GENERAL MILLS INC (GIS) Risk Factors
This page reproduces the company's own Item 1A Risk Factors text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Informational only - not investment advice. See Disclaimer.
ITEM 1A - Risk Factors
Our
business
is
subject
to
various
risks
and
uncertainties.
Any
of
the
risks
described
below
could
materially,
adversely
affect
our
business, financial condition, and results of operations.
Business and Industry Risks
The
categories
in
which
we
participate
are
very
competitive,
and
if
we
are
not
able
to
compete
effectively,
our
results
of
operations could be adversely
affected.
The
human
and
pet
food
categories
in
which
we
participate
are
very
competitive.
Our principal
competitors
in
these
categories
are
manufacturers,
as
well
as
retailers
with
their
own
branded
and
private
label
products.
Competitors
market
and
sell
their
products
through
brick-and-mortar
stores
and
e-commerce.
All
of
our
principal
competitors
have
substantial
financial,
marketing,
and
other
resources.
In
most
product
categories,
we
compete
not
only
with
other
widely
advertised
branded
products,
but
also
with
regional
brands
and
with
generic
and
private
label
products
that
are generally
sold
at
lower prices.
Competition
in
our
product
categories
is
based on
product
innovation, product
quality,
price,
brand recognition
and loyalty,
effectiveness
of marketing,
promotional
activity,
convenient
ordering
and
delivery
to
the
consumer,
and
the
ability
to
identify
and
satisfy
consumer
preferences.
If
our
large
competitors
were
to
seek
an
advantage
through
pricing
or
promotional
changes,
we
could
choose
to
do
the
same,
which
could
adversely affect
our margins
and profitability.
If we
did not
do the
same, our
revenues and
market share
could be
adversely affected.
Our market share
and revenue growth
could also be
adversely impacted if
we are not
successful in introducing
innovative products
in
response
to
changing
consumer
demands
or by
new product
introductions
of our
competitors.
If
we
are unable
to build
and
sustain
brand
equity
by
offering
recognizably
superior
product
quality,
we
may
be
unable
to
maintain
premium
pricing
over
generic
and
private label products.
We may be unable to maintain our profit
margins in the face of a consolidating retail environment.
There has
been significant
consolidation in
the grocery industry,
resulting in
customers with increased
purchasing power.
In addition,
large
retail
customers
may
seek
to
use
their
position
to
improve
their
profitability
through
improved
efficiency,
lower
pricing,
increased
reliance
on
their
own
brand
name
products,
increased
emphasis
on
generic
and
other
economy
brands,
and
increased
promotional
programs.
If we
are
unable
to use
our
scale, marketing
expertise,
product
innovation,
knowledge
of consumers’
needs,
and category
leadership positions
to respond
to these
demands, our
profitability and
volume growth
could be
negatively impacted.
In
addition, the loss
of any large
customer could
adversely affect our
sales and profits.
In fiscal 2025,
Walmart
accounted for 22
percent
of our
consolidated net
sales and
31 percent
of net
sales of
our North
America Retail
segment.
For more
information on
significant
customers, please see Note 8 to the Consolidated Financial Statements in Item 8 of this
report.
Price
changes
for
the
commodities
we
depend
on
for
raw
materials,
packaging,
and
energy
may
adversely
affect
our
profitability.
The
principal
raw
materials
that
we
use
are
commodities
that
experience
price
volatility
caused
by
external
conditions
such
as
weather,
climate
change,
product
scarcity,
limited
sources
of
supply,
commodity
market
fluctuations,
currency
fluctuations,
trade
tariffs
(including
recent
tariffs
imposed
or
threatened
to
be
imposed
by
the
United
States
on
China,
Canada,
Mexico,
and
other
countries and any retaliatory
actions taken by such
countries), pandemics, war
(including sanctions imposed
on Russia for its
invasion
of Ukraine),
and changes in
governmental agricultural
and energy
policies and regulations.
Commodity prices
have become, and
may
continue
to be,
more volatile.
Commodity price
changes may
result in
unexpected increases
in raw
material, packaging,
energy,
and
transportation costs. If we
are unable to increase
productivity to offset
these increased costs or
increase our prices, we
may experience
9
reduced margins
and profitability.
We
do not
fully hedge
against changes
in commodity
prices, and
the risk
management procedures
that we do use may not always work as we intend.
Concerns with the safety and quality of our products could cause consumers
to
avoid certain products or ingredients.
