# GENERAL MILLS INC (GIS) FY 2022 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GENERAL MILLS INC's 10-K for fiscal year 2022.

SEC filing source: https://www.sec.gov/Archives/edgar/data/40704/000119312522185257/d313744d10k.htm
Accession: 0001193125-22-185257
Filing date: 2022-06-30
Report date: 2022-05-29
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/GIS/
All MD&A years: /company/GIS/mda/
Next year: /company/GIS/mda/fy2023/ (FY 2023)

ITEM 7 - Management’s Discussion and Analysis of
 
Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

We
 
are
 
a
 
global packaged
 
foods company.
 
We
 
develop
 
distinctive
 
value-added
 
food
 
products
 
and
 
market
 
them under
 
unique
 
brand

names.
 
We
 
work
 
continuously
 
to
 
improve
 
our
 
core
 
products
 
and
 
to
 
create
 
new
 
products
 
that
 
meet
 
consumers’
 
evolving
 
needs
 
and

preferences.
 
In
 
addition,
 
we
 
build
 
the
 
equity
 
of
 
our
 
brands
 
over
 
time
 
with
 
strong
 
consumer-directed
 
marketing,
 
innovative
 
new

products,
 
and
 
effective
 
merchandising.
 
We
 
believe
 
our
 
brand-building
 
approach
 
is
 
the
 
key
 
to
 
winning
 
and
 
sustaining
 
leading
 
share

positions in markets around the globe.

Our fundamental
 
financial goal is
 
to generate competitively
 
differentiated returns
 
for our shareholders
 
over the long
 
term. We
 
believe

achieving
 
that
 
goal
 
requires
 
us
 
to
 
generate
 
a
 
consistent
 
balance
 
of
 
net
 
sales
 
growth,
 
margin
 
expansion,
 
cash
 
conversion,
 
and
 
cash

return to shareholders over time.

Our long-term growth objectives are to deliver the following performance
 
on average over time:

●

2 to 3 percent annual growth in organic net sales;

●

mid-single-digit annual growth in adjusted operating profit;

●

mid- to high-single-digit annual growth in adjusted diluted earnings per share
 
(EPS);

●

free cash flow conversion of at least 95 percent of adjusted net earnings after
 
tax; and

●

cash return to shareholders of 80 to 90 percent of free cash flow,
 
including an attractive dividend yield.

We
 
are executing
 
our Accelerate
 
strategy to
 
drive sustainable,
 
profitable gro
 
wth and
 
top-tier shareholder
 
returns over
 
the long
 
term.

The
 
strategy
 
focuses
 
on
 
four
 
pillars
 
to
 
create
 
competitive
 
advantages
 
and
 
win:
 
boldly
 
building
 
brands,
 
relentlessly
 
innovating,

unleashing
 
our scale,
 
and
 
being a
 
force for
 
good. We
 
are prioritizing
 
our core
 
markets, global
 
platforms,
 
and
 
local gem
 
brands
 
that

have
 
the
 
best
 
prospects
 
for
 
profitable
 
growth
 
and
 
we
 
are
 
committed
 
to
 
reshaping
 
our
 
portfolio
 
with
 
strategic
 
acquisitions
 
and

divestitures to further enhance our growth profile.

We
 
expect that
 
changes in
 
consumer behaviors
 
driven by
 
the COVID-19
 
pandemic will
 
result in
 
ongoing elevated
 
consumer demand

for food at home, relative to pre-pandemic levels. These
 
changes include more time spent working
 
from home and increased consumer

appreciation
 
for cooking
 
and baking.
 
We
 
plan to
 
capitalize on
 
these opportunities,
 
addressing evolving
 
consumer
 
needs through
 
our

leading brands, innovation, and advantaged capabilities to generate profitable
 
growth.

In fiscal 2022,
 
we successfully adapted
 
to the volatile operating
 
environment, responding quickly
 
to significant increases in
 
input cost

inflation and supply chain disruptions and keeping
 
our brands available for our customers and consumers.
 
As a result, we were able to

grow organic
 
net sales, adjusted
 
operating profit,
 
and adjusted diluted
 
EPS ahead of
 
our initial targets.
 
We
 
achieved each
 
of the
 
three

priorities we established at the beginning of the year:

We
 
continued
 
to
 
compete
 
effectively,
 
including
 
holding
 
or
 
growing
 
market
 
share
 
in
 
70
 
percent
 
of
 
our
 
global
 
priority

businesses.
 
We
 
generated organic
 
net sales
 
growth across
 
each of
 
our four
 
operating segments,
 
fueled by
 
compelling brand

building
 
and
 
innovation
 
across our
 
leading
 
brands,
 
and
 
supported
 
with
 
strong
 
levels
 
of
 
net price
 
realization
 
in
 
response
 
to

significant input cost inflation.

We
 
successfully navigated
 
the dynamic supply
 
chain environment, which
 
was characterized by
 
steadily increasing input
 
cost

inflation,
 
reaching
 
8
 
percent
 
for
 
the
 
full
 
year,
 
and
 
record
 
levels
 
of
 
supply
 
chain
 
disruptions
 
affecting
 
our
 
sourcing,

manufacturing,
 
and logistics
 
operations.
 
We
 
leveraged
 
our Strategic
 
Revenue
 
Management
 
(SRM) capability
 
to accelerate

pricing actions in
 
the face of increasing
 
inflation, generating 7
 
points of positive
 
organic net price
 
realization and mix
 
for the

year.
 
And
 
we
 
moved
 
quickly
 
to
 
address
 
supply
 
chain
 
disruptions
 
and
 
outpace
 
our
 
competition
 
in
 
terms
 
of
 
on-shelf

availability for our brands.

We
 
executed
 
our
 
portfolio
 
and
 
organizational
 
reshaping
 
actions
 
without
 
disrupting
 
our
 
base
 
business.
 
We
 
announced
 
or

closed
 
seven
 
different
 
acquisitions
 
and
 
divestitures
 
during
 
the
 
year,
 
helping
 
further
 
upgrade
 
the
 
growth
 
profile
 
of
 
our

portfolio.
 
And we
 
successfully implemented
 
significant changes
 
to our
 
organizational
 
structure, including
 
streamlining our

North
 
America
 
Retail
 
operating
 
unit
 
structure,
 
realigning
 
our
 
North
 
America
 
Foodservice
 
segment
 
and
 
shifting
 
our
 
U.S.

convenience stores
 
business into North
 
America Retail, creating
 
a new International
 
segment and adjusting
 
our go-to-market

model
 
across
 
many
 
global
 
markets,
 
and
 
establishing
 
a
 
new
 
Strategy
 
&
 
Growth
 
organization
 
tasked
 
with
 
advancing
 
many

aspects of our Accelerate strategy.

Our consolidated net
 
sales for fiscal
 
2022 rose 5
 
percent to $19.0 billion.
 
On an organic
 
basis, net sales
 
increased 6 percent
 
compared

to year-ago
 
levels. Operating
 
profit of
 
$3.5 billion increased
 
11 percent.
 
Adjusted operating
 
profit of
 
$3.2 billion increased
 
2 percent

on a constant-currency
 
basis.
 
Diluted EPS of $4.42
 
was up 17 percent
 
compared to fiscal 2021
 
results. Adjusted diluted EPS
 
of $3.94

18

increased
 
4
 
percent
 
on
 
a
 
constant-currency
 
basis
 
(See
 
the
 
“Non-GAAP
 
Measures”
 
section
 
below
 
for
 
a
 
description
 
of
 
our
 
use
 
of

measures not defined by generally accepted accounting principles (GAAP)).

Net
 
cash
 
provided
 
by
 
operations
 
totaled
 
$3.3 billion
 
in
 
fiscal
 
2022
 
representing
 
a
 
conversion
 
rate
 
of
 
121
 
percent
 
of
 
net
 
earnings,

including earnings attributable
 
to redeemable and noncontrolling
 
interests. This cash generation
 
supported capital investments
 
totaling

$569 million, and
 
our resulting
 
free cash flow
 
was $2.7 billion
 
at a conversion
 
rate of 113
 
percent of
 
adjusted net
 
earnings, including

earnings
 
attributable
 
to
 
redeemable
 
and
 
noncontrolling
 
interests.
 
We
 
returned
 
cash
 
to
 
shareholders
 
through
 
dividends
 
totaling
 
$1.2

billion and net share repurchases
 
totaling $715 million. Our ratio
 
of net debt-to-operating cash flow
 
was 3.3 in fiscal 2022, and our
 
net

debt-to-adjusted earnings before net interest, income taxes, depreciation
 
and amortization (net debt-to-adjusted EBITDA) ratio was 2.8

(See the “Non-GAAP Measures” section below for a description of our use of
 
measures not defined by GAAP).

A
 
detailed
 
review
 
of
 
our
 
fiscal
 
2022
 
performance
 
compared
 
to
 
fiscal
 
2021
 
appears
 
below
 
in
 
the
 
section
 
titled
 
“Fiscal
 
2022

Consolidated Results of Operations.” A detailed review
 
of our fiscal 2021 performance compared to our fiscal 2020
 
performance is set

forth
 
in Part
 
II, Item
 
7 of
 
our Form
 
10-K for
 
the fiscal
 
year
 
ended
 
May 30, 2021
 
under the
 
caption
 
“Management’s
 
Discussion and

Analysis of
 
Financial Condition
 
and Results
 
of Operations
 
– Fiscal
 
2021 Results
 
of Consolidated
 
Operations,” which
 
is incorporated

herein by reference.

In fiscal 2023,
 
we expect to
 
build on our
 
positive momentum
 
and continue
 
to advance our
 
Accelerate strategy.
 
Our key priorities
 
are

to
 
continue
 
to
 
compete
 
effectively,
 
invest
 
in
 
our
 
brands
 
and
 
capabilities,
 
and
 
reshape
 
our
 
portfolio.
 
We
 
expect
 
the
 
largest
 
factors

impacting
 
our
 
performance
 
in
 
fiscal
 
2023
 
will
 
be
 
the
 
economic
 
health
 
of
 
consumers,
 
the
 
inflationary
 
cost
 
environment,
 
and
 
the

frequency and severity of disruptions
 
in the supply chain.
 
Total input
 
cost inflation is expected to
 
be approximately 14 percent
 
of cost

of goods
 
sold in
 
fiscal 2023.
 
We
 
are addressing
 
the inflationary
 
environment with
 
holistic margin
 
management (HMM)
 
cost savings

expected to
 
total approximately
 
3 to
 
4 percent
 
of cost
 
of goods
 
sold and
 
low-double-digit net
 
price realization
 
generated through
 
our

SRM capability.
 
We are planning
 
for volume elasticities to increase but remain below
 
historical levels and supply chain disruptions to

slowly moderate in fiscal 2023 compared to fiscal 2022 levels.

Based on these assumptions, our key full-year fiscal 2023 targets are
 
summarized below:

●

Organic net sales are expected to increase 4 to 5 percent.

●

Adjusted operating
 
profit is
 
expected to
 
range between
 
down 2
 
percent and
 
up 1
 
percent in
 
constant-currency from
 
the base

of
 
$3.2
 
billion
 
reported
 
in
 
fiscal
 
2022,
 
including
 
a
 
3-point
 
net
 
headwind
 
from
 
divestitures
 
and
 
acquisitions
 
announced
 
or

closed in fiscal 2022.

●

Adjusted diluted EPS are
 
expected to range between
 
flat and up 3 percent
 
in constant-currency from
 
the base of $3.94 earned

in fiscal 2022, including a 3-point net headwind from divestitures and
 
acquisitions announced or closed in fiscal 2022.

●

Free cash flow conversion is expected to be at least 90 percent of adjusted after-tax
 
earnings.

See the “Non-GAAP Measures” section below for a description of our use
 
of measures not defined by GAAP.

Certain terms used throughout this report are defined in a glossary in Item
 
8 of this report.

FISCAL 2022 CONSOLIDATED
 
RESULTS
 
OF OPERATIONS

In fiscal
 
2022, net
 
sales increased
 
5 percent
 
compared to
 
fiscal 2021
 
and organic
 
net sales increased
 
6 percent
 
compared to
 
last year.

