# GENERAL MILLS INC (GIS) FY 2023 MD&A

Verbatim Item 7 Management's Discussion and Analysis from GENERAL MILLS INC's 10-K for fiscal year 2023.

SEC filing source: https://www.sec.gov/Archives/edgar/data/40704/000119312523177500/d523469d10k.htm
Accession: 0001193125-23-177500
Filing date: 2023-06-28
Report date: 2023-05-28
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/
Previous year: /company/GIS/mda/fy2022/ (FY 2022)
Next year: /company/GIS/mda/fy2024/ (FY 2024)

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 growth
 
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.

In
 
fiscal
 
2023,
 
we
 
continued
 
to
 
successfully
 
adapt
 
to
 
the
 
dynamic
 
operating
 
environment
 
and
 
deliver
 
strong
 
performance.
 
This

included
 
growth
 
in
 
organic
 
net
 
sales,
 
adjusted
 
operating
 
profit,
 
and
 
adjusted
 
diluted
 
EPS
 
that
 
was
 
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
 
more
 
than
 
50
 
percent
 
of
 
our
 
global

priority businesses for
 
the fifth consecutive
 
year, when
 
adjusting for an
 
unusual competitive
 
dynamic in cereal
 
in fiscal 2022

and
 
assessing
 
that
 
platform
 
on
 
a
 
2-year
 
basis.
 
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 13 percent input cost inflation.

We
 
continued
 
to
 
invest
 
for
 
the
 
future,
 
including
 
a
 
17
 
percent
 
increase
 
in
 
media
 
and
 
advertising
 
expense,
 
a
 
double-digit

increase
 
in
 
investment
 
in
 
our
 
digital
 
and
 
technology
 
capability,
 
and
 
a
 
strong
 
increase
 
in
 
capital
 
investment
 
related
 
to
 
new

growth capacity.

We
 
continued
 
to reshape
 
our portfolio,
 
including
 
closing
 
on one
 
acquisition and
 
two divestitures
 
that further
 
improved our

portfolio’s ability to generate profitable
 
growth over the long term.

Our
 
consolidated
 
net
 
sales
 
for
 
fiscal
 
2023
 
rose
 
6
 
percent
 
to
 
$20,094 million.
 
On
 
an
 
organic
 
basis,
 
net
 
sales
 
increased
 
10
 
percent

compared
 
to
 
year-ago
 
levels.
 
Operating
 
profit
 
of
 
$3,434 million
 
was
 
down
 
1
 
percent.
 
Adjusted
 
operating
 
profit
 
of
 
$3,457 million

increased 8 percent on
 
a constant-currency basis.
 
Diluted EPS of $4.31 was
 
down 2 percent compared
 
to fiscal 2022
 
results. Adjusted

diluted
 
EPS
 
of
 
$4.30
 
increased
 
10
 
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
 
$2,779 million in
 
fiscal 2023,
 
representing a
 
conversion rate
 
of 106
 
percent of
 
net earnings,

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

$690 million, and our resulting free cash flow was $2,089
 
million at a conversion rate of 80 percent of adjusted
 
net earnings, including

earnings attributable
 
to redeemable
 
and noncontrolling
 
interests. We
 
returned cash
 
to shareholders
 
through dividends
 
totaling $1,288

million and net
 
share repurchases totaling
 
$1,171 million. (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
 
2023
 
performance
 
compared
 
to
 
fiscal
 
2022
 
appears
 
below
 
in
 
the
 
section
 
titled
 
“Fiscal
 
2023

Consolidated Results of Operations.” A detailed review of
 
our fiscal 2022
 
performance compared to our fiscal 2021
 
performance is set

forth
 
in Part
 
II, Item
 
7 of
 
our Form
 
10-K for
 
the fiscal
 
year
 
ended
 
May 30, 2022
 
under the
 
caption
 
“Management’s
 
Discussion and

16

Analysis of
 
Financial Condition
 
and Results
 
of Operations
 
– Fiscal
 
2022
 
Results of
 
Consolidated Operations,”
 
which is incorporated

herein by reference.

In fiscal 202
 
4, we expect
 
to build on
 
our positive momentum
 
and continue
 
to advance our
 
Accelerate strategy.
 
Our key priorities
 
are

to
 
continue
 
to
 
compete
 
effectively,
 
to
 
improve
 
our
 
supply
 
chain
 
efficiency,
 
and
 
to
 
maintain
 
our
 
disciplined
 
approach
 
to
 
capital

allocation.
 
We
 
expect
 
the
 
largest
 
factors
 
impacting
 
our
 
performance
 
in
 
fiscal
 
2024
 
will
 
be
 
the
 
economic
 
health
 
of
 
consumers,
 
the

moderating
 
rate of
 
input cost
 
inflation,
 
and the
 
increasing stability
 
of the
 
supply chain
 
environment. We
 
expect to
 
drive organic
 
net

sales
 
growth
 
in
 
fiscal
 
2024
 
through
 
strong
 
marketing,
 
innovation,
 
in-store
 
support,
 
and
 
net
 
price
 
realization
 
generated
 
through
 
our

Strategic Revenue
 
Management (SRM) capability,
 
most of which
 
will be carried
 
over from SRM
 
actions taken in
 
fiscal 2023. For
 
the

full year,
 
input cost inflation
 
is expected to
 
be approximately
 
5 percent of
 
total cost of
 
goods sold, driven
 
primarily by labor
 
inflation

that
 
continues
 
to
 
impact
 
sourcing,
 
manufacturing,
 
and
 
logistics
 
costs.
 
