GENERAL MILLS INC (GIS)

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.

Guided by our

purpose to make

food the world

loves, 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

standing

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.

Our

consolidated

net

sales

for

fiscal

2025

declined

2

percent

to

$19.5

billion.

On

an

organic

basis,

net

sales

decreased

2

percent

compared to year-ago levels. Operating

profit of $3.3 billion decreased

4 percent. Adjusted operating profit

of $3.4 billion decreased 7

percent on a

constant-currency basis.

Diluted EPS declined

5 percent to

$4.10. Adjusted diluted

EPS of $4.21

decreased 7 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 $2,918

million in

fiscal 2025

representing a

conversion rate

of 126

percent of

net earnings,

including

earnings attributable

to noncontrolling

interests. This

cash generation

supported capital

investments

totaling $625

million,

and

our

resulting

free

cash

flow was

$2,293

million

at

a

conversion

rate

of 97

percent of

adjusted

net

earnings,

including

earnings

attributable

to

noncontrolling

interests.

We

returned

cash

to

shareholders

through

dividends

totaling

$1,339

million

and

share

repurchases

totaling

$1,203

million

(See

the

“Non-GAAP

Measures”

section

below

for

a

description

of

our

use

of

measures

not

defined by GAAP).

In

fiscal

2025,

the

operating

environment

was

characterized

by

significant

volatility

and

uncertainty,

resulting

in

value-seeking

behaviors by

consumers that

were deeper

and more

prolonged than

we expected.

As a

result, we

made important

changes to

adapt to

the evolving

environment and

put our

business on

a path

back to

growth.

We

increased investment

to bring

consumers greater

value,

which strengthened our

pound volume performance

as we exited the

year.

While the level of

incremental investment

resulted in fiscal

2025

financial

results

below

our

targeted

ranges,

we

expect

the

improved

pound

volume

and

household

penetration

trends

will

translate into stronger top- and bottom-line performance over the long

term.

We

delivered mixed performance against the three priorities we established

at the beginning of the year:

We

did not achieve our objective

of accelerating organic net sales

growth, with full-year organic

net sales declining 2 percent

driven primarily

by unfavorable

organic net

price realization

and mix

resulting from

our increased

investments in

consumer

value (see the ‘Non-GAAP Measures” section below for our use of

this measure not defined by GAAP).

We

successfully

created

fuel

for

our

investments,

including

generating

industry-leading

Holistic

Margin

Management

(HMM) cost savings by increasingly applying digital and technology capabilities throughout

our supply chain.

We

successfully drove

strong cash

generation, with

free cash

flow conversion

finishing at

97 percent,

which was

above our

full-year

target

of

95

percent.

This

enabled

us

to

fund

capital

investment,

raise

our

dividend,

and

continue

our

share

repurchase activity.

We

also continued

to reshape our

portfolio, including

acquisitions and divestitures

that further

improved

18

our portfolio’s

ability to generate profitable growth

over the long term (see the

“Non-GAAP Measures” section below

for our

use of this measure not defined by GAAP).

A

detailed

review

of

our

fiscal

2025

performance

compared

to

fiscal

2024

appears

below

in

the

section

titled

“Fiscal

2025

Consolidated Results of Operations.” A detailed review

of our fiscal 2024 performance compared to our fiscal

2023 performance is set

forth

in Part

II, Item

7 of

our Form

10-K for

the fiscal

year

ended

May 26, 2024

under the

caption

“Management’s

Discussion and

Analysis of

Financial Condition

and Results

of Operations

– Fiscal

2024 Consolidated

Results of

Operations,” which

is incorporated

herein by reference.

In fiscal 2026, we

plan to continue advancing

our Accelerate strategy.

Our key priorities are to

return North America Retail

to volume

growth,

Accelerate

North

America

Pet

growth

with

an

expanded

portfolio,

and

drive

efficiencies

to

reinvest

in

growth.

We

expect

category

growth

to

be

below

our

long-term

projections,

reflecting

less

benefit

from

net price

realization

and

mix

amid

a

continued

challenging

consumer

backdrop.

To

strengthen

our

categories

and

market

share

performance,

we

plan

to

increase

investment

in

consumer

value,

product

news,

innovation,

and

brand

building,

guided

by

our

remarkable

experience

framework.

This

includes

a

significant

strategic investment

to launch

Blue Buffalo

into the

fast-growing

U.S. fresh

pet food

sub-category

in calendar

2025.

We

expect

the

combination

of

these

growth

investments,

input

cost

inflation,

and

a

reset

of

corporate

incentive

will

outpace

expected

HMM cost savings of 5 percent of cost of

goods sold, savings from our global transformation

initiative, and benefits from a 53rd week

in fiscal 2026.

In addition, we

expect the net

impact of the

divestiture of

our North American

yogurt businesses and

the Whitebridge

Pet Brands acquisition will reduce adjusted operating profit growth

by approximately 5 points in fiscal 2026.

Based on these assumptions, our key full-year fiscal 2026 targets

are summarized below:

●

Organic net sales are expected to range between down 1 percent and

up 1 percent.

●

Adjusted operating profit

is expected to

be down 10

to 15 percent in

constant currency from

the base of

$3.4 billion reported

in fiscal 2025.

●

Adjusted diluted

EPS is

expected

to be

down 10

to 15

percent in

constant currency

from the

base of

$4.21 earned

in fiscal

2025.

●

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 2025 CONSOLIDATED

RESULTS

OF OPERATIONS

In

fiscal

2025,

net

sales

and

organic

net

sales

decreased

2

percent

compared

to

fiscal

2024.