Operating
 
profit
 
increased
 
11
 
percent
 
to
 
$3,476
 
million
 
primarily
 
driven
 
by
 
favorable
 
net
 
price
 
realization
 
and
 
mix,
 
gains
 
on

divestitures,
 
net
 
restructuring
 
recoveries,
 
and
 
a
 
decrease
 
in
 
certain
 
selling,
 
general,
 
and
 
administrative
 
(SG&A)
 
expenses,
 
partially

offset
 
by
 
higher
 
input
 
costs,
 
lower
 
net
 
corporate
 
investment
 
activity,
 
higher
 
transaction
 
and
 
integration
 
costs,
 
and
 
volume
 
declines.

Operating profit margin
 
of 18.3 percent increased
 
100 basis points.
 
Adjusted operating profit
 
of $3,213 million
 
increased 2 percent on

a constant-currency
 
basis, primarily
 
driven by
 
a decrease
 
in certain
 
SG&A expenses.
 
Adjusted operating
 
profit margin
 
decreased 50

basis
 
points
 
to
 
16.9
 
percent.
 
Diluted
 
earnings
 
per
 
share
 
of
 
$4.42
 
increased
 
17
 
percent
 
compared
 
to
 
fiscal
 
2021.
 
Adjusted
 
diluted

earnings
 
per
 
share
 
of
 
$3.94
 
increased
 
4
 
percent
 
on
 
a
 
constant-currency
 
basis
 
(see
 
the
 
“Non-GAAP
 
Measures”
 
section
 
below
 
for
 
a

description of our use of measures not defined by GAAP).

19

A summary of our consolidated financial results for fiscal 2022 follows:

Fiscal 2022

In millions,

except per

share

Fiscal 2022 vs.

Fiscal 2021

Percent of Net

Sales

Constant-

Currency

Growth (a)

Net sales

$

18,992.8

5

%

Operating profit

3,475.8

11

%

18.3

%

Net earnings attributable to General Mills

2,707.3

16

%

Diluted earnings per share

$

4.42

17

%

Organic net sales growth rate (a)

6

%

Adjusted operating profit (a)

3,213.3

2

%

16.9

%

2

%

Adjusted diluted earnings per share (a)

$

3.94

4

%

4

%

(a)
 
See the "Non-GAAP Measures" section below for our use of measures not defined by
 
GAAP.

Consolidated

net sales

were as follows:

Fiscal 2022

Fiscal 2022 vs.

Fiscal 2021

Fiscal 2021

Net sales (in millions)

$

18,992.8

5

%

$

18,127.0

Contributions from volume growth (a)

(5)

pts

Net price realization and mix

10

pts

Foreign currency exchange

Flat

Note: Table may
 
not foot due to rounding

(a) Measured in tons based on the stated weight of our product shipments.

The
 
5
 
percent
 
increase
 
in
 
net
 
sales
 
in
 
fiscal
 
2022
 
reflects
 
favorable
 
net
 
price
 
realization
 
and
 
mix,
 
partially
 
offset
 
by
 
a
 
decrease
 
in

contributions from volume growth.

Components of organic net sales growth are shown in the following
 
table:

Fiscal 2022 vs. Fiscal 2021

Contributions from organic volume growth (a)

(1)

pt

Organic net price realization and mix

7

pts

Organic net sales growth

6

pts

Foreign currency exchange

Flat

Acquisition and divestitures

(1)

pt

Net sales growth

5

pts

Note: Table may
 
not foot due to rounding

(a) Measured in tons based on the stated weight of our product shipments.

Organic net sales in fiscal 2022 increased 6 percent
 
compared to fiscal 2021,
 
driven by favorable organic net price realization and
 
mix,

partially offset by a decrease in contributions from
 
organic volume growth.

Cost of sales

increased $912 million in fiscal 2022
 
to $12,591 million. The increase was
 
primarily driven by a $1,514 million
 
increase

attributable to
 
product rate and
 
mix, partially offset
 
by a $608
 
million decrease due
 
to lower volume.
 
We
 
recorded a
 
$133 million net

decrease
 
in
 
cost
 
of
 
sales
 
related
 
to
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
and
 
grain
 
inventories
 
in
 
fiscal
 
2022,

compared to a net decrease of $139
 
million in fiscal 2021
 
(please see Note 8 to the Consolidated
 
Financial Statements in Item 8 of this

report for additional information).

Gross margin

decreased 1 percent in
 
fiscal 2022 versus fiscal 2021.
 
Gross margin as a percent
 
of net sales decreased
 
190 basis points

to 33.7 percent compared to fiscal 2021.

SG&A
 
expenses

increased
 
$67 million
 
to
 
$3,147 million
 
in
 
fiscal
 
2022
 
compared
 
to
 
fiscal
 
2021.
 
The
 
increase
 
in
 
SG&A
 
expenses

primarily reflects
 
lower net corporate
 
investment activity
 
and higher transaction
 
costs, partially offset
 
by lower media
 
and advertising

expenses and other administrative costs. SG&A expenses as a percent
 
of net sales in fiscal 2022 decreased 40 basis points compared to

fiscal 2021.

20

Divestitures
 
gain

totaled
 
$194
 
million
 
in
 
fiscal
 
2022

due
 
to
 
the
 
sale
 
of
 
our
 
interests
 
in
 
Yoplait
 
SAS,
 
Yoplait
 
Marques
 
SNC,
 
and

Liberté Marques
 
Sàrl and
 
our European
 
dough businesses
 
(please refer
 
to Note
 
3 to
 
the Consolidated
 
Financial Statements
 
in Part
 
I,

Item 1 of this report). Divestiture loss totaled $54 million in fiscal 2021 due
 
to the sale of our Laticínios Carolina business in Brazil.

Restructuring, impairment,
 
and other exit
 
costs (recoveries)

totaled $26 million
 
of net recoveries
 
in fiscal 2022
 
compared to $170

million of charges in
 
fiscal 2021. In fiscal 2022,
 
we approved restructuring actions
 
in the International segment
 
to drive efficiencies in

manufacturing and logistics operations
 
,
 
and as a result, we
 
recorded $12 million of
 
charges in fiscal 2022.
 
We recorded
 
a net recovery

of
 
$38
 
million
 
in
 
fiscal
 
2022,
 
which
 
includes
 
a
 
$34
 
million
 
reduction
 
to
 
our
 
restructuring
 
reserves
 
primarily
 
related
 
to
 
severance

charges.
 
In
 
fiscal
 
2021,
 
we
 
approved
 
restructuring
 
actions
 
designed
 
to
 
better
 
align
 
our
 
organizational
 
structure
 
and
 
resources
 
with

strategic
 
initiatives
 
and
 
actions
 
related
 
to
 
route-to-market
 
and
 
supply
 
chain
 
optimization.
 
Please
 
see
 
Note
 
4
 
to
 
the
 
Consolidated

Financial Statements in Item 8 of this report for additional information.

Benefit
 
plan
 
non-service
 
income

totaled
 
$113 million
 
in
 
fiscal
 
2022
 
compared
 
to
 
$133 million
 
in
 
fiscal
 
2021,
 
primarily
 
reflecting

higher
 
amortization
 
of
 
losses
 
(please
 
see
 
Note
 
2
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
in
 
Item
 
8
 
of
 
this
 
report
 
for
 
additional

information).

Interest, net

for fiscal 2022 totaled $380 million, $40 million lower than fiscal 2021,
 
primarily driven by lower average debt balances.

Our

effective
 
tax rate

for fiscal
 
2022
 
was 18.3
 
percent
 
compared to
 
22.0 percent
 
in fiscal
 
2021.
 
The 3.7
 
percentage point
 
decrease

was primarily
 
driven by a
 
change in the
 
valuation allowance on
 
our capital loss
 
carryforwards, certain non
 
-taxable components of
 
the

divestiture gains, and favorable changes
 
in earnings mix by jurisdiction.
 
Our adjusted effective tax rate
 
was 20.9 percent in fiscal 2022

compared to
 
21.1 percent
 
in fiscal
 
2021 (see
 
the “Non-GAAP
 
Measures” section
 
below for
 
a description
 
of our
 
use of
 
measures not

defined by GAAP).

After-tax earnings from
 
joint ventures

decreased 5 percent
 
to $112 million
 
in fiscal 2022 compared
 
to fiscal 2021,
 
primarily driven

by higher input costs and
 
lower net sales at CPW,
 
partially offset by
 
lower SG&A expenses at CPW and
 
higher net sales at HDJ. On
 
a

constant-currency basis,
 
after-tax earnings
 
from joint ventures
 
decreased 3 percent
 
(see the “Non-GAAP
 
Measures” section below
 
for

a description of
 
our use of
 
measures not defined
 
by GAAP). The
 
components of our
 
joint ventures’ net
 
sales growth are
 
shown in the

following table:

Fiscal 2022 vs. Fiscal 2021

CPW

HDJ

Total

Contributions from volume growth (a)

(3)

pts

8

pts

Net price realization and mix

2

pts

1

pt

Net sales growth in constant currency

(1)

pt

9

pts

1

pt

Foreign currency exchange

(2)

pts

(8)

pts

(3)

pts

Net sales growth

(3)

pts

1

pt

(2)

pts

Note: Table may
 
not foot due to rounding

(a) Measured in tons based on the stated weight of our product shipments

Net
 
earnings
 
attributable
 
to
 
redeemable
 
and
 
noncontrolling
 
interests

increased
 
to
 
$28
 
million
 
in
 
fiscal
 
2022
 
compared
 
to
 
$6

million in
 
fiscal 2021,
 
primarily due
 
to the loss
 
on sale
 
of the Laticínios
 
Carolina business
 
in Brazil
 
in fiscal 2021,
 
partially offset
 
by

the sale of our interests in Yoplait
 
SAS, Yoplait
 
Marques SNC, and Liberté Marques Sàrl in fiscal 2022.

Average
 
diluted
 
shares
 
outstanding

decreased
 
by
 
6 million
 
in
 
fiscal
 
2022
 
from
 
fiscal
 
2021
 
primarily
 
due
 
to
 
share
 
repurchase

activity.

RESULTS
 
OF SEGMENT OPERATIONS

Our businesses are organized into four operating segments: North
 
America Retail; International; Pet, and North America Foodservice.

In
 
fiscal
 
2022,
 
we
 
announced
 
a
 
new
 
organization
 
structure
 
to
 
streamline
 
our
 
global
 
operations.
 
As
 
a
 
result
 
of
 
this
 
global

reorganization,
 
beginning
 
in
 
the
 
third
 
quarter
 
of
 
fiscal
 
2022,
 
we
 
reported
 
results
 
for
 
our
 
four
 
operating
 
segments
 
as
 
follows:
 
North

America Retail; International;
 
Pet; and North America
 
Foodservice. We
 
have restated our
 
net sales by segment
 
and segment operating

profit amounts
 
to reflect
 
our new
 
operating segments.
 
These segment
 
changes had
 
no effect
 
on previously
 
reported consolidated
 
net

sales, operating
 
profit, net
 
earnings attributable
 
to General
 
Mills, or
 
earnings
 
per share.
 
Please refer
 
to Note
 
17 of
 
the Consolidated

Financial Statements in Part 8 of this report for a description of our operating
 
segments.

Our
 
North
 
America
 
Retail
 
operating
 
segment
 
includes
 
convenience
 
store
 
businesses
 
from
 
our
 
former
 
Convenience
 
Stores
 
&

Foodservice
 
segment.
 
Within
 
our
 
North
 
America
 
Retail
 
operating
 
segment,
 
our
 
former
 
U.S.
 
Cereal
 
operating
 
unit
 
and
 
U.S.
 
Yogurt

operating
 
unit
 
have
 
been
 
combined
 
into
 
the
 
U.S.
 
Morning
 
Foods
 
operating
 
unit.
 
Additionally,
 
the
 
U.S.
 
Meals
 
&
 
Baking
 
Solutions

21

operating unit
 
combines the
 
former U.S.
 
Meals &
 
Baking operating
 
unit with
 
certain businesses
 
from the
 
U.S. Snacks
 
operating unit.

The
 
Canada
 
operating
 
unit
 
excludes
 
Canada
 
foodservice
 
businesses
 
which
 
are
 
now
 
included
 
in
 
our
 
North
 
America
 
Foodservice

operating segment.
 