We
 
expect
 
to
 
generate
 
higher
 
levels
 
of
 
Holistic
 
Margin

Management (HMM) cost savings compared to fiscal 2023.

Based on these assumptions, our key full-year fiscal 2024 targets
 
are summarized below:

●

Organic net sales are expected to increase 3 to 4 percent.

●

Adjusted operating profit
 
is expected to increase
 
4 to 6 percent in
 
constant-currency from the
 
base of $3,457 million
 
reported

in fiscal 2023.

●

Adjusted
 
diluted
 
EPS
 
are
 
expected
 
to
 
range
 
between
 
4
 
to 6
 
percent
 
in
 
constant-currency
 
from
 
the
 
base
 
of
 
$4.30
 
earned
 
in

fiscal 2023.

●

Free cash flow conversion is expected to be at least 95 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 2023 CONSOLIDATED
 
RESULTS
 
OF OPERATIONS

In fiscal 2023,
 
net sales increased
 
6 percent compared
 
to fiscal 2022
 
and organic net
 
sales increased 10
 
percent compared to
 
last year.

Operating profit decreased 1 percent
 
to $3,434 million primarily driven
 
by higher input costs, a decrease
 
in contributions from volume

growth,
 
an
 
unfavorable
 
change
 
to
 
the
 
mark-to-market
 
valuation
 
of
 
certain
 
commodities
 
positions
 
and
 
grain
 
inventories,
 
and
 
an

increase in selling, general,
 
and administrative (SG&A) expenses,
 
including increased media
 
and advertising expenses,
 
partially offset

by
 
favorable
 
net
 
price
 
realization
 
and
 
mix.
 
Operating
 
profit
 
margin
 
of
 
17.1
 
percent
 
decreased
 
120
 
basis
 
points.
 
Adjusted
 
operating

profit of $3,
 
457 million increased
 
8 percent
 
on a constant-currency
 
basis, primarily
 
driven by
 
favorable net price
 
realization and
 
mix,

partially offset
 
by higher
 
input costs,
 
a decrease
 
in contributions
 
from volume
 
growth and
 
an increase
 
in SG&A
 
expenses, including

increased media and advertising expenses. Adjusted operating profit
 
margin increased 30 basis points to 17.2 percent.
 
Diluted earnings

per share of $4.31 decreased 2 percent compared
 
to fiscal 2022. Adjusted diluted earnings per share
 
of $4.30 increased 10 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).

A summary of our consolidated financial results for fiscal 2023 follows:

Fiscal 2023

In millions,

except per

share

Fiscal 2023 vs.

Fiscal 2022

Percent of Net

Sales

Constant-

Currency

Growth (a)

Net sales

$

20,094.2

6

%

Operating profit

3,433.8

(1)

%

17.1

%

Net earnings attributable to General Mills

2,593.9

(4)

%

Diluted earnings per share

$

4.31

(2)

%

Organic net sales growth rate (a)

10

%

Adjusted operating profit (a)

3,457.3

8

%

17.2

%

8

%

Adjusted diluted earnings per share (a)

$

4.30

9

%

10

%

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

17

Consolidated

net sales

were as follows:

Fiscal 2023

Fiscal 2023 vs.

Fiscal 2022

Fiscal 2022

Net sales (in millions)

$

20,094.2

6

%

$

18,992.8

Contributions from volume growth (a)

(8)

pts

Net price realization and mix

15

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.

Net sales in fiscal
 
2023 increased 6
 
percent compared to fiscal
 
2022, driven by favorable
 
net price realization
 
and mix, partially offset

by a decrease in contributions from volume growth and unfavorable
 
foreign currency exchange.

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

Fiscal 2023 vs. Fiscal 2022

Contributions from organic volume growth (a)

(4)

pts

Organic net price realization and mix

14

pts

Organic net sales growth

10

pts

Foreign currency exchange

(1)

pt

Acquisitions and divestitures

(4)

pts

Net sales growth

6

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
 
2023 increased
 
10 percent
 
compared to
 
fiscal 2022,
 
driven by
 
favorable organic
 
net price
 
realization and

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

Cost of sales

increased $958 million in fiscal 2023
 
to $13,548 million. The increase was
 
primarily driven by a $1,454 million
 
increase

attributable to
 
product rate and
 
mix, partially offset
 
by a $950
 
million decrease due
 
to lower volume.
 
We
 
recorded a
 
$292 million net

increase
 
in
 
cost
 
of
 
sales
 
related
 
to
 
mark-to-market
 
valuation
 
of
 
certain
 
commodity
 
positions
 
and
 
grain
 
inventories
 
in
 
fiscal
 
2023,

compared to a net decrease of $133
 
million in fiscal 2022
 
(please see Note 8 to the Consolidated
 
Financial Statements in Item 8 of this

report
 
for
 
additional
 
information).
 