Operating

profit

of

$3,305

million

decreased

4

percent

compared

to

fiscal

2024,

primarily

driven

by

unfavorable

net

price

realization

and

mix,

an

increase

in

selling,

general,

and

administrative

(SG&A)

expenses,

legal

and

voluntary

recall

net

recoveries

recorded

in

fiscal

2024,

a

decrease

in

contributions from

volume growth, higher

restructuring and transformation

charges, higher

acquisition and divestiture

transaction and

integration

costs, and

an unfavorable

change in

the mark

-to-market

valuation

of

certain commodity

positions

and

grain

inventories.

These impacts were

partially offset by

impairment charges recorded

in fiscal 2024,

a divestiture gain related

to the sale of

our Canada

yogurt

business

in

fiscal

2025,

and

lower

input

costs.

Operating

profit

margin

of

17.0

percent

decreased

30

basis

points.

Adjusted

operating

profit

of

$3,353

million

decreased

7

percent

on

a

constant-currency

basis,

primarily

driven

by

unfavorable

net

price

realization

and

mix,

an

increase in

SG&A

expenses,

and

a decrease

in

contributions

from volume

growth,

partially

offset

by

lower

input costs. Adjusted

operating profit margin

decreased 90 basis

points to 17.2

percent. Diluted earnings

per share of

$4.10 decreased

5 percent compared

to fiscal 2024.

Adjusted diluted earnings

per share of

$4.21 decreased 7

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 2025 follows:

Fiscal 2025

In millions,

except per

share

Fiscal 2025 vs.

Fiscal 2024

Percent of Net

Sales

Constant-

Currency

Growth (a)

Net sales

$

19,486.6

(2)

%

Operating profit

3,304.8

(4)

%

17.0

%

Net earnings attributable to General Mills

2,295.2

(8)

%

Diluted earnings per share

$

4.10

(5)

%

Organic net sales growth rate (a)

(2)

%

Adjusted operating profit (a)

3,352.6

(7)

%

17.2

%

(7)

%

Adjusted diluted earnings per share (a)

$

4.21

(7)

%

(7)

%

(a)

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

GAAP.

Consolidated

net sales

were as follows:

Fiscal 2025

Fiscal 2025 vs.

Fiscal 2024

Fiscal 2024

Net sales (in millions)

$

19,486.6

(2)

%

$

19,857.2

Contributions from volume growth (a)

(1)

pt

Net price realization and mix

(1)

pt

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.

Net sales

in fiscal

2025 decreased

2 percent

compared to

fiscal 2024,

driven by

a decrease

in contributions

from volume

growth and

unfavorable net price realization and mix.

Components of organic net sales growth are shown in the following

table:

Fiscal 2025 vs. Fiscal 2024

Contributions from organic volume growth (a)

Flat

Organic net price realization and mix

(1)

pt

Organic net sales growth

(2)

pts

Foreign currency exchange

Flat

Acquisitions and divestiture

Flat

Net sales growth

(2)

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 2025

decreased 2

percent compared

to fiscal 2024,

driven by

unfavorable organic

net price realization

and

mix.

Cost of

sales

decreased $172 million

in fiscal

2025 to

$12,754 million. The

decrease was

primarily driven

by a

$95 million

decrease

attributable to lower

volume and an $89

million decrease attributable

to product rate and mix.

We

recorded a $16 million

net decrease

in cost of

sales related to

the mark-to-market valuation

of certain commodity

positions and grain

inventories in fiscal

2025, compared

to a net decrease

of $39 million in

fiscal 2024 (please refer

to Note 8 to

the Consolidated Financial

Statements in Item

8 of this report

for

additional

information).

We

also

recorded

$9

million

of

restructuring

charges

in

fiscal

2025

compared

to

$18

million

of

restructuring charges

and $2 million

of restructuring initiative

project-related costs in

cost of sales

in fiscal 2024

(please refer to

Note

4 to the Consolidated Financial Statements in Item 8 of this report for additional

information).

Gross

margin

decreased

3

percent

in

fiscal

2025

compared

to

fiscal

2024.

Gross

margin

as

a

percent

of

net

sales

of

34.6

percent

decreased 30 basis points compared to fiscal 2024.

SG&A expenses

increased $187 million to

$3,446 million in fiscal 2025

compared to fiscal 2024

primarily driven by a

legal recovery

in fiscal 2024, transaction

and integration costs recorded

in fiscal 2025 related to

the definitive agreements to

sell our North American

yogurt businesses

and costs

related to

the Whitebridge

Pet Brands

acquisition,

the addition

of a

pet food

business in

Europe in

fiscal

20

2024,

and net recoveries

recorded in fiscal

2024 from the

fiscal 2023 voluntary

recall on certain

international

Häagen-Dazs

ice cream

products. SG&A expenses as a percent of net sales in fiscal 2025

increased 130 basis points compared to fiscal 2024.

Divestitures

gain, net

totaled $96 million in fiscal 2025

related to the sale of our Canada yogurt business (please refer

to Note 3 to the

Consolidated Financial Statements in Item 8 of this report).

Restructuring,

transformation,

impairment,

and other

exit

costs

totaled

$78

million in

fiscal 202

5

compared

to $241

million

in

fiscal 2024. In fiscal 2025, we approved a multi-year global transformation

initiative to drive increased productivity by enhancing end-

to-end

business

processes,

enabled

by

targeted

organizational

actions,

and

as

a

result,

we

recorded

$70

million

of

charges

in

fiscal

2025.

We

also recorded

$8 million

of restructuring

charges in

fiscal 2025

related to

actions previously

announced.

In fiscal 2024,

we

recorded a

$117

million non-cash

goodwill impairment

charge

related to

our Latin

America reporting

unit and

$103 million

of non-

cash

impairment

charges

related

to

our

Top

Chews

,

True

Chews

,

and

EPIC

brand

intangible

assets.

