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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. Filing date: 2022-06-30. Report date: 2022-05-29. Accession: 0001193125-22-185257.

This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high.

Company profile: GIS · All MD&A years: index · Next year: 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.

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