We
could
be
adversely
affected
if
consumers
in
our
principal
markets
lose
confidence
in
the
safety
and
quality
of
certain
of
our
products
or
ingredients.
Adverse
publicity
about
these
types
of
concerns,
whether
or
not
valid,
may
discourage
consumers
from
buying our products or cause production and delivery disruptions.
We
may be
unable to
anticipate changes
in consumer
preferences and
trends,
which may
result in
decreased demand
for our
products.
Our
success
depends
in
part
on
our
ability
to
anticipate
the
tastes,
eating
habits
(including
the
impact
of
weight
loss
drugs),
and
purchasing
behaviors
of
consumers
and
to
offer
products
that
appeal
to
their
preferences
in
channels
where
they
shop.
Consumer
preferences
and category-level
consumption
may change
from time
to time
and can
be affected
by a
number of
different
trends and
other factors. If we fail
to anticipate, identify or react to
these changes and trends, such as
adapting to emerging
e-commerce channels,
or to
introduce new
and improved
products on
a timely
basis, we
may experience
reduced demand
for our
products, which
would in
turn
cause
our
revenues
and
profitability
to
suffer.
Similarly,
demand
for
our
products
could
be
affected
by
consumer
concerns
regarding
the
health
effects
of
ingredients
such
as
sodium,
genetically
modified
organisms,
sugar
and
sugar
alternatives,
color
additives,
preservatives,
processed
wheat
and
other
ingredients,
grain-free
or
legume-rich
pet
food,
or
other
product
ingredients
or
attributes.
We may be unable to grow
our market share or add products that are
in faster
growing and more profitable categories.
The
food
industry’s
growth
potential
is
constrained
by
population
growth.
Our
success
depends
in
part
on
our
ability
to
grow
our
business faster than
populations are growing
in the markets
that we serve.
One way to
achieve that growth
is to enhance
our portfolio
by adding innovative
new products in faster
growing and more
profitable categories. Our future
results will also depend
on our ability
to
increase
market
share
in
our
existing
product
categories.
If
we
do
not
succeed
in
developing
innovative
products
for
new
and
existing categories, our growth and profitability could be adversely
affected.
Our results may be negatively impacted if consumers do not maintain
their favorable perception of our brands.
Maintaining and continually
enhancing the value
of our many
iconic brands is critical
to the success of
our business. The value
of our
brands
is
based
in
large
part
on
the
degree
to
which
consumers
react
and
respond
positively
to
these
brands.
Brand
value
could
diminish
significantly
due
to
a
number
of
factors,
including
consumer
perception
that
we
have
acted
in
an
irresponsible
manner,
adverse publicity
about our
products, our
failure to
maintain the
quality of
our products,
concerns or
perceptions about
the nutrition
profile and
health effects
of ingredients
or substances
(including the
processing thereof)
in our
products or
packaging, the
failure of
our products to
deliver consistently positive
consumer experiences, concerns
about food safety,
or our products
becoming unavailable
to consumers. Consumer demand for our products
may also be impacted by changes in the level
of advertising or promotional support.
The
use
of
social
and
digital
media
by
consumers,
us,
and
third
parties
increases
the
speed
and
extent
that
information
or
misinformation
and
opinions
can
be
shared.
Negative
posts
or
comments
about
us,
our
brands,
or
our
products
on
social
or
digital
media could
seriously damage
our brands
and reputation.
If we
do not
maintain the
favorable perception
of our
brands, our
business
results could be negatively impacted.
Operating Risks
If
we
are
not
efficient
in
our
production,
our
profitability
could
suffer
as
a
result
of
the
highly
competitive
environment
in
which we operate.
Our future success and
earnings growth depend in
part on our ability to
be efficient in the
production and manufacture of
our products
in
highly
competitive
markets.
Gaining
additional
efficiencies
may
become
more
difficult
over
time.
Our
failure
to
reduce
costs
through
productivity
gains
or
by
eliminating
redundant
costs
resulting
from
acquisitions
or
divestitures
could
adversely
affect
our
profitability
and
weaken
our
competitive
position.
Many
productivity
initiatives
involve
complex
reorganization
of
manufacturing
facilities
and
production
lines.
Such
manufacturing
realignment
may
result
in
the
interruption
of
production,
which
may
negatively
impact product
volume and
margins. We
periodically engage
in restructuring,
transformation, and
cost savings
initiatives designed
to
increase our
efficiency and
reduce expenses. If
we are unable
to execute
those initiatives as
planned, we
may not realize
all or any
of
the anticipated benefits, which could adversely affect our business and
results of operations.