In

fiscal

2024,

we

approved

restructuring

actions to

enhance the

go-to-market

commercial strategy

and associated

organizational

structure of

our North

America

Pet segment,

and as

a result,

we recorded

$17 million

of charges

in fiscal

2024. Please

refer to

Note 4

to the

Consolidated Financial

Statements in Item 8 of this report for additional information.

Benefit

plan

non-service

income

totaled

$54

million

in

fiscal

2025

compared

to

$76 million

in

fiscal

2024,

primarily

reflecting

higher amortization

of losses

and higher

interest costs

(please refer

to Note

14 to

the Consolidated

Financial Statements

in Item

8 of

this report for additional information).

Interest,

net

for fiscal

2025 totaled

$524 million, $45

million higher

than fiscal

2024, primarily

driven by

higher average

long-term

debt levels.

Our

effective tax rate

for fiscal 2025 was 20.2 percent compared

to 19.6 percent in fiscal 2024. The 0.6

percentage point increase was

primarily driven

by certain nonrecurring

tax benefits in

fiscal 2024, partially

offset by favorable

earnings mix by

jurisdiction in fiscal

2025. Our

adjusted

effective

tax rate

was 20.6

percent in

fiscal 2025

compared

to 20.1

percent in

fiscal 2024

(see the

“Non-GAAP

Measures”

section

below

for

a

description

of

our

use

of

measures

not

defined

by

GAAP).

The

0.5

percentage

point

increase

was

primarily

due

to

certain

nonrecurring

tax

benefits

in

fiscal

2024,

partially

offset

by

favorable

earnings

mix

by

jurisdiction

in

fiscal

2025.

After-tax

earnings from

joint ventures

decreased

to

$58 million

in

fiscal

2025

compared

to

$85

million

in

fiscal

2024,

primarily

driven

by our

share of

asset impairment

charges

at CPW

in

fiscal

2025.

On

a constant

-currency

basis,

after-tax

earnings from

joint

ventures decreased

29 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 2025 vs. Fiscal 2024

CPW

HDJ

Total

Contributions from volume growth (a)

(4)

pts

4

pts

Net price realization and mix

3

pts

(1)

pt

Net sales growth in constant currency

(1)

pts

3

pts

(1)

pt

Foreign currency exchange

(3)

pts

(2)

pts

(3)

pts

Net sales growth

(4)

pts

1

pt

(3)

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 noncontrolling interests

increased to $24 million in fiscal 2025

compared to $22 million in fiscal 2024.

Average diluted shares

outstanding

decreased by 22 million in fiscal 2025 from fiscal 2024 primarily due to share repurchase

s.

RESULTS

OF SEGMENT OPERATIONS

Our

businesses

are

organized

into

four

operating

segments:

North

America

Retail,

International,

North

America

Pet,

and

North

America Foodservice.

21

The following tables provide

the dollar amount and percentage

of net sales and operating

profit from each segment for

fiscal 2025 and

fiscal 2024:

Fiscal Year

2025

2024

In Millions

Dollars

Percent of Total

Dollars

Percent of Total

Net Sales

North America Retail

$

11,907.0

61

%

$

12,473.4

63

%

International

2,797.8

14

2,746.5

14

North America Pet

2,470.8

13

2,375.8

12

North America Foodservice

2,300.9

12

2,258.7

11

Total

$

19,476.5

100

%

$

19,854.4

100

%

Segment Operating Profit

North America Retail

$

2,729.9

73

%

$

3,080.4

77

%

International

96.4

3

125.2

3

North America Pet

501.0

14

485.9

12

North America Foodservice

355.4

10

315.5

8

Total

$

3,682.7

100

%

$

4,007.0

100

%

Net sales of $10.1

million in fiscal 2025

and $2.8 million in

fiscal 2024 related to

a business managed

by our Strategic Growth

Office

are included within corporate and other net sales, which is reported separately

from segment net sales.

Segment

operating

profit

as

reviewed

by

our

executive

management

excludes

unallocated

corporate

items,

net

gain

or

loss

on

divestitures, and restructuring, transformation, 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 2025

Fiscal 2025 vs. 2024

Percentage Change

Fiscal 2024

Net sales (in millions)

$

11,907.0

(5)

%

$

12,473.4

Contributions from volume growth (a)

(4)

pts

Net price realization and mix

Flat

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 Retail

net sales decreased

5 percent in

fiscal 2025 compared

to fiscal 2024, driven

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 2025 vs. 2024

Percentage Change

Contributions from organic volume growth (a)

(2)

pts

Organic net price realization and mix

(1)

pt

Organic net sales growth

(3)

pts

Foreign currency exchange

Flat

Divestiture (b)

(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.

(b)

Divestiture

of

Canada

yogurt

business

in

the

third

quarter

of

fiscal

2025.

Please

refer

to

Note

3

to

the

Consolidated

Financial

Statements in Part II, Item 8 of this report.

North

America

Retail

organic

net

sales

decreased

3

percent

in

fiscal

2025

compared

to

fiscal

2024,

driven

by

a

decrease

in

contributions from organic volume growth and unfavorable

organic net price realization and mix.

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

In Millions

Fiscal 2025

Fiscal 2025 vs. 2024

Percentage Change

Fiscal 2024

U.S. Meals & Baking Solutions

$

4,238.9

(2)

%

$

4,324.3

U.S. Morning Foods

3,439.9

(3)

%

3,561.8

U.S. Snacks

3,356.3

(5)

%

3,538.9

Canada (a)

871.9

(17)

%

1,048.4

Total

$

11,907.0

(5)

%

$

12,473.4

(a)

On

a

constant

currency

basis,

Canada

operating

unit

net

sales

decreased

14

percent

in

fiscal

2025.