In
 
fiscal
 
2023,
 
we
 
recorded
 
a
 
$25
 
million
 
charge
 
related
 
to
 
a
 
voluntary
 
recall
 
on
 
certain

international

Häagen-Dazs

ice cream
 
products.
 
We
 
also recorded
 
$5 million
 
of restructuring
 
charges and
 
$2 million
 
of restructuring

initiative project-related
 
costs in
 
cost of
 
sales in
 
fiscal 2023
 
compared to
 
$3 million
 
of restructuring
 
charges in
 
cost of
 
sales in
 
fiscal

2022 (please see Note 4 to the Consolidated Financial Statements in Item 8 of this
 
report for additional information).

Gross margin

increased 2 percent
 
in fiscal 2023
 
compared to fiscal
 
2022. Gross margin
 
as a percent
 
of net sales
 
decreased 110
 
basis

points to 32.6 percent compared to fiscal 2022.

SG&A expenses

increased $353 million to $3,500
 
million in fiscal 2023 compared
 
to fiscal 2022 primarily driven
 
by increased media

and
 
advertising
 
expenses,
 
unfavorable
 
valuation
 
adjustments
 
and
 
the
 
loss
 
on
 
sale
 
of
 
certain
 
corporate
 
investments,
 
an
 
increase
 
in

certain compensation and benefits
 
expenses,
 
and an increase in charitable
 
contributions in fiscal 2023. SG&A
 
expenses as a percent of

net sales in fiscal 2023 increased 80 basis points compared to fiscal 2022.

Divestitures
 
gain, net

totaled $445
 
million in
 
fiscal 2023

primarily related
 
to the
 
sale of our
 
Helper main
 
meals and
 
Suddenly Salad

side dishes
 
business.
 
In fiscal
 
2022,
 
we recorded
 
a $194
 
million divestitures
 
gain
 
related
 
to the
 
sale of
 
our
 
interest 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).

Restructuring,
 
impairment,
 
and
 
other
 
exit
 
costs
 
(recoveries)

totaled
 
$56
 
million
 
in
 
fiscal
 
2023
 
compared
 
to
 
$26
 
million
 
of
 
net

recoveries
 
in
 
fiscal
 
2022.
 
In
 
fiscal
 
2023,
 
we
 
approved
 
restructuring
 
actions
 
to
 
enhance
 
the
 
efficiency
 
of
 
our
 
global
 
supply
 
chain

structure and to optimize
 
our Häagen-Dazs shops network,
 
and as a result,
 
we recorded $41 million
 
of charges in
 
fiscal 2023. In fiscal

2022,
 
we
 
approved
 
restructuring
 
actions
 
in the
 
International
 
segment
 
to drive
 
efficiencies
 
in
 
manufacturing
 
and
 
logistics operations

and recorded $12 million
 
of charges.
 
Please see Note 4
 
to the Consolidated Financial
 
Statements in Item 8
 
of this report for
 
additional

information.

18

Benefit plan
 
non-service income

totaled $89
 
million in
 
fiscal 2023
 
compared to
 
$113 million
 
in fiscal
 
2022, primarily
 
reflecting an

increase in interest costs, partially
 
offset by lower amortization
 
of losses and higher expected
 
return on plan assets (please
 
see Note 14

to the Consolidated Financial Statements in Item 8 of this report
 
for additional information).

Interest, net

for fiscal 2023 totaled $382 million, $2 million higher than fiscal
 
2022.

Our

effective tax rate

for fiscal
 
2023 was 19.5 percent compared to 18.3
 
percent in fiscal 2022. The 1.2 percentage
 
point increase was

primarily
 
driven
 
by
 
a
 
change in
 
the
 
valuation
 
allowance
 
on our
 
capital
 
loss carryforward
 
s
 
in
 
fiscal
 
2022,
 
partially
 
offset
 
by
 
certain

favorable discrete tax
 
items in fiscal 2023
 
.
 
Our adjusted effective
 
tax rate was 20.4
 
percent in fiscal 2023
 
compared to 20.9
 
percent in

fiscal 2022
 
(see the
 
“Non-GAAP Measures”
 
section below
 
for a
 
description of
 
our use
 
of measures
 
not defined
 
by GAAP).
 
The 0.5

percentage point decrease was primarily due to certain favorable discrete tax
 
items in fiscal 2023.

After-tax earnings
 
from
 
joint ventures

decreased to
 
$81 million in
 
fiscal 2023
 
compared to
 
$112
 
million in
 
fiscal 2022,
 
primarily

driven by higher input
 
costs at CPW and
 
HDJ and lower net sales
 
at HDJ,
 
partially offset by
 
favorable net price realization
 
and mix at

CPW.
 
On
 
a
 
constant-currency
 
basis,
 
after-tax
 
earnings
 
from
 
joint
 
ventures
 
decreased
 
18
 
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 2023 vs. Fiscal 2022

CPW

HDJ

Total

Contributions from volume growth (a)

(10)

pts

(5)

pts

Net price realization and mix

14

pts

Flat

Net sales growth in constant currency

4

pts

(5)

pts

2

pts

Foreign currency exchange

(8)

pts

(15)

pts

(10)

pts

Net sales growth

(5)

pts

(21)

pts

(8)

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

decreased
 
to
 
$16
 
million
 
in
 
fiscal
 
2023
 
compared
 
to
 
$28

million in fiscal 2022, primarily driven 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
 
11 million
 
in
 
fiscal
 
2023
 
from
 
fiscal
 
2022
 
primarily
 
due
 
to
 
share
 
repurchases,

partially offset by option exercises.