10
Disruption of our supply chain could adversely affect our business.
Our
ability
to
make,
move,
and
sell
products
is
critical
to
our
success.
Damage
or
disruption
to
raw
material
supplies
or
our
manufacturing
or
distribution
capabilities
due
to
weather,
climate
change,
natural
disaster,
fire,
terrorism,
cyber-attack,
pandemics,
war,
governmental
restrictions
or
mandates,
labor
shortages,
strikes,
import/export
restrictions,
or
other
factors
could
impair
our
ability to
manufacture or
sell our
products. Many
of our
product lines
are manufactured
at a
single location
or sourced
from a
single
supplier.
The
failure
of
third
parties
on
which
we
rely,
including
those
third
parties
who
supply
our
ingredients,
packaging,
capital
equipment
and
other
necessary
operating
materials,
contract
manufacturers,
commercial
transport,
distributors,
contractors,
and
external business partners, to meet
their obligations to us, or significant
disruptions in their ability to do
so, may negatively impact our
operations. Our
suppliers’ policies
and practices
can damage
our reputation
and the quality
and safety
of our
products. Disputes
with
significant suppliers,
including disputes regarding
pricing or performance,
could adversely affect
our ability to
supply products to
our
customers and
could materially
and adversely
affect our
sales, financial
condition, and
results of
operations. Failure
to take
adequate
steps
to
mitigate
the
likelihood
or
potential
impact
of
such
events,
or
to
effectively
manage
such
events
if
they
occur,
particularly
when a
product is
sourced from
a single
location or
supplier,
could adversely
affect our
business and
results of
operations, as
well as
require additional resources to restore our supply chain.
Short term or
sustained increases in
consumer demand at
our retail customers
may exceed our
production capacity or
otherwise strain
our supply chain. Our failure to meet the demand for our products could
adversely affect our business and results of operations.
Our international operations are subject to political and economic
risks.
In fiscal
2025, 19
percent of
our consolidated
net sales
were generated
outside of
the United
States. We
are accordingly
subject to
a
number of risks relating to doing business internationally,
any of which could significantly harm our business. These risks include:
●
political and economic instability;
●
exchange controls and currency exchange rates;
●
tariffs on products and
ingredients that we import and export
(including recent tariffs imposed
or threatened to be imposed by
the United States on China, Canada, Mexico, and other countries and any retaliatory
actions taken by such countries);
●
political sentiment impacting
global trade, including
the willingness of consumers
outside the United States
to purchase from
United States corporations or to purchase products manufactured outside the country
of sale;
●
nationalization or government control of operations;
●
compliance with anti-corruption regulations;
●
foreign tax treaties and policies; and
●
restriction on the transfer of funds to and from foreign countries, including
potentially negative tax consequences.
Our financial performance
on a U.S. dollar
denominated basis is subject
to fluctuations in currency
exchange rates. These fluctuations
could cause material
variations in our results
of operations. Our principal
exposures are to the
Australian dollar,
Brazilian real, British
pound sterling,
Canadian dollar,
Chinese renminbi,
euro, Japanese
yen, Mexican
peso, and
Swiss franc.
From time
to time,
we enter
into
agreements
that
are
intended
to
reduce
the
effects
of
our
exposure
to
currency
fluctuations,
but
these
agreements
may
not
be
effective in significantly reducing our exposure.
A
strengthening
in
the
U.S.
dollar
relative
to
other
currencies
in
the
countries
in
which
we
operate
would
negatively
affect
our
reported results of operations and financial results due to currency translation losses and
currency transaction losses.
Our business operations could be disrupted if our information technology
systems fail to perform adequately or are breached.
Information
technology
serves
an
important
role
in
the
efficient
and
effective
operation
of
our
business.
We
rely
on
information
technology networks
and systems, including
the internet, to
process, transmit,
and store electronic
information to
manage a variety
of
business processes and
to comply with
regulatory,
legal, and tax requirements.
Our information technology
systems and infrastructure
are
critical
to
effectively
manage
our
key
business
processes
including
digital
marketing,
order
entry
and
fulfillment,
supply
chain
management,
finance,
administration,
and
other
business
processes.
