||||||||||||||||||||||||
| Shares | Par Amount | Additional Paid-In Capital | Shares | Amount | Retained Earnings | Accumulated Other | Non- controlling | Total Equity | Redeemable Interest | |||||||||||||||||||||||||||||||
Balance as of May 29, 2016 |
|
754.6 |
|
$ |
75.5 |
|
$ |
1,177.0 |
|
|
(157.8 |
) |
$ |
(6,326.6 |
) |
$ |
12,616.5 |
|
$ |
(2,612.2 |
) |
$ |
376.9 |
|
$ |
5,307.1 |
|
$ |
845.6 |
| ||||||||||
Total comprehensive income | 1,657.5 | 367.7 | 13.8 | 2,039.0 | 17.2 | |||||||||||||||||||||||||||||||||||
Cash dividends declared ($1.92 per share) | (1,135.1 | ) | (1,135.1 | ) | ||||||||||||||||||||||||||||||||||||
Shares purchased | (25.4 | ) | (1,651.5 | ) | (1,651.5 | ) | ||||||||||||||||||||||||||||||||||
Stock compensation plans (includes income tax benefits of $64.1) | 3.6 | 5.5 | 215.2 | 218.8 | ||||||||||||||||||||||||||||||||||||
Unearned compensation related to stock unit awards | (78.5 | ) | (78.5 | ) | ||||||||||||||||||||||||||||||||||||
Earned compensation | 94.9 | 94.9 | ||||||||||||||||||||||||||||||||||||||
Increase in redemption value of redeemable interest | (75.9 | ) | (75.9 | ) | 75.9 | |||||||||||||||||||||||||||||||||||
Acquisition of interest in subsidiary | (0.2 | ) | 0.1 | (0.1 | ) | |||||||||||||||||||||||||||||||||||
Distributions to redeemable and noncontrolling interest holders | (33.2 | ) | (33.2 | ) | (27.8) | |||||||||||||||||||||||||||||||||||
Balance as of May 28, 2017 | 754.6 | 75.5 | 1,120.9 | (177.7 | ) | (7,762.9 | ) | 13,138.9 | (2,244.5 | ) | 357.6 | 4,685.5 | 910.9 | |||||||||||||||||||||||||||
Total comprehensive income | 2,131.0 | 144.9 | 26.9 | 2,302.8 | 43.6 | |||||||||||||||||||||||||||||||||||
Cash dividends declared ($1.96 per share) | (1,139.7 | ) | (1,139.7 | ) | ||||||||||||||||||||||||||||||||||||
Shares purchased | (10.9 | ) | (601.6 | ) | (601.6 | ) | ||||||||||||||||||||||||||||||||||
Shares issued | (39.1 | ) | 22.7 | 1,009.0 | 969.9 | |||||||||||||||||||||||||||||||||||
Stock compensation plans | (57.9 | ) | 4.4 | 188.0 | 130.1 | |||||||||||||||||||||||||||||||||||
Unearned compensation related to stock unit awards | (58.1 | ) | (58.1 | ) | ||||||||||||||||||||||||||||||||||||
Earned compensation | 77.0 | 77.0 | ||||||||||||||||||||||||||||||||||||||
Decrease in redemption value of redeemable interest | 159.7 | 159.7 | (159.7) | |||||||||||||||||||||||||||||||||||||
Distributions to redeemable and noncontrolling interest holders | (33.2 | ) | (33.2 | ) | (18.6) | |||||||||||||||||||||||||||||||||||
Reclassification of certain income tax effects | 329.4 | (329.4 | ) | - | ||||||||||||||||||||||||||||||||||||
Balance as of May 27, 2018 | 754.6 | 75.5 | 1,202.5 | (161.5 | ) | (7,167.5 | ) | 14,459.6 | (2,429.0 | ) | 351.3 | 6,492.4 | 776.2 | |||||||||||||||||||||||||||
Total comprehensive income (loss) | 1,752.7 | (196.4 | ) | 0.4 | 1,556.7 | (11.1) | ||||||||||||||||||||||||||||||||||
Cash dividends declared ($1.96 per share) | (1,181.7 | ) | (1,181.7 | ) | ||||||||||||||||||||||||||||||||||||
Shares purchased | - | (1.1 | ) | (1.1 | ) | |||||||||||||||||||||||||||||||||||
Stock compensation plans | (96.4 | ) | 8.8 | 389.6 | 293.2 | |||||||||||||||||||||||||||||||||||
Unearned compensation related to stock unit awards | (71.3 | ) | (71.3 | ) | ||||||||||||||||||||||||||||||||||||
Earned compensation | 82.8 | 82.8 | ||||||||||||||||||||||||||||||||||||||
Increase in investment in redeemable interest | - | 55.7 | ||||||||||||||||||||||||||||||||||||||
Decrease in redemption value of redeemable interest | 269.1 | 269.1 | (269.1) | |||||||||||||||||||||||||||||||||||||
Distributions to redeemable and noncontrolling interest holders | (38.5 | ) | (38.5 | ) | ||||||||||||||||||||||||||||||||||||
Adoption of revenue recognition accounting requirements | (33.9 | ) | (33.9 | ) | ||||||||||||||||||||||||||||||||||||
Balance as of May 26, 2019 | 754.6 | $ | 75.5 | $ | 1,386.7 | (152.7 | ) | $ | (6,779.0 | ) | $ | 14,996.7 | $ | (2,625.4 | ) | $ | 313.2 | $ | 7,367.7 | $ | 551.7 | |||||||||||||||||||
| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Cash Flows - Operating Activities | ||||||||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 1,786.2 | $ | 2,163.0 | $ | 1,701.1 | ||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 620.1 | 618.8 | 603.6 | |||||||||
After-tax earnings from joint ventures | (72.0) | (84.7) | (85.0) | |||||||||
Distributions of earnings from joint ventures | 86.7 | 113.2 | 75.6 | |||||||||
Stock-based compensation | 84.9 | 77.0 | 95.7 | |||||||||
Deferred income taxes | 93.5 | (504.3) | 183.9 | |||||||||
Pension and other postretirement benefit plan contributions | (28.8) | (31.8) | (45.4) | |||||||||
Pension and other postretirement benefit plan costs | 6.1 | 4.6 | 35.7 | |||||||||
Divestitures loss | 30.0 | - | 13.5 | |||||||||
Restructuring, impairment, and other exit costs | 235.7 | 126.0 | 117.0 | |||||||||
Changes in current assets and liabilities, excluding the effects of acquisitions and divestitures | (7.5) | 542.1 | (194.2) | |||||||||
Other, net | (27.9) | (182.9) | (86.3) | |||||||||
|
|
|
|
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| |||||||
Net cash provided by operating activities | 2,807.0 | 2,841.0 | 2,415.2 | |||||||||
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| |||||||
Cash Flows - Investing Activities | ||||||||||||
Purchases of land, buildings, and equipment | (537.6) | (622.7) | (684.4) | |||||||||
Acquisition, net of cash acquired | - | (8,035.8) | - | |||||||||
Investments in affiliates, net | 0.1 | (17.3) | 3.3 | |||||||||
Proceeds from disposal of land, buildings, and equipment | 14.3 | 1.4 | 4.2 | |||||||||
Proceeds from divestitures | 26.4 | - | 17.5 | |||||||||
Exchangeable note | - | - | 13.0 | |||||||||
Other, net | (59.7) | (11.0) | (0.5) | |||||||||
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| |||||||
Net cash used by investing activities | (556.5) | (8,685.4) | (646.9) | |||||||||
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| |||||||
Cash Flows - Financing Activities | ||||||||||||
Change in notes payable | (66.3) | 327.5 | 962.4 | |||||||||
Issuance of long-term debt | 339.1 | 6,550.0 | 1,072.1 | |||||||||
Payment of long-term debt | (1,493.8) | (600.1) | (1,000.0) | |||||||||
Proceeds from common stock issued on exercised options | 241.4 | 99.3 | 112.6 | |||||||||
Proceeds from common stock issued | - | 969.9 | - | |||||||||
Purchases of common stock for treasury | (1.1) | (601.6) | (1,651.5) | |||||||||
Dividends paid | (1,181.7) | (1,139.7) | (1,135.1) | |||||||||
Investments in redeemable interest | 55.7 | - | - | |||||||||
Distributions to noncontrolling and redeemable interest holders | (38.5) | (51.8) | (61.0) | |||||||||
Other, net | (31.2) | (108.0) | (46.9) | |||||||||
|
|
|
|
|
| |||||||
Net cash provided (used) by financing activities | (2,176.4) | 5,445.5 | (1,747.4) | |||||||||
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| |||||||
Effect of exchange rate changes on cash and cash equivalents | (23.1) | 31.8 | (18.5) | |||||||||
|
|
|
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|
| |||||||
Increase (decrease) in cash and cash equivalents | 51.0 | (367.1) | 2.4 | |||||||||
Cash and cash equivalents - beginning of year | 399.0 | 766.1 | 763.7 | |||||||||
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| |||||||
Cash and cash equivalents - end of year | $ | 450.0 | $ | 399.0 | $ | 766.1 | ||||||
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| |||||||
Cash Flow from Changes in Current Assets and Liabilities, excluding the effects of acquisitions and divestitures: | ||||||||||||
Receivables | $ | (42.7) | $ | (122.7) | $ | (69.2) | ||||||
Inventories | 53.7 | 15.6 | (61.5) | |||||||||
Prepaid expenses and other current assets | (114.3) | (10.7) | 16.6 | |||||||||
Accounts payable | 162.4 | 575.3 | 99.5 | |||||||||
Other current liabilities | (66.6) | 84.6 | (179.6) | |||||||||
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Changes in current assets and liabilities | $ | (7.5) | $ | 542.1 | $ | (194.2) | ||||||
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independent of
other asset groups.Measurement ofan impairmentloss wouldbe basedon theused
Redeemable Interest
We have a 51 percent controlling interest in Yoplait SAS, a consolidated entity. Sodiaal International (Sodiaal) holds the remaining 49 percent interest in Yoplait SAS. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. This put option requires us to classify Sodiaal’s interest as a redeemable interest outside of equity on our Consolidated Balance Sheets for as long as the put is exercisable by Sodiaal. When the put is no longer exercisable, the redeemable interest will be reclassified to noncontrolling interests on our Consolidated Balance Sheets. We adjust the value of the redeemable interest through additionalpaid-in capital on our Consolidated Balance Sheets quarterly to the redeemable interest’s redemption value, which approximates its fair value. During the second and fourth quarters of fiscal 2019, we adjusted the redeemable interest’s redemption value based on a discounted cash flow model. The significant assumptions used to estimate the redemption value include projected revenue growth and profitability from our long-range plan, capital spending, depreciation, taxes, foreign currency exchange rates, and a discount rate.
