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xbrli:shares

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 29, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM              TO

 

Commission file number: 001-01185

________________

GENERAL MILLS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

41-0274440

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

Number One General Mills Boulevard

 

Minneapolis, Minnesota

55426

(Address of principal executive offices)

(Zip Code)

 

 

 

(763)764-7600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $.10 par value

 

GIS

 

New York Stock Exchange

1.000% Notes due 2023

 

GIS23A

 

New York Stock Exchange

0.450% Notes due 2026

 

GIS26

 

New York Stock Exchange

1.500% Notes due 2027

 

GIS27

 

New York Stock Exchange

 

 

 

________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer £

 

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

 


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. £

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

 

Number of shares of Common Stock outstanding as of December 10, 2020: 611,436,598 (excluding 143,176,730 shares held in the treasury).

 


 

General Mills, Inc.

 

Table of Contents

 

 

Page

PART I – Financial Information

 

Item 1. Financial Statements

 

Consolidated Statements of Earnings for the quarters and six-month periods ended November 29, 2020 and November 24, 2019

4

Consolidated Statements of Comprehensive Income for the quarters and six-month periods ended November 29, 2020 and November 24, 2019

5

Consolidated Balance Sheets as of November 29, 2020, and May 31, 2020

6

Consolidated Statements of Total Equity and Redeemable Interest for the quarters and six-month periods ended November 29, 2020 and November 24, 2019

7

Consolidated Statements of Cash Flows for the six-month periods ended November 29, 2020 and November 24, 2019

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk

40

Item 4. Controls and Procedures

41

PART II – Other Information

 

Item 6. Exhibits

42

Signatures

43

 

 

3


 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

 

 

 

 

 

 

Item 1. Financial Statements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

Nov. 29, 2020

 

 

Nov. 24, 2019

 

 

Nov. 29, 2020

 

 

Nov. 24, 2019

Net sales

$

4,719.4

 

$

4,420.8

 

$

9,083.4

 

$

8,423.3

Cost of sales

 

2,998.3

 

 

2,851.7

 

 

5,771.9

 

 

5,464.7

Selling, general, and administrative expenses

 

804.1

 

 

759.0

 

 

1,540.3

 

 

1,477.9

Restructuring, impairment, and other

exit costs (recoveries)

 

0.4

 

 

(1.1)

 

 

0.9

 

 

7.1

Operating profit

 

916.6

 

 

811.2

 

 

1,770.3

 

 

1,473.6

Benefit plan non-service income

 

(32.9)

 

 

(30.2)

 

 

(66.2)

 

 

(60.4)

Interest, net

 

100.6

 

 

119.4

 

 

211.7

 

 

238.1

Earnings before income taxes and

after-tax earnings from joint ventures

 

848.9

 

 

722.0

 

 

1,624.8

 

 

1,295.9

Income taxes

 

189.4

 

 

155.5

 

 

360.2

 

 

222.7

After-tax earnings from joint ventures

 

36.4

 

 

24.9

 

 

77.7

 

 

46.7

Net earnings, including earnings attributable to

redeemable and noncontrolling interests

 

695.9

 

 

591.4

 

 

1,342.3

 

 

1,119.9

Net earnings attributable to redeemable and

noncontrolling interests

 

7.5

 

 

10.6

 

 

15.0

 

 

18.5

Net earnings attributable to General Mills

$

688.4

 

$

580.8

 

$

1,327.3

 

$

1,101.4

Earnings per share - basic

$

1.12

 

$

0.96

 

$

2.16

 

$

1.82

Earnings per share - diluted

$

1.11

 

$

0.95

 

$

2.14

 

$

1.80

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

4


 

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Six-Month Period Ended

 

 

Nov. 29, 2020

 

 

Nov. 24, 2019

 

 

Nov. 29, 2020

 

 

Nov. 24, 2019

Net earnings, including earnings attributable to

redeemable and noncontrolling interests

$

695.9

 

$

591.4

 

$

1,342.3

 

$

1,119.9

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

23.7

 

 

(2.8)

 

 

89.9

 

 

(6.5)

Other fair value changes:

 

 

 

 

 

 

 

 

 

 

 

Hedge derivatives

 

1.9

 

 

(12.8)

 

 

(10.2)

 

 

(9.0)

Reclassification to earnings:

 

 

 

 

 

 

 

 

 

 

 

Hedge derivatives

 

1.0

 

 

0.2

 

 

(0.7)

 

 

(0.4)