The resulting North
 
America Foodservice operating
 
segment exclusively includes
 
our foodservice businesses.
 
Our

International
 
operating
 
segment
 
combines
 
our
 
former
 
Europe
 
&
 
Australia
 
and
 
Asia
 
&
 
Latin
 
America
 
operating
 
segments.
 
Our
 
Pet

operating segment is unchanged.

The following tables provide
 
the dollar amount and percentage
 
of net sales and operating
 
profit from each segment for
 
fiscal 2022 and

fiscal 2021:

Fiscal Year

2022

2021

In Millions

Dollars

Percent of Total

Dollars

Percent of Total

Net Sales

North America Retail

$

11,572.0

61

%

$

11,250.0

62

%

International

3,315.7

17

3,656.8

20

Pet

2,259.4

12

1,732.4

10

North America Foodservice

1,845.7

10

1,487.8

8

Total

$

18,992.8

100

%

$

18,127.0

100

%

Segment Operating Profit

North America Retail

$

2,699.7

74

%

$

2,725.9

75

%

International

232.0

6

236.6

7

Pet

470.6

13

415.0

12

North America Foodservice

255.5

7

203.3

6

Total

$

3,657.8

100

%

$

3,580.8

100

%

Segment
 
operating
 
profit
 
as
 
reviewed
 
by
 
our
 
executive
 
management
 
excludes
 
unallocated
 
corporate
 
items,
 
net
 
gain
 
or
 
loss
 
on

divestitures, and restructuring, impairment, and other exit costs that are centrally
 
managed.

NORTH AMERICA RETAIL
 
SEGMENT

Our North America Retail
 
operating segment reflects business
 
with a wide variety of
 
grocery stores, mass merchandisers, membership

stores,
 
natural
 
food
 
chains,
 
drug,
 
dollar
 
and
 
discount
 
chains,
 
convenience
 
stores,
 
and
 
e-commerce
 
grocery
 
providers.
 
Our
 
product

categories
 
in
 
this
 
business
 
segment
 
are
 
ready-to-eat
 
cereals,
 
refrigerated
 
yogurt,
 
soup,
 
meal
 
kits,
 
refrigerated
 
and
 
frozen
 
dough

products,
 
dessert
 
and
 
baking
 
mixes,
 
frozen
 
pizza
 
and
 
pizza
 
snacks,
 
snack
 
bars,
 
fruit
 
snacks,
 
savory
 
snacks,
 
and
 
a
 
wide
 
variety
 
of

organic products
 
including ready-to-eat
 
cereal, frozen
 
and shelf-stable vegetables,
 
meal kits, fruit
 
snacks, snack
 
bars, and
 
refrigerated

yogurt.

North America Retail net sales were as follows:

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 may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

The
 
3
 
percent
 
increase
 
in
 
North
 
America
 
Retail
 
net
 
sales
 
for
 
fiscal
 
2022
 
was
 
driven
 
by
 
favorable
 
net
 
price
 
realization
 
and
 
mix,

partially offset by a decrease in contributions from volume growth.

22

The components of North America Retail organic net
 
sales growth are shown in the following table:

Fiscal 2022 vs. 2021

Percentage Change

Contributions from organic volume growth (a)

(6)

pts

Organic net price realization and mix

9

pts

Organic net sales growth

3

pts

Foreign currency exchange

Flat

Net sales growth

3

pts

Note: Table may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

North
 
America
 
Retail organic
 
net
 
sales increased
 
3 percent
 
in fiscal
 
2022
 
compared
 
to fiscal
 
2021,
 
driven
 
by favorable
 
organic
 
net

price realization and mix, partially offset by a decrease in
 
contributions from organic volume growth.

Net sales for our North America Retail operating units are shown in the following table:

In Millions

Fiscal 2022

Fiscal 2022 vs. 2021

Percentage Change

Fiscal 2021

U.S. Meals & Baking Solutions

$

4,023.8

Flat

$

4,042.2

U.S. Morning Foods

3,370.9

2

%

3,314.0

U.S. Snacks

3,191.4

9

%

2,940.5

Canada (a)

985.9

3

%

953.3

Total

$

11,572.0

3

%

$

11,250.0

(a)

On a constant
 
currency basis, Canada
 
operating unit net
 
sales increased 1
 
percent in fiscal
 
2022. See the
 
“Non-GAAP Measures”

section below for our use of this measure not defined by GAAP.

Segment
 
operating
 
profit
 
decreased
 
1
 
percent
 
to $2,700
 
million
 
in
 
fiscal
 
2022
 
compared
 
to
 
$2,726
 
million
 
in
 
fiscal
 
2021,
 
primarily

driven by higher input costs and
 
a decrease in contributions from volume
 
growth,
 
partially offset by favorable net
 
price realization and

mix
 
and
 
a
 
decrease
 
in certain
 
SG&A
 
expenses.
 
Segment
 
operating
 
profit
 
decreased
 
1 percent
 
on a
 
constant-currency
 
basis in
 
fiscal

2022 compared to fiscal 2021 (see the “Non-GAAP Measures” section below
 
for our use of this measure not defined by GAAP).

INTERNATIONAL SEGMENT

Our International
 
operating segment
 
reflects retail
 
and foodservice
 
businesses outside
 
of the
 
United States
 
and Canada.
 
Our product

categories
 
include
 
super-premium
 
ice
 
cream
 
and frozen
 
desserts, meal
 
kits,
 
salty
 
snacks,
 
snack
 
bars,
 
dessert
 
and
 
baking
 
mixes,
 
and

shelf stable vegetables.

International net sales were as follows:

Fiscal 2022

Fiscal 2022 vs. 2021

Percentage Change

Fiscal 2021

Net sales (in millions)

$

3,315.7

(9)

%

$

3,656.8

Contributions from volume growth (a)

(19)

pts

Net price realization and mix

9

pts

Foreign currency exchange

1

pt

Note: Table may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

The
 
9
 
percent
 
decrease
 
in
 
International
 
net
 
sales
 
in
 
fiscal
 
2022
 
was
 
driven
 
by
 
a
 
decrease
 
in
 
contributions
 
from
 
volume
 
growth,

including
 
the
 
impact
 
of
 
volume declines
 
from
 
divestitures,
 
partially
 
offset
 
by
 
favorable
 
net
 
price
 
realization
 
and
 
mix
 
and
 
favorable

foreign currency exchange.

23

The components of International organic net sales growth
 
are shown in the following table:

Fiscal 2022 vs. 2021

Percentage Change

Contributions from organic volume growth (a)

Flat

Organic net price realization and mix

2

pts

Organic net sales growth

2

pts

Foreign currency exchange

1

pt

Divestitures (b)

(12)

pts

Net sales growth

(9)

pts

Note: Table may
 
not foot due to rounding

(a)

Measured in tons based on the stated weight of our product shipments.

(b)

Divestitures include
 
the impact
 
of the
 
sale of our
 
interests in
 
Yoplait
 
SAS, Yoplait
 
Marques SNC,
 
and Liberté
 
Marques Sàrl
 
and

our European
 
dough businesses in
 
fiscal 2022
 
and the sale
 
of the Laticínios
 
Carolina business in
 
Brazil in fiscal
 
2021. Please see

Note 3 to the Consolidated Financial Statements in Part II, Item 8 of this report.

The 2
 
percent increase
 
in International
 
organic
 
net sales
 
growth in
 
fiscal 2022
 
was driven
 
by favorable
 
organic
 
net price
 
realization

and mix.

Segment
 
operating
 
profit decreased
 
2 percent
 
to $232 million
 
in fiscal
 
2022 compared
 
to $237
 
million
 
in 2021,
 
primarily
 
driven by

higher
 
input
 
costs
 
and
 
a
 
decrease
 
in
 
contributions
 
from
 
volume
 
growth,
 
including
 
the
 
impact
 
of volume
 
declines
 
from
 
divestitures,

partially
 
offset
 
by favorable
 
net price
 
realization
 
and mix
 
and
 
a decrease
 
in SG&A
 
expenses. Segment
 
operating
 
profit decreased
 
4

percent on a constant-currency
 
basis in fiscal 2022 compared to fiscal
 
2021 (see the “Non-GAAP Measures”
 
section below for our use

of this measure not defined by GAAP).

PET SEGMENT

Our Pet operating segment includes
 
pet food products sold primarily in
 
the United States and Canada in national
 
pet superstore chains,

e-commerce retailers,
 
grocery stores,
 
regional pet
 
store chains,
 
mass merchandisers,
 
and veterinary
 
clinics and
 
hospitals. Our
 
product

categories include
 
dog and
 
cat food
 
(dry foods,
 
wet foods,
 
and treats)
 
made with
 
whole meats,
 
fruits, and
 
vegetables and
 
other high-

quality natural ingredients.
 
Our tailored pet product offerings
 
address specific dietary,
 
lifestyle, and life-stage needs
 
and span different

product types, diet types, breed sizes for dogs, lifestages, flavors, product
 
functions,
 
and textures and cuts for wet foods.

Pet net sales were as follows:

Fiscal 2022

Fiscal 2022 vs. 2021

Percentage Change

Fiscal 2021

Net sales (in millions)

$

2,259.4

30

%

$

1,732.4

Contributions from volume growth (a)

11

pts

Net price realization and mix

19

pts

Foreign currency exchange

Flat

Note: Table may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

Pet net
 
sales increased
 
30
 
percent
 
in
 
fiscal
 
2022
 
compared to
 
fiscal
 
2021,
 
driven
 
by favorable
 
net
 
price
 
realization
 
and mix
 
and
 
an

increase in contributions from volume growth,
 
including incremental volume from the acquisition of Tyson
 
Foods’ pet treats business.

24

The components of Pet organic net sales growth are shown in the following
 
table:

Fiscal 2022 vs. 2021

Percentage Change

Contributions from organic volume growth (a)

8

pts

Organic net price realization and mix

10

pts

Organic net sales growth

18

pts

Foreign currency exchange

Flat

Acquisition (b)

13

pts

Net sales growth

30

pts

Note: Table may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

(b)

Acquisition of Tyson
 
Foods’ pet treats business
 
in fiscal 2022. Please
 
see Note 3 to
 
the Consolidated Financial
 
Statements in Part

II, Item 8 of this report.

The 18
 
percent increase
 
in Pet
 
organic
 
net sales
 
growth
 
in fiscal
 
2022 was
 
driven by
 
favorable organic
 
net price
 
realization and
 
mix

and an increase in contributions from organic volume
 
growth.

Pet operating
 
profit increased
 
13 percent
 
to $471 million
 
in fiscal 2022,
 
compared to
 
$415 million in
 
fiscal 2021, primarily
 
driven by

favorable net
 
price realization
 
and mix
 
and an increase
 
in contributions
 
from volume
 
growth, including
 
incremental volume
 
from the

acquisition
 
of
 
Tyson
 
Foods’
 
pet
 
treats
 
business,
 
partially
 
offset
 
by
 
higher
 
input
 
costs and
 
an
 
increase
 
in
 
SG&A
 
expenses.
 
Segment

operating
 
profit
 
increased
 
13
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
fiscal
 
2022
 
compared
 
to
 
fiscal
 
2021
 
(see
 
the
 
“Non-GAAP

Measures” section below for our use of this measure not defined by GAAP).

NORTH AMERICA FOODSERVICE SEGMENT

Our
 
major
 
product
 
categories
 
in
 
our
 
North
 
America
 
Foodservice
 
operating
 
segment
 
are
 
ready-to-eat
 
cereals,
 
snacks,
 
refrigerated

yogurt,
 
frozen
 
meals,
 
unbaked
 
and
 
fully
 
baked
 
frozen
 
dough
 
products,
 
baking
 
mixes,
 
and
 
bakery
 
flour.
 
Many
 
products
 
we
 
sell
 
are

branded to the consumer
 
and nearly all are
 
branded to our customers.
 
We
 
sell to distributors and
 
operators in many customer
 
channels

including foodservice, vending, and supermarket bakeries.