We
recognize the underfundedor overfunded statusof a definedbenefit pension planas an assetor liability andrecognize changesinIn fiscal 2018, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans and the supplemental pension plans that resulted in the spinoff of a portion of the General Mills Pension Plan (the Plan) and the 2005 Supplemental Retirement Plan and the Supplemental Retirement Plan (Grandfathered) (together, the Supplemental Plans) into new plans effective May 31, 2018. The benefits offered to the plans’ participants were unchanged. The result of the reorganization was the creation of the General Mills Pension Plan I (Plan I) and the 2005 Supplemental Retirement Plan I and the Supplemental Retirement Plan I (Grandfathered) (together, the Supplemental Plans I). The reorganization was made to facilitate a targeted investment strategy over time and to provide additional flexibility in evaluating opportunities to reduce risk and volatility. Actuarial gains and losses associated with the Plan and the Supplemental Plans are amortized over the average remaining service period of the active participants. Actuarial gains and losses associated with the Plan I and the Supplemental Plans I are amortized over the average remaining life of the participants. Please refer to Note 13 for a description of our defined benefit pension, other postretirement benefit, and postemployment benefit plans.
In the first quarter of fiscal 2019, we adopted new accounting requirements for the recognition of revenue from contracts with customers. Under the new standard, we apply a principles-based five step model to recognize revenue upon the transfer of control of promised goods to customers and in an amount that reflects the consideration for which we expect to be entitled to in exchange for those goods. The principles-based five step model includes: 1) identifying the contract(s) with a customer; 2) identifying the performance obligations in the contract; 3) determining the transaction price; 4) allocating the transaction price to the performance obligations in the contract; and 5) recognizing revenue when (or as) we satisfy a performance obligation. We utilized a comprehensive approach to evaluate and document the impact of the guidance on our current accounting policies and practices. We did not identify any material differences resulting from applying the new requirements to our revenue contracts. Additionally, we did not identify any significant changes to our business processes, systems, and controls to support recognition andannual disclosure requirements under for
We recorded a $33.9 million cumulative effect adjustment net of income tax effects to the opening balance of fiscal 2019 retained earnings, a decrease to deferred income taxes of $11.4 million, and an increase to other current liabilities of $45.3 million related to the timing of recognition of certain promotional expenditures.
In the third quarter of fiscal 2018, we adopted new accounting requirements that codify Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 118, as it relates to allowing for recognition of provisional amounts related to the U.S. Tax Cuts and Jobs Act (TCJA) in the event that the accounting is not complete and a reasonable estimate can be made. Where necessary information is not available, prepared, or analyzed to determine a reasonable estimate, no provisional amount should be recorded.retrospective
In the third quarter of fiscal 2018, we adopted new accounting requirements that provide the option to reclassify stranded income tax effects resulting from the TCJA from AOCI to retained earnings. We elected to reclassify the stranded income tax effects of the TCJA of $329.4 million from AOCI to retained earnings. This reclassification consisted of deferred taxes originally recorded in AOCI that exceeded the newly enacted federal corporate tax rate. The new accounting requirements allowed for adjustments to reclassification amounts in subsequent periods as a result of changes to the provisional amounts recorded.
In the first quarter of fiscal 2018, we adopted new requirements for the accounting and presentation of stock-based payments. The
In the first quarter of fiscal 2018, we adopted new accounting requirements which permit reporting entities to measure a goodwill impairment loss by the amount by which a reporting unit’s carrying value exceeds the reporting unit’s fair value. Previously, goodwill impairment losses were required to be measured by determining the implied fair value of goodwill. Our annual goodwill impairment test was performed as of the first day of the second quarter of fiscal 2018, and the adoption of this guidance
Cash Flows.
During the third quarter of
yogurt business in China and simultaneously entered into a new Yoplait license agreement with the purchaser for their use of theYoplait brand. We recorded apre-tax gain of $5.4 million.
We consolidated Blue Buffalo into our Consolidated Balance Sheets and recorded goodwillas of $5.3 billion, an indefinite-lived intangible assetMay
The consolidated results of Blue Buffalo are reported as our Pet operating segment on aone-month lag.
The following unaudited supplemental
| Unaudited | ||||||||
| Fiscal Year | ||||||||
| In Millions | 2018 | 2017 | ||||||
Net sales | $ | 17,057.4 | $ | 16,772.9 | ||||
Net earnings attributable to General Mills | 2,252.4 | 1,540.2 | ||||||
The fiscal 2017 pro forma amounts include transaction and integration costs of $83.9 million and the purchase accounting adjustment to record inventory at fair value of $52.7 million. The fiscal 2017 and fiscal 2018 pro forma amounts include interest expense of $238.7 million on the debt issued to finance the transaction and amortization expense of $13.5 million based on the estimated fair value and useful life of the customer relationships intangible asset. Additionally, the pro forma amounts include an increase to cost of sales by $1.6 million
Brazil.
ASSET IMPAIRMENTS
In fiscal 2019, we recorded a $192.6 million charge related to the impairment of ourProgresso, Food Should Taste Good,and Mountain Highbrand intangible assets in restructuring, impairment, and other exit costs. Please see Note 6 for additional information.
In fiscal 2019, we recorded a $14.8 million charge in restructuring, impairment, and other exit costs related to the impairment of certain manufacturing assets in our North America Retail and Asia & Latin America segments.
In fiscal 2018, we recorded a $96.9 million charge related to the impairment of ourYoki, Mountain High, andImmaculate Baking brand intangible assets in restructuring, impairment, and other exit costs.
RESTRUCTURING INITIATIVES
We view
our restructuring activities as actionsthat help us meet our long-termgrowthCharges
| Expense, in Millions | ||||
Targeted actions in global supply chain | $ | 80.2 | ||
Charges associated with restructuring actions previously announced | (2.6) | |||
Total | $ | 77.6 | ||
In fiscal 2019, we approved
2023
In fiscal 2019, we paid $49.3 million in cash related to restructuring initiatives in fiscal 2019.
Charges
| Expense, in Millions | ||||
Global cost savings initiatives | $ | 49.3 | ||
Charges associated with restructuring actions previously announced | 33.4 | |||
Total | $ | 82.7 | ||
| Expense, in Millions | ||||
Global reorganization | $ | 72.1 | ||
Restructuring of certain international product lines | 45.1 | |||
Closure of Vineland, New Jersey plant | 41.4 | |||
Closure of Melbourne, Australia plant | 21.9 | |||
Charges associated with restructuring actions previously announced | 43.6 | |||
Total | $ | 224.1 | ||
$
| Fiscal | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Restructuring, impairment, and other exit costs | $ | 275.1 | $ | 165.6 | $ | 180.4 | ||||||
Cost of sales | 9.9 | 14.0 | 41.5 | |||||||||
Total restructuring charges | 285.0 | 179.6 | 221.9 | |||||||||
Project-related costs classified in cost of sales | $ | 1.3 | $ | 11.3 | $ | 43.9 | ||||||
| In Millions | Severance | Contract Termination | Other Exit Costs | Total | ||||||||||||
Reserve balance as of May 29, 2016 | $ | 73.6 | $ | 1.5 | $ | 1.5 | $ | 76.6 | ||||||||
Fiscal 2017 charges, including foreign currency translation | 95.0 | 0.9 | 8.1 | 104.0 | ||||||||||||
Utilized in fiscal 2017 | (86.8 | ) | (1.7 | ) | (7.1 | ) | (95.6 | ) | ||||||||
Reserve balance as of May 28, 2017 | 81.8 | 0.7 | 2.5 | 85.0 | ||||||||||||
Fiscal 2018 charges, including foreign currency translation | 40.8 | 0.2 | (0.7 | ) | 40.3 | |||||||||||
Utilized in fiscal 2018 | (56.6 | ) | (0.8 | ) | (1.1 | ) | (58.5 | ) | ||||||||
Reserve balance as of May 27, 2018 | 66.0 | 0.1 | 0.7 | 66.8 | ||||||||||||
Fiscal 2019 charges, including foreign currency translation | 7.7 | 2.5 | 1.4 | 11.6 | ||||||||||||
Utilized in fiscal 2019 | (37.2 | ) | (2.6 | ) | (2.1 | ) | (41.9 | ) | ||||||||
Reserve balance as of May 26, 2019 | $ | 36.5 | $ | - | $ | - | $ | 36.5 | ||||||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Cumulative investments | $ | 452.9 | $ | 499.6 | ||||
Goodwill and other intangibles | 472.1 | 488.7 | ||||||
Aggregate advances included in cumulative investments | 249.0 | 295.3 | ||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Sales to joint ventures | $ | 4.2 | $ | 7.4 | $ | 7.0 | ||||||
Net (repayments) advances | (0.1 | ) | 17.3 | (3.3 | ) | |||||||
Dividends received | 86.7 | 113.2 | 75.6 | |||||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Net sales: | ||||||||||||
CPW | $ | 1,647.7 | $ | 1,734.0 | $ | 1,648.4 | ||||||
HDJ | 396.2 | 430.4 | 435.1 | |||||||||
Total net sales | 2,043.9 | 2,164.4 | 2,083.5 | |||||||||
Gross margin | 744.4 | 853.6 | 865.9 | |||||||||
Earnings before income taxes | 155.4 | 216.2 | 243.3 | |||||||||
Earnings after income taxes | 111.9 | 176.7 | 190.3 | |||||||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Current assets | $ | 895.6 | $ | 938.5 | ||||
Noncurrent assets | 839.2 | 902.5 | ||||||
Current liabilities | 1,517.3 | 1,579.3 | ||||||
Noncurrent liabilities | 77.1 | 72.6 | ||||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Goodwill | $ | 13,995.8 | $ | 14,065.0 | ||||
Other intangible assets: | ||||||||
Intangible assets not subject to amortization: | ||||||||
Brands and other indefinite-lived intangibles | 6,590.8 | 6,818.7 | ||||||
Intangible assets subject to amortization: | ||||||||
Franchise agreements, customer relationships, and other finite-lived intangibles | 786.1 | 811.7 | ||||||
Less accumulated amortization | (210.1 | ) | (185.3 | ) | ||||
Intangible assets subject to amortization | 576.0 | 626.4 | ||||||
Other intangible assets | 7,166.8 | 7,445.1 | ||||||
Total | $ | 21,162.6 | $ | 21,510.1 | ||||
level. See Note 17 for
additional information on| In Millions | North America Retail | Pet | Convenience Stores & Foodservice | Europe & Australia | Asia & Latin America | Joint Ventures | Total | |||||||||||||||||||||
Balance as of May 29, 2016 | $ | 6,410.3 | $ | - | $ | 921.1 | $ | 716.5 | $ | 287.1 | $ | 406.2 | $ | 8,741.2 | ||||||||||||||
Divestiture | - | - | (2.3 | ) | - | - | - | (2.3 | ) | |||||||||||||||||||
Other activity, primarily foreign currency translation | (3.8 | ) | - | - | (15.7 | ) | 25.3 | 2.5 | 8.3 | |||||||||||||||||||
Balance as of May 28, 2017 | 6,406.5 | - | 918.8 | 700.8 | 312.4 | 408.7 | 8,747.2 | |||||||||||||||||||||
Acquisition | - | 5,294.9 | - | - | - | - | 5,294.9 | |||||||||||||||||||||
Other activity, primarily foreign currency translation | 4.1 | - | - | 29.1 | (27.4 | ) | 17.1 | 22.9 | ||||||||||||||||||||
Balance as of May 27, 2018 | 6,410.6 | 5,294.9 | 918.8 | 729.9 | 285.0 | 425.8 | 14,065.0 | |||||||||||||||||||||
Divestitures | - | - | - | - | (0.5 | ) | - | (0.5 | ) | |||||||||||||||||||
Purchase accounting adjustment | - | 5.6 | - | - | - | - | 5.6 | |||||||||||||||||||||
Other activity, primarily foreign currency translation | (4.1 | ) | - | - | (29.5 | ) | (24.3 | ) | (16.4 | ) | (74.3 | ) | ||||||||||||||||
Balance as of May 26, 2019 | $ | 6,406.5 | $ | 5,300.5 | $ | 918.8 | $ | 700.4 | $ | 260.2 | $ | 409.4 | $ | 13,995.8 | ||||||||||||||
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In Millions Total Balance as of May 26, 2019 $ 7,166.8 Other activity, primarilyamortization | ||||
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Our annual goodwill and indefinite-livedforeign currency translation
| In Millions | Impairment Charge | Fair Value as of Nov. 25, 2018 (a) | ||||||
Progresso | $ | 132.1 | $ | 330.0 | ||||
Food Should Taste Good | 45.1 | - | ||||||
Mountain High | 15.4 | - | ||||||
Total | $ | 192.6 | $ | 330.0 | ||||
(a) Level 3 assets in the fair value hierarchy. |
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In fiscal 2018, we recorded a $96.9 million charge related to the impairment of ourYoki, Mountain High, andImmaculate Baking brand intangible assets in restructuring, impairment, and other exit costs.