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
 
completed a
 
new organization
 
structure to
 
streamline our
 
global operations.
 
We
 
restated our
 
net sales
 
by segment

and
 
segment
 
operating
 
profit
 
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.

19

The following tables provide
 
the dollar amount and percentage
 
of net sales and operating
 
profit from each segment for
 
fiscal 2023 and

fiscal 2022:

Fiscal Year

2023

2022

In Millions

Dollars

Percent of Total

Dollars

Percent of Total

Net Sales

North America Retail

$

12,659.9

63

%

$

11,572.0

61

%

International

2,769.5

14

3,315.7

17

Pet

2,473.3

12

2,259.4

12

North America Foodservice

2,191.5

11

1,845.7

10

Total

$

20,094.2

100

%

$

18,992.8

100

%

Segment Operating Profit

North America Retail

$

3,181.3

78

%

$

2,699.7

74

%

International

161.8

4

232.0

6

Pet

445.5

11

470.6

13

North America Foodservice

290.0

7

255.5

7

Total

$

4,078.6

100

%

$

3,657.8

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 and snack bars.

North America Retail net sales were as follows:

Fiscal 2023

Fiscal 2023 vs. 2022

Percentage Change

Fiscal 2022

Net sales (in millions)

$

12,659.9

9

%

$

11,572.0

Contributions from volume growth (a)

(6)

pts

Net price realization and mix

16

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
 
increase
 
in
 
North
 
America
 
Retail
 
net
 
sales
 
for
 
fiscal
 
2023
 
was
 
driven
 
by
 
favorable
 
net
 
price
 
realization
 
and
 
mix,

partially offset by a decrease in contributions from volume growth
 
and unfavorable foreign currency exchange.

20

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

Fiscal 2023 vs. 2022

Percentage Change

Contributions from organic volume growth (a)

(4)

pts

Organic net price realization and mix

16

pts

Organic net sales growth

12

pts

Foreign currency exchange

(1)

pt

Divestitures (b)

(2)

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 primarily include the impact
 
of the sale of our Helper main
 
meals and Suddenly Salad side
 
dishes businesses in fiscal

2023.
 
Please see Note 3 to the Consolidated Financial Statements in Part II, Item 8 of this report.

North America
 
Retail organic
 
net sales
 
increased 12
 
percent in
 
fiscal 2023
 
compared to
 
fiscal 2022,
 
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 2023

Fiscal 2023 vs. 2022

Percentage Change

Fiscal 2022

U.S. Meals & Baking Solutions

$

4,426.3

10

%

$

4,023.8

U.S. Morning Foods

3,620.1

7

%

3,370.9

U.S. Snacks

3,611.0

13

%

3,191.4

Canada (a)

1,002.5

2

%

985.9

Total

$

12,659.9

9

%

$

11,572.0

(a)

On a constant
 
currency basis, Canada
 
operating unit net
 
sales increased 8
 
percent in fiscal
 
2023.
 
See the “Non-GAAP
 
Measures”

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

Segment operati
 
ng profit
 
increased 18
 
percent to
 
$3,181 million in
 
fiscal 2023
 
compared to
 
$2,700 million
 
in fiscal
 
2022,
 
primarily

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

growth,
 
and an
 
increase in
 
SG&A expenses,
 
including increased
 
media and
 
advertising expenses.
 
Segment operating
 
profit increased

18 percent on
 
a constant-currency basis
 
in fiscal 2023
 
compared to fiscal 2022
 
(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 2023

Fiscal 2023 vs. 2022

Percentage Change

Fiscal 2022

Net sales (in millions)

$

2,769.5

(16)

%

$

3,315.7

Contributions from volume growth (a)

(28)

pts

Net price realization and mix

16

pts

Foreign currency exchange

(5)

pts

Note: Table may
 
not foot due to rounding.

(a)

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

The
 
16
 
percent
 
decrease
 
in
 
International
 
net
 
sales
 
in
 
fiscal
 
2023
 
was
 
driven
 
by
 
a
 
decrease
 
in
 
contributions
 
from
 
volume
 
growth,

including
 
the
 
impact
 
of volume
 
declines
 
from
 
divestitures
 
and
 
the
 
voluntary
 
recall
 
on certain
 
international

Häagen-Dazs

ice
 
cream

products, and unfavorable foreign currency exchange, partially offset
 
by favorable net price realization and mix.

21

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

Fiscal 2023 vs. 2022

Percentage Change

Contributions from organic volume growth (a)

(8)

pts

Organic net price realization and mix

12

pts

Organic net sales growth

4

pts

Foreign currency exchange

(5)

pts

Divestitures (b)

(16)

pts

Net sales growth

(16)

pts

Note: Table may
 
not foot due to rounding

(a)

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

(b)

Divestitures primarily 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.
 