These
technologies
enable
internal
and
external
communication
among
our
locations, employees,
suppliers,
customers,
and others
and
include the
receipt and
storage of
personal information
about
our employees,
consumers, and
proprietary business
information. Our
information technology
systems, some
of which
are dependent
on services
provided
by third
parties, may
be vulnerable
to damage,
interruption,
or shutdown
due to
any number
of causes
such as
catastrophic events,
natural disasters, fires,
power outages, systems
failures, telecommunications
failures, security breaches,
computer
viruses, hackers, employee error
or malfeasance, and other
causes. Increased cyber-security threats
pose a potential risk to
the security
and
viability
of
our
information
technology
systems,
as
well
as
the
confidentiality,
integrity,
and
availability
of
the
data
stored
on
those systems. The
failure of our
information technology
systems to perform
as we anticipate
could disrupt
our business and
result in
transaction
errors,
processing
inefficiencies,
data
loss,
legal
claims
or
proceedings,
regulatory
penalties,
and
the
loss
of
sales
and
customers. Any
interruption of
our information
technology systems
could have
operational, reputational,
legal, and
financial impacts
that may have a material adverse effect on our business.
11
Our failure to successfully integrate acquisitions into our
existing operations could adversely affect our financial results.
From
time
to
time,
we
evaluate
potential
acquisitions
or
joint
ventures
that
would
further
our
strategic
objectives.
Our
success
depends, in part,
upon our ability
to integrate acquired
and existing operations.
If we are
unable to successfully
integrate acquisitions,
our financial
results could
suffer.
Additional potential
risks associated
with acquisitions
include
additional debt
leverage, the
loss of
key
employees
and
customers
of
the
acquired
business,
the
assumption
of
unknown
liabilities,
the
inherent
risk
associated
with
entering a geographic area or line of business in which we have
no or limited prior experience, failure to achieve anticipated
synergies,
and the impairment of goodwill or other acquisition-related intangible assets.
Legal and Regulatory Risks
If
our
products
become
adulterated,
misbranded,
or
mislabeled,
we
might
need
to
recall
those
items
and
may
experience
product liability claims if
consumers or their pets are injured.
We may need
to recall some of our products if they become adulterated,
misbranded, or mislabeled. A widespread product recall could
result in
significant losses
due to
the costs
of a
recall, the
destruction of
product inventory,
and lost
sales due
to the
unavailability of
product for a period of time.
We could
also suffer losses from a
significant product liability judgment
against us. A significant product
recall or
product liability
case could
also result
in adverse
publicity,
damage to
our reputation,
and a
loss of
consumer confidence
in
our products, which could have an adverse effect on our business results and the
value of our brands.
New regulations or regulatory-based claims could adversely
affect our business.
Our facilities and
products are subject
to many laws and
regulations administered by
the United States Department
of Agriculture, the
Federal Food and Drug
Administration, the Occupational
Safety and Health Administration,
and other federal, state, local,
and foreign
governmental agencies
relating to
the production,
packaging, labelling,
storage, distribution,
quality,
and safety
of food
products and
the
health
and
safety
of
our
employees.
Our
failure
to
comply
with
such
laws
and
regulations
could
subject
us
to
lawsuits,
administrative
penalties,
and civil
remedies,
including fines,
injunctions,
and recalls
of our
products.
We
advertise our
products and
could be
the target
of claims
relating to
alleged false
or deceptive
advertising
under federal,
state, and
foreign laws
and regulations.
We
may
also
be
subject
to
new
laws
or
regulations
restricting
the
marketing
or
sale
of
our
products
because
of
ingredients
or
substances (including
the processing
thereof)
in our
products or
product packaging.
These limitations
may
require that
we highlight
perceived concerns
about a
product or
product packaging,
warn consumers
to avoid
consumption of
certain ingredients
or substances
present in our products,
restrict the audience
to whom products are
marketed or sold, limit
the locations in which
our products may be
available, or discontinue
the use of
certain ingredients or
packaging. Changes
in laws or
regulations that impose
additional regulatory
requirements
on us
could
increase our
cost of
doing business,
restrict our
actions,
and reduce
consumption
of our
products, causing
our results of operations to be adversely affected.
We
are
subject
to
various
federal,
state,
local,
and
foreign
environmental
laws
and
regulations.
Our
failure
to
comply
with
environmental laws and regulations could subject us
to lawsuits, administrative penalties, and civil remedies.
We are currently
party to
a variety of
environmental remediation obligations.
Due to regulatory
complexities, uncertainties inherent
in litigation, and
the risk of
unidentified contaminants
on current and
former properties of
ours, the potential
exists for remediation,
liability,
indemnification, and
compliance
costs
to
differ
from
our
estimates.