Significant assumptions used in that assessment included our long-range cash flow projections for the businesses, royalty rates, weighted-average cost of capital rates, and tax rates.
Our Latin America reporting unit and theYokibrand intangible asset had fair values that were not substantially in
| In Millions | Carrying Value of Intangible Asset | Excess Fair Value as of Fiscal 2019 Test Date | ||||||
Latin America | $ | 209.0 | 7% | |||||
Yoki | $ | 49.1 | 10% | |||||
While having significant coverage
The organizational changes
also resulted in changesin certain reporting units,one level below the segmentlevel, and were considered| Cost | Fair Value | Gross Gains | Gross Losses | |||||||||||||||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | |||||||||||||||||||||||||||||||||||
| In Millions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||
Available for sale debt securities | $ | 34.3 | $ | 25.4 | $ | 34.3 | $ | 25.4 | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||||
Equity securities | 0.6 | 0.3 | 18.5 | 3.5 | 17.9 | 3.2 | - | - | ||||||||||||||||||||||||||||||
Total | $ | 34.9 | $ | 25.7 | $ | 52.8 | $ | 28.9 | $ | 17.9 | $ | 3.2 | $ | - | $ | - | ||||||||||||||||||||||
| Marketable Securities | ||||||||
| In Millions | Cost | Fair Value | ||||||
Under 1 year (current) | $ | 34.3 | $ | 34.3 | ||||
Equity securities | 0.6 | 18.5 | ||||||
Total | $ | 34.9 | $ | 52.8 | ||||
The fair value and carrying amounts of long-term debt, including the current portion, were $13,272.8 million and $13,021.3 million, respectively, as of May 26, 2019. 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.
commodities
cost.
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Net gain (loss) onmark-to-market valuation of commodity positions | $ | (39.0 | ) | $ | 14.3 | $ | (22.0 | ) | ||||
Net loss on commodity positions reclassified from unallocated corporate items to segment operating profit | 10.0 | 11.3 | 32.0 | |||||||||
Netmark-to-market revaluation of certain grain inventories | (7.0 | ) | 6.5 | 3.9 | ||||||||
Netmark-to-market valuation of certain commodity positions recognized in unallocated corporate items | $ | (36.0 | ) | $ | 32.1 | $ | 13.9 | |||||
As of May 26, 2019, the net notional value
Fixed Interest Rate Exposures —Fixed-to-floating interest rate swaps are accounted for as fair value hedges with effectiveness assessed based on changes in the fair value of the underlying debt and
incremental
In advance of planned debt financing related to the acquisition of Blue Buffalo, we entered into $3,800.0 million of treasury locks due April 19, 2018, with an average fixed rate of 2.9 percent. All of these treasury locks were cash settled for $43.9 million during the fourth quarter of fiscal 2018, concurrent with the issuance of our $850.0 million5.5-year fixed-rate notes, $800.0 million7-year fixed-rate notes, $1,400.0 million10-year fixed-rate notes, $500.0 million20-year fixed-rate notes, and $650.0 million30-year fixed-rate notes.
In advance of planned debt financing, in fiscal 2018, we entered into $500.0 million of treasury locks due October 15, 2017 with an average fixed rate of 1.8 percent. All of these treasury locks were cash settled for $3.7 million during the second quarter of fiscal 2018, concurrent with the issuance of our $500.0 million5-year fixed-rate notes.
| In Millions | Gain/(Loss) | |||
3.15% notes due December 15, 2021 | $ | (25.3 | ) | |
2.6% notes due October 12, 2022 | 2.5 | |||
1.0% notes due April 27, 2023 | (0.9 | ) | ||
3.7% notes due October 17, 2023 | (1.5 | ) | ||
3.65% notes due February 15, 2024 | 8.4 | |||
4.0% notes due April 17, 2025 | (3.4 | ) | ||
3.2% notes due February 10, 2027 | 13.2 | |||
1.5% notes due April 27, 2027 | (2.6 | ) | ||
4.2% notes due April 17, 2028 | (9.1 | ) | ||
4.55% notes due April 17, 2038 | (10.3 | ) | ||
5.4% notes due June 15, 2040 | (11.8 | ) | ||
4.15% notes due February 15, 2043 | 9.3 | |||
4.7% notes due April 17, 2048 | (13.7 | ) | ||
Netpre-tax hedge loss in AOCI | $ | (45.2 | ) | |
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Pay-floating swaps - notional amount | $ | 500.0 | $ | 500.0 | ||||
Average receive rate | 2.2% | 2.2% | ||||||
Average pay rate | 3.1% | 2.9% | ||||||
Mexican peso, and
.
| May 26, 2019 | May 26, 2019 | |||||||||||||||||||||||||||||||
| Fair Values of Assets | Fair Values of Liabilities | |||||||||||||||||||||||||||||||
| In Millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||
Interest rate contracts (a) (b) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (1.9) | $ | - | $ | (1.9) | ||||||||||||||||
Foreign exchange contracts (c) (d) | - | 12.9 | - | 12.9 | - | (3.3) | - | (3.3) | ||||||||||||||||||||||||
Total | - | 12.9 | - | 12.9 | - | (5.2) | - | (5.2) | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||
Foreign exchange contracts (c) (d) | - | 2.4 | - | 2.4 | - | (1.9) | - | (1.9) | ||||||||||||||||||||||||
Commodity contracts (c) (e) | 1.4 | 5.2 | - | 6.6 | (4.4) | (3.5) | - | (7.9) | ||||||||||||||||||||||||
Grain contracts (c) (e) | - | 6.7 | - | 6.7 | - | (2.3) | - | (2.3) | ||||||||||||||||||||||||
Total | 1.4 | 14.3 | - | 15.7 | (4.4) | (7.7) | - | (12.1) | ||||||||||||||||||||||||
Other assets and liabilities reported at fair value: | ||||||||||||||||||||||||||||||||
Marketable investments (a) (f) | 18.5 | 34.3 | - | 52.8 | - | - | - | - | ||||||||||||||||||||||||
Long-lived assets (g) | - | 19.0 | - | 19.0 | - | - | - | - | ||||||||||||||||||||||||
Indefinite-lived intangible assets (h) | - | - | 330.0 | 330.0 | - | - | - | - | ||||||||||||||||||||||||
Total | 18.5 | 53.3 | 330.0 | 401.8 | - | - | - | - | ||||||||||||||||||||||||
Total assets, liabilities, and derivative positions recorded at fair value | $ | 19.9 | $ | 80.5 | $ | 330.0 | $ | 430.4 | $ | (4.4) | $ | (12.9) | $ | - | $ | (17.3) | ||||||||||||||||
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| Fair Values of Assets | Fair Values of Liabilities | |||||||||||||||||||||||||||||||
| In Millions | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Derivatives designated as hedging instruments: | ||||||||||||||||||||||||||||||||
Interest rate contracts (a) (b) | $ | - | $ | - | $ | - | $ | - | $ | - | $ | (6.6) | $ | - | $ | (6.6) | ||||||||||||||||
Foreign exchange contracts (c) (d) | - | 9.4 | - | 9.4 | - | (6.4) | - | (6.4) | ||||||||||||||||||||||||
Total | - | 9.4 | - | 9.4 | - | (13.0) | - | (13.0) | ||||||||||||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||||||||||||||||
Foreign exchange contracts (c) (d) | - | 2.5 | - | 2.5 | - | (0.8) | - | (0.8) | ||||||||||||||||||||||||
Commodity contracts (c) (e) | 14.7 | 13.0 | - | 27.7 | (0.5) | (0.6) | - | (1.1) | ||||||||||||||||||||||||
Grain contracts (c) (e) | - | 7.1 | - | 7.1 | - | (1.2) | - | (1.2) | ||||||||||||||||||||||||
Total | 14.7 | 22.6 | - | 37.3 | (0.5) | (2.6) | - | (3.1) | ||||||||||||||||||||||||
Other assets and liabilities reported at fair value: | ||||||||||||||||||||||||||||||||
Marketable investments (a) (f) | 3.5 | 25.4 | - | 28.9 | - | - | - | - | ||||||||||||||||||||||||
Long-lived assets (g) | - | 10.0 | - | 10.0 | - | - | - | - | ||||||||||||||||||||||||
Indefinite-lived intangible assets (h) | - | - | 79.0 | 79.0 | - | - | - | - | ||||||||||||||||||||||||
Total | 3.5 | 35.4 | 79.0 | 117.9 | - | - | - | - | ||||||||||||||||||||||||
Total assets, liabilities, and derivative positions recorded at fair value | $ | 18.2 | $ | 67.4 | $ | 79.0 | $ | 164.6 | $ | (0.5) | $ | (15.6) | $ | - | $ | (16.1) | ||||||||||||||||
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| Interest Rate Contracts | Foreign Exchange Contracts | Equity Contracts | Commodity Contracts | Total | ||||||||||||||||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||||||||||||||||
| In Millions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||||||
Derivatives in Cash Flow Hedging Relationships: | ||||||||||||||||||||||||||||||||||||||||
Amount of gain (loss) recognized in other comprehensive income (OCI) (a) | $ | - | $ | (50.5) | $ | 15.7 | $ | (14.6) | $ | - | $ | - | $ | - | $ | - | $ | 15.7 | $ | (65.1) | ||||||||||||||||||||
Amount of net gain (loss) reclassified from AOCI into earnings (a) (b) | (9.0) | 19.3 | 8.4 | (4.2) | - | - | - | - | (0.6) | 15.1 | ||||||||||||||||||||||||||||||
Amount of net gain (loss) recognized in earnings (c) | - | (2.6) | 0.5 | (0.3) | - | - | - | - | 0.5 | (2.9) | ||||||||||||||||||||||||||||||
Derivatives in Fair Value Hedging Relationships: | ||||||||||||||||||||||||||||||||||||||||
Amount of net gain (loss) recognized in earnings (d) | 2.4 | (3.4) | - | - | - | - | - | - | 2.4 | (3.4) | ||||||||||||||||||||||||||||||
Derivatives Not Designated as Hedging Instruments: | ||||||||||||||||||||||||||||||||||||||||
Amount of net gain (loss) recognized in earnings (d) | - | - | 7.5 | (2.8) | 0.7 | 14.3 | (33.6) | 26.9 | (25.4) | 38.4 | ||||||||||||||||||||||||||||||
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| Assets | Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset in the Balance Sheet (e) | Gross Amounts Not Offset in the Balance Sheet (e) | |||||||||||||||||||||||||||||||||||||||||||||||
| In Millions | Gross Amounts of Recognized Assets | Gross Liabilities Offset in the Balance Sheet (a) | Net Assets | Financial Instruments | Cash Collateral Received | Net Amount (c) | Gross Amounts of Recognized Liabilities | Gross in the | Net Amounts of Liabilities (b) | Financial Instruments | Cash Collateral Pledged | Net Amount (d) | ||||||||||||||||||||||||||||||||||||