Please see Note 3 to the Consolidated Financial Statements in Part II, Item

8 of this report.

The 4
 
percent increase
 
in International
 
organic
 
net sales
 
growth in
 
fiscal 2023
 
was driven
 
by favorable
 
organic
 
net price
 
realization

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

Segment operating
 
profit decreased
 
30 percent
 
to $162 million
 
in fiscal
 
2023 compared
 
to $232
 
million in
 
2022, primarily
 
driven by

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

the
 
voluntary
 
recall on
 
certain
 
international

Häagen-Dazs

ice
 
cream
 
products,
 
partially
 
offset
 
by
 
favorable
 
net
 
price realization
 
and

mix and a decrease in
 
SG&A expenses, including an
 
insurance recovery from the voluntary
 
recall. Segment operating profit
 
decreased

25 percent on
 
a constant-currency basis
 
in fiscal 2023
 
compared to fiscal 2022
 
(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 2023

Fiscal 2023 vs. 2022

Percentage Change

Fiscal 2022

Net sales (in millions)

$

2,473.3

9

%

$

2,259.4

Contributions from volume growth (a)

(2)

pts

Net price realization and mix

12

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
 
9 percent
 
in fiscal
 
2023 compared
 
to fiscal
 
2022, driven
 
by favorable
 
net price
 
realization and
 
mix,
 
partially

offset by a decrease in contributions from volume growth.

22

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

Fiscal 2023 vs. 2022

Percentage Change

Contributions from organic volume growth (a)

(3)

pts

Organic net price realization and mix

11

pts

Organic net sales growth

9

pts

Foreign currency exchange

Flat

Acquisition (b)

1

pt

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)

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 9
 
percent increase
 
in Pet
 
organic
 
net sales
 
growth in
 
fiscal 2023
 
was driven
 
by favorable
 
organic
 
net price
 
realization and
 
mix,

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

Pet operating
 
profit decreased
 
5 percent
 
to $446 million
 
in fiscal
 
2023, compared
 
to $471 million
 
in fiscal
 
2022, primarily
 
driven by

higher
 
input
 
costs,
 
an
 
increase
 
in
 
SG&A
 
expenses,
 
including
 
an
 
increase
 
in
 
media
 
and
 
advertising
 
expenses,
 
and
 
a
 
decrease
 
in

contributions
 
from volume
 
growth,
 
partially
 
offset
 
by favorable
 
net price
 
realization
 
and mix.
 
Segment operating
 
profit decreas
 
ed 5

percent on a constant-currency basis
 
in fiscal 2023 compared to fiscal
 
2022 (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 2023

Fiscal 2023 vs. 2022

Percentage Change

Fiscal 2022

Net sales (in millions)

$

2,191.5

19

%

$

1,845.7

Contributions from volume growth (a)

2

pts

Net price realization and mix

16

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 19
 
percent in fiscal
 
2023,
 
driven by favorable
 
net price realization
 
and mix, including

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

23

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

Fiscal 2023 vs. 2022

Percentage Change

Contributions from organic volume growth (a)

(2)

pts

Organic net price realization and mix

15

pts

Organic net sales growth

13

pts

Foreign currency exchange

Flat

Acquisition (b)

6

pts

Net sales growth

19

pts

Note: Table may
 
not foot due to rounding

(a)

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

(b)

Acquisition
 
of
 
TNT
 
Crust
 
in
 
fiscal
 
2023.
 
Please
 
see
 
Note
 
3
 
to
 
the
 
Consolidated
 
Financial
 
Statements
 
in
 
Part
 
II,
 
Item
 
8
 
of
 
this

report.

The 13
 
percent increase
 
in North
 
America
 
Foodservice
 
organic
 
net sales
 
growth
 
in fiscal
 
2023
 
was driven
 
by
 
favorable organic
 
net

price realization
 
and mix,
 
including market
 
index pricing
 
on bakery
 
flour, partially
 
offset by
 
a decrease in
 
contributions from
 
organic

volume growth.

Segment
 
operating
 
profit
 
increased
 
14
 
percent
 
to
 
$290 million
 
in
 
fiscal
 
2023,
 
compared
 
to
 
$256 million
 
in
 
fiscal
 
2022,
 
primarily

driven by
 
favorable net
 
price realization
 
and mix,
 
partially offset
 
by higher
 
input costs
 
and an
 
increase in
 
SG&A expenses.
 
Segment

operating
 
profit
 
increased
 
14
 
percent
 
on
 
a
 
constant-currency
 
basis
 
in
 
fiscal
 
2023
 
compared
 
to
 
fiscal
 
2022
 
(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.

Unallocated corporate
 
expense totaled $1,033
 
million in fiscal
 
2023, compared
 
to $403 million
 
last year.
 
We
 
recorded a $292
 
million

net increase
 
in expense
 
related to
 
the mark-to-market
 
valuation
 
of certain
 
commodity positions
 
and
 
grain inventories
 
in fiscal
 
2023,

compared to
 
a $133 million
 
net decrease
 
in expense
 
last year.
 
We
 
recorded $84
 
million of
 
net losses
 
related to
 
valuation adjustments

and the sale of corporate investments in fiscal 2023,
 
compared to $15 million of net losses in fiscal 2022.
 