See

the

“Non-GAAP

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

Segment operating

profit decreased

11

percent to

$2,730 million in

fiscal 2025

compared to

$3,080 million

in fiscal

2024, primarily

driven by a

decrease in contributions

from volume growth,

higher input costs,

and unfavorable net

price realization

and mix, partially

offset by lower

SG&A expenses. Segment

operating profit decreased

11 percent

on a constant-currency

basis in fiscal 2025

compared

to fiscal 2024 (see the “Non-GAAP Measures” section below for our use

of this measure not defined by GAAP).

INTERNATIONAL SEGMENT

Our

International

operating

segment

consists

of

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,

shelf-stable

vegetables,

and

pet

food

products.

We

also

sell

super-premium

ice

cream

and

frozen

desserts

directly

to

consumers

through owned

retail shops. Our

International segment

also includes products

manufactured in

the United States

for export, mainly

to

Caribbean and Latin American markets, as well as products we

manufacture for sale to our international joint ventures. Revenu

es from

export activities are reported in the region or country where the end customer

is located.

International net sales were as follows:

Fiscal 2025

Fiscal 2025 vs. 2024

Percentage Change

Fiscal 2024

Net sales (in millions)

$

2,797.8

2

%

$

2,746.5

Contributions from volume growth (a)

3

pts

Net price realization and mix

1

pt

Foreign currency exchange

(2)

pts

Note: Table may

not foot due to rounding.

(a)

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

International net

sales increased 2

percent in fiscal

2025 compared to

fiscal 2024, driven

by an increase

in contributions from

volume

growth and favorable net price realization and mix, partially offset

by unfavorable foreign currency exchange.

23

The components of International organic net sales growth

are shown in the following table:

Fiscal 2025 vs. 2024

Percentage Change

Contributions from organic volume growth (a)

1

pt

Organic net price realization and mix

Flat

Organic net sales growth

Flat

Foreign currency exchange

(2)

pts

Acquisition (b)

4

pts

Net sales growth

2

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 a pet food business in Europe in fiscal 2024. Please refer to Note

3 to the Consolidated Financial Statements in Part

II, Item 8 of this report.

International organic net sales in fiscal 2025 essentially matched

fiscal 2024.

Segment

operating

profit decreased

23

percent to

$96 million

in fiscal

2025 compared

to $125

million

in 2024,

primarily

driven by

higher

SG&A

expenses

and

unfavorable

net

price

realization

and

mix,

partially

offset

by

lower

input

costs

and

an

increase

in

contributions

from

volume

growth.

Segment

operating

profit

decreased

33

percent

on

a

constant-currency

basis

in

fiscal

2025

compared to fiscal 2024 (see the “Non-GAAP Measures” section below

for our use of this measure not defined by GAAP).

NORTH AMERICA PET SEGMENT

Our North

America 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, life

stages, flavors,

product functions,

and textures

and

cuts for wet foods.

North America Pet net sales were as follows:

Fiscal 2025

Fiscal 2025 vs. 2024

Percentage Change

Fiscal 2024

Net sales (in millions)

$

2,470.8

4

%

$

2,375.8

Contributions from volume growth (a)

4

pts

Net price realization and mix

Flat

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

Pet net

sales increased

4 percent

in fiscal

2025 compared

to fiscal

2024, driven

by an

increase in

contributions from

volume growth.

24

The components of North America Pet organic net sales growth

are shown in the following table:

Fiscal 2025 vs. 2024

Percentage Change

Contributions from organic volume growth (a)

3

pts

Organic net price realization and mix

(2)

pts

Organic net sales growth

Flat

Foreign currency exchange

Flat

Acquisition (b)

4

pts

Net sales growth

4

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 Whitebridge

Pet Brands business in

fiscal 2025. Please

refer to Note 3

to the Consolidated

Financial Statements in

Part II, Item 8 of this report.

North America Pet organic net sales in fiscal 2025 essentially matched

fiscal 2024.

North

America

Pet

operating

profit

increased

3

percent

to

$501 million

in

fiscal

2025,

compared

to

$486 million

in

fiscal

2024,

primarily driven by an increase in contributions

from volume growth and lower input costs, partially offset

by higher SG&A expenses,

including increased media and advertising expenses,

and unfavorable net price realization and mix. Segment

operating profit increased

3 percent

on a

constant-currency basis

in fiscal

2025 compared

to fiscal

2024 (see

the “Non-GAAP

Measures” section

below for

our

use of this measure not defined by GAAP).

NORTH AMERICA FOODSERVICE SEGMENT

Our

North

America

Foodservice

segment

consists

of

foodservice

businesses

in

the

United

States

and

Canada.

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 2025

Fiscal 2025 vs. 2024

Percentage Change

Fiscal 2024

Net sales (in millions)

$

2,300.9

2

%

$

2,258.7

Contributions from volume growth (a)

1

pt

Net price realization and mix

1

pt

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 2 percent in fiscal

2025 compared to fiscal 2024, driven by an increase in

contributions

from volume growth and favorable net price realization and mix.

The components of North America Foodservice organic

net sales growth are shown in the following table:

Fiscal 2025 vs. 2024

Percentage Change

Contributions from organic volume growth (a)

1

pt

Organic net price realization and mix

1

pt

Organic net sales growth

2

pts

Foreign currency exchange

Flat

Net sales growth

2

pts

Note: Table may

not foot due to rounding.

(a)

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

25

North

America

Foodservice

organic

net

sales

increased

2

percent

in

fiscal

2025

compared

to

fiscal

2024,

driven

by

an

increase

in

contributions from organic volume growth and favorable

organic net price realization and mix.

Segment

operating

profit

increased

13

percent

to

$355 million

in

fiscal

2025,

compared

to

$316 million

in

fiscal

2024,

primarily

driven by favorable

net price realization and

mix. Segment operating

profit increased 13 percent

on a constant-currency

basis in fiscal

2025 compared to fiscal 2024 (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,

results

from

certain businesses managed by our Strategic Growth Office,

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

$396 million

in fiscal 2025

,

compared to

$334 million

last year.