Amortization of losses and prior service costs

 

19.8

 

 

19.6

 

 

39.3

 

 

39.2

Other comprehensive income, net of tax

 

46.4

 

 

4.2

 

 

118.3

 

 

23.3

Total comprehensive income

 

742.3

 

 

595.6

 

 

1,460.6

 

 

1,143.2

Comprehensive income attributable to

redeemable and noncontrolling interests

 

12.8

 

 

4.0

 

 

86.5

 

 

6.2

Comprehensive income attributable to General Mills

$

729.5

 

$

591.6

 

$

1,374.1

 

$

1,137.0

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

5


 

Consolidated Balance Sheets

 

GENERAL MILLS, INC. AND SUBSIDIARIES

 

(In Millions, Except Par Value)

 

 

 

 

Nov. 29, 2020

 

 

May 31, 2020

 

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,582.8

 

$

1,677.8

 

Receivables

 

 

1,784.3

 

 

1,615.1

 

Inventories

 

 

1,712.5

 

 

1,426.3

 

Prepaid expenses and other current assets

 

 

328.6

 

 

402.1

 

Total current assets

 

 

6,408.2

 

 

5,121.3

 

Land, buildings, and equipment

 

 

3,529.8

 

 

3,580.6

 

Goodwill

 

 

14,020.4

 

 

13,923.2

 

Other intangible assets

 

 

7,147.5

 

 

7,095.8

 

Other assets

 

 

1,201.7

 

 

1,085.8

 

Total assets

 

$

32,307.6

 

$

30,806.7

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

3,398.6

 

$

3,247.7

 

Current portion of long-term debt

 

 

2,885.7

 

 

2,331.5

 

Notes payable

 

 

126.2

 

 

279.0

 

Other current liabilities

 

 

2,053.7

 

 

1,633.3

 

Total current liabilities

 

 

8,464.2

 

 

7,491.5

 

Long-term debt

 

 

10,952.5

 

 

10,929.0

 

Deferred income taxes

 

 

1,939.4

 

 

1,947.1

 

Other liabilities

 

 

1,511.2

 

 

1,545.0

 

Total liabilities

 

 

22,867.3

 

 

21,912.6

 

Redeemable interest

 

 

587.7

 

 

544.6

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock, 754.6 shares issued, $0.10 par value

 

 

75.5

 

 

75.5

 

Additional paid-in capital

 

 

1,333.3

 

 

1,348.6

 

Retained earnings

 

 

16,374.2

 

 

15,982.1

 

Common stock in treasury, at cost, shares of 143.2 and 144.8

 

 

(6,365.4)

 

 

(6,433.3)

 

Accumulated other comprehensive loss

 

 

(2,867.6)

 

 

(2,914.4)

 

Total stockholders' equity

 

 

8,550.0

 

 

8,058.5

 

Noncontrolling interests

 

 

302.6

 

 

291.0

 

Total equity

 

 

8,852.6

 

 

8,349.5

 

Total liabilities and equity

 

$

32,307.6

 

$

30,806.7

 

 

 

 

 

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

6


 

Consolidated Statements of Total Equity and Redeemable Interest

 

GENERAL MILLS, INC. AND SUBSIDIARIES

 

(Unaudited) (In Millions, Except per Share Data)

 

 

Quarter Ended

 

 

Nov. 29, 2020

 

Nov. 24, 2019

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Total equity, beginning balance

 

 

$

8,757.9

 

 

 

$

7,695.6

 

Common stock, 1 billion shares authorized, $0.10 par value

754.6

 

 

75.5

 

754.6

 

 

75.5

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

1,335.5

 

 

 

 

1,370.9

 

Stock compensation plans

 

 

 

(2.4)

 

 

 

 

(4.2)

 

Unearned compensation related to stock unit awards

 

 

 

(2.8)

 

 

 

 

(3.4)

 

Earned compensation

 

 

 

20.0

 

 

 

 

18.6

 

(Increase) decrease in redemption value of redeemable interest

 

 

 

(17.0)

 

 

 

 

5.1

 

Ending balance

 

 

 

1,333.3

 

 

 

 

1,387.0

 

Retained earnings:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

16,312.5

 

 

 

 

15,218.8

 

Comprehensive income

 

 

 

688.4

 

 

 

 

580.8

 

Cash dividends declared ($1.02 and $0.49 per share)

 

 

 

(626.7)

 

 

 

 

(297.8)

 

Ending balance

 

 

 