In fiscal 2023, we recorded a

$22 million net charge
 
related to a voluntary
 
recall on certain international

Häagen-Dazs

ice cream products.
 
In addition, we recorded

$6 million of integration
 
costs primarily related to
 
our acquisition of TNT Crust
 
in fiscal 2023, compared
 
to $22 million of integration

costs
 
related
 
to
 
our
 
acquisition
 
of
 
Tyson
 
Foods’
 
pet
 
treats
 
business
 
in
 
fiscal
 
2022.
 
In
 
fiscal
 
2022,
 
we
 
recorded
 
$73
 
million
 
of

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

of
 
our
 
European
 
dough
 
businesses.
 
In
 
addition,
 
we
 
recorded
 
a
 
$22
 
million
 
recovery
 
related
 
to
 
a
 
Brazil
 
indirect
 
tax
 
item
 
and
 
a
 
$13

million
 
insurance
 
recovery
 
in
 
fiscal
 
2022.
 
In
 
addition,
 
certain
 
compensation
 
and
 
benefits
 
expenses
 
and
 
charitable
 
contributions

increased in fiscal 2023 compared to fiscal 2022.

IMPACT OF INFLATION

We
 
experienced
 
broad
 
based
 
global
 
input
 
cost
 
inflation
 
of
 
13
 
percent
 
in
 
fiscal
 
2023
 
and
 
8
 
percent
 
in
 
fiscal
 
2022.
 
We
 
expect

approximately
 
5
 
percent
 
input
 
cost
 
inflation
 
in
 
fiscal
 
2024.
 
We
 
attempt
 
to
 
minimize
 
the
 
effects
 
of
 
inflation
 
through
 
HMM,
 
SRM,

planning, and operating practices. Our market 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

$6.1 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

24

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

acquisitions.

As of
 
May
 
28,
 
2023,
 
we had
 
$381
 
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.

Cash Flows from Operations

Fiscal Year

In Millions

2023

2022

Net earnings, including earnings attributable to redeemable and noncontrolling
 
interests

$

2,609.6

$

2,735.0

Depreciation and amortization

546.6

570.3

After-tax earnings from joint ventures

(81.3)

(111.7)

Distributions of earnings from joint ventures

69.9

107.5

Stock-based compensation

111.7

98.7

Deferred income taxes

(22.2)

62.2

Pension and other postretirement benefit plan contributions

(30.1)

(31.3)

Pension and other postretirement benefit plan costs

(27.6)

(30.1)

Divestitures gain, net

(444.6)

(194.1)

Restructuring, impairment, and other exit costs (recoveries)

24.4

(117.1)

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

(48.9)

277.4

Other, net

71.1

(50.7)

Net cash provided by operating activities

$

2,778.6

$

3,316.1

During
 
fiscal
 
2023,
 
cash
 
provided
 
by
 
operations
 
was
 
$2,779
 
million
 
compared
 
to
 
$3,316 million
 
in
 
the
 
same
 
period
 
last
 
year.
 
The

$538 million decrease
 
was primarily driven by
 
a $326 million change in
 
current assets and liabilities
 
and a $250 million
 
change in net

divestitures
 
gain.
 
The
 
$326
 
million
 
change
 
in
 
current
 
assets
 
and
 
liabilities
 
was
 
primarily
 
driven
 
by
 
a
 
$233
 
million
 
change
 
in

inventories
 
and
 
a
 
$257
 
million
 
change
 
in
 
accounts
 
payable,
 
partially
 
offset
 
by
 
a
 
$125
 
million
 
change
 
in
 
the
 
timing
 
of
 
accounts

receivable.

We
 
strive
 
to
 
grow
 
core
 
working
 
capital
 
at
 
or
 
below
 
the
 
rate
 
of
 
growth
 
in
 
our
 
net
 
sales.
 
For
 
fiscal
 
2023,
 
core
 
working
 
capital
 
net

liability
 
decreased
 
20
 
percent,
 
compared
 
to
 
a
 
net
 
sales
 
increase
 
of
 
6
 
percent.
 
The
 
core
 
working
 
capital
 
net
 
liability
 
decreased
 
$84

million from a
 
net liability of
 
$423 million in
 
fiscal 2022 to
 
a net liability of
 
$339 million in
 
fiscal 2023. The
 
$84 million net
 
liability

decrease was primarily due to an increase in inventories, partially offset
 
by an increase in accounts payable in fiscal 2023.

Cash Flows from Investing Activities

Fiscal Year

In Millions

2023

2022

Purchases of land, buildings, and equipment

$

(689.5)

$

(568.7)

Acquisitions, net of cash acquired

(251.5)

(1,201.3)

Investments in affiliates, net

(32.2)

15.4

Proceeds from disposal of land, buildings, and equipment

1.3

3.3

Proceeds from divestitures, net of cash divested

633.1

74.1

Other, net

(7.6)

(13.5)

Net cash used by investing activities

$

(346.4)

$

(1,690.7)

In
 
fiscal
 
2023,
 
we
 
used
 
$346 million
 
of
 
cash
 
through
 
investing
 
activities
 
compared
 
to
 
$1,691 million
 
in
 
fiscal
 
2022.
 