In fiscal

2024, we

recorded a

$53

million

legal

recovery.

We

recorded

$49

million

of

transaction

costs

related

to

the

definitive

agreements

to

sell

our

North

American yogurt businesses and the Whitebridge Pet Brands acquisition

in fiscal 2025, compared to $14 million of transaction costs in

fiscal 2024, primarily

related to our

acquisition of a

pet food business

in Europe.

We

also recorded $14

million of integration

costs in

fiscal 2025,

related to

the acquisition

of Whitebridge

Pet Brands

and the

acquisition of

a pet

food business

in Europe.

In fiscal

2024,

we

recorded

$30

million

of

net recoveries

related

to

a

voluntary

recall

on

certain

international

Häagen-Dazs

ice

cream

products

in

fiscal 2023. We

recorded a $16 million net decrease in expense related to the mark-to-market

valuation of certain commodity positions

and grain

inventories in fiscal

2025, compared

to a $39

million net decrease

in expense

last year.

In addition,

we recorded $8

million

of net losses related to valuation adjustments in fiscal 2025,

compared to $18 million of net losses related to valuation

adjustments and

the

sale

of

corporate

investments

in

fiscal

2024.

We

recorded

$9

million

of

restructuring

charges

and

$1

million

of

restructuring

initiative

project-related

costs

in

cost

of

sales

in

fiscal

2025,

compared

to

$18

million

of

restructuring

charges

and

$2

million

of

restructuring

initiative

project-related

costs

in

cost

of

sales

in

fiscal

2024.

Certain

compensation

and

benefit

related

expenses

decreased in fiscal 2025 compared to fiscal 2024.

IMPACT OF INFLATION

We

experienced broad-based global input cost inflation

of 4 percent in fiscal 2025 and fiscal 2024. We

expect approximately 3 percent

input cost inflation

in fiscal 2026

before the impact

of newly enacted

tariffs. We

expect the gross

risk of newly

enacted tariffs

to be 1

to 2 percent

of cost of

goods sold, and

we are attempting

to mitigate tariff

risk through

various methods.

We

attempt to minimize

the

effects

of

inflation

through

HMM,

Strategic

Revenue

Management

(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

$6.2 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

25,

2025,

we had

$316

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

2025

2024

Net earnings, including earnings attributable to noncontrolling interests

$

2,318.9

$

2,518.6

Depreciation and amortization

539.0

552.7

After-tax earnings from joint ventures

(57.6)

(84.8)

Distributions of earnings from joint ventures

44.6

50.4

Stock-based compensation

91.7

95.3

Deferred income taxes

(120.9)

(48.5)

Pension and other postretirement benefit plan contributions

(30.8)

(30.1)

Pension and other postretirement benefit plan costs

(12.7)

(27.0)

Divestitures gain, net

(95.9)

-

Restructuring, transformation, impairment, and other exit costs

74.3

223.5

Changes in current assets and liabilities, excluding the effects of

acquisitions and divestitures

192.4

10.6

Other, net

(24.8)

41.9

Net cash provided by operating activities

$

2,918.2

$

3,302.6

During

fiscal

2025,

cash

provided

by

operations

was

$2,918

million

compared

to

$3,303 million

in

the

same

period

last

year.

The

$384 million decrease was

primarily driven by a

$296 million decrease in net

earnings excluding the impact

of the divestiture in fiscal

2025, and a $149 million change in restructuring, transformation,

impairment, and other exit costs.

We

strive

to

grow

core

working

capital

at

or

below

the

rate

of

growth

in

our

net

sales.

For

fiscal

2025,

core

working

capital

net

liability

decreased

23

percent,

compared

to

a

net

sales

decrease

of

2

percent.

The

core

working

capital

net

liability

decreased

$90

million from $393

million in fiscal

2024

to $303 million

in fiscal 2025,

primarily due to

an increase in

receivables, partially offset

by

an increase in accounts payable.

Cash Flows from Investing Activities

Fiscal Year

In Millions

2025

2024

Purchases of land, buildings, and equipment

$

(625.3)

$

(774.1)

Acquisitions, net of cash acquired

(1,419.3)

(451.9)

Investments in affiliates, net

13.3

(2.7)

Proceeds from disposal of land, buildings, and equipment

1.1

0.8

Proceeds from divestitures, net of cash divested

241.8

-

Other, net

(6.5)

30.5

Net cash used by investing activities

$

(1,794.9)

$

(1,197.4)

In

fiscal

2025,

we

used

$1,795 million

of

cash

through

investing

activities

compared

to $1,197

million

in

fiscal

2024.

We

invested

$625 million in land, buildings, and equipment in fiscal 2025, a

decrease of $149 million from fiscal 2024.

During fiscal 2025, we acquired Whitebridge Pet Brands for $1,412

million cash, net of cash acquired.

During fiscal 2025, we

completed the sale of our Canada yogurt business for $242 million cash.

During fiscal 2024, we acquired a pet food business in

Europe for $426 million cash, net of cash acquired, and we paid an additional

$8 million purchase price holdback after certain closing

conditions were met in fiscal 2025.

We

expect

capital

expenditures

to

be

approximately

3.5

percent

of

reported

net

sales

in

fiscal

2026.