Commodity contracts | $ | 6.6 | $ | - | $ | 6.6 | $ | (4.9 | ) | $ | - | $ | 1.7 | $ | (7.9 | ) | $ | - | $ | (7.9 | ) | $ | 4.9 | $ | - | $ | (3.0) | |||||||||||||||||||||
Interest rate contracts | - | - | - | - | - | - | (2.2 | ) | - | (2.2 | ) | - | - | (2.2) | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts | 15.3 | - | 15.3 | (5.1 | ) | - | 10.2 | (5.2 | ) | - | (5.2 | ) | 5.1 | - | (0.1) | |||||||||||||||||||||||||||||||||
Equity contracts | 0.7 | - | 0.7 | (0.7 | ) | - | - | (5.8 | ) | - | (5.8 | ) | 0.7 | - | (5.1) | |||||||||||||||||||||||||||||||||
Total | $ | 22.6 | $ | - | $ | 22.6 | $ | (10.7 | ) | $ | - | $ | 11.9 | $ | (21.1 | ) | $ | - | $ | (21.1 | ) | $ | 10.7 | $ | - | $ | (10.4) | |||||||||||||||||||||
| May 27, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Assets | Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Amounts Not Offset in the Balance Sheet (e) | Gross Amounts Not Offset in the Balance Sheet (e) | |||||||||||||||||||||||||||||||||||||||||||||||
| In Millions | Gross Amounts of Recognized Assets | Gross Liabilities Offset in the Balance Sheet (a) | Net Amounts of Assets (b) | Financial Instruments | Cash Collateral Received | Net Amount (c) | Gross Amounts of Recognized Liabilities | Gross in the | Net Amounts of Liabilities (b) | Financial Instruments | Cash Collateral Pledged | Net Amount (d) | ||||||||||||||||||||||||||||||||||||
Commodity contracts | $ | 27.7 | �� | $ | - | $ | 27.7 | $ | (1.1 | ) | $ | - | $ | 26.6 | $ | (1.1 | ) | $ | - | $ | (1.1 | ) | $ | 1.1 | $ | - | $ | - | ||||||||||||||||||||
Interest rate contracts | - | - | - | - | - | - | (6.9 | ) | - | (6.9 | ) | - | - | (6.9) | ||||||||||||||||||||||||||||||||||
Foreign exchange contracts | 11.8 | - | 11.8 | (5.7 | ) | - | 6.1 | (7.2 | ) | - | (7.2 | ) | 5.7 | - | (1.5) | |||||||||||||||||||||||||||||||||
Equity contracts | 3.9 | - | 3.9 | (0.4 | ) | - | 3.5 | (0.4 | ) | - | (0.4 | ) | 0.4 | - | - | |||||||||||||||||||||||||||||||||
Total | $ | 43.4 | $ | - | $ | 43.4 | $ | (7.2 | ) | $ | - | $ | 36.2 | $ | (15.6 | ) | $ | - | $ | (15.6 | ) | $ | 7.2 | $ | - | $ | (8.4) | |||||||||||||||||||||
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| Percent of total | Consolidated | North America Retail | Convenience Stores & Foodservice | Europe & Australia | Asia & Latin America | Pet | ||||||||||||||||||
Walmart (a): | ||||||||||||||||||||||||
Net sales | 20% | 31% | 7% | 1% | 4% | 3% | ||||||||||||||||||
Accounts receivable | 22% | 3% | 1% | 6% | 9% | |||||||||||||||||||
Five largest customers: | ||||||||||||||||||||||||
Net sales | 55% | 45% | 24% | 12% | 69% | |||||||||||||||||||
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We
offercertainsuppliersaccesstothird-partyservicesthatallowthemtoviewourscheduledpaymentsonline.Thethird-party| May 26, 2019 | May 27, 2018 | |||||||||||||||
| In Millions | Notes Payable | Weighted- Average Interest Rate | Notes Payable | Weighted- Average Interest Rate | ||||||||||||
U.S. commercial paper | $ | 1,298.5 | 2.7 | % | $ | 1,213.5 | 2.2% | |||||||||
Financial institutions | 170.2 | 9.0 | 336.3 | 6.2 | ||||||||||||
Total | $ | 1,468.7 | 3.4 | % | $ | 1,549.8 | 3.1% | |||||||||
| In Billions | Facility Amount | Borrowed Amount | ||||||
Credit facility expiring: | ||||||||
May 2022 | $ | 2.7 | $ | - | ||||
June 2019 | 0.2 | - | ||||||
Total committed credit facilities | 2.9 | - | ||||||
Uncommitted credit facilities | 0.7 | 0.2 | ||||||
Total committed and uncommitted credit facilities | $ | 3.6 | $ | 0.2 | ||||
The 29, 2022:
29, 2022.
In February 2019, we repaid $1,150.0 €
In April 2018, we issued $4,800.0 million principal amount of fixed-rate notes. Interest on the notes is payable semi-annually in arrears. We may redeem the notes in whole, or in part, at any time at the applicable redemption price. The notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used to finance a portion of the Blue Buffalo acquisition. The principal amounts of these fixed-rate notes were as follows:
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In April 2018, we issued $1,250.0 million principal amount of floating-rate notes. Interest on the notes is payable quarterly in arrears. The notes are not generally redeemable prior to maturity. These notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds were used to finance a portion of the Blue Buffalo acquisition. The principal amounts of these floating-rate notes were as follows:
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In February 2018, we paid $113.8 million to repurchase $100.0 million of our previously issued 6.39 percent medium term notes due 2023. We recorded the $13.8 million premium paid in the repurchase as net interest expense.
In October 2017, we issued $500.0 million principal amount of 2.6 percent fixed-rate notes due October 12, 2022. Interest on the notes is payable semiannually in arrears. We may redeem the notes in whole, or in part, at any time at the applicable redemption price. The notes are senior unsecured obligations that include a change of control repurchase provision. The net proceeds, together with cash on hand, were used to repay $500.0 million of 1.4 2.1
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
4.2% notes due April 17, 2028 | $ | 1,400.0 | $ | 1,400.0 | ||||
5.65% notes due February 15, 2019 | - | 1,150.0 | ||||||
3.15% notes due December 15, 2021 | 1,000.0 | 1,000.0 | ||||||
3.7% notes due October 17, 2023 | 850.0 | 850.0 | ||||||
Floating-rate notes due April 16, 2021 | 850.0 | 850.0 | ||||||
4.0% notes due April 17, 2025 | 800.0 | 800.0 | ||||||
3.2% notes due February 10, 2027 | 750.0 | 750.0 | ||||||
4.7% notes due April 17, 2048 | 650.0 | 650.0 | ||||||
3.2% notes due April 16, 2021 | 600.0 | 600.0 | ||||||
Euro-denominated 2.1% notes due November 16, 2020 | 560.1 | 582.6 | ||||||
Euro-denominated 1.0% notes due April 27, 2023 | 560.1 | 582.6 | ||||||
Euro-denominated floating-rate notes due January 15, 2020 | 560.1 | 582.6 | ||||||
4.55% notes due April 17, 2038 | 500.0�� | 500.0 | ||||||
2.6% notes due October 12, 2022 | 500.0 | 500.0 | ||||||
5.4% notes due June 15, 2040 | 500.0 | 500.0 | ||||||
4.15% notes due February 15, 2043 | 500.0 | 500.0 | ||||||
3.65% notes due February 15, 2024 | 500.0 | 500.0 | ||||||
2.2% notes due October 21, 2019 | 500.0 | 500.0 | ||||||
Euro-denominated 1.5% notes due April 27, 2027 | 448.1 | 466.1 | ||||||
Floating-rate notes due October 17, 2023 | 400.0 | 400.0 | ||||||
Euro-denominated 0.0% notes due January 15, 2020 | 336.1 | - | ||||||
Euro-denominated floating-rate notes due March 20, 2019 | - | 349.6 | ||||||
Euro-denominated 2.2% notes due June 24, 2021 | 224.0 | 232.8 | ||||||
Medium-term notes, 2.36% to 6.59%, due fiscal 2022 or later | 104.2 | 104.2 | ||||||
Other, including debt issuance costs and capital leases | (71.4) | (81.7) | ||||||
| 13,021.3 | 14,268.8 | |||||||
Less amount due within one year | (1,396.5) | (1,600.1) | ||||||
Total long-term debt | $ | 11,624.8 | $ | 12,668.7 | ||||
| In Millions | ||||
2020 | $ | 1,396.5 | ||
2021 | 2,114.4 | |||
2022 | 1,224.1 | |||
2023 | 1,060.2 | |||
2024 | 1,750.0 | |||
We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal holds the remaining interests in each of the entities. On the acquisition date, we recorded the $904.4 million fair value of Sodiaal’s 49 percent euro-denominated interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. We adjust the value of the redeemable interest through additionalpaid-in capital on our Consolidated Balance Sheets quarterly to the redeemable interest’s redemption value, which approximates its fair value. Yoplait SAS pays dividends annually if it meets certain financial metrics set forth in its shareholders’ agreement. As of May 26, 2019, the redemption value of the euro-denominated redeemable interest was $551.7 million.
On the acquisition dates, we recorded the $281.4 million fair value of Sodiaal’s 50 percent euro-denominated interest in Yoplait Marques SNC and 50 percent Canadian dollar-denominated interest in Liberté Marques Sàrl as noncontrolling interests on our Consolidated Balance Sheets. Yoplait Marques SNC earns a royalty stream through a licensing agreement with Yoplait SAS for the rights to Yoplait and related trademarks. Liberté Marques Sàrl earns a royalty stream through licensing agreements with certain Yoplait group companies for the rights to Liberté and related trademarks. These entities pay dividends annually based on their available cash as of their fiscal year end.
We paid dividends of $22.0 million in fiscal 2019 and $37.7 million in fiscal 2018 to Sodiaal under the terms of the Yoplait SAS, Yoplait Marques SNC, and Liberté Marques Sàrl shareholder agreements.
A subsidiary of Yoplait SAS has entered into an exclusive milk supply agreement for its European operations with Sodiaal at market-determined prices through July 1, 2021. Net purchases totaled $210.8 million for fiscal 2019 and $230.8 million for fiscal 2018.
During the second quarter of fiscal 2019, Sodiaal invested $55.7 million in Yoplait SAS.
subsidiar
y.For financial reporting purposes,
On March 27, 2018, we issued 22.7 million shares of the Company’s common stock, par value $0.10 per share, at a public offering price of $44.00 per share for total proceeds of $1.0 billion. We paid $30.1 million in issuance costs, that were recorded in additionalpaid-in capital. The net proceeds of $969.9 million were used to finance a portion of the acquisition of Blue Buffalo.