North America Foodservice net sales were as follows:

Fiscal 2022

Fiscal 2022 vs. 2021

Percentage Change

Fiscal 2021

Net sales (in millions)

$

1,845.7

24

%

$

1,487.8

Contributions from volume growth (a)

5

pts

Net price realization and mix

19

pts

Foreign currency exchange

Flat

Note: Table may
 
not foot due to rounding.

(a)

Measured in tons based on the stated weight of our product shipments.

North
 
America
 
Foodservice
 
net
 
sales
 
increased
 
24
 
percent
 
in
 
fiscal
 
2022,
 
driven
 
by
 
favorable
 
price
 
realization
 
and
 
mix,
 
including

market index pricing on bakery flour, and an
 
increase in contributions from volume growth.

The components of North America Foodservice organic
 
net sales growth are shown in the following table:

Fiscal 2022 vs. 2021

Percentage Change

Contributions from organic volume growth (a)

5

pts

Organic net price realization and mix

19

pts

Organic net sales growth

24

pts

Foreign currency exchange

Flat

Net sales growth

24

pts

Note: Table may
 
not foot due to rounding

(a)

Measured in tons based on the standard weight of our product shipments.

25

The 24
 
percent increase
 
in North
 
America
 
Foodservice
 
organic
 
net sales
 
growth
 
in fiscal
 
2022
 
was driven
 
by favorable
 
organic
 
net

price
 
realization
 
and
 
mix,
 
including
 
market
 
index
 
pricing
 
on
 
bakery
 
flour,
 
and
 
an
 
increase
 
in
 
contributions
 
from
 
organic
 
volume

growth.

Segment
 
operating
 
profit
 
increased
 
26
 
percent
 
to
 
$256 million
 
in
 
fiscal
 
2022,
 
compared
 
to
 
$203 million
 
in
 
fiscal
 
2021,
 
primarily

driven by favorable net price
 
realization and mix and
 
an increase in contributions from
 
volume growth,
 
partially offset by higher
 
input

costs.
 
Segment
 
operating
 
profit
 
increased
 
26
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
fiscal
 
2022
 
compared
 
to
 
fiscal
 
2021
 
(see
 
the

“Non-GAAP Measures” section below for our use of this measure not
 
defined by GAAP).

UNALLOCATED CORPORATE
 
ITEMS

Unallocated
 
corporate
 
items
 
include
 
corporate
 
overhead
 
expenses,
 
variances
 
to
 
planned
 
domestic
 
employee
 
benefits
 
and
 
incentives,

certain
 
charitable
 
contributions,
 
restructuring
 
initiative
 
project-related
 
costs,
 
gains
 
and
 
losses
 
on
 
corporate
 
investments,
 
and
 
other

items
 
that
 
are
 
not
 
part
 
of
 
our
 
measurement
 
of
 
segment
 
operating
 
performance.
 
These
 
include
 
gains
 
and
 
losses
 
arising
 
from
 
the

revaluation
 
of
 
certain
 
grain
 
inventories
 
and
 
gains
 
and
 
losses
 
from
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
until

passed
 
back
 
to
 
our
 
operating
 
segments.
 
These
 
items
 
affecting
 
operating
 
profit
 
are
 
centrally
 
managed
 
at
 
the
 
corporate
 
level
 
and
 
are

excluded
 
from
 
the
 
measure
 
of
 
segment
 
profitability
 
reviewed
 
by
 
executive
 
management.
 
Under
 
our
 
supply
 
chain
 
organization,
 
our

manufacturing, warehouse, and distribution
 
activities are substantially integrated across
 
our operations in order to maximize
 
efficiency

and
 
productivity.
 
As
 
a
 
result,
 
fixed
 
assets
 
and
 
depreciation
 
and
 
amortization
 
expenses
 
are
 
neither
 
maintained
 
nor
 
available
 
by

operating segment.

In
 
fiscal
 
2022,
 
unallocated
 
corporate
 
expense
 
increased
 
$191
 
million
 
to
 
$403
 
million
 
compared
 
to
 
$212 million
 
last
 
year.
 
In
 
fiscal

2022,
 
we
 
recorded
 
a
 
$133
 
million
 
net
 
decrease
 
in
 
expense
 
related
 
to
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
and

grain inventories,
 
compared to a $139
 
million net decrease in
 
expense in the
 
prior year.
 
In fiscal 2022,
 
we recorded $15
 
million of net

losses related to
 
the sale of
 
corporate investments
 
and valuation adjustments,
 
compared to $76
 
million of net
 
gains in fiscal
 
2021. We

recorded $22
 
million of integration
 
costs related to
 
our acquisition
 
of Tyson
 
Foods’ pet
 
treats business and
 
$73 million
 
of transaction

costs primarily
 
related
 
to the
 
sale of
 
our interests
 
in
 
Yoplait
 
SAS, Yoplait
 
Marques
 
SNC, and
 
Liberté
 
Marques
 
Sàrl,
 
the sale
 
of our

European dough businesses,
 
the definitive agreements
 
to sell our Helper
 
main meals and Suddenly
 
Salad side dishes business,
 
and the

definitive agreement
 
to acquire TNT
 
Crust in fiscal
 
2022, compared
 
to $10 million
 
of transaction costs
 
in fiscal 2021.
 
In addition, we

recorded a
 
$22 million
 
recovery related
 
to a
 
Brazil indirect
 
tax item
 
in fiscal
 
2022 compared
 
to a
 
$9 million
 
recovery in
 
fiscal 2021.

We
 
recorded a $13
 
million insurance recovery
 
in fiscal 2022. In
 
fiscal 2021, we
 
recorded a $4
 
million favorable adjustment
 
related to

a product recall in fiscal 2020 in our international Green Giant business.

IMPACT OF INFLATION

We
 
experienced broad
 
based global input
 
cost inflation
 
of 8 percent
 
in fiscal 2022
 
and 4 percent
 
in fiscal 202
 
1. We
 
expect input
 
cost

inflation of
 
approximately 14
 
percent in
 
fiscal 2023.
 
We
 
attempt to
 
minimize the
 
effects of
 
inflation through
 
HMM, SRM,
 
planning,

and operating practices. Our risk management practices are discussed in Item
 
7A of this report.

LIQUIDITY AND CAPITAL
 
RESOURCES

The primary source of our
 
liquidity is cash flow from
 
operations. Over the most recent
 
two-year period, our operations have
 
generated

$6.3 billion
 
in cash.
 
A substantial
 
portion of
 
this operating
 
cash flow
 
has been
 
returned to
 
shareholders through
 
dividends and
 
share

repurchases.
 
We
 
also
 
use
 
cash
 
from
 
operations
 
to
 
fund
 
our
 
capital
 
expenditures,
 
acquisitions,
 
and
 
debt
 
service.
 
We
 
typically
 
use
 
a

combination
 
of
 
cash,
 
notes
 
payable,
 
and
 
long-term
 
debt,
 
and
 
occasionally
 
issue
 
shares
 
of
 
common
 
stock,
 
to
 
finance
 
significant

acquisitions.

As of
 
May
 
29,
 
2022,
 
we
 
had
 
$523 million
 
of
 
cash
 
and
 
cash
 
equivalents
 
held
 
in
 
foreign
 
jurisdictions.
 
In
 
anticipation
 
of
 
repatriating

funds
 
from
 
foreign
 
jurisdictions,
 
we
 
record
 
local
 
country
 
withholding
 
taxes
 
on
 
our
 
international
 
earnings,
 
as
 
applicable.
 
We
 
may

repatriate our
 
cash and
 
cash equivalents
 
held by
 
our foreign
 
subsidiaries without
 
such funds
 
being subject
 
to further
 
U.S. income
 
tax

liability. Earnings
 
prior to fiscal 2018 from our foreign subsidiaries remain permanently reinvested
 
in those jurisdictions.

26

Cash Flows from Operations

Fiscal Year

In Millions

2022

2021

Net earnings, including earnings attributable to redeemable and noncontrolling
 
interests

$

2,735.0

$

2,346.0

Depreciation and amortization

570.3

601.3

After-tax earnings from joint ventures

(111.7)

(117.7)

Distributions of earnings from joint ventures

107.5

95.2

Stock-based compensation

98.7

89.9

Deferred income taxes

62.2

118.8

Pension and other postretirement benefit plan contributions

(31.3)

(33.4)

Pension and other postretirement benefit plan costs

(30.1)

(33.6)

Divestitures (gain) loss

(194.1)

53.5

Restructuring, impairment, and other exit (recoveries) costs

(117.1)

150.9

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

277.4

(155.9)

Other, net

(50.7)

(131.8)

Net cash provided by operating activities

$

3,316.1

$

2,983.2

During
 
fiscal
 
2022,
 
cash
 
provided
 
by
 
operations
 
was
 
$3,316 million
 
compared
 
to
 
$2,983 million
 
in
 
the
 
same
 
period
 
last
 
year.
 
The

$333 million increase was primarily
 
driven by a $433 million change in
 
current assets and liabilities and a
 
$389 million increase in net

earnings,
 
partially
 
offset
 
by
 
a
 
$268
 
million
 
change
 
in
 
restructuring
 
costs and
 
a
 
$248
 
million
 
change
 
in
 
divestitures
 
gain.
 
The
 
$433

million change in current assets and liabilities was primarily
 
driven by a $269 million change in inventories
 
and a $238 million change

in other
 
current liabilities, primarily
 
driven by changes
 
in income taxes
 
payable and the
 
fair value of
 
certain currency
 
and commodity

derivatives. These were partially offset by a $194
 
million change in receivables.

We
 
strive to grow core
 
working capital at or below
 
the rate of growth in
 
our net sales. For
 
fiscal 2022, core working
 
capital decreased

117 percent,
 
compared to a net sales
 
increase of 5 percent.
 
As of May 29, 2022,
 
our core working capital
 
balance was a net liability of

$423 million
 
compared to
 
a net liability
 
of $194
 
million in
 
fiscal 2021.
 
The $229
 
million change
 
was primarily
 
due to an
 
increase in

accounts payable in fiscal 2022 primarily due to input cost inflation.

Cash Flows from Investing Activities

Fiscal Year

In Millions

2022

2021

Purchases of land, buildings, and equipment

$

(568.7)

$

(530.8)

Acquisitions, net of cash acquired

(1,201.3)

-

Investments in affiliates, net

15.4

15.5

Proceeds from disposal of land, buildings, and equipment

3.3

2.7

Proceeds from divestitures, net of cash divested

74.1

2.9

Other, net

(13.5)

(3.1)

Net cash used by investing activities

$

(1,690.7)

$

(512.8)

In
 
fiscal
 
2022,
 
we
 
used
 
$1,691 million
 
of
 
cash
 
through
 
investing
 
activities
 
compared
 
to
 
$513 million
 
in
 
fiscal
 
2021.
 
We
 
invested

$569 million in land, buildings, and equipment in fiscal 2022, an
 
increase of $38 million from fiscal 2021.

During fiscal 2022, we acquired Tyson
 
Foods’ pet treats business for an aggregate purchase price of $1.2 billion.

During fiscal
 
2022, we
 
sold our
 
interests in
 
Yoplait
 
SAS, Yoplait
 
Marques SNC,
 
and Liberté
 
Marques Sàrl
 
for cash
 
proceeds of
 
$32

million, net
 
of cash divested
 
as part of
 
the sale. We
 
also completed
 
the sale of
 
our European dough
 
businesses in fiscal
 
2022 for
 
cash

proceeds of $42 million.

We
 
expect
 
capital
 
expenditures
 
to
 
be
 
approximately
 
4.0
 
percent
 
of
 
reported
 
net
 
sales
 
in
 
fiscal
 
2023.
 
These
 
expenditures
 
will
 
fund

initiatives that are expected to fuel growth, support innovative products,
 
and continue HMM initiatives throughout the supply chain.