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

2025

2024

Change in notes payable

$

667.1

$

(20.5)

Issuance of long-term debt

2,354.9

2,065.2

Payment of long-term debt

(1,300.0)

(901.5)

Repurchase of Class A limited membership interests in General Mills Cereals, LLC

(252.8)

-

Proceeds from common stock issued on exercised options

43.0

25.5

Purchases of common stock for treasury

(1,202.9)

(2,002.4)

Dividends paid

(1,338.7)

(1,363.4)

Distributions to noncontrolling interest holders

(21.6)

(21.3)

Other, net

(129.1)

(53.9)

Net cash used by financing activities

$

(1,180.1)

$

(2,272.3)

Financing

activities used

$1,180 million of

cash in

fiscal 2025

compared to

$2,272 million

in fiscal

2024. We

had $1,722 million

of

net debt

issuances in

fiscal 2025

compared to

$1,143 million of

net debt

issuances in

fiscal 2024.

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 2025, we

received $43 million of net

proceeds from common stock

issued on exercised options

compared to $26 million

in fiscal 2024.

During fiscal 2025, we purchased

the outstanding Class A limited

membership interests in General

Mills Cereals, LLC (GMC Class A

Interests)

from

the third-party

holder

for

$253 million.

For more

information,

please refer

to Note

10 to

the Consolidated

Financial

Statements in Item 8 of this report.

During fiscal 2025, we

repurchased 19 million shares

of our common stock for

$1,203 million. During fiscal 2024,

we repurchased 29

million shares of our common stock for $2,002 million.

Dividends paid in fiscal 2025 totaled

$1,339 million, or $2.40 per share.

Dividends paid in fiscal 2024

totaled $1,363 million, or $2.36

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

2025

2024

Investments in affiliates, net

$

13.3

$

(2.7)

Dividends received

44.6

50.4

The following table details the credit facilities and lines of credit we had available

as of May 25, 2025:

In Millions

Borrowing Capacity

Borrowed Amount

Committed credit facility expiring October 2029

$

2,700.0

$

-

Uncommitted credit facilities and lines of credit

703.7

7.6

Total

$

3,403.7

$

7.6

To ensure availability

of funds, we maintain bank credit lines and have commercial paper programs

available to us in the United States

and Europe.

Certain

of

our

long-term

debt

agreements

and

our

credit

facilities

contain

restrictive

covenants.

As

of

May

25,

2025,

we

were

in

compliance with all of these covenants.

We have

$1,528 million of long-term debt maturing

in the next 12 months that

is classified as current, including

€500 million of 0.125

percent fixed-rate notes due November 15, 2025,

€600 million of 0.45 percent fixed-rate notes due January

15, 2026, and €250 million

28

of

floating-rate

notes

due

April 22,

2026.

We

believe

that cash

flows

from

operations,

together

with available

short- and

long-term

debt financing, will be adequate to meet our material contractual

obligations and overall liquidity and capital needs

for at least the next

12 months.

As of May

25, 2025,

our total debt,

including the

impact of derivative

instruments designated

as hedges,

was 74 percent

in fixed-rate

and 26

percent in

floating-rate instruments,

compared to

85 percent

in fixed-rate

and 15

percent in

floating-rate instruments

on May

26, 2024.

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,

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

$470

million

as

of

May

25,

2025,

and

$425

million

as

of

May

26,

2024.

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.

As of

May

25,

2025,

we

had

$22 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

2025

assessment of our

intangible assets as of

the first

day

of

the

second

quarter

of

fiscal

2025,

and

we

determined

there

was

no

impairment

of

our

intangible

assets

as

their

related

fair

values

were

substantially

in

excess

of

the

carrying

values,

except

for

the

Uncle

Toby’s

brand

intangible

asset.

In

addition,

while

having

significant coverage

as of

our fiscal

2025 assessment

date, the

Progresso

,

Nudges

,

True

Chews

, and

Kitano

brand intangible

assets had risk of decreasing coverage. We

will continue to monitor these businesses for potential impairment

.

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.

29

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 4.0

percent in

the 1-year

period ended

May 25,

2025, and

returns of

0.2 percent,

4.3 percent,

6.7 percent, and 6.2 percent for the 5, 10, 15, and 20-year periods ended

May 25, 2025.

On a weighted

-average basis, the

expected rate

of return for

all defined

benefit plans

and other postretirement

plans was 7.63

percent

and 7.79

percent for fiscal

2025, 7.13

percent and 7.34

percent for

fiscal 2024, and

6.70 percent and

6.76 percent for

fiscal 2023. For

fiscal

2026,

we

decreased

our

weighted-average

expected

rate

of

return

on

plan

assets

due

to

an

increase

in

bond

asset

allocation

policy for

our principal

defined benefit

pension and

other postretirement

plans in

the United

States to

7.60 percent

and 7.40

percent,

respectively.

Lowering

the

expected

long-term

rate

of

return

on

assets

by

100

basis

points

would

increase

our

net

pension

and

postretirement

expense by $57 million for

fiscal 2026. 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.

30

Our weighted-average discount rates were as follows:

Defined Benefit

Pension Plans

Other

Postretirement

Benefit Plans

Postemployment

Benefit Plans

Effective rate for fiscal 2026 service costs

6.02

%

6.11

%

5.42

%

Effective rate for fiscal 2026 interest costs

5.32

%

5.34

%

4.91

%

Obligations as of May 31, 2025

5.79

%

5.67

%

5.04

%

Effective rate for fiscal 2025 service costs

5.58

%

5.48

%

5.37

%

Effective rate for fiscal 2025 interest costs

5.40

%

5.28

%

5.05

%

Obligations as of May 31, 2024

5.52

%

5.52

%

5.05

%

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

%

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 2026 by approximately

$27 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 7.9

percent for

retirees age

65 and

over and

7.9 percent

for retirees

under age

65 at

the end

of fiscal

2025. Rates

are graded

down

annually until

the ultimate

trend rate

of 4.5

percent is

reached in

2034 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

2025,

we

recorded

net

defined

benefit

pension,

other

postretirement

benefit,

and

postemployment

benefit

plan

expense

of

$9 million

compared to

$11 million

of income

in fiscal

2024 and

$6 million

of income

in fiscal

2023.