16,374.2

 

 

 

 

15,501.8

 

Common stock in treasury:

 

 

 

 

 

 

 

 

 

 

Beginning balance

(143.3)

 

 

(6,370.2)

 

(150.5)

 

 

(6,681.8)

 

Shares purchased

-

 

 

(0.1)

 

-

 

 

(0.1)

 

Stock compensation plans

0.1

 

 

4.9

 

0.5

 

 

19.7

 

Ending balance

(143.2)

 

 

(6,365.4)

 

(150.0)

 

 

(6,662.2)

 

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

(2,908.7)

 

 

 

 

(2,600.6)

 

Comprehensive income

 

 

 

41.1

 

 

 

 

10.8

 

Ending balance

 

 

 

(2,867.6)

 

 

 

 

(2,589.8)

 

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

313.3

 

 

 

 

312.8

 

Comprehensive income

 

 

 

4.7

 

 

 

 

1.6

 

Distributions to noncontrolling interest holders

 

 

 

(15.4)

 

 

 

 

(6.1)

 

Ending balance

 

 

 

302.6

 

 

 

 

308.3

 

Total equity, ending balance

 

 

$

8,852.6

 

 

 

$

8,020.6

 

Redeemable interest:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

$

584.9

 

 

 

$

547.8

 

Comprehensive income

 

 

 

8.1

 

 

 

 

2.4

 

Increase (decrease) in redemption value of redeemable interest

 

 

 

17.0

 

 

 

 

(5.1)

 

Distributions to redeemable interest holder

 

 

 

(22.3)

 

 

 

 

-

 

Ending balance

 

 

$

587.7

 

 

 

$

545.1

 

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

7


 

Consolidated Statements of Total Equity and Redeemable Interest

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions, Except per Share Data)

 

 

Six-Month Period Ended

 

 

Nov. 29, 2020

 

Nov. 24, 2019

 

 

Shares

 

Amount

 

Shares

 

Amount

Total equity, beginning balance

 

 

 

$

8,349.5

 

 

 

$

7,367.7

Common stock, 1 billion shares authorized, $0.10 par value

 

754.6

 

 

75.5

 

754.6

 

 

75.5

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

 

1,348.6

 

 

 

 

1,386.7

Stock compensation plans

 

 

 

 

21.2

 

 

 

 

13.8

Unearned compensation related to stock unit awards

 

 

 

 

(77.7)

 

 

 

 

(69.9)

Earned compensation

 

 

 

 

48.2

 

 

 

 

47.3

(Increase) decrease in redemption value of redeemable interest

 

 

 

 

(7.0)

 

 

 

 

9.1

Ending balance

 

 

 

 

1,333.3

 

 

 

 

1,387.0

Retained earnings:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

 

15,982.1

 

 

 

 

14,996.7

Comprehensive income

 

 

 

 

1,327.3

 

 

 

 

1,101.4

Cash dividends declared ($1.51 and $0.98 per share)

 

 

 

 

(929.5)

 

 

 

 

(596.3)

Adoption of current expected credit loss accounting requirements

 

 

 

 

(5.7)

 

 

 

 

-

Ending balance

 

 

 

 

16,374.2

 

 

 

 

15,501.8

Common stock in treasury:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

(144.8)

 

 

(6,433.3)

 

(152.7)

 

 

(6,779.0)

Shares purchased

 

-

 

 

(0.1)

 

-

 

 

(0.1)

Stock compensation plans

 

1.6

 

 

68.0

 

2.7

 

 

116.9

Ending balance

 

(143.2)

 

 

(6,365.4)

 

(150.0)

 

 

(6,662.2)

Accumulated other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

 

(2,914.4)

 

 

 

 

(2,625.4)

Comprehensive income

 

 

 

 

46.8

 

 

 

 

35.6

Ending balance

 

 

 

 

(2,867.6)

 

 

 

 

(2,589.8)

Noncontrolling interests:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

 

291.0

 

 

 

 

313.2

Comprehensive income

 

 

 

 

28.1

 

 

 

 

3.7

Distributions to noncontrolling interest holders

 

 

 

 

(16.5)

 

 

 

 

(8.6)

Ending balance

 

 

 

 

302.6

 

 

 

 

308.3

Total equity, ending balance

 

 

 

$

8,852.6

 

 

 

$

8,020.6

Redeemable interest:

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

 

$

544.6

 

 

 

$

551.7

Comprehensive income

 

 

 

 

58.4

 