We
cannot
guarantee
that
our
costs
in
relation
to
these
matters,
or
compliance
with
environmental
laws
in
general,
will
not
exceed
our
established
liabilities
or
otherwise
have
an
adverse
effect
on
our
business
and
results of operations.
Climate change and other sustainability matters could adversely affect
our business.
There is
growing concern
that carbon
dioxide and
other greenhouse
gases in
the earth’s
atmosphere may
have an
adverse impact
on
global temperatures, weather patterns, and the frequency
and severity of extreme weather and natural disasters.
If such climate change
has a negative effect on agricultural productivity,
we may experience decreased availability and higher pricing for certain commodities
that are necessary
for our
products. Increased
frequency or
severity of
extreme weather
could also impair
our production
capabilities,
disrupt our
supply chain,
impact demand
for our
products, and
increase our
insurance and
other operating
costs.
Increasing concern
over
climate
change
or
other
sustainability
issues
also
may
adversely
impact
demand
for
our
products
due
to
changes
in
consumer
preferences or
negative consumer
reaction to
our commitments
and actions
to address
these issues.
We
may also
become subject
to
additional
legal
and
regulatory
requirements
relating
to
climate
change
or
other
sustainability
issues,
including
greenhouse
gas
emission
regulations
(e.g.,
carbon
taxes),
energy
policies,
sustainability
initiatives
(e.g.,
single-use
plastic
limits),
and
disclosure
obligations.
If additional legal
and regulatory
requirements are
enacted and
are more aggressive
than the sustainability
measures that
we are currently
undertaking to reduce
our emissions and
improve our energy
efficiency and
other sustainability goals,
or if we
chose
to take actions to achieve more aggressive goals, we may experience significant
increases in our costs of operations.
12
We
have announced goals
and commitments to
reduce our carbon footprint.
If we fail to
achieve or improperly
report on our progress
toward
achieving
our
carbon
emissions
reduction
goals
and
commitments,
then
the
resulting
negative
publicity
could
harm
our
reputation and adversely affect demand for our products.
Financial and Economic Risks
Volatility
in
the
market
value
of
derivatives
we
use
to
manage
exposures
to
fluctuations
in
commodity
prices
may
cause
volatility in our gross margins and net earnings.
We
utilize derivatives
to manage
price risk
for some
of our
principal ingredient
and energy
costs, including
grains (oats,
wheat, and
corn), oils (principally soybean),
dairy products, natural gas, and diesel
fuel. Changes in the values
of these derivatives are recorded
in
earnings, which
may result
in volatility
in both
gross margin
and net
earnings. These
gains and
losses are
reported in
cost of
sales in
our Consolidated
Statements of Earnings
and in unallocated
corporate items outside
our segment operating
results until we
utilize the
underlying input in our manufacturing
process, at which time the gains
and losses are reclassified to segment
operating profit. We
also
record our grain inventories at net realizable value. We
may experience volatile earnings as a result of these accounting treatments.
Economic downturns could limit consumer demand for our products.
The
willingness
of
consumers
to
purchase
our
products
depends
in
part
on
local
economic
conditions.
In
periods
of
economic
uncertainty,
consumers
may
purchase
more
generic,
private
label,
and
other
economy
brands
and
may
forego
certain
purchases
altogether.
In those circumstances,
we could experience
a reduction in sales
of higher margin
products or a shift
in our product mix
to
lower margin
offerings.
In addition,
as a
result of
economic conditions
or competitive
actions, we
may be
unable to
raise our
prices
sufficiently to
protect margins.
Consumers may
also reduce the
amount of food
that they consume
away from home
at customers that
purchase products
from our
North America
Foodservice segment.
Any of
these events
could have
an adverse
effect on
our results
of
operations.
We
have
a
substantial
amount
of
indebtedness,
which
could
limit
financing
and
other
options
and
in
some
cases
adversely
affect our ability to pay dividends.
As
of
May
25,
2025,
we
had
total
debt
and
noncontrolling
interests
of
$14.9
billion.
The
agreements
under
which
we
have
issued
indebtedness
do not
prevent us
from
incurring
additional unsecured
indebtedness
in the
future.
Our level
of indebtedness
may
limit
our:
●
ability to
obtain additional
financing for
working capital,
capital expenditures,
or general
corporate purposes,
particularly if
the ratings assigned to our debt securities by rating organizations
were revised downward; and
●
flexibility to
adjust to
changing business
and market
conditions and
may make
us more
vulnerable to
a downturn
in general
economic conditions.