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
| ||||||||||||
Shares of common stock | - | 10.9 | 25.4 | |||||||||
Aggregate purchase price | $ | 1.1 | $ | 601.6 | $ | 1,651.5 | ||||||
| ||||||||||||
| Fiscal 2019 | ||||||||||||||||||||
| General Mills | Noncontrolling Interests | Redeemable Interest | ||||||||||||||||||
| In Millions | Pretax | Tax | Net | Net | Net | |||||||||||||||
| ||||||||||||||||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 1,752.7 | $ | 13.9 | $ | 19.6 | ||||||||||||||
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Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation | $ | (38.3) | $ | - | (38.3) | (13.5) | (31.0) | |||||||||||||
Net actuarial loss | (325.6) | 72.2 | (253.4) | - | - | |||||||||||||||
Other fair value changes: | ||||||||||||||||||||
Hedge derivatives | 15.9 | (3.7) | 12.2 | - | (0.1) | |||||||||||||||
Reclassification to earnings: | ||||||||||||||||||||
Securities (a) | (2.6) | 0.6 | (2.0) | - | - | |||||||||||||||
Hedge derivatives (b) | 0.1 | 0.4 | 0.5 | - | 0.4 | |||||||||||||||
Amortization of losses and prior service costs (c) | 107.5 | (22.9) | 84.6 | - | - | |||||||||||||||
| ||||||||||||||||||||
Other comprehensive loss | (243.0) | 46.6 | (196.4) | (13.5) | (30.7) | |||||||||||||||
| ||||||||||||||||||||
Total comprehensive income (loss) | $ | 1,556.3 | $ | 0.4 | $ | (11.1) | ||||||||||||||
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| Fiscal 2018 | ||||||||||||||||||||
| General Mills | Noncontrolling Interests | Redeemable Interest | ||||||||||||||||||
| In Millions | Pretax | Tax | Net | Net | Net | |||||||||||||||
| ||||||||||||||||||||
Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 2,131.0 | $ | 13.4 | $ | 18.6 | ||||||||||||||
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Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation | $ | (76.9 | ) | $ | - | (76.9 | ) | 13.5 | 26.4 | |||||||||||
Net actuarial income | 185.5 | (45.4) | 140.1 | - | - | |||||||||||||||
Other fair value changes: | ||||||||||||||||||||
Securities | 1.8 | (0.6) | 1.2 | - | - | |||||||||||||||
Hedge derivatives | (64.7 | ) | 14.2 | (50.5 | ) | - | (0.3 | ) | ||||||||||||
Reclassification to earnings: | ||||||||||||||||||||
Securities (a) | (6.6 | ) | 1.5 | (5.1 | ) | - | - | |||||||||||||
Hedge derivatives (b) | 24.9 | (6.4) | 18.5 | - | (1.1 | ) | ||||||||||||||
Amortization of losses and prior service costs (c) | 176.8 | (59.2) | 117.6 | - | - | |||||||||||||||
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Other comprehensive income | 240.8 | (95.9) | 144.9 | 13.5 | 25.0 | |||||||||||||||
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Total comprehensive income | $ | 2,275.9 | $ | 26.9 | $ | 43.6 | ||||||||||||||
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| Fiscal 2017 | ||||||||||||||||||||
| General Mills | Noncontrolling Interests | Redeemable Interest | ||||||||||||||||||
| In Millions | Pretax | Tax | Net | Net | Net | |||||||||||||||
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Net earnings, including earnings attributable to redeemable and noncontrolling interests | $ | 1,657.5 | $ | 11.3 | $ | 32.3 | ||||||||||||||
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Other comprehensive income (loss): | ||||||||||||||||||||
Foreign currency translation | $ | 19.5 | $ | - | 19.5 | 2.5 | (15.7 | ) | ||||||||||||
Net actuarial income | 307.3 | (109.4) | 197.9 | - | - | |||||||||||||||
Other fair value changes: | ||||||||||||||||||||
Securities | 1.3 | (0.5) | 0.8 | - | - | |||||||||||||||
Hedge derivatives | 65.9 | (16.1) | 49.8 | - | 3.5 | |||||||||||||||
Reclassification to earnings: | ||||||||||||||||||||
Hedge derivatives (a) | (25.2) | 2.4 | (22.8 | ) | - | (2.9 | ) | |||||||||||||
Amortization of losses and prior service costs (b) | 197.2 | (74.7) | 122.5 | - | - | |||||||||||||||
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Other comprehensive income (loss) | 566.0 | (198.3) | 367.7 | 2.5 | (15.1 | ) | ||||||||||||||
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Total comprehensive income | $ | 2,025.2 | $ | 13.8 | $ | 17.2 | ||||||||||||||
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|
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Accumulated other comprehensive loss balances, net of tax effects,
were as follows:| In Millions | May 26, 2019 | May 27, 2018 | ||||||
| ||||||||
Foreign currency translation adjustments | $ | (739.9) | $ | (701.6) | ||||
Unrealized gain (loss) from: | ||||||||
Securities | - | 2.0 | ||||||
Hedge derivatives | (19.4) | (32.1) | ||||||
Pension, other postretirement, and postemployment benefits: | ||||||||
Net actuarial loss | (1,880.5) | (1,723.6) | ||||||
Prior service credits | 14.4 | 26.3 | ||||||
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Accumulated other comprehensive loss | $ | (2,625.4) | $ | (2,429.0) | ||||
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hedge derivatives
| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
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Estimated fair values of stock options granted | $ | 5.35 | $ | 6.18 | $ | 8.80 | ||||||
Assumptions: | ||||||||||||
Risk-free interest rate | 2.9 % | 2.2% | 1.7 % | |||||||||
Expected term | 8.5 years | 8.2 years | 8.5 years | |||||||||
Expected volatility | 16.3 % | 15.8% | 17.8 % | |||||||||
Dividend yield | 4.3 % | 3.6% | 2.9 % | |||||||||
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Our
expectedtermrepresentstheperiodoftimethatoptionsgrantedareexpectedtobeoutstandingbasedonhistoricaldatato2021, and $
| Options Outstanding (Thousands) | Weighted- Price Per | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value (Millions) | |||||||||||||
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Balance as of May 27, 2018 | 28,963.8 | $ | 42.90 | |||||||||||||
Granted | 3,149.8 | 46.09 | ||||||||||||||
Exercised | (7,968.1 | ) | 30.96 | |||||||||||||
Forfeited or expired | (492.5 | ) | 53.73 | |||||||||||||
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Outstanding as of May 26, 2019 | 23,653.0 | $ | 47.12 | 4.82 | $ | 180.0 | ||||||||||
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Exercisable as of May 26, 2019 | 14,219.0 | 41.80 | 2.79 | $ | 159.8 | |||||||||||
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Net cash proceeds from the exercise of stock options less shares used for minimum withholding taxes and the intrinsic value of
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
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Net cash proceeds | $ | 241.4 | $ | 99.3 | $ | 112.6 | ||||||
Intrinsic value of options exercised | $ | 126.7 | $ | 83.6 | $ | 176.5 | ||||||
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awards is restricted during the vesting period. Participants holding restricted stock, but not restricted stock units or performance share units, are entitled to vote on
| Equity Classified | Liability Classified | |||||||||||||||
| Share- Settled Units (Thousands) | Weighted- Grant-Date Fair Value | Share- Settled Units (Thousands) | Weighted- Grant-Date Fair Value | |||||||||||||
| ||||||||||||||||
Non-vested as of May 27, 2018 | 3,731.8 | $ | 57.50 | 121.3 | $ | 58.26 | ||||||||||
Granted | 1,814.5 | 46.14 | 33.8 | 46.16 | ||||||||||||
Vested | (880.6 | ) | 51.30 | (35.2 | ) | 55.48 | ||||||||||
Forfeited or expired | (393.4 | ) | 58.44 | (11.8 | ) | 57.64 | ||||||||||
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Non-vested as of May 26, 2019 | 4,272.3 | $ | 53.87 | 108.1 | $ | 55.45 | ||||||||||
| ||||||||||||||||
| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| ||||||||||||
Number of units granted (thousands) | 1,848.2 | 1,551.3 | 1,462.3 | |||||||||
Weighted-average price per unit | $ | 46.14 | $ | 55.12 | $ | 67.01 | ||||||
| ||||||||||||
2022.
| Fiscal Year | ||||||||||||
| In Millions, Except per Share Data | 2019 | 2018 | 2017 | |||||||||
| ||||||||||||
Net earnings attributable to General Mills | $ | 1,752.7 | $ | 2,131.0 | $ | 1,657.5 | ||||||
| ||||||||||||
Average number of common shares—basic EPS | 600.4 | 576.8 | 587.1 | |||||||||
Incremental share effect from: (a) | ||||||||||||
Stock options | 3.1 | 6.9 | 8.1 | |||||||||
Restricted stock units, performance share units, and other | 1.9 | 2.0 | 2.8 | |||||||||
| ||||||||||||
Average number of common shares—diluted EPS | 605.4 | 585.7 | 598.0 | |||||||||
| ||||||||||||
Earnings per share—basic | $ | 2.92 | $ | 3.69 | $ | 2.82 | ||||||
Earnings per share —diluted | $ | 2.90 | $ | 3.64 | $ | 2.77 | ||||||
| ||||||||||||
|
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
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Anti-dilutive stock options, restricted stock units, | 14.1 | 8.9 | 2.3 | |||||||||
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In fiscal 2018, we approved an amendment to reorganize the U.S. qualified defined benefit pension plans and the supplemental pension plans that resulted in the spinoff of a portion of the General Mills Pension Plan (the Plan) and the 2005 Supplemental Retirement Plan and the Supplemental Retirement Plan (Grandfathered) (together, the Supplemental Plans) into new plans effective May 31, 2018. The benefits offered to the plans’ participants were unchanged. The result of the reorganization was the creation of the General Mills Pension Plan I (Plan I) and the 2005 Supplemental Retirement Plan I and the Supplemental Retirement Plan I (Grandfathered) (together, the Supplemental Plans I). The reorganization was made to facilitate a targeted investment strategy over time and to provide additional flexibility in evaluating opportunities to reduce risk and volatility. Actuarial gains and losses associated with the Plan and the Supplemental Plans are amortized over the average remaining service life of the active participants. Actuarial gains and losses associated with the Plan I and the Supplemental Plans I are amortized over the average remaining life of the participants.