 

 

 

2.5

Increase (decrease) in redemption value of redeemable interest

 

 

 

 

7.0

 

 

 

 

(9.1)

Distributions to redeemable interest holder

 

 

 

 

(22.3)

 

 

 

 

-

Ending balance

 

 

 

$

587.7

 

 

 

$

545.1

See accompanying notes to consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

8


 

Consolidated Statements of Cash Flows

GENERAL MILLS, INC. AND SUBSIDIARIES

(Unaudited) (In Millions)

 

Six-Month Period Ended

 

 

Nov. 29, 2020

 

 

Nov. 24, 2019

Cash Flows - Operating Activities

 

 

 

 

 

Net earnings, including earnings attributable to

redeemable and noncontrolling interests

$

1,342.3

 

$

1,119.9

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

295.1

 

 

307.7

After-tax earnings from joint ventures

 

(77.7)

 

 

(46.7)

Distributions of earnings from joint ventures

 

29.7

 

 

28.9

Stock-based compensation

 

48.7

 

 

47.8

Deferred income taxes

 

42.3

 

 

(9.9)

Pension and other postretirement benefit plan contributions

 

(15.6)

 

 

(14.3)

Pension and other postretirement benefit plan costs

 

(16.9)

 

 

(15.5)

Restructuring, impairment, and other exit costs

 

(3.6)

 

 

11.3

Changes in current assets and liabilities

 

(147.8)

 

 

7.7

Other, net

 

(69.7)

 

 

19.7

Net cash provided by operating activities

 

1,426.8

 

 

1,456.6

Cash Flows - Investing Activities

 

 

 

 

 

Purchases of land, buildings, and equipment

 

(226.2)

 

 

(158.5)

Investments in affiliates, net

 

18.1

 

 

(14.3)

Proceeds from disposal of land, buildings, and equipment

 

0.4

 

 

0.6

Other, net

 

(3.6)

 

 

9.5

Net cash used by investing activities

 

(211.3)

 

 

(162.7)

Cash Flows - Financing Activities

 

 

 

 

 

Change in notes payable

 

(159.6)

 

 

(119.7)

Issuance of long-term debt

 

971.3

 

 

-

Payment of long-term debt

 

(555.0)

 

 

(509.3)

Proceeds from common stock issued on exercised options

 

31.1

 

 

68.6

Purchases of common stock for treasury

 

(0.1)

 

 

(0.1)

Dividends paid

 

(617.7)

 

 

(596.3)

Distributions to noncontrolling and redeemable interest holders

 

(4.8)

 

 

(8.6)

Other, net

 

(18.8)

 

 

(14.4)

Net cash used by financing activities

 

(353.6)

 

 

(1,179.8)

Effect of exchange rate changes on cash and cash equivalents

 

43.1

 

 

(3.9)

Increase in cash and cash equivalents

 

905.0

 

 

110.2

Cash and cash equivalents - beginning of year

 

1,677.8

 

 

450.0

Cash and cash equivalents - end of period

$

2,582.8

 

$

560.2

Cash Flow from changes in current assets and liabilities:

 

 

 

 

 

Receivables

$

(135.2)

 

$

(97.0)

Inventories

 

(258.6)

 

 

(167.2)

Prepaid expenses and other current assets

 

81.6

 

 

67.6

Accounts payable

 

165.8

 

 

245.7

Other current liabilities

 

(1.4)

 

 

(41.4)

Changes in current assets and liabilities

$

(147.8)

 

$

7.7

See accompanying notes to consolidated financial statements.

 

 

 

 

9


 

GENERAL MILLS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1) Background

 

The accompanying Consolidated Financial Statements of General Mills, Inc. (we, us, our, General Mills, or the Company) have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature, including the elimination of all intercompany transactions and any noncontrolling and redeemable interests’ share of those transactions. Operating results for the quarter ended November 29, 2020, are not necessarily indicative of the results that may be expected for the fiscal year ending May 30, 2021.

 

These statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2020. The accounting policies used in preparing these Consolidated Financial Statements are the same as those described in Note 2 to the Consolidated Financial Statements in that Form 10-K with the exception of new requirements adopted in the first quarter of fiscal 2021.

