GENERAL MILLS INC (GIS) FY 2025 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
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
impact
of
acquisitions,
divestitures,
and
restructuring
and transformation
actions throughout
fiscal 2026.
The unavailable
information could
have a
significant impact
on our
fiscal 2026 GAAP financial results.
38
For fiscal 2026, we
currently expect: the net impact
from foreign currency exchange
rates (based on a blend
of forward and forecasted
rates and hedge
positions), acquisitions and
divestitures completed
prior to fiscal
2026 and those
expected to close
in fiscal 2026,
and
a 53rd week
to reduce net
sales growth by
approximately 4 percent;
foreign currency
exchange rates to
have an immaterial
impact on
adjusted
operating
profit
and
adjusted
diluted
EPS
growth;
and
restructuring
and
transformation
charges
and
transaction
and
acquisition integration costs related to actions previously announced
to total approximately $90 million to $95 million.