Other Postretirement Benefit Plans
2021, we approved
amendments to reorganizecertain U.S. retiree health andwelfare benefit plans. The GeneralMills Retiree| Fiscal Year | ||||||||
| 2019 | 2018 | |||||||
| ||||||||
Health care cost trend rate for next year | 6.4% and 6.7% | 6.7% and 7.0% | ||||||
Rate to which the cost trend rate is assumed to decline (ultimate rate) | 4.5% | 4.5% | ||||||
Year that the rate reaches the ultimate trend rate | 2029 | 2029 | ||||||
| ||||||||
We review our health care cost trend rates annually. Our review is based on data we collect about our health care claims experience and information provided by our actuaries. This information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health
A one percentage point change in the health care cost trend rate would have the following effects:
| In Millions | One Percentage Point Increase | One Percentage Point Decrease | ||||||
| ||||||||
Effect on the aggregate of the service and interest cost components in fiscal 2020 | $ | 1.4 | $ | (1.3) | ||||
Effect on the other postretirement accumulated benefit obligation as of May 26, 2019 | $ | 43.5 | $ | (40.3) | ||||
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Summarized
financialinformationaboutdefinedbenefitpension,otherpostretirementbenefit,andpostemploymentbenefitplansis| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | ||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||
| In Millions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
| ||||||||||||||||||||||||
Change in Plan Assets: | ||||||||||||||||||||||||
Fair value at beginning of year | $ | 6,177.4 | $ | 5,925.2 | $ | 726.1 | $ | 694.8 | ||||||||||||||||
Actual return on assets | 391.9 | 496.5 | 41.3 | 50.5 | ||||||||||||||||||||
Employer contributions | 30.4 | 41.8 | 0.1 | 0.1 | ||||||||||||||||||||
Plan participant contributions | 3.9 | 6.1 | 15.0 | 15.7 | ||||||||||||||||||||
Benefits payments | (305.2) | (298.0) | (28.7) | (35.0) | ||||||||||||||||||||
Foreign currency | (6.8) | 5.8 | - | - | ||||||||||||||||||||
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Fair value at end of year (a) | $ | 6,291.6 | $ | 6,177.4 | $ | 753.8 | $ | 726.1 | ||||||||||||||||
| ||||||||||||||||||||||||
Change in Projected Benefit Obligation: | ||||||||||||||||||||||||
Benefit obligation at beginning of year | $ | 6,416.0 | $ | 6,458.6 | $ | 871.8 | $ | 951.4 | $ | 126.7 | $ | 134.5 | ||||||||||||
Service cost | 94.6 | 102.9 | 9.9 | 11.6 | 7.6 | 8.6 | ||||||||||||||||||
Interest cost | 248.0 | 217.9 | 33.1 | 30.1 | 3.0 | 2.3 | ||||||||||||||||||
Plan amendment | - | 25.4 | - | (0.7) | 1.7 | 1.2 | ||||||||||||||||||
Curtailment/other | (0.7) | - | - | - | - | - | ||||||||||||||||||
Plan participant contributions | 3.9 | 6.1 | 15.0 | 15.7 | - | - | ||||||||||||||||||
Medicare Part D reimbursements | - | - | 2.5 | 3.0 | - | - | ||||||||||||||||||
Actuarial loss (gain) | 301.8 | (102.0) | (45.4) | (73.9) | 2.6 | (7.0) | ||||||||||||||||||
Benefits payments | (305.8) | (298.6) | (62.2) | (64.9) | (13.2) | (13.1) | ||||||||||||||||||
Foreign currency | (7.1) | 5.7 | (0.6) | (0.5) | (0.4) | 0.2 | ||||||||||||||||||
| ||||||||||||||||||||||||
Projected benefit obligation at end of year (a) | $ | 6,750.7 | $ | 6,416.0 | $ | 824.1 | $ | 871.8 | $ | 128.0 | $ | 126.7 | ||||||||||||
| ||||||||||||||||||||||||
Plan assets less than benefit obligation as of fiscal year end | $ | (459.1) | $ | (238.6) | $ | (70.3) | $ | (145.7) | $ | (128.0) | $ | (126.7) | ||||||||||||
| ||||||||||||||||||||||||
obligation as of
2021
| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | Total | |||||||||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | |||||||||||||||||||||||||||||
| In Millions | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Net actuarial (loss) gain | $ | (1,961.6) | $ | (1,764.1) | $ | 81.0 | $ | 44.4 | $ | 0.1 | $ | (3.9) | $ | (1,880.5) | $ | (1,723.6) | ||||||||||||||||
Prior service (costs) credits | (5.9) | (7.1) | 26.3 | 33.1 | (6.0) | 0.3 | 14.4 | 26.3 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Amounts recorded in accumulated other comprehensive loss | $ | (1,967.5) | $ | (1,771.2) | $ | 107.3 | $ | 77.5 | $ | (5.9) | $ | (3.6) | $ | (1,866.1) | $ | (1,697.3) | ||||||||||||||||
| ||||||||||||||||||||||||||||||||
| Defined Benefit Pension Plans | ||||||||
| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
| ||||||||
Projected benefit obligation | $ | 589.7 | $ | 551.6 | ||||
Accumulated benefit obligation | 552.2 | 498.8 | ||||||
Plan assets at fair value | 14.4 | 10.2 | ||||||
| ||||||||
| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | ||||||||||||||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||||||||||||||
| In Millions | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Service cost | $ | 94.6 | $ | 102.9 | $ | 119.7 | $ | 9.9 | $ | 11.6 | $ | 12.5 | $ | 7.6 | $ | 8.6 | $ | 8.8 | ||||||||||||||||||
Interest cost | 248.0 | 217.9 | 216.5 | 33.1 | 30.1 | 32.2 | 3.0 | 2.3 | 2.6 | |||||||||||||||||||||||||||
Expected return on plan assets | (445.8) | (480.2) | (486.7) | (40.4) | (52.2) | (48.5) | - | - | - | |||||||||||||||||||||||||||
Amortization of losses | 109.8 | 177.0 | 190.2 | 0.6 | 0.8 | 2.5 | 0.1 | 0.8 | 1.7 | |||||||||||||||||||||||||||
Amortization of prior service costs (credits) | 1.5 | 1.9 | 2.5 | (5.5) | (5.4) | (5.4) | 0.7 | 0.6 | 0.6 | |||||||||||||||||||||||||||
Other adjustments | - | - | 3.1 | - | - | 1.3 | 6.7 | 6.7 | 1.3 | |||||||||||||||||||||||||||
Settlement or curtailment losses | 0.3 | - | 3.8 | - | - | (0.9) | - | - | (1.4) | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Net expense | $ | 8.4 | $ | 19.5 | $ | 49.1 | $ | (2.3) | $ | (15.1) | $ | (6.3) | $ | 18.1 | $ | 19.0 | $ | 13.6 | ||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
We expect to recognize the following amounts in net periodic benefit
| In Millions | Defined Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | |||||||||
| ||||||||||||
Amortization of losses | $ | 106.9 | $ | (2.1 | ) | $ | 0.4 | |||||
Amortization of prior service costs (credits) | 1.5 | (5.5 | ) | 0.9 | ||||||||
| ||||||||||||
| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | ||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
| ||||||||||||||||||||||||
Discount rate | 3.91 % | 4.20 % | 3.79 % | 4.17 % | 3.10 % | 3.60 % | ||||||||||||||||||
Rate of salary increases | 4.17 | 4.27 | - | - | 4.47 | 4.44 | ||||||||||||||||||
| ||||||||||||||||||||||||
| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | Postemployment Benefit Plans | ||||||||||||||||||||||||||||||||||
| Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
Discount rate (a) | 4.20 % | 4.08 % | 4.19 % | 4.17 % | 3.92 % | 3.97 % | 3.60 % | 2.87 % | 2.94 % | |||||||||||||||||||||||||||
Service cost effective rate | 4.34 | 4.37 | 4.57 | 4.27 | 4.27 | 4.42 | 3.99 | 3.54 | 3.55 | |||||||||||||||||||||||||||
Interest cost effective rate | 3.92 | 3.45 | 3.44 | 3.80 | 3.24 | 3.17 | 3.37 | 2.67 | 2.67 | |||||||||||||||||||||||||||
Rate of salary increases | 4.27 | 4.25 | 4.28 | - | - | - | 4.44 | 4.46 | 4.35 | |||||||||||||||||||||||||||
Expected long-term rate of return on plan assets | 7.25 | 7.88 | 8.17 | 5.67 | 7.59 | 7.85 | - | - | - | |||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||||||
|
| Fiscal Year 2019 | Fiscal Year 2018 | |||||||||||||||||||||||||||||||
| In Millions | Level 1 | Level 2 | Level 3 | Total Assets | Level 1 | Level 2 | Level 3 | Total Assets | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Fair value measurement of pension plan assets: | ||||||||||||||||||||||||||||||||
Equity (a) | $ | 1,226.2 | $ | 664.6 | $ | - | $ | 1,890.8 | $ | 1,722.5 | $ | 782.1 | $ | - | $ | 2,504.6 | ||||||||||||||||
Fixed income (b) | 1,635.5 | 1,144.9 | - | 2,780.4 | 1,264.5 | 714.5 | - | 1,979.0 | ||||||||||||||||||||||||
Real asset investments (c) | 179.4 | 59.9 | - | 239.3 | 229.1 | 115.2 | - | 344.3 | ||||||||||||||||||||||||
Other investments (d) | - | - | 0.3 | 0.3 | - | - | 0.3 | 0.3 | ||||||||||||||||||||||||
Cash and accruals | 186.5 | - | - | 186.5 | 124.4 | - | - | 124.4 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Fair value measurement of pension plan assets | $ | 3,227.6 | $ | 1,869.4 | $ | 0.3 | $ | 5,097.3 | $ | 3,340.5 | $ | 1,611.8 | $ | 0.3 | $ | 4,952.6 | ||||||||||||||||
| ||||||||||||||||||||||||||||||||
Assets measured at net asset value (e) |
| �� | 1,194.3 | 1,224.8 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total pension plan assets (f) | $ | 6,291.6 | $ | 6,177.4 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Fair value measurement of postretirement benefit plan assets: | ||||||||||||||||||||||||||||||||
Equity (a) | $ | - | $ | 66.8 | $ | - | $ | 66.8 | $ | - | $ | 35.8 | $ | - | $ | 35.8 | ||||||||||||||||
Fixed income (b) | 139.7 | 241.4 | - | 381.1 | 241.0 | 123.6 | - | 364.6 | ||||||||||||||||||||||||
Real asset investments (c) | 0.3 | - | - | 0.3 | 8.0 | - | - | 8.0 | ||||||||||||||||||||||||
Cash and accruals | 11.1 | - | - | 11.1 | 19.1 | - | - | 19.1 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Fair value measurement of Postretirement benefit plan assets | $ | 151.1 | $ | 308.2 | $ | - | $ | 459.3 | $ | 268.1 | $ | 159.4 | $ | - | $ | 427.5 | ||||||||||||||||
| ||||||||||||||||||||||||||||||||
Assets measured at net asset value (e) | 294.5 | 298.6 | ||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total postretirement benefit plan assets (f) | $ | 753.8 | $ | 726.1 | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
2021.
| Defined Benefit Pension Plans | Other Postretirement Benefit Plans | |||||||||||||||
| Fiscal Year | Fiscal Year | |||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
Asset category: | ||||||||||||||||
United States equities | 20.3 % | 25.8 % | 19.1 % | 20.6 % | ||||||||||||
International equities | 12.5 | 16.1 | 11.2 | 10.7 | ||||||||||||
Private equities | 8.1 | 7.7 | 4.9 | 4.2 | ||||||||||||
Fixed income | 46.7 | 36.1 | 61.3 | 59.6 | ||||||||||||
Real assets | 12.4 | 14.3 | 3.5 | 4.9 | ||||||||||||
Total | 100.0 % | 100.0 % | 100.0 % | 100.0 % | ||||||||||||
Contributions and Future Benefit Payments
| In Millions | Defined Benefit Pension Plans | Other Postretirement Benefit Plans Gross Payments | Medicare Subsidy Receipts | Postemployment Benefit Plans | ||||||||||||
2020 | $ | 319.0 | $ | 52.4 | $ | 3.2 | $ | 20.1 | ||||||||
2021 | 324.9 | 53.9 | 3.1 | 18.0 | ||||||||||||
2022 | 331.8 | 55.7 | 2.9 | 16.6 | ||||||||||||
2023 | 338.8 | 57.2 | 3.0 | 15.3 | ||||||||||||
2024 | 346.3 | 56.9 | 3.1 | 14.3 | ||||||||||||
2025-2029 | 1,856.4 | 282.4 | 15.7 | 59.6 | ||||||||||||
2020.