We
 
invested

$690 million in land, buildings, and equipment in fiscal 2023,
 
an increase of $121 million from fiscal 2022.

During fiscal 2023, we acquired TNT Crust for $252 million cash, net of cash acquired.
 
During fiscal 2023, we completed the sale of

our Helper main meals and Suddenly Salad side dishes businesses for cash proceeds
 
of $607 million.

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

25

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
 
percent
 
of
 
reported
 
net
 
sales
 
in
 
fiscal
 
2024.
 
These
 
expenditures
 
will
 
fund

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

Cash Flows from Financing Activities

Fiscal Year

In Millions

2023

2022

Change in notes payable

$

(769.3)

$

551.4

Issuance of long-term debt

2,324.4

2,203.7

Payment of long-term debt

(1,421.7)

(3,140.9)

Proceeds from common stock issued on exercised options

232.3

161.7

Purchases of common stock for treasury

(1,403.6)

(876.8)

Dividends paid

(1,287.9)

(1,244.5)

Distributions to redeemable and noncontrolling interest holders

(15.7)

(129.8)

Other, net

(62.6)

(28.0)

Net cash used by financing activities

$

(2,404.1)

$

(2,503.2)

Financing activities
 
used $2.4 billion
 
of cash
 
in fiscal
 
2023 compared
 
to $2.5 billion
 
in fiscal
 
2022. We
 
had $133 million
 
of net
 
debt

issuances in
 
fiscal 2023
 
compared to
 
$386 million of
 
net debt repayments
 
in fiscal 2022.
 
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
 
2023,
 
we
 
received
 
$232 million
 
of
 
net
 
proceeds
 
from
 
common
 
stock
 
issued
 
on
 
exercised
 
options
 
compared
 
to

$162 million in fiscal 2022.

During fiscal 2023, we
 
repurchased 18 million shares
 
of our common stock for
 
$1,404 million. During fiscal 2022,
 
we repurchased 14

million shares of our common stock for $877 million.

Dividends paid in fiscal 2023 totaled
 
$1,288 million, or $2.16 per share. Dividends
 
paid in fiscal 2022
 
totaled $1,244 million, or $2.04

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

2023

2022

Investments in affiliates, net

$

(32.2)

$

15.4

Dividends received

69.9

107.5

The following table details the fee-paid committed and uncommitted credit
 
lines we had available as of May 28, 2023:

In Billions

Facility Amount

Borrowed Amount

Committed credit facility expiring April 2026

$

2.7

$

-

Uncommitted credit facilities

0.6

-

Total committed
 
and uncommitted credit facilities

$

3.3

$

-

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
 
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.

26

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

May 28, 2023, we were in compliance with all of these covenants.

We
 
have $1,709 million
 
of long-term debt
 
maturing in the
 
next 12 months
 
that is classified
 
as current, including
 
$500 million of
 
3.65

percent fixed-rate notes due February
 
15, 2024, $400 million of floating-rate
 
notes due October 17, 2023, €500
 
million of floating-rate

notes due July
 
27, 2023, and €250
 
million of floating-rate
 
notes due November
 
10, 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
 
28, 2023,
 
our total debt,
 
including the
 
impact of derivative
 
instruments designated
 
as hedges, was
 
80 percent
 
in fixed-rate

and 20
 
percent in
 
floating-rate instruments,
 
compared to
 
77 percent
 
in fixed-rate
 
and 23
 
percent in
 
floating-rate instruments
 
on May

29, 2022.

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). The
 
floating preferred
 
return rate
 
on GMC’s
 
Class A
 
Interests is

the sum of three
 
-month Term
 
SOFR plus 186
 
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
 
.

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

$394 million
 
as of
 
May 28,
 
2023, and
 
$420 million
 
as of
 
May 29,
 
2022. 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

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.

27

As of
 
May
 
28,
 
2023,
 
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
 
2023
 
assessment of our
 
intangible assets as of
 
the first

day
 
of
 
the
 
second
 
quarter
 
of
 
fiscal
 
2023,
 
and
 
we
 
determined
 
there
 
was
 
no
 
impairment
 
of
 
our
 
intangible
 
assets
 
as
 
their
 
related
 
fair

values
 
were
 
substantially
 
in
 
excess
 
of
 
the
 
carrying
 
value,
 
except
 
for

Uncle
 
Toby’s

band
 
intangible
 
asset.
 
In
 
addition,
 
while
 
having

significant
 
coverage
 
as
 
of
 
our
 
fiscal
 
2023
 
assessment
 
date,
 
the

Progresso

and

EPIC

brand
 
intangible
 
assets
 
had
 
risk
 
of
 
decreasing

coverage. We will continue
 
to monitor these businesses for potential impairment.

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

2023

2022

2021

Estimated fair values of stock options granted

$

14.16

$

8.77

$

8.03

Assumptions:

Risk-free interest rate

3.3

%

1.5

%

0.7

%

Expected term

8.5

years

8.5

years

8.5

years

Expected volatility

20.9

%

20.2

%

19.5

%

Dividend yield

3.1

%

3.4

%

3.3

%

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
 
2023

volatility assumption would increase the grant date fair value of our fiscal 2023
 
option awards by 5 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

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.