As of

May 25,

2025,

we had

cumulative unrecognized

actuarial net losses of

$2 billion on our

defined benefit pension plans

and cumulative unrecognized

actuarial

net gains of

$209 million on our

postretirement and postemployment

benefit plans. These

net unrecognized actuarial

losses will result

in

increases

in

our

future

net

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 November 2024, the Financial Accounting

Standards Board (FASB)

issued Accounting Standards Update (ASU)

2024-03 requiring

additional

income statement

disclosures. The

ASU requires

the disaggregation

of specific

categories of

expenses underlying

the line

items presented

on the

income statement.

Additionally,

the ASU

requires enhanced

disclosure of

selling expenses.

The requirements

of the ASU are effective for annual periods

beginning after December 15, 2026, and interim periods

within fiscal years beginning after

December

15,

2027.

For

us,

annual

reporting

requirements

will

be

effective

for

our

fiscal

2028

Form

10-K

and

interim

reporting

requirements will be

effective beginning

with our first

quarter of fiscal

2029. Early adoption

is permitted and

the amendments should

be applied on a prospective

basis. Retrospective application is permitted.

We

are in the process of

analyzing the impact of the

ASU on

our related disclosures.

31

In

December

2023,

the

FASB

issued

ASU

2023-09

requiring

enhanced

income

tax

disclosures.

The

ASU

requires

disclosure

of

specific

categories

and

disaggregation

of

information

in

the

rate

reconciliation

table.

The

ASU

also

requires

disclosure

of

disaggregated

information

related

to

income

taxes

paid,

income

or

loss

from

continuing

operations

before

income

tax

expense

or

benefit, and

income tax

expense or benefit

from continuing

operations. The

requirements of

the ASU are

effective for

annual periods

beginning after December 15, 2024,

which for us is fiscal 2026.

Early adoption is permitted

and the amendments should be

applied on

a prospective

basis. Retrospective

application is

permitted.

We

are in

the process

of analyzing

the impact

of the

ASU on

our 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.

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.

Divestiture gain

Divestiture gain

related to

the sale of

our Canada

yogurt business

in fiscal

2025. Please

refer to

Note 3

to the

Consolidated Financial

Statements in Item 8 of this report.

Restructuring and transformation charges

Restructuring

and

transformation

charges

related

to global

transformation

actions and

previously

announced

restructuring actions

in

fiscal 2025. Restructuring

charges related to

commercial strategy restructuring

actions and previously

announced restructuring

actions

in fiscal 2024. Please refer to Note 4 to the Consolidated Financial Statements

in Item 8 of this report.

Transaction costs

Fiscal 2025

transaction costs

related to

the definitive

agreements to

sell our

North American

yogurt businesses

and the

Whitebridge

Pet Brands

acquisition.

Transaction

costs primarily

related to

the acquisition

of a

pet food

business in

Europe in

fiscal 2024.

Please

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

CPW asset impairments

CPW impairment charges related to certain long-lived

assets recorded in fiscal 2025.

Mark-to-market effects

Net mark-to-market

valuation of

certain commodity

positions recognized

in unallocated

corporate items.

Please refer to

Note 8 to

the

Consolidated Financial Statements in Item 8 of this report.

Acquisition integration costs

Integration

costs

related

to

the

acquisitions

of

Whitebridge

Pet

Brands

and

a

pet

food

business

in

Europe

recorded

in

fiscal

2025.

Integration

costs

primarily

resulting

from

the

acquisition

of

TNT

Crust

in

fiscal

2024.

Please

refer

to

Note

3

to

the

Consolidated

Financial Statements in Item 8 of this report.

Capital appreciation paid on GMC Class A Interests

Capital account

appreciation

attributable

and paid

to the

third-party

holder of

GMC Class

A Interests

in fiscal

2025.

Please refer

to

Note 10 to the Consolidated Financial Statements in Item 8 of this report.

32

Investment activity, net

Valuation

adjustments of certain

corporate investments in

fiscal 2025. Valuation

adjustments and the

gain on sale

of certain corporate

investments in fiscal 2024.

Project-related costs

Restructuring

initiative

project-related

costs related

to previously

announced

restructuring

actions recorded

in fiscal

2025 and

fiscal

2024. Please refer to Note 4 to the Consolidated Financial Statements in

Item 8 of this report.

Goodwill and other intangible assets impairments

Non-cash impairment

charges related

to our Latin

America reporting unit

goodwill and our

Top

Chews

,

True Chews

, and

EPIC

brand

intangible assets in fiscal 2024. Please refer to Note 6 to the Consolidated Financial

Statements in Item 8 of this report.

Legal recovery

Legal recovery recorded in fiscal 2024.

Product recall, net

Recoveries recorded in fiscal 2024 related to the fiscal 2023 voluntary recall

of certain international

Häagen-Dazs

ice cream products,

net of costs incurred.

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 and Related Constant-currency Growth

Rate

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

2025

2024

Change

Operating profit as reported

$

3,304.8

$

3,431.7

(4)

%

Divestiture gain

(95.9)

-

Restructuring and transformation charges

87.5

38.8

Transaction costs

49.1

14.0

Mark-to-market effects

(15.7)

(39.1)

Acquisition integration costs

13.9

0.2

Investment activity, net

8.3

18.5

Project-related costs

0.5

2.0

Goodwill and other intangible assets impairments

-

220.2

Legal recovery

-

(53.2)

Product recall, net

-

(30.3)

Adjusted operating profit

$

3,352.6

$

3,602.7

(7)

%

Foreign currency exchange impact

Flat

Adjusted operating profit growth, on a constant-currency basis

(7)

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, see the Significant Items Impacting Comparability section above.