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Earnings before income taxes andafter-tax earnings from joint ventures: | ||||||||||||
United States | $ | 1,788.2 | $ | 1,884.0 | $ | 1,941.6 | ||||||
Foreign | 293.8 | 251.6 | 329.7 | |||||||||
Total earnings before income taxes andafter-tax earnings from joint ventures | $ | 2,082.0 | $ | 2,135.6 | $ | 2,271.3 | ||||||
Income taxes: | ||||||||||||
Currently payable: | ||||||||||||
Federal | $ | 151.9 | $ | 441.2 | $ | 368.5 | ||||||
State and local | 35.3 | 35.2 | 21.1 | |||||||||
Foreign | 84.6 | 85.2 | 81.7 | |||||||||
Total current | 271.8 | 561.6 | 471.3 | |||||||||
Deferred: | ||||||||||||
Federal | 86.7 | (478.5 | ) | 201.3 | ||||||||
State and local | 21.6 | 15.7 | 10.2 | |||||||||
Foreign | (12.3 | ) | (41.5 | ) | (27.6 | ) | ||||||
Total deferred | 96.0 | (504.3 | ) | 183.9 | ||||||||
Total income taxes | $ | 367.8 | $ | 57.3 | $ | 655.2 | ||||||
| Fiscal Year | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
United States statutory rate | 21.0 | % | 29.4 | % | 35.0% | |||||||
State and local income taxes, net of federal tax benefits | 2.5 | 1.7 | 0.8 | |||||||||
Foreign rate differences | - | (2.0 | ) | (3.5) | ||||||||
Provisional net tax benefit | (0.4 | ) | (24.5 | ) | - | |||||||
Stock based compensation | (1.2 | ) | (1.2 | ) | - | |||||||
Capital loss (a) | (3.7 | ) | - | - | ||||||||
Prior period tax adjustment | - | 1.9 | - | |||||||||
Domestic manufacturing deduction | - | (1.9 | ) | (2.8) | ||||||||
Other, net | (0.5 | ) | (0.7 | ) | (0.7) | |||||||
Effective income tax rate | 17.7 | % | 2.7 | % | 28.8% | |||||||
|
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Accrued liabilities | $ | 50.9 | $ | 47.2 | ||||
Compensation and employee benefits | 196.6 | 210.2 | ||||||
Pension | 103.2 | 57.1 | ||||||
Tax credit carryforwards | 7.3 | 7.4 | ||||||
Stock, partnership, and miscellaneous investments | 104.2 | 147.9 | ||||||
Capital losses | 73.1 | 12.9 | ||||||
Net operating losses | 141.7 | 161.2 | ||||||
Other | 71.3 | 52.9 | ||||||
Gross deferred tax assets | 748.3 | 696.8 | ||||||
Valuation allowance | 213.7 | 176.0 | ||||||
Net deferred tax assets | 534.6 | 520.8 | ||||||
Brands | 1,472.6 | 1,498.7 | ||||||
Fixed assets | 377.8 | 329.5 | ||||||
Intangible assets | 259.7 | 255.1 | ||||||
Tax lease transactions | 23.9 | 26.0 | ||||||
Inventories | 39.0 | 38.8 | ||||||
Stock, partnership, and miscellaneous investments | 330.0 | 317.1 | ||||||
Unrealized hedges | 27.9 | 28.5 | ||||||
Other | 34.7 | 30.9 | ||||||
Gross deferred tax liabilities | 2,565.6 | 2,524.6 | ||||||
Net deferred tax liability | $ | 2,031.0 | $ | 2,003.8 | ||||
| ||||
| ||||
| ||||
| ||||
| ||||
Information about our tax loss carryforwards follows:
| ||||
| ||||
| ||||
follows
| ||||
| ||||
| ||||
| ||||
The legislation also includes provisions that affected our fiscal 2019 results, including but not limited to, a reduction in the U.S. corporate tax rate on domestic operations; the creation of a new minimum tax called the base erosion anti-abuse tax; a new provision that taxes U.S. allocated expenses as well as currently taxes certain income from
While the new legislation generally eliminates U.S. federal income tax on dividends from foreign subsidiaries going forward, certain income earned by foreign subsidiaries must be included currently in our U.S. taxable income under the new GILTI inclusion rules. Under U.S. GAAP, we are allowed to make an accounting policy election and record the taxes as a period cost as incurred or factor such amounts into the measurement of deferred taxes. In fiscal 2018, we made an accounting policy election to record these taxes as a period cost.
As of May 26, 2019, we have not recognized a deferred tax liability for unremitted earnings of approximately $2.3 billion from our foreign operations
In addition, in fiscal 2018, we adopted Accounting Standards Update2018-02:Income Statement – Reporting Comprehensive Income (Topic 220) (ASU2018-02), which provides the option to reclassify stranded income tax
effects resulting from the TCJA from AOCI to retained earnings. We elected to reclassify the stranded income tax effects of the TCJA of $329.4 million from AOCI to retained earnings. This reclassification consists of deferred taxes originally recorded in AOCI that exceed the newly enacted federal corporate tax rate.
We are
subject to federal incometaxes in the United Statesas well as various state, local,and foreign jurisdictions. Anumber of yearsSeveral state
During fiscal 2017, the
disallowance
for all years.| Fiscal Year | ||||||||
| In Millions | 2019 | 2018 | ||||||
Balance, beginning of year | $ | 196.3 | $ | 135.5 | ||||
Tax positions related to current year: | ||||||||
Additions | 19.5 | 24.1 | ||||||
Reductions | (0.1) | - | ||||||
Tax positions related to prior years: | ||||||||
Additions | 3.8 | 54.8 | ||||||
Reductions | (13.2) | (7.9) | ||||||
Settlements | (41.0) | (3.9) | ||||||
Lapses in statutes of limitations | (26.2) | (6.3) | ||||||
Balance, end of year | $ | 139.1 | $ | 196.3 | ||||
30, 2021.
Our leases are generally
Some operating leases require payment
Noncancelable future lease commitments are:
| In Millions | Operating Leases | Capital Leases | ||||||
Fiscal 2020 | $ | 120.0 | $ | 0.2 | ||||
Fiscal 2021 | 101.7 | 0.1 | ||||||
Fiscal 2022 | 85.0 | - | ||||||
Fiscal 2023 | 63.8 | - | ||||||
Fiscal 2024 | 49.1 | - | ||||||
After fiscal 2024 | 63.0 | - | ||||||
Total noncancelable future lease commitments | $ | 482.6 | $ | 0.3 | ||||
Less: interest | - | |||||||
Present value of obligations under capital leases | $ | 0.3 | ||||||
Depreciation on capital leases is recorded as depreciation expense in our results of operations.
As of May 26, 2019, we have issued guarantees and comfort letters of $681.6 million for the debt and other obligations of
29, 2022.
North America
Foodservice.Our Europe & Australia operating segment reflects retail and foodservice businesses in the greater Europe and Australia regions. Our product categories include refrigerated yogurt, meal kits, super-premium ice cream, refrigerated and frozen dough products, shelf stable vegetables, grain snacks, and dessert and baking mixes. We also sell super-premium ice cream directly to consumers through owned retail shops. Revenues from franchise fees are reported in the region or country where the franchisee is located.
Our Asia & Latin America operating segment consists of retail and foodservice businesses in the greater Asia and South America regions. Our
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 domestic employee benefits and incentives, contributions branded
Our operating segment results were as follows:
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Net sales: | ||||||||||||
North America Retail | $ | 9,925.2 | $ | 10,115.4 | $ | 10,196.9 | ||||||
Convenience Stores & Foodservice | 1,969.1 | 1,930.2 | 1,870.0 | |||||||||
Europe & Australia | 1,886.7 | 1,984.6 | 1,824.5 | |||||||||
Asia & Latin America | 1,653.3 | 1,710.2 | 1,728.4 | |||||||||
Pet | 1,430.9 | - | - | |||||||||
Total | $ | 16,865.2 | $ | 15,740.4 | $ | 15,619.8 | ||||||
Operating profit: | ||||||||||||
North America Retail | $ | 2,277.2 | $ | 2,217.4 | $ | 2,303.6 | ||||||
Convenience Stores & Foodservice | 419.5 | 392.6 | 401.2 | |||||||||
Europe & Australia | 123.3 | 142.1 | 164.2 | |||||||||
Asia & Latin America | 72.4 | 39.6 | 83.6 | |||||||||
Pet | 268.4 | - | - | |||||||||
Total segment operating profit | $ | 3,160.8 | $ | 2,791.7 | $ | 2,952.6 | ||||||
Unallocated corporate items | 339.8 | 206.2 | 273.6 | |||||||||
Divestitures loss | 30.0 | - | 6.5 | |||||||||
Restructuring, impairment, and other exit costs | 275.1 | 165.6 | 180.4 | |||||||||
Operating profit | $ | 2,515.9 | $ | 2,419.9 | $ | 2,492.1 | ||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
U.S. Meals & Baking | $ | 3,839.8 | $ | 3,865.7 | $ | 3,876.6 | ||||||
U.S. Cereal | 2,255.4 | 2,251.8 | 2,251.8 | |||||||||
U.S. Snacks | 2,060.9 | 2,140.5 | 2,098.2 | |||||||||
U.S. Yogurt and Other | 906.7 | 927.4 | 1,064.3 | |||||||||
Canada | 862.4 | 930.0 | 906.0 | |||||||||
Total | $ | 9,925.2 | $ | 10,115.4 | $ | 10,196.9 | ||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Snacks | $ | 3,359.3 | $ | 3,419.0 | $ | 3,302.2 | ||||||
Cereal | 2,672.2 | 2,679.2 | 2,673.2 | |||||||||
Convenient meals | 2,641.8 | 2,677.4 | 2,653.6 | |||||||||
Yogurt | 2,193.6 | 2,320.1 | 2,403.5 | |||||||||
Dough | 1,692.8 | 1,684.1 | 1,690.6 | |||||||||
Baking mixes and ingredients | 1,608.9 | 1,653.4 | 1,654.1 | |||||||||
Pet | 1,430.9 | - | - | |||||||||
Super-premium ice cream | 813.2 | 803.7 | 738.4 | |||||||||
Other | 452.5 | 503.5 | 504.2 | |||||||||
Total | $ | 16,865.2 | $ | 15,740.4 | $ | 15,619.8 | ||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Net sales: | ||||||||||||
United States | $ | 12,462.8 | $ | 11,115.6 | $ | 11,160.9 | ||||||
Non-United States | 4,402.4 | 4,624.8 | 4,458.9 | |||||||||
Total | $ | 16,865.2 | $ | 15,740.4 | $ | 15,619.8 | ||||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Cash and cash equivalents: | ||||||||
United States | $ | 51.0 | $ | 15.7 | ||||
Non-United States | 399.0 | 383.3 | ||||||
Total | $ | 450.0 | $ | 399.0 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Land, buildings, and equipment: | ||||||||
United States | $ | 2,872.8 | $ | 3,031.7 | ||||