There are
various financial
covenants and
other restrictions
in our
debt instruments
and noncontrolling
interests. If
we fail to
comply
with any of
these requirements, the
related indebtedness,
and other unrelated
indebtedness, could
become due and
payable prior
to its
stated maturity and our ability to obtain additional or alternative financing
may also be adversely affected.
Our ability
to make
scheduled payments
on or
to refinance
our debt
and other
obligations will
depend on
our operating
and financial
performance,
which
in
turn
is
subject
to
prevailing
economic
conditions
and
to
financial,
business,
and
other
factors
beyond
our
control.
We
depend
on stable,
liquid
and
well-functioning
capital and
credit markets
to fund
our operations.
Our financial
performance,
our
credit ratings,
interest rates,
the stability
of financial
institutions with
which we
partner, and
the liquidity
of the
overall global
capital
markets could affect our access to, and the availability,
terms and conditions, and cost of capital.
Volatility
in the
securities markets,
interest
rates,
and other
factors could
substantially
increase
our defined
benefit
pension,
other postretirement benefit, and postemployment
benefit costs.
We
sponsor
a number
of defined
benefit plans
for employees
in the
United
States, Canada,
and various
foreign
locations, including
defined
benefit
pension,
retiree
health
and
welfare,
severance,
and
other
postemployment
plans.
Our
major
defined
benefit
pension
plans are
funded with
trust assets
invested in
a globally
diversified portfolio
of securities
and other
investments. Changes
in interest
rates, mortality
rates, health
care costs,
early
retirement rates,
investment
returns, and
the market
value of
plan
assets can
affect
the
funded status
of our
defined benefit
plans and
cause volatility
in the
net periodic
benefit cost
and future
funding requirements
of the
plans.
A
significant
increase
in
our
obligations
or
future
funding
requirements
could
have
a
negative
impact
on
our
results
of
operations and cash flows from operations.
13
A
change
in
the
assumptions
regarding
the
future
performance
of
our
businesses
or
a
different
weighted-average
cost
of
capital
used
to
value
our
reporting
units
or
our
indefinite-lived
intangible
assets
could
negatively
affect
our
consolidated
results of operations and net worth.
As of May
25, 2025,
we had $22.4
billion of
goodwill and
indefinite-lived intangible
assets. Goodwill for
each of
our reporting
units
is tested
for impairment
annually and
whenever events
or changes
in circumstances
indicate that
impairment may
have occurred.
We
compare
the
carrying
value
of
the
reporting
unit,
including
goodwill,
to
the
fair
value
of
the
reporting
unit.
If
the
fair
value
of
the
reporting unit
is less than
the carrying
value of
the reporting
unit, including
goodwill, impairment
has occurred.
Our estimates
of fair
value are determined
based on a
discounted cash
flow model. Growth
rates for sales
and profits are
determined using inputs
from our
long-range planning process. We
also make estimates of discount rates, perpetuity growth assumptions,
market comparables, and other
factors.
If
current
expectations
for
growth
rates
for
sales
and
profits
are
not
met,
or
other
market
factors
and
macroeconomic
conditions were to change,
then our reporting units could
become significantly impaired. While
we currently believe that
our goodwill
is not impaired, different assumptions regarding
the future performance of our businesses could result in significant impairment
losses.
We
evaluate
the
useful
lives
of
our
intangible
assets,
primarily
intangible
assets
associated
with
the
Blue
Buffalo
,
Pillsbury
,
Totino’s
,
Progresso
,
Old El Paso
,
Tiki Pets
,
Annie’s
,
Nudges
,
Edgard &
Cooper
,
and
Häagen-Dazs
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.
Our
indefinite-lived
intangible
assets
are
also
tested
for
impairment
annually
and
whenever
events
or
changes
in
circumstances
indicate
that impairment
may have
occurred.
Our estimate
of the
fair value
of the
brands is
based on
a discounted
cash flow
model
using inputs
including projected
revenues from
our long-range
plan, assumed
royalty rates which
could be
payable if we
did not
own
the brands, and
a discount rate.
If current expectations
for growth
rates for sales
and margins
are not met,
or other market
factors and
macroeconomic
conditions
were
to
change,
then
our
indefinite-lived
intangible
assets
could
become
significantly
impaired.
Our
Progresso
,
Nudges
,
Uncle Toby’s
,
True
Chews
, and
Kitano
brands had
risk of
decreasing
coverage
and we
continue
to monitor
these businesses.
For further information
on goodwill and intangible
assets, please refer to
Note 6 to the Consolidated
Financial Statements in
Item 8 of
this report.