28

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
 
a
 
5.7
 
percent
 
loss
 
in
 
the
 
1-year
 
period
 
ended
 
May
 
28,
 
2023
 
and
 
returns
 
of
 
3.4
 
percent,
 
5.9

percent, 5.5 percent, and 7.7 percent for the 5, 10, 15, and 20-year periods
 
ended May 28, 2023.

On a weighted-average basis, the
 
expected rate of return for all
 
defined benefit plans was 6.70
 
percent for fiscal 2023, 5.85
 
percent for

fiscal 2022, and 5.72 percent for fiscal 2021.
 
For fiscal 2024, 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
 
7.20 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 $62 million for
 
fiscal 2024. 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.

Our weighted-average discount rates were as follows:

Defined Benefit

Pension Plans

Other

Postretirement

Benefit Plans

Postemployment

Benefit Plans

Effective rate for fiscal 2024 service costs

5.27

%

5.15

%

5.00

%

Effective rate for fiscal 2024 interest costs

5.06

%

4.96

%

4.61

%

Obligations as of May 31, 2023

5.18

%

5.19

%

4.55

%

Effective rate for fiscal 2023 service costs

4.57

%

4.41

%

3.69

%

Effective rate for fiscal 2023 interest costs

4.03

%

3.80

%

3.35

%

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

%

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 2024 by approximately
 
$30 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.

29

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 6.6
 
percent for
 
retirees age
 
65 and
 
over and
 
6.6 percent
 
for retirees
 
under age
 
65 at
 
the end
 
of fiscal
 
2023. Rates
 
are graded
 
down

annually until
 
the ultimate
 
trend rate
 
of 4.5
 
percent is
 
reached in
 
2032 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
 
2023,
 
we
 
recorded
 
net
 
defined
 
benefit
 
pension,
 
other
 
postretirement
 
benefit,
 
and
 
postemployment
 
benefit
 
plan
 
income
 
of

$6 million
 
compared to
 
$26 million of
 
income in
 
fiscal 2022
 
and $4 million
 
of expense
 
in fiscal
 
2021. As
 
of May
 
28, 2023,
 
we had

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

net
 
gains
 
of
 
$189 million
 
on
 
our
 
postretirement
 
and
 
postemployment
 
benefit
 
plans,
 
mainly
 
as
 
the
 
result
 
of
 
liability
 
increases
 
from

lower historical
 
interest rates. 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
 
December
 
2022,
 
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

through
 
December 31,
 
2024.
 
We
 
have
 
reviewed
 
and
 
modified
 
certain
 
contracts,
 
where
 
necessary,
 
to
 
apply
 
a
 
new
 
reference
 
rate,

primarily the SOFR. The guidance
 
has not had and
 
is not expected to have
 
a material impact on
 
our results of operations
 
and financial

position. We
 
will continue
 
to review
 
our contracts
 
and arrangements
 
that will
 
be affected
 
by a
 
discontinued reference
 
rate during
 
the

transition period.

In September 2022,
 
the FASB
 
issued Accounting Standards
 
Update (ASU) 2022-04
 
requiring enhanced disclosures
 
related to supplier

financing programs.
 
The ASU
 
requires disclosure
 
of the
 
key terms
 
of the
 
program and
 
a rollforward
 
of the
 
related obligation
 
during

the annual period,
 
including the amount of
 
obligations confirmed and
 
obligations subsequently paid.
 
The new disclosure requirements

are effective
 
for fiscal years beginning
 
after December 15, 2022,
 
with the exception
 
of the rollforward requirement,
 
which is effective

for fiscal years beginning
 
after December 15, 2023,
 
which for us is
 
the first quarter of
 
fiscal 2024 for the
 
primary requirement and
 
the

first quarter
 
of fiscal
 
2025 for
 
the rollforward
 
requirement. Early
 
adoption is
 
permitted. We
 
have historically
 
presented the
 
key terms

of these
 
programs
 
and the
 
associated obligation
 
outstanding. We
 
do not
 
expect this
 
ASU to
 
have a
 
material
 
impact on
 
our financial

statements and related disclosures.

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.

30

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, net

Net divestitures
 
gain primarily
 
related to
 
the sale
 
of our
 
Helper main
 
meals and
 
Suddenly Salad
 
side dishes
 
business in
 
fiscal 2023.

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

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.

Investment activity, net

Valuation
 
adjustments and the
 
loss on sale of
 
certain corporate investments
 
in fiscal 2023.
 
Valuation
 
adjustments and the
 
gain on sale

of certain corporate investments in fiscal 2022.

Restructuring charges (recoveries) and project-related
 
costs

Restructuring
 
charges
 
and
 
project-related
 
costs
 
for
 
global
 
supply
 
chain
 
actions,
 
network
 
optimization
 
actions,
 
and
 
previously

announced
 
restructuring
 
actions
 
in
 
fiscal
 
2023.
 
Restructuring
 
charges
 
for
 
International
 
restructuring
 
actions
 
and
 
net
 
restructuring

recoveries for previously announced restructuring
 
actions in fiscal 2022. Please see Note 4 to the
 
Consolidated Financial Statements in