Non-United States | 914.4 | 1,015.5 | ||||||
Total | $ | 3,787.2 | $ | 4,047.2 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Receivables: | ||||||||
Customers | $ 1,708.5 | $ 1,712.6 | ||||||
Less allowance for doubtful accounts | (28.8) | (28.4) | ||||||
Total | $ 1,679.7 | $ 1,684.2 | ||||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Inventories: | ||||||||
Raw materials and packaging | $ | 434.9 | $ | 400.0 | ||||
Finished goods | 1,245.9 | 1,364.2 | ||||||
Grain | 92.0 | 91.2 | ||||||
Excess of FIFO over LIFO cost (a) | (213.5) | (213.2) | ||||||
Total | $ | 1,559.3 | $ | 1,642.2 | ||||
|
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Prepaid expenses and other current assets: | ||||||||
Other receivables | $ | 250.2 | $ | 174.4 | ||||
Prepaid expenses | 189.0 | 165.6 | ||||||
Derivative receivables, primarily commodity-related | 42.2 | 40.5 | ||||||
Grain contracts | 6.7 | 7.1 | ||||||
Miscellaneous | 9.4 | 10.7 | ||||||
Total | $ | 497.5 | $ | 398.3 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Land, buildings, and equipment: | ||||||||
Land | $ | 73.6 | $ | 77.7 | ||||
Buildings | 2,477.2 | 2,396.3 | ||||||
Buildings under capital lease | 0.3 | 0.3 | ||||||
Equipment | 6,548.3 | 6,236.6 | ||||||
Equipment under capital lease | 5.7 | 5.8 | ||||||
Capitalized software | 631.6 | 593.6 | ||||||
Construction in progress | 343.8 | 692.9 | ||||||
Total land, buildings, and equipment | 10,080.5 | 10,003.2 | ||||||
Less accumulated depreciation | (6,293.3) | (5,956.0) | ||||||
Total | $ | 3,787.2 | $ | 4,047.2 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Other assets: | ||||||||
Investments in and advances to joint ventures | $ | 452.9 | $ | 499.6 | ||||
Pension assets | 323.5 | 309.9 | ||||||
Life insurance | 22.7 | 26.9 | ||||||
Miscellaneous | 175.8 | 106.6 | ||||||
Total | $ | 974.9 | $ | 943.0 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Other current liabilities: | ||||||||
Accrued trade and consumer promotions | $ | 484.4 | $ | 499.6 | ||||
Accrued payroll | 345.5 | 347.0 | ||||||
Dividends payable | 19.2 | 17.5 | ||||||
Accrued taxes | 37.5 | 94.8 | ||||||
Accrued interest, including interest rate swaps | 92.6 | 107.7 | ||||||
Grain contracts | 2.3 | 1.2 | ||||||
Restructuring and other exit costs reserve | 36.5 | 66.8 | ||||||
Derivative payable | 13.2 | 8.3 | ||||||
Miscellaneous | 336.6 | 302.9 | ||||||
Total | $ | 1,367.8 | $ | 1,445.8 | ||||
| In Millions | May 26, 2019 | May 27, 2018 | ||||||
Other noncurrent liabilities: | ||||||||
Accrued compensation and benefits, including obligations for underfunded other postretirement benefit and postemployment benefit plans | $ | 1,153.3 | $ | 999.4 | ||||
Accrued taxes | 227.1 | 265.3 | ||||||
Miscellaneous | 68.5 | 76.3 | ||||||
Total | $ | 1,448.9 | $ | 1,341.0 | ||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Depreciation and amortization | $ | 620.1 | $ | 618.8 | $ | 603.6 | ||||||
Research and development expense | 221.9 | 219.1 | 218.2 | |||||||||
Advertising and media expense (including production and communication costs) | 601.6 | 575.9 | 623.8 | |||||||||
| Fiscal Year | ||||||||||||
| Expense (Income), in Millions | 2019 | 2018 | 2017 | |||||||||
Interest expense | $ | 530.2 | $ | 389.5 | $ | 306.7 | ||||||
Capitalized interest | (2.8) | (4.1) | (4.6) | |||||||||
Interest income | (5.6) | (11.7) | (7.0) | |||||||||
Interest, net | $ | 521.8 | $ | 373.7 | $ | 295.1 | ||||||
| Fiscal Year | ||||||||||||
| In Millions | 2019 | 2018 | 2017 | |||||||||
Cash interest payments | $ | 500.1 | $ | 269.5 | $ | 285.8 | ||||||
Cash paid for income taxes | 440.8 | 489.4 | 551.1 | |||||||||
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||||||||||||||||||
| In Millions, Except Per Share Amounts
| Fiscal Year | Fiscal Year | Fiscal Year | Fiscal Year | ||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||
Net sales | $ | 4,094.0 | $ | 3,769.2 | $ | 4,411.2 | $ | 4,198.7 | $ | 4,198.3 | $ | 3,882.3 | $ | 4,161.7 | $ | 3,890.2 | ||||||||||||||||
Gross margin | 1,342.8 | 1,313.3 | 1,509.7 | 1,446.2 | 1,443.0 | 1,256.5 | 1,461.3 | 1,419.6 | ||||||||||||||||||||||||
Net earnings attributable to General Mills | 392.3 | 404.7 | 343.4 | 430.5 | 446.8 | 941.4 | 570.2 | 354.4 | ||||||||||||||||||||||||
EPS: | ||||||||||||||||||||||||||||||||
Basic | $ | 0.66 | $ | 0.70 | $ | 0.57 | $ | 0.75 | $ | 0.74 | $ | 1.64 | $ | 0.95 | $ | 0.60 | ||||||||||||||||
Diluted | $ | 0.65 | $ | 0.69 | $ | 0.57 | $ | 0.74 | $ | 0.74 | $ | 1.62 | $ | 0.94 | $ | 0.59 | ||||||||||||||||
During
We recorded brand intangible asset impairment charges of $96.9 million in2021.
Glossary
Accelerated depreciation associated with restructured assets.The increase in depreciation expense caused by updating the salvage value and shortening the useful life of depreciable fixed assets an
AOCI. deferred
Level 1:Unadjusted quoted prices in active markets | ||
Focus 6 platforms. The Focus 6 platforms for identical assets or liabilities.
Free cash flow.
equipment.
Operatingcashflowconversionrate.
TCJA. U.S. Tax Cuts and Jobs Act which was signed into law on December 22, 2017.
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING29, 2022.
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29, 2022
Information regarding our executive officers is set forth in Item 1 of this report.
The information regarding our Audit Committee, including the members of the Audit Committee and audit committee financial experts, set forth in the section entitled “Board Committees and Their Functions” contained in our definitive Proxy Statement for our 2019 Annual Meeting of Shareholders is incorporated herein by reference.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides certain information as of May 26, 2019, with respect to our equity compensation plans:
| Plan Category | Number of Securities to (1) | Weighted-Average (2)(a) | Number of Securities Remaining (3) | |||||||||
Equity compensation plans approved by security holders | 30,678,206 | (b) | $ | 47.12 | 30,265,462 | (d) | ||||||
Equity compensation plans not approved by security holders | 123,190 | (c) | $ | - | - | |||||||
Total | 30,801,396 | $ | 47.12 | 30,265,462 | ||||||||
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ITEM 14 Principal Accounting Fees and Services
The information contained in the section entitled “Independent Registered Public Accounting Firm Fees” in our definitive Proxy Statement for our 2019 Annual Meeting of Shareholders is incorporated herein by reference.
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31, 2020.
30, 2021.
31, 2020.
31, 2020.
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PCAOB ID:
II – Valuation 2000).
3. Exhibits:
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Confidential information has been omitted from the exhibit and filed
separately with the SEC pursuant to Rule 24b-2 of theSignature
GENERAL MILLS, INC.Dated: June 27, 2019By: /s/ Kofi A. Bruce Name: Kofi A. BruceTitle: Vice President, ControllerSignatureTitleDate/s/ Jeffrey L HarmeningJeffrey L. HarmeningChairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)June 27, 2019/s/ Donal L. MulliganDonal L. MulliganChief Financial Officer(Principal Financial Officer)June 27, 2019/s/ Kofi A. BruceKofi A. BruceVice President, Controller(Principal Accounting Officer)June 27, 2019/s/ Alicia S. Boler DavisAlicia S. Boler DavisDirectorJune 27, 2019/s/ R. Kerry ClarkR. Kerry ClarkDirectorJune 27, 2019/s/ David M. CordaniDavid M. CordaniDirectorJune 27, 2019/s/ Roger W. Ferguson Jr.Roger W. Ferguson Jr.DirectorJune 27, 2019/s/ Maria G. HenryMaria G. HenryDirectorJune 27, 2019/s/ Heidi G. MillerHeidi G. MillerDirectorJune 27, 2019/s/ Diane L. NealDiane L. NealDirectorJune 27, 2019/s/ Steve OdlandSteve OdlandDirectorJune 27, 2019/s/ Maria A. SastreMaria A. SastreDirectorJune 27, 2019/s/ Eric D. SprunkEric D. SprunkDirectorJune 27, 2019/s/ Jorge A. UribeJorge A. UribeDirectorJune 27, 2019
| Fiscal Year | ||||||||||||
In Millions
| 2019 | 2018 | 2017 | |||||||||
Allowance for doubtful accounts: | ||||||||||||
Balance at beginning of year | $ | 28.4 | $ | 24.3 | $ | 29.6 | ||||||
Additions charged to expense | 23.9 | 26.7 | 16.6 | |||||||||
Bad debt write-offs | (22.7 | ) | (26.9 | ) | (23.2) | |||||||
Other adjustments and reclassifications | (0.8 | ) | 4.3 | 1.3 | ||||||||
Balance at end of year | $ | 28.8 | $ | 28.4 | $ | 24.3 | ||||||
Valuation allowance for deferred tax assets: | ||||||||||||
Balance at beginning of year | $ | 176.0 | $ | 231.8 | $ | 227.0 | ||||||
Additions charged to expense | (5.2 | ) | 2.4 | 5.2 | ||||||||
Adjustments due to acquisitions, translation of amounts, and other | 42.9 | (58.2 | ) | (0.4) | ||||||||
Balance at end of year | $ | 213.7 | $ | 176.0 | $ | 231.8 | ||||||
Reserve for restructuring and other exit charges: | ||||||||||||
Balance at beginning of year | $ | 66.8 | $ | 85.0 | $ | 76.6 | ||||||
Additions charged to expense, including translation amounts | 11.6 | 40.3 | 104.0 | |||||||||
Net amounts utilized for restructuring activities | (41.9 | ) | (58.5 | ) | (95.6) | |||||||
Balance at end of year | $ | 36.5 | $ | 66.8 | $ | 85.0 | ||||||
Reserve for LIFO valuation: | ||||||||||||
Balance at beginning of year | $ | 213.2 | $ | 209.1 | $ | 219.3 | ||||||
Increase (decrease) | 0.3 | 4.1 | (10.2) | |||||||||
Balance at end of year | $ | 213.5 | $ | 213.2 | $ | 209.1 | ||||||
118