33

Adjusted Diluted EPS and Related Constant-currency Growth Rate

This measure

is used in

reporting to

our Board of

Directors and executive

management.

We

believe that

this measure provides

useful

information to

investors because it

is the profitability

measure we use

to evaluate earnings

performance on

a comparable year-to-year

basis.

The reconciliation of our GAAP measure, diluted EPS, to adjusted diluted

EPS and the related constant-currency growth rate follows:

Fiscal Year

Per Share Data

2025

2024

Change

Diluted earnings per share, as reported

$

4.10

$

4.31

(5)

%

Divestiture gain

(0.15)

-

Restructuring and transformation charges

0.12

0.05

Transaction costs

0.07

0.02

CPW asset impairments

0.04

-

Mark-to-market effects

(0.02)

(0.05)

Acquisition integration costs

0.02

-

Capital appreciation paid on GMC Class A Interests

0.02

-

Investment activity, net

0.01

0.02

Goodwill and other intangible assets impairments

-

0.28

Legal recovery

-

(0.07)

Product recall, net

-

(0.04)

Adjusted diluted earnings per share

$

4.21

$

4.52

(7)

%

Foreign currency exchange impact

Flat

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

(7)

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, see 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.

34

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 2025

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

$

2,318.9

Divestiture gain, net of tax

(84.8)

Restructuring and transformation charges, net of tax

67.2

Transaction costs, net of tax

37.8

CPW asset impairments, net of tax

23.3

Mark-to-market effects, net of tax

(12.1)

Acquisition integration costs, net of tax

11.9

Investment activity, net,

net of tax

6.4

Project-related costs, net of tax

0.4

Adjusted net earnings, including earnings attributable to noncontrolling

interests

$

2,369.1

Net cash provided by operating activities

2,918.2

Purchases of land, buildings, and equipment

(625.3)

Free cash flow

$

2,292.9

Net cash provided by operating activities conversion rate

126%

Free cash flow conversion rate

97%

Note: Table may not foot due rounding.

For more information on the reconciling items, see 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

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

2025

2024

Operating profit as reported

$

3,304.8

17.0

%

$

3,431.7

17.3

%

Divestiture gain

(95.9)

(0.5)

%

-

-

%

Restructuring and transformation charges

87.5

0.4

%

38.8

0.2

%

Transaction costs

49.1

0.3

%

14.0

0.1

%

Mark-to-market effects

(15.7)

(0.1)

%

(39.1)

(0.2)

%

Acquisition integration costs

13.9

0.1

%

0.2

-

%

Investment activity, net

8.3

-

%

18.5

0.1

%

Project-related costs

0.5

-

%

2.0

-

%

Goodwill and other intangible assets impairments

-

-

%

220.2

1.1

%

Legal recovery

-

-

%

(53.2)

(0.3)

%

Product recall, net

-

-

%

(30.3)

(0.2)

%

Adjusted operating profit

$

3,352.6

17.2

%

$

3,602.7

18.1

%

Note: Table may not foot due to rounding.

For more information on the reconciling items, see the Significant Items Impacting Comparability section above.

36

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

2025

2024

In Millions

(Except Per Share Data)

Pretax

Earnings (a)

Income

Taxes

Pretax

Earnings (a)

Income

Taxes

As reported

$

2,835.0

$

573.7

$

3,028.3

$

594.5

Divestiture gain

(95.9)

(11.1)

-

-

Restructuring and transformation charges

87.5

20.2

38.8

10.4

Transaction costs

49.1

11.3

14.0

2.1

Mark-to-market effects

(15.7)

(3.6)

(39.1)

(9.0)

Acquisition integration costs

13.9

2.0

0.2

0.1

Investment activity, net

8.3

1.9

18.5

5.9

Project-related costs

0.5

0.2

2.0

0.7

Goodwill and other intangible assets impairments

-

-

220.2

58.4

Legal recovery

-

-

(53.2)

(12.9)

Product recall, net

-

-

(30.3)

(7.0)

As adjusted

$

2,882.7

$

594.6

$

3,199.4

$

643.1

Effective tax rate:

As reported

20.2%

19.6%

As adjusted

20.6%

20.1%

Sum of adjustments to income taxes

$

20.9

$

48.6

Average number

of common shares - diluted EPS

557.5

579.5

Impact of income tax adjustments on adjusted diluted EPS

$

(0.04)

$

(0.08)

Note: Table may not foot due to rounding.

(a)

Earnings before income taxes and after-tax earnings from joint ventures.

For more information on the reconciling items, see the Significant Items Impacting Comparability section above.

37

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 2025

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

(32)

%

Impact of foreign currency exchange

(3)

pts

Percentage change in after-tax earnings from joint ventures on

a constant-currency basis

(29)

%

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 2025

Percentage change in net sales as reported

(17)

%

Impact of foreign currency exchange

(3)

pts

Percentage change in net sales on a constant-currency basis

(14)

%

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 2025

Percentage Change

in Operating Profit

as Reported

Impact of Foreign

Currency Exchange

Percentage Change

in Operating Profit

on Constant-

Currency Basis

North America Retail

(11)

%

Flat

(11)

%

International

(23)

%

10

pts

(33)

%

North America Pet

3

%

Flat

3

%

North America Foodservice

13

%

Flat

13

%

Note: Table may not foot due to rounding.

Forward-Looking Financial Measures

Our fiscal

2026 outlook

for organic

net sales

growth, constant-currency

adjusted operating

profit and

adjusted diluted

EPS, and

free

cash

flow

conversion

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

and

transformation

charges,

acquisition

transaction

and

integration costs,

acquisitions,

divestitures,

mark-to-market

effects,

and

a 53rd

week.

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