27

Cash Flows from Financing Activities

Fiscal Year

In Millions

2022

2021

Change in notes payable

$

551.4

$

71.7

Issuance of long-term debt

2,203.7

1,576.5

Payment of long-term debt

(3,140.9)

(2,609.0)

Debt exchange participation incentive cash payment

-

(201.4)

Proceeds from common stock issued on exercised options

161.7

74.3

Purchases of common stock for treasury

(876.8)

(301.4)

Dividends paid

(1,244.5)

(1,246.4)

Distributions to redeemable and noncontrolling interest holders

(129.8)

(48.9)

Other, net

(28.0)

(30.9)

Net cash used by financing activities

$

(2,503.2)

$

(2,715.5)

Financing activities
 
used $2.5 billion
 
of cash
 
in fiscal
 
2022 compared
 
to $2.7 billion
 
in fiscal
 
2021. We
 
had $386 million
 
of net
 
debt

repayments
 
in
 
fiscal
 
2022
 
compared
 
to
 
$961 million
 
of
 
net
 
debt
 
repayments
 
in
 
fiscal
 
2021.
 
In
 
addition,
 
we
 
paid
 
a
 
participation

incentive of
 
$201 million related
 
to a debt
 
exchange in fiscal
 
2021. For more
 
information on our
 
debt issuances and
 
payments, please

refer to Note 9 to the Consolidated Financial Statements in Item 8 of this report.

During
 
fiscal
 
2022,
 
we
 
received
 
$162 million
 
of
 
net
 
proceeds
 
from
 
common
 
stock
 
issued
 
on
 
exercised
 
options
 
compared
 
to

$74 million in fiscal 2021.

During fiscal
 
2022, we
 
repurchased 14
 
million shares
 
of our
 
common
 
stock for
 
$877 million.
 
During fiscal
 
2021, we
 
repurchased 5

million shares of our common stock for $301 million.

Dividends paid in fiscal 2022 totaled
 
$1,244 million, or $2.04 per share. Dividends
 
paid in fiscal 2021
 
totaled $1,246 million, or $2.02

per share.

Selected Cash Flows from Joint Ventures

Selected cash flows from our joint ventures are set forth in the following table:

Fiscal Year

Inflow (Outflow), in Millions

2022

2021

Investments in affiliates, net

$

15.4

$

15.5

Dividends received

107.5

95.2

The following table details the fee-paid committed and uncommitted credit
 
lines we had available as of May 29, 2022:

In Billions

Facility Amount

Borrowed Amount

Credit facility expiring:

April 2026

$

2.7

$

-

Total committed
 
credit facilities

2.7

-

Uncommitted credit facilities

0.6

0.1

Total committed
 
and uncommitted credit facilities

$

3.3

$

0.1

To ensure
 
availability of funds, we maintain bank credit lines and have commercial paper programs
 
available to us in the United States

and Europe. We also
 
have uncommitted and asset-backed credit lines that support our
 
foreign operations.

We
 
have material
 
contractual obligations
 
that arise
 
in the
 
normal course
 
of business
 
and we
 
believe that
 
cash flows
 
from operations

will be adequate to meet our liquidity and capital needs for at least the next
 
12 months.

Certain
 
of
 
our
 
long-term
 
debt
 
agreements,
 
our
 
credit
 
facilities,
 
and
 
our
 
noncontrolling
 
interests
 
contain
 
restrictive
 
covenants.
 
As
 
of

May 29, 2022, we were in compliance with all of these covenants.

28

We
 
have $1,674
 
million of long-term
 
debt maturing in
 
the next 12
 
months that is
 
classified as current,
 
including $500 million
 
of 2.60

percent
 
fixed-rate notes
 
due October
 
12, 2022,
 
$100 million
 
of 7.47
 
percent fixed-rate
 
notes due
 
October 15,
 
2022, €250
 
million
 
of

0.00
 
percent
 
fixed-rate
 
notes
 
due
 
November
 
11,
 
2022,
 
€500
 
million
 
of
 
1.00
 
percent
 
fixed-rate
 
notes
 
due
 
April
 
27,
 
2023,
 
and
 
€250

million of
 
floating rate
 
notes due May
 
16, 2023. We
 
believe that
 
cash flows from
 
operations, together
 
with available
 
short-
 
and long-

term debt financing, will be adequate to meet our liquidity and capital
 
needs for at least the next 12 months.

As of May
 
29, 2022,
 
our total debt,
 
including the
 
impact of derivative
 
instruments designated
 
as hedges, was
 
77 percent
 
in fixed-rate

and 23
 
percent in
 
floating-rate instruments,
 
compared to
 
88 percent
 
in fixed-rate
 
and 12
 
percent in
 
floating-rate instruments
 
on May

30, 2021.

Our net
 
debt
 
to operating
 
cash flow
 
ratio decreased
 
to 3.3
 
in fiscal
 
2022 from
 
3.7 in
 
fiscal 2021,
 
primarily
 
driven by
 
an increase
 
in

cash
 
provided
 
by operations.
 
Our
 
net debt
 
-to-adjusted
 
EBITDA ratio
 
declined
 
to 2.8
 
in fiscal
 
2022
 
from 2.9
 
in fiscal
 
2021 (see
 
the

“Non-GAAP Measures” section below for our use of this measure not
 
defined by GAAP).

The
 
third-party
 
holder
 
of
 
the
 
General
 
Mills
 
Cereals,
 
LLC
 
(GMC)
 
Class
 
A
 
Interests
 
receives
 
quarterly
 
preferred
 
distributions
 
from

available net
 
income based
 
on the application
 
of a
 
floating preferred
 
return rate
 
to the
 
holder’s capital
 
account balance
 
established in

the most recent mark-to-market valuation
 
(currently $252 million). On June 1, 2021,
 
the floating preferred return rate on GMC’s
 
Class

A Interests
 
was reset
 
to the
 
sum of
 
three-month LIBOR
 
plus 160
 
basis points.
 
The preferred
 
return rate
 
is adjusted
 
every three
 
years

through a negotiated agreement with the Class A Interest holder or through
 
a remarketing auction.

We
 
have an option
 
to purchase the
 
Class A Interests for
 
consideration equal to
 
the then current
 
capital account value,
 
plus any unpaid

preferred return
 
and the
 
prescribed make-whole
 
amount. If
 
we purchase
 
these interests,
 
any change
 
in the
 
third-party holder’s
 
capital

account
 
from
 
its
 
original
 
value
 
will
 
be
 
charged
 
directly
 
to
 
retained
 
earnings
 
and
 
will
 
increase
 
or
 
decrease
 
the
 
net
 
earnings
 
used
 
to

calculate EPS in that period.

CRITICAL ACCOUNTING ESTIMATES

For a complete description of our
 
significant accounting policies, please see Note
 
2 to the Consolidated Financial
 
Statements in Item 8

of this report. Our critical accounting
 
estimates are those that have
 
a meaningful impact on the reporting of our
 
financial condition and

results of operations.
 
These estimates include
 
our accounting for
 
revenue recognition, valuation
 
of long-lived assets,
 
intangible assets,

stock-based compensation, income taxes, and defined benefit pension,
 
other postretirement benefit, and postemployment benefit plans
 
.

Considerations related to the COVID-19 pandemic

The continuing
 
impact that
 
the recent
 
COVID-19 pandemic
 
will have
 
on our
 
consolidated results
 
of operations
 
is uncertain.
 
We
 
saw

increased
 
orders from
 
retail customers
 
across all
 
geographies in
 
response to
 
increased consumer
 
demand for
 
food at
 
home. We
 
also

experienced
 
a
 
COVID-19-related
 
decrease
 
in
 
consumer
 
traffic
 
in
 
away-from-home
 
food
 
outlets.
 
In
 
fiscal
 
2023,
 
we
 
expect
 
at-home

food demand
 
will decline year
 
over year across
 
most of our
 
core markets
 
though will remain
 
above pre-pandemic
 
levels. Conversely,

we expect away-from home food demand
 
to continue to recover,
 
though not fully to pre-pandemic levels.
 
We expect one of
 
the largest

factors
 
impacting
 
our
 
performance
 
will
 
be
 
relative
 
balance
 
of
 
at-home
 
versus
 
away-from-home
 
consumer
 
food
 
demand,
 
primarily

driven by
 
the level
 
of virus
 
control in
 
markets around
 
the world,
 
which remains
 
uncertain. We
 
have considered
 
the potential
 
impacts

of the
 
COVID-19 pandemic
 
in our
 
significant accounting
 
estimates as
 
of May
 
29, 2022,
 
and will
 
continue to
 
evaluate the
 
nature and

extent of the impact to our business and consolidated results of operations.

Revenue Recognition

Our
 
revenues
 
are
 
reported
 
net
 
of
 
variable
 
consideration
 
and
 
consideration
 
payable
 
to
 
our
 
customers,
 
including
 
trade
 
promotion,

consumer
 
coupon
 
redemption,
 
and
 
other
 
reductions
 
to
 
the
 
transaction
 
price,
 
including
 
estimated
 
allowances
 
for
 
returns,
 
unsalable

product,
 
and
 
prompt
 
pay
 
discounts.
 
Trade
 
promotions
 
are
 
recorded
 
using
 
significant
 
judgment
 
of
 
estimated
 
participation
 
and

performance levels
 
for offered
 
programs at the
 
time of sale.
 
Differences between
 
the estimated and
 
actual reduction to
 
the transaction

price
 
are
 
recognized
 
as
 
a
 
change
 
in
 
estimate
 
in
 
a
 
subsequent
 
period.
 
Our
 
accrued
 
trade
 
and
 
coupon
 
promotion
 
liabilities
 
were

$420 million
 
as of
 
May 29,
 
2022, and
 
$508 million
 
as of
 
May 30,
 
2021. Because
 
these amounts
 
are significant,
 
if our
 
estimates are

inaccurate we would have to make adjustments in subsequent periods that could have
 
a significant effect on our results of operations.

Valuation
 
of Long-Lived Assets

We
 
estimate
 
the useful
 
lives
 
of long
 
-lived
 
assets and
 
make
 
estimates concerning
 
undiscounted
 
cash flows
 
to review
 
for impairment

whenever
 
events or
 
changes in
 
circumstances indicate
 
that the
 
carrying
 
amount of
 
an asset
 
(or asset
 
group)
 
may not
 
be recoverable.

Fair value is measured using discounted cash flows or independent appraisals,
 
as appropriate.

Intangible Assets

Goodwill
 
and
 
other
 
indefinite-lived
 
intangible
 
assets
 
are
 
not
 
subject
 
to
 
amortization
 
and
 
are
 
tested
 
for
 
impairment
 
annually
 
and

whenever
 
events or
 
changes in
 
circumstances
 
indicate
 
that impairment
 
may have
 
occurred. Our
 
estimates of
 
fair value
 
for
 
goodwill

impairment
 
testing
 
are determined
 
based on
 
a
 
discounted
 
cash
 
flow
 
model.
 
We
 
use
 
inputs from
 
our
 
long-range
 
planning
 
process to

29

determine
 
growth
 
rates
 
for
 
sales
 
and
 
profits.
 
We
 
also
 
make
 
estimates
 
of
 
discount
 
rates,
 
perpetuity
 
growth
 
assumptions,
 
market

comparables, and other factors.

We evaluate the
 
useful lives of our other intangible assets, mainly brands, to
 
determine if they are finite or indefinite-lived.
 
Reaching a

determination
 
on
 
useful
 
life
 
requires
 
significant
 
judgments
 
and
 
assumptions
 
regarding
 
the
 
future
 
effects
 
of
 
obsolescence,
 
demand,

competition, other economic
 
factors (such as the
 
stability of the industry,
 
known technological advances,
 
legislative action that
 
results

in an uncertain or
 
changing regulatory environment,
 
and expected changes in
 
distribution channels), the level
 
of required maintenance

expenditures,
 
and
 
the
 
expected
 
lives
 
of
 
other
 
related
 
groups
 
of
 
assets.
 
Intangible
 
assets
 
that
 
are
 
deemed
 
to
 
have
 
finite
 
lives
 
are

amortized
 
on a
 
straight-line basis
 
over their
 
useful lives,
 
generally
 
ranging from
 
4 to
 
30 years.
 
Our estimate
 
of the
 
fair value
 
of our

brand
 
assets
 
is
 
based
 
on
 
a
 
discounted
 
cash
 
flow
 
model
 
using
 
inputs
 
which
 
include
 
projected
 
revenues
 
from
 
our
 
long-range
 
plan,

assumed royalty rates that could be payable if we did not own the brands, and a discount
 
rate.