In the first quarter of fiscal 2021, we adopted new accounting requirements related to the measurement of credit losses on financial instruments, including trade receivables. The new standard and subsequent amendments replace the incurred loss impairment model with a forward-looking expected credit loss model, which will generally result in earlier recognition of credit losses. Our allowance for doubtful accounts represents our estimate of expected credit losses related to our trade receivables. We pool our trade receivables based on similar risk characteristics, such as geographic location, business channel, and other account data. To estimate our allowance for doubtful accounts, we leverage information on historical losses, asset-specific risk characteristics, current conditions, and reasonable and supportable forecasts of future conditions. Account balances are written off against the allowance when we deem the amount is uncollectible. We adopted the requirements of the new standard and subsequent amendments using the modified retrospective transition approach, and recorded a decrease to retained earnings of $5.7 million after-tax.

Certain terms used throughout this report are defined in the “Glossary” section below.

 

 

(2) Restructuring, Impairment, and Other Exit Costs

 

In the six-month period ended November 29, 2020, we did not undertake any new restructuring actions. We recorded $0.9 million of restructuring charges for previously announced restructuring actions in the second quarter of fiscal 2021 and $1.9 million in the six-month period ended November 29, 2020. We recorded $10.5 million of restructuring charges in the second quarter of fiscal 2020 and $24.8 million in the six-month period ended November 24, 2019. The restructuring charges primarily relate to actions to drive efficiencies in targeted areas of our global supply chain. Certain actions are subject to union negotiations and works counsel consultations, where required. We expect these actions to be completed by the end of fiscal 2022.

 

We paid net $5.5 million of cash in the six-month period ended November 29, 2020, related to restructuring actions previously announced. We paid net $13.5 million of cash in the same period of fiscal 2020.

 

Restructuring and impairment charges and project-related costs are recorded in our Consolidated Statements of Earnings as follows:

 

 

 

Quarter Ended

 

Six-Month

Period Ended

In Millions

 

Nov. 29, 2020

 

Nov. 24, 2019

 

Nov. 29, 2020

 

Nov. 24, 2019

Cost of sales

$

0.5

$

11.6

$

1.0

$

17.7

Restructuring, impairment, and other exit costs (recoveries)

 

0.4

 

(1.1)

 

0.9

 

7.1

Total restructuring and impairment charges

 

0.9

 

10.5

 

1.9

 

24.8

Project-related costs classified in cost of sales

$

-

$

0.7

$

-

$

0.7

10


 

(3) Goodwill and Other Intangible Assets

 

The components of goodwill and other intangible assets are as follows:

 

In Millions

 

Nov. 29, 2020

 

May 31, 2020

Goodwill

$

14,020.4

$

13,923.2

Other intangible assets:

 

 

 

 

Intangible assets not subject to amortization:

 

 

 

 

Brands and other indefinite-lived intangibles

 

6,611.7

 

6,561.4

Intangible assets subject to amortization:

 

 

 

 

Franchise agreements, customer relationships, and other finite-lived intangibles

 

812.2

 

777.8

Less accumulated amortization

 

(276.4)

 

(243.4)

Intangible assets subject to amortization, net

 

535.8

 

534.4

Other intangible assets

 

7,147.5

 

7,095.8

Total

$

21,167.9

$

21,019.0

 

Based on the carrying value of finite-lived intangible assets as of November 29, 2020, annual amortization expense for each of the next five fiscal years is estimated to be approximately $40 million.

 

The changes in the carrying amount of goodwill during the six-month period ended November 29, 2020 were as follows:

 

In Millions

 

North America Retail

 

Pet

 

Convenience Stores & Foodservice

 

Europe & Australia

 

Asia & Latin America

 

Joint Ventures

 

Total

Balance as of May 31, 2020

 

$

6,403.7

 

$

5,300.5

 

$

918.8

 

$

690.7

 

$

203.8

 

$

405.7

 

$

13,923.2

Other activity, primarily

foreign currency translation

 

 

6.8

 

 

-

 

 

-

 

 

53.9

 

 

5.0

 

 

31.5

 

 

97.2

Balance as of Nov. 29, 2020

 

$

6,410.5

 

$

5,300.5

 

$

918.8

 

$

744.6

 

$

208.8

 

$

437.2

 

$

14,020.4

 

The changes in the carrying amount of other intangible assets during the six-month period ended November 29, 2020 were as follows:

 

In Millions

 

 

Total

Balance as of May 31, 2020

 

$

7,095.8

Other activity, primarily foreign currency translation

 

 

51.7

Balance as of Nov. 29, 2020

 

$

7,147.5

 

Our annual goodwill and indefinite-lived intangible assets impairment test was performed on the first day of the second quarter of fiscal 