As of
 
May
 
29,
 
2022,
 
we
 
had
 
$21 billion
 
of
 
goodwill
 
and
 
indefinite-lived
 
intangible
 
assets. While
 
we
 
currently
 
believe
 
that
 
the
 
fair

value of
 
each intangible
 
exceeds its carrying
 
value and
 
that those intangibles
 
will contribute indefinitely
 
to our cash
 
flows, materially

different
 
assumptions
 
regarding
 
future performance
 
of our
 
businesses
 
or
 
a different
 
weighted-average
 
cost
 
of capital
 
could
 
result
 
in

material impairment losses
 
and amortization expense.
 
We
 
performed our fiscal
 
2022
 
assessment of our
 
intangible assets as of
 
the first

day
 
of
 
the
 
second
 
quarter
 
of
 
fiscal
 
2022,
 
and
 
we
 
determined
 
there
 
was
 
no
 
impairment
 
of
 
our
 
intangible
 
assets
 
as
 
their
 
related
 
fair

values were substantially in excess of the carrying values.

During the
 
third quarter of
 
fiscal 2022,
 
we changed our
 
organizational and
 
management structure
 
to streamline our
 
global operations.

As
 
a
 
result
 
of
 
these
 
changes,
 
we
 
reassessed
 
our
 
operating
 
segments
 
as
 
well
 
as
 
our
 
reporting
 
units.
 
Under
 
our
 
new
 
organizational

structure,
 
our
 
chief
 
operating
 
decision
 
maker
 
assesses
 
performance
 
and
 
makes
 
decisions
 
about
 
resources
 
to
 
be
 
allocated
 
to
 
our

segments at the
 
North America Retail, International,
 
Pet, and North America
 
Foodservice operating segment
 
level. Please see Note 17

to the Consolidated Financial Statements in Item 8 of this report for additional
 
information on our operating segments.

The organizational changes
 
also resulted in changes
 
in certain reporting units,
 
one level below the segment
 
level, and were considered

a
 
triggering
 
event
 
that
 
required
 
a
 
goodwill
 
impairment
 
test
 
during
 
the
 
third
 
quarter
 
of
 
fiscal
 
2022.
 
We
 
determined
 
there
 
was
 
no

impairment
 
of
 
the
 
goodwill
 
of
 
the
 
impacted
 
reporting
 
units
 
as
 
their
 
related
 
fair
 
values
 
were
 
substantially
 
in
 
excess
 
of
 
the
 
carrying

values.

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, please
 
see Note 12
 
to

the Consolidated Financial Statements in Item 8 of this report.

The
 
estimated
 
fair
 
values
 
of
 
stock
 
options
 
granted
 
and
 
the
 
assumptions
 
used
 
for
 
the
 
Black-Scholes
 
option-pricing
 
model
 
were
 
as

follows:

Fiscal Year

2022

2021

2020

Estimated fair values of stock options granted

$

8.77

$

8.03

$

7.10

Assumptions:

Risk-free interest rate

1.5

%

0.7

%

2.0

%

Expected term

8.5

years

8.5

years

8.5

years

Expected volatility

20.2

%

19.5

%

17.4

%

Dividend yield

3.4

%

3.3

%

3.6

%

The risk-free interest rate
 
for periods during the
 
expected term of the options
 
is based on the U.S. Treasury
 
zero-coupon yield curve in

effect at the time of grant. An increase in the expected term by
 
1 year, leaving all other assumptions constant, would
 
decrease the grant

date
 
fair value
 
by less
 
than
 
1 percent.
 
If all
 
other
 
assumptions
 
are held
 
constant,
 
a one
 
percentage
 
point
 
increase
 
in our
 
fiscal
 
2022

volatility assumption would increase the grant date fair value of our fiscal 2022
 
option awards by 7 percent.

To
 
the extent
 
that actual
 
outcomes differ
 
from our
 
assumptions, we
 
are not
 
required to
 
true up
 
grant-date fair
 
value-based expense
 
to

final
 
intrinsic
 
values.
 
Historical
 
data
 
has
 
a
 
significant
 
bearing
 
on
 
our
 
forward-looking
 
assumptions.
 
Significant
 
variances
 
between

actual and predicted experience could lead to prospective revisions
 
in our assumptions, which could then significantly
 
impact the year-

over-year comparability of stock-based compensation expense.

Any corporate
 
income tax
 
benefit realized
 
upon exercise
 
or vesting
 
of an
 
award in
 
excess of
 
that previously
 
recognized
 
in earnings

(referred to as
 
a windfall tax benefit)
 
is presented in the
 
Consolidated Statements of
 
Cash Flows as an
 
operating cash flow.
 
The actual

30

impact on future years’
 
cash flows will depend,
 
in part, on the volume
 
of employee stock option
 
exercises during a particular
 
year and

the
 
relationship
 
between
 
the
 
exercise-date
 
market
 
value
 
of
 
the
 
underlying
 
stock
 
and
 
the
 
original
 
grant-date
 
fair
 
value
 
previously

determined for financial reporting purposes.

Realized windfall
 
tax benefits
 
and shortfall
 
tax deficiencies
 
related to the
 
exercise or
 
vesting of
 
stock-based awards
 
are recognized
 
in

the Consolidated Statement
 
of Earnings. Because
 
employee stock option
 
exercise behavior is not
 
within our control,
 
it is possible that

significantly different reported results could occur if different
 
assumptions or conditions were to prevail.

Income Taxes

We
 
apply a more-likely-than-not
 
threshold to the
 
recognition and derecognition
 
of uncertain tax
 
positions. Accordingly,
 
we recognize

the amount of
 
tax benefit that
 
has a greater
 
than 50 percent
 
likelihood of being
 
ultimately realized upon
 
settlement. Future changes
 
in

judgment related
 
to the
 
expected ultimate
 
resolution of
 
uncertain tax
 
positions will
 
affect earnings
 
in the
 
period of
 
such change.
 
For

more information on income taxes, please see Note 15 to the Consolidated Financial
 
Statements in Item 8 of this report.

Defined Benefit Pension, Other Postretirement Benefit, and Postemployment
 
Benefit Plans

We have
 
defined benefit pension plans covering
 
many employees in the United States,
 
Canada, Switzerland, and the
 
United Kingdom.

We also
 
sponsor plans that provide
 
health care benefits to
 
many of our retirees
 
in the United States, Canada,
 
and Brazil. Under certain

circumstances,
 
we
 
also
 
provide
 
accruable
 
benefits,
 
primarily
 
severance,
 
to
 
former
 
and
 
inactive
 
employees
 
in
 
the
 
United
 
States,

Canada,
 
and
 
Mexico.
 
Please see
 
Note
 
14
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
in
 
Item
 
8
 
of
 
this
 
report
 
for
 
a
 
description
 
of
 
our

defined benefit pension, other postretirement benefit, and postemployment
 
benefit plans.

We
 
recognize
 
benefits
 
provided
 
during
 
retirement
 
or
 
following
 
employment
 
over
 
the
 
plan
 
participants’
 
active
 
working
 
lives.

Accordingly,
 
we
 
make
 
various
 
assumptions
 
to
 
predict
 
and
 
measure
 
costs
 
and
 
obligations
 
many
 
years
 
prior
 
to
 
the
 
settlement
 
of
 
our

obligations.
 
Assumptions
 
that
 
require
 
significant
 
management
 
judgment
 
and
 
have
 
a material
 
impact
 
on
 
the
 
measurement
 
of
 
our
 
net

periodic
 
benefit
 
expense
 
or
 
income
 
and
 
accumulated
 
benefit
 
obligations
 
include
 
the
 
long-term
 
rates
 
of
 
return
 
on
 
plan
 
assets,
 
the

interest rates used to discount the obligations for our benefit plans, and health
 
care cost trend rates.

Expected Rate of Return on Plan Assets

Our expected
 
rate of return
 
on plan assets
 
is determined
 
by our asset
 
allocation, our
 
historical long-term
 
investment performance,
 
our

estimate of future long-term returns
 
by asset class (using input from our
 
actuaries, investment services, and investment
 
managers), and

long-term inflation
 
assumptions. We
 
review this assumption
 
annually for
 
each plan; however,
 
our annual
 
investment performance
 
for

one particular year does not, by itself, significantly influence our evaluation.

Our
 
historical
 
investment
 
returns
 
(compound
 
annual
 
growth
 
rates)
 
for
 
our
 
United
 
States
 
defined
 
benefit
 
pension
 
and
 
other

postretirement
 
benefit
 
plan
 
assets were
 
an 8.4
 
percent
 
loss in
 
the 1
 
year
 
period ended
 
May 29,
 
2022 and
 
returns of
 
6.4 percent,
 
8.2

percent, 6.2 percent, and 8.0 percent for the 5, 10, 15, and 20 year periods
 
ended May 29, 2022.

On a weighted-average basis, the
 
expected rate of return for all
 
defined benefit plans was 5.85
 
percent for fiscal 2022, 5.72
 
percent for

fiscal 2021, and 6.95 percent for fiscal 2020.
 
For fiscal 2023, we increased our weighted-average
 
expected rate of return on plan assets

for our principal
 
defined benefit pension
 
and other postretirement
 
plans in the
 
United States to
 
6.75 percent due
 
to higher prospective

long-term asset returns primarily on fixed income investments.

Lowering
 
the
 
expected
 
long-term
 
rate
 
of
 
return
 
on
 
assets
 
by
 
100
 
basis
 
points
 
would
 
increase
 
our
 
net
 
pension
 
and
 
postretirement

expense by $66 million for
 
fiscal 2023. A market-related
 
valuation basis is used to reduce
 
year-to-year expense volatility.
 
The market-

related valuation
 
recognizes certain
 
investment gains
 
or losses over
 
a five-year
 
period from
 
the year
 
in which
 
they occur.
 
Investment

gains or
 
losses for
 
this purpose
 
are the difference
 
between the
 
expected return
 
calculated using
 
the market-related
 
value of
 
assets and

the
 
actual
 
return
 
based
 
on
 
the
 
market-related
 
value
 
of
 
assets.
 
Our
 
outside
 
actuaries
 
perform
 
these
 
calculations
 
as
 
part
 
of
 
our

determination of annual expense or income.

Discount Rates

We
 
estimate
 
the
 
service
 
and
 
interest
 
cost
 
components
 
of
 
the
 
net
 
periodic
 
benefit
 
expense
 
for
 
our
 
United
 
States
 
and
 
most
 
of
 
our

international
 
defined
 
benefit
 
pension,
 
other
 
postretirement
 
benefit,
 
and
 
postemployment
 
benefit
 
plans
 
utilizing
 
a
 
full
 
yield
 
curve

approach
 
by applying
 
the specific
 
spot rates
 
along
 
the yield
 
curve used
 
to determine
 
the benefit
 
obligation
 
to the
 
relevant projected

cash flows. Our
 
discount rate assumptions
 
are determined annually
 
as of May 31
 
for our defined
 
benefit pension, other
 
postretirement

benefit,
 
and
 
postemployment
 
benefit
 
plan
 
obligations.
 
We
 
work
 
with
 
our
 
outside
 
actuaries
 
to
 
determine
 
the
 
timing
 
and
 
amount
 
of

expected future cash outflows to plan
 
participants and, using the Aa Above Median
 
corporate bond yield, to develop a forward
 
interest

rate curve, including
 
a margin to
 
that index based
 
on our credit
 
risk. This forward
 
interest rate curve
 
is applied to
 
our expected
 
future

cash outflows to determine our discount rate assumptions.

31

Our weighted-average discount rates were as follows:

Defined Benefit

Pension Plans

Other

Postretirement

Benefit Plans

Postemployment

Benefit Plans

Effective rate for fiscal 2023 service costs

4.53

%

4.41

%

3.67

%

Effective rate for fiscal 2023 interest costs

4.01

%

3.80

%

3.34

%

Obligations as of May 31, 2022

4.39

%

4.36

%

3.62

%

Effective rate for fiscal 2022 service costs

3.53

%

3.34

%

2.46

%

Effective rate for fiscal 2022 interest costs

2.42

%

2.08

%

1.48

%

Obligations as of May 31, 2021

3.17

%

3.03

%

2.04

%

Effective rate for fiscal 2021 service costs

3.59

%

3.44

%

2.54

%

Effective rate for fiscal 2021 interest costs

2.54

%

2.32

%

1.41

%

Lowering
 
the
 
discount
 
rates
 
by
 
100
 
basis
 
points
 
would
 
increase
 
our
 
net
 
defined
 
benefit
 
pension,
 
other
 
postretirement
 
benefit,
 
and

postemployment benefit plan expense
 
for fiscal 2023 by approximately
 
$49 million. All obligation-related
 
experience gains and losses

are amortized
 
using
 
a straight-line
 
method over
 
the average
 
remaining
 
service period
 
of active
 
plan participants
 
or over
 
the average

remaining lifetime of the remaining plan participants if the plan is viewed as “all or
 
almost all” inactive participants.

Health Care Cost Trend
 
Rates

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
 
care cost trend
 
rate is adjusted
 
as necessary to

remain consistent
 
with this
 
review,
 
recent experiences,
 
and short-term
 
expectations. Our
 
initial health
 
care cost
 
trend rate
 
assumption

is 6.0
 
percent for
 
retirees age
 
65 and
 
over and
 
5.9 percent
 
for retirees
 
under age
 
65 at
 
the end
 
of fiscal
 
2022. Rates
 
are graded
 
down

annually until
 
the ultimate
 
trend rate
 
of 4.5
 
percent is
 
reached in
 
2031 for
 
all retirees.
 
The trend
 
rates are
 
applicable for
 
calculations

only if
 
the retirees’
 
benefits increase
 
as a
 
result of
 
health care
 
inflation. The
 
ultimate trend
 
rate is
 
adjusted annually,
 
as necessary,
 
to

approximate
 
the
 
current
 
economic
 
view
 
on
 
the
 
rate
 
of
 
long-term
 
inflation
 
plus
 
an
 
appropriate
 
health
 
care
 
cost
 
premium.
 
Assumed

trend rates for health care costs have an important effect on the
 
amounts reported for the other postretirement benefit plans.

Any
 
arising
 
health
 
care
 
claims cost-related
 
experience
 
gain
 
or
 
loss is
 
recognized
 
in the
 
calculation
 
of expected
 
future claims.
 
Once

recognized, experience gains and
 
losses are amortized using a straight-line
 
method over the average remaining
 
service period of active

plan participants
 
or over
 
the average
 
remaining lifetime
 
of the
 
remaining plan
 
participants if
 
the plan
 
is viewed
 
as “all
 
or almost
 
all”

inactive participants.

Financial Statement Impact

In
 
fiscal
 
2022,
 
we
 
recorded
 
net
 
defined
 
benefit
 
pension,
 
other
 
postretirement
 
benefit,
 
and
 
postemployment
 
benefit
 
plan
 
income
 
of

$26 million compared
 
to $4 million
 
of expense
 
in fiscal
 
2021 and
 
$2 million of
 
income in
 
fiscal 2020.
 
As of
 
May 29,
 
2022, we
 
had

cumulative unrecognized
 
actuarial net losses of
 
$2 billion on our
 
defined benefit pension plans
 
and cumulative unrecognized
 
actuarial

net
 
gains
 
of
 
$207 million
 
on
 
our
 
postretirement
 
and
 
postemployment
 
benefit
 
plans,
 
mainly
 
as
 
the
 
result
 
of
 
liability
 
increases
 
from

lower
 
interest
 
rates,
 
partially
 
offset
 
by
 
increases
 
in
 
the
 
values
 
of
 
plan
 
assets
 
in
 
prior
 
fiscal
 
years.
 
These
 
unrecognized
 
actuarial
 
net

losses will
 
result in
 
increases
 
in our
 
future pension
 
and postretirement
 
benefit
 
expenses
 
because
 
they
 
currently
 
exceed the
 
corridors

defined by GAAP.

Actual
 
future
 
net
 
defined
 
benefit
 
pension,
 
other
 
postretirement
 
benefit,
 
and
 
postemployment
 
benefit
 
plan
 
income
 
or
 
expense
 
will

depend on
 
investment performance,
 
changes in
 
future discount
 
rates, changes
 
in health care
 
cost trend
 
rates, and
 
other factors
 
related

to the populations participating in these plans.

RECENTLY
 
ISSUED ACCOUNTING PRONOUNCEMENTS

In March 2020, the Financial
 
Accounting Standards Board (FASB)
 
issued optional accounting guidance
 
for a limited period of time
 
to

ease
 
the
 
potential
 
burden
 
in
 
accounting
 
for
 
reference
 
rate reform.
 
The new
 
standard
 
provides
 
expedients
 
and
 
exceptions to
 
existing

accounting
 
requirements
 
for
 
contract
 
modifications
 
and
 
hedge accounting
 
related
 
to
 
transitioning
 
from discontinued
 
reference
 
rates,

such as
 
LIBOR,
 
to alternative
 
reference
 
rates, if
 
certain
 
criteria are
 
met. The
 
new accounting
 
requirements
 
can be
 
applied as
 
of the

beginning of
 
the interim
 
period including
 
March 12, 2020,
 
or any
 
date thereafter,
 
through December 31,
 
2022. We
 
are in
 
the process

of reviewing our contracts
 
and arrangements that
 
will be affected by
 
a discontinued reference rate
 
and are analyzing the
 
impact of this

guidance on our results of operations and financial position.

32

NON-GAAP MEASURES

We
 
have
 
included
 
in
 
this
 
report
 
measures
 
of
 
financial
 
performance
 
that
 
are not
 
defined
 
by
 
GAAP.
 
We
 
believe
 
that
 
these
 
measures

provide useful information to investors and include these measures in other
 
communications to investors.

For each
 
of these
 
non-GAAP financial
 
measures, we
 
are providing
 
below a
 
reconciliation of
 
the differences
 
between the
 
non-GAAP

measure and the most
 
directly comparable GAAP measure,
 
an explanation of why
 
we believe the non-GAAP
 
measure provides useful

information to
 
investors, and
 
any additional
 
material purposes
 
for which
 
our management
 
or Board
 
of Directors
 
uses the
 
non-GAAP

measure. These non-GAAP measures should be viewed in addition to, and not
 
in lieu of, the comparable GAAP measure.

Significant Items Impacting Comparability

Several
 
measures
 
below
 
are
 
presented
 
on
 
an
 
adjusted
 
basis.
 
The
 
adjustments
 
are
 
either
 
items
 
resulting
 
from
 
infrequently
 
occurring

events or items that, in management’s
 
judgment, significantly affect the year-to-year
 
assessment of operating results.

The following are descriptions of significant items impacting comparability
 
of our results.

Divestitures (gain) loss

Divestitures gain
 
related to
 
the sale
 
of our
 
interests in
 
Yoplait
 
SAS, Yoplait
 
Marques SNC,
 
and Liberté
 
Marques Sàrl
 
and the
 
sale of

our European dough businesses
 
in fiscal 2022. Divestiture
 
loss related to the sale
 
of our Laticínios Carolina business
 
in Brazil in fiscal

2021.
 
Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

Transaction costs

Fiscal 2022
 
transaction costs
 
relate primarily
 
to the sale
 
of our
 
interests in
 
Yoplait
 
SAS, Yoplait
 
Marques SNC,
 
and Liberté
 
Marques

Sàrl,
 
the
 
sale
 
of
 
our
 
European
 
dough
 
businesses,
 
the
 
definitive
 
agreements
 
to
 
sell
 
our
 
Helper
 
main
 
meals
 
and
 
Suddenly
 
Salad
 
side

dishes business, and
 
the definitive agreement
 
to acquire TNT Crust.
 
Fiscal 2021 transaction
 
costs related to
 
the sale of our
 
interests in

Yoplait
 
SAS,
 
Yoplait
 
Marques
 
SNC,
 
and
 
Liberté
 
Marques
 
Sàrl
 
and
 
the
 
acquisition
 
of
 
Tyson
 
Foods’
 
pet
 
treats
 
business. Please
 
see

Note 3 to the Consolidated Financial Statements in Item 8 of this report.

Non-income tax recovery

Recovery related to a Brazil indirect tax item recorded in fiscal 2022 and fiscal 2021
 
.

Acquisition integration costs

Integration
 
costs resulting
 
from the
 
acquisition of
 
Tyson
 
Foods’ pet
 
treats business.
 
Please see
 
Note 3
 
to the
 
Consolidated Financial

Statements in Item 8 of this report.

Investment activity, net

Valuation
 
adjustments and the gain on sale of certain corporate investments in fiscal 2022 and fiscal 2021.

Mark-to-market effects

Net
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
recognized
 
in
 
unallocated
 
corporate
 
items.
 
Please
 
see
 
Note
 
8
 
to
 
the

Consolidated Financial Statements in Item 8 of this report.

Restructuring (recoveries) charges

Restructuring
 
charges
 
for
 
International
 
supply
 
chain
 
optimization
 
actions
 
and
 
net
 
restructuring
 
recoveries
 
for
 
previously
 
announced

restructuring
 
actions
 
in
 
fiscal
 
2022.
 
Restructuring
 
charges
 
for
 
previously
 
announced
 
restructuring
 
actions
 
in
 
fiscal
 
2021.
 
Please
 
see

Note 4 to the Consolidated Financial Statements in Item 8 of this report.

Product recall

Net product recall adjustment recorded in fiscal 2021 related to our international
 
Green Giant business.

Tax items

Discrete
 
tax
 
benefit
 
recognized
 
in
 
fiscal
 
2022
 
related
 
to
 
a
 
release
 
of
 
a
 
valuation
 
allowance
 
associated
 
with
 
our
 
capital
 
loss

carryforwards expected
 
to be used
 
against future divestiture
 
gains. Discrete
 
tax item related
 
to amendments to
 
reorganize certain
 
U.S.

retiree health and welfare benefits plans in fiscal 2021.

CPW restructuring charges

CPW restructuring charges related to previously announced restructuring
 
actions.

33

Organic Net Sales Growth Rates

We
 
provide organic
 
net sales
 
growth rates
 
for our
 
consolidated net
 
sales and
 
segment net
 
sales. This
 
measure is
 
used in
 
reporting to

our
 
Board
 
of
 
Directors
 
and
 
executive
 
management
 
and
 
as
 
a
 
component
 
of
 
the
 
measurement
 
of
 
our
 
performance
 
for
 
incentive

compensation purposes.
 
We
 
believe that
 
organic net
 
sales growth
 
rates provide
 
useful information
 
to investors
 
because they
 
provide

transparency
 
to underlying
 
performance
 
in our
 
net sales
 
by excluding
 
the effect
 
that foreign
 
currency
 
exchange rate
 
fluctuations,
 
as

well
 
as
 
acquisitions,
 
divestitures,
 
and
 
a
 
53

rd

week,
 
when
 
applicable,
 
have
 
on
 
year-to-year
 
comparability.
 
A
 
reconciliation
 
of
 
these

measures to reported
 
net sales growth
 
rates, the relevant
 
GAAP measures, are
 
included in our
 
Consolidated Results of
 
Operations and

Results of Segment Operations discussions in the MD&A above.

Adjusted Operating Profit Growth on a Constant-currency Basis

This measure is used in reporting
 
to our Board of Directors and
 
executive management and as a
 
component of the measurement of
 
our

performance for
 
incentive compensation purposes.
 
We
 
believe that
 
this measure provides
 
useful information
 
to investors because
 
it is

the
 
operating
 
profit
 
measure
 
we
 
use
 
to
 
evaluate
 
operating
 
profit
 
performance
 
on
 
a
 
comparable
 
year-to-year
 
basis.
 
Additionally,
 
the

measure
 
is
 
evaluated
 
on
 
a
 
constant-currency
 
basis
 
by
 
excluding
 
the
 
effect
 
that
 
foreign
 
currency
 
exchange
 
rate
 
fluctuations
 
have
 
on

year-to-year comparability given the volatility in foreign
 
currency exchange rates.

Our adjusted operating profit growth on a constant-currency basis is calculated
 
as follows:

Fiscal Year

2022

2021

Change

Operating profit as reported

$

3,475.8

$

3,144.8

11

%

Divestitures (gain) loss

(194.1)

53.5

Mark-to-market effects

(133.1)

(138.8)

Transaction costs

72.8

9.5

Restructuring (recoveries) charges

(23.2)

172.7

Acquisition integration costs

22.4

-

Non-income tax recovery

(22.0)

(8.8)

Investment activity, net

14.7

(76.4)

Product recall adjustment, net

-

(3.5)

Adjusted operating profit

$

3,213.3

$

3,153.2

2

%

Foreign currency exchange impact

Flat

Adjusted operating profit growth, on a constant-currency basis

2

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

34

Adjusted Diluted EPS and Related Constant-currency Growth Rate

This measure
 
is used in
 
reporting to
 
our Board of
 
Directors and executive
 
management. We
 
believe that
 
this measure provides
 
useful

information to
 
investors because it
 
is the profitabil
 
ity measure we
 
use to evaluate
 
earnings performance on
 
a comparable year-to-year

basis.

The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted
 
EPS and the related constant-currency growth rate follows:

Fiscal Year

Per Share Data

2022

2021

2022 vs.

2021 Change

Diluted earnings per share, as reported

$

4.42

$

3.78

17

%

Divestitures (gain) loss

(0.31)

0.04

Mark-to-market effects

(0.17)

(0.17)

Transaction costs

0.09

0.01

Restructuring (recoveries) charges

(0.03)

0.22

Acquisition integration costs

0.03

-

Non-income tax recovery

(0.02)

(0.01)

Investment activity, net

0.01

(0.10)

Tax items

(0.08)

0.02

Adjusted diluted earnings per share

$

3.94

$

3.79

4

%

Foreign currency exchange impact

Flat

Adjusted diluted earnings per share growth, on a constant-currency basis

4

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

See our reconciliation
 
below of the effective
 
income tax rate as
 
reported to the adjusted
 
effective income tax
 
rate for the tax
 
impact of

each item affecting comparability.

35

Free Cash Flow Conversion Rate

We
 
believe
 
this
 
measure
 
provides
 
useful
 
information
 
to
 
investors
 
because
 
it
 
is
 
important
 
for
 
assessing
 
our
 
efficiency
 
in
 
converting

earnings
 
to
 
cash
 
and
 
returning
 
cash
 
to
 
shareholders.
 
The
 
calculation
 
of
 
free
 
cash
 
flow
 
conversion
 
rate
 
and
 
net
 
cash
 
provided
 
by

operating activities conversion rate, its equivalent GAAP measure, follows:

In Millions

Fiscal 2022

Net earnings, including earnings attributable to redeemable and noncontrolling
 
interests, as reported

$

2,735.0

Divestitures gain, net of tax

(189.0)

Mark-to-market effects, net of tax

(102.5)

Transaction costs, net of tax

56.4

Restructuring (recoveries) charges, net of tax

(16.7)

Acquisition integration costs, net of tax

17.2

Non-income tax recovery,
 
net of tax

(14.5)

Investment activity, net,
 
net of tax

6.2

CPW restructuring charges, net of tax

(0.9)

Tax item

(50.7)

Adjusted net earnings, including earnings attributable to redeemable and
 
noncontrolling interests

$

2,440.5

Net cash provided by operating activities

3,316.1

Purchases of land, buildings, and equipment

(568.7)

Free cash flow

$

2,747.4

Net cash provided by operating activities conversion rate

121%

Free cash flow conversion rate

113%

Note: Table may not foot due rounding.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

See our reconciliation
 
below of the effective
 
income tax rate as
 
reported to the
 
adjusted effective income
 
tax rate for the
 
tax impact of

each item affecting comparability.

36

Net Debt-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, including
 
earnings attributable
 
to redeemable
 
and noncontrolling interests,
 
its

GAAP equivalent, as well as the calculation of the net debt-to-adjusted EBITDA
 
ratio are as follows:

Fiscal Year

In Millions

2022

2021

Total debt (a)

$

11,620.4

$

12,612.0

Cash

569.4

1,505.2

Net debt

$

11,051.0

$

11,106.8

Net earnings, including earnings attributable to

redeemable and noncontrolling interests, as reported

$

2,735.0

$

2,346.0

Income taxes

586.3

629.1

Interest, net

379.6

420.3

Depreciation and amortization

570.3

601.3

EBITDA

4,271.2

3,996.8

After-tax earnings from joint ventures

(111.7)

(117.7)

Divestitures (gain) loss

(194.1)

53.5

Mark-to-market effects

(133.1)

(138.8)

Transaction costs

72.8

9.5

Restructuring (recoveries) charges

(23.2)

172.7

Acquisition integration costs

22.4

-

Non-income tax recovery

(22.0)

(8.8)

Investment activity, net

14.7

(76.4)

Product recall adjustment, net

-

(3.5)

Adjusted EBITDA

$

3,897.0

$

3,887.4

Net debt-to-adjusted EBITDA ratio

2.8

2.9

Note: Table may not foot due to rounding.

(a)

Notes payable and long-term debt, including current portion.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

37

Adjusted Operating Profit as a Percent of Net Sales (Adjusted Operating Profit
 
Margin)

We believe
 
this measure provides useful information
 
to investors because it is important
 
for assessing our operating profit margin
 
on a

comparable year-to-year basis.

Our adjusted operating profit margins are calculated as follows:

Fiscal Year

Percent of Net Sales

2022

2021

Operating profit as reported

$

3,475.8

18.3

%

$

3,144.8

17.3

%

Divestitures (gain) loss

(194.1)

(1.0)

%

53.5

0.3

%

Mark-to-market effects

(133.1)

(0.7)

%

(138.8)

(0.8)

%

Transaction costs

72.8

0.4

%

9.5

0.1

%

Restructuring (recoveries) charges

(23.2)

(0.1)

%

172.7

1.0

%

Acquisition integration costs

22.4

0.1

%

-

-

%

Non-income tax recovery

(22.0)

(0.1)

%

(8.8)

-

%

Investment activity, net

14.7

0.1

%

(76.4)

(0.4)

%

Product recall adjustment, net

-

-

%

(3.5)

-

%

Adjusted operating profit

$

3,213.3

16.9

%

$

3,153.2

17.4

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

38

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

2022

2021

In Millions

(Except Per Share Data)

Pretax

Earnings (a)

Income

Taxes

Pretax

Earnings (a)

Income

Taxes

As reported

$3,209.6

$586.3

$2,857.4

$629.1

Divestitures (gain) loss

(194.1)

(5.1)

53.5

0.4

Mark-to-market effects

(133.1)

(30.6)

(138.8)

(31.9)

Transaction costs

72.8

16.4

9.5

2.3

Restructuring (recoveries) charges

(23.2)

(6.4)

172.7

35.5

Acquisition integration costs

22.4

5.1

-

-

Non-income tax recovery

(22.0)

(7.5)

(8.8)

(3.0)

Investment activity, net

14.7

8.5

(76.4)

(15.6)

Tax items

-

50.7

-

(11.2)

Product recall adjustment, net

-

-

(3.5)

(0.4)

As adjusted

$2,947.1

$617.4

$2,865.7

$605.2

Effective tax rate:

As reported

18.3%

22.0%

As adjusted

20.9%

21.1%

Sum of adjustments to income taxes

$31.1

($24.0)

Average number
 
of common shares - diluted EPS

612.6

619.1

Impact of income tax adjustments on adjusted diluted EPS

$(0.05)

$0.04

Note: Table may not foot due to rounding.

For more information on the reconciling items, please refer to the Significant Items Impacting Comparability section above.

39

Constant-currency After-Tax
 
Earnings from Joint Ventures
 
Growth Rate

We
 
believe that
 
this measure
 
provides useful
 
information to
 
investors because
 
it provides
 
transparency to
 
underlying performance
 
of

our joint
 
ventures by
 
excluding the
 
effect
 
that foreign
 
currency exchange
 
rate fluctuations
 
have on
 
year-to-year
 
comparability given

volatility in foreign currency exchange markets.

After-tax earnings from joint ventures growth rate on
 
a constant-currency basis are calculated as follows:

Fiscal 2022

Percentage change in after-tax earnings from joint ventures as reported

(5)

%

Impact of foreign currency exchange

(3)

pts

Percentage change in after-tax earnings from joint ventures on
 
a constant-currency basis

(3)

%

Note: Table may not foot due to rounding.

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

transparency to
 
the underlying
 
performance for
 
the Canada operating
 
unit within our
 
North America Retail
 
segment by
 
excluding the

effect
 
that
 
foreign
 
currency
 
exchange
 
rate
 
fluctuations
 
have
 
on
 
year-to-year
 
comparability
 
given
 
volatility
 
in
 
foreign
 
currency

exchange markets.

Net sales growth rate for our Canada operating unit on a constant-currency
 
basis is calculated as follows:

Fiscal 2022

Percentage change in net sales as reported

3

%

Impact of foreign currency exchange

3

pts

Percentage change in net sales on a constant-currency basis

1

%

Note: Table may not foot due to rounding.

Constant-currency Segment Operating Profit Growth Rates

We
 
believe that
 
this measure
 
provides useful
 
information to
 
investors because
 
it provides
 
transparency to
 
underlying performance
 
of

our
 
segments
 
by
 
excluding
 
the
 
effect
 
that
 
foreign
 
currency
 
exchange
 
rate
 
fluctuations
 
have
 
on
 
year-to-year
 
comparability
 
given

volatility in foreign currency exchange markets.

Our segments’ operating profit growth rates on a constant-currency
 
basis are calculated as follows:

Fiscal 2022

Percentage Change

in Operating Profit

as Reported

Impact of Foreign

Currency Exchange

Percentage Change

in Operating Profit

on Constant-

Currency Basis

North America Retail

(1)

%

Flat

(1)

%

International

(2)

%

2

pts

(4)

%

Pet

13

%

Flat

13

%

North America Foodservice

26

%

Flat

26

%

Note: Table may not foot due to rounding.

Forward-Looking Financial Measures

Our fiscal 2023
 
outlook for organic
 
net sales growth,
 
constant-currency adjusted
 
operating profit,
 
adjusted diluted
 
EPS, and free
 
cash

flow are
 
non-GAAP financial
 
measures
 
that exclude,
 
or have
 
otherwise
 
been adjusted
 
for,
 
items impacting
 
comparability,
 
including

the
 
effect
 
of foreign
 
currency exchange
 
rate
 
fluctuations,
 
restructuring
 
charges
 
and project-related
 
costs,
 
acquisition
 
transaction
 
and

integration
 
costs,
 
acquisitions,
 
divestitures,
 
and
 
mark-to-market
 
effects.
 
We
 
are
 
not
 
able
 
to
 
reconcile
 
these
 
forward-looking
 
non-

GAAP financial
 
measures to
 
their most
 
directly comparable
 
forward-looking
 
GAAP financial
 
measures without
 
unreasonable efforts

because we are unable to
 
predict with a reasonable degree
 
of certainty the actual impact
 
of changes in foreign currency
 
exchange rates

and
 
commodity
 
prices
 
or
 
the
 
timing
 
or
 
impact
 
of
 
acquisitions,
 
divestitures,
 
and
 
restructuring
 
actions
 
throughout
 
fiscal
 
2023.
 
The

unavailable information could have a significant impact on our fiscal 2023 GAAP financial
 
results.

40

For
 
fiscal
 
2023,
 
we
 
currently expect:
 
foreign
 
currency
 
exchange
 
rates
 
(based
 
on
 
a blend
 
of
 
forward
 
and
 
forecasted
 
rates and
 
hedge

positions)
 
and
 
acquisitions
 
and
 
divestitures
 
completed
 
prior
 
to
 
fiscal
 
2023
 
and
 
those
 
closed
 
or
 
expected
 
to
 
close
 
in
 
fiscal
 
2023
 
to

reduce net
 
sales growth by
 
approximately 3
 
percent; foreign
 
currency exchange
 
rates to reduce
 
adjusted operating
 
profit and adjusted

diluted
 
EPS growth
 
by
 
approximately
 
1
 
percent;
 
and
 
restructuring
 
charges
 
and
 
project-related
 
costs and
 
transaction
 
and
 
acquisition

integration costs related to actions previously announced to total approximately
 
$15 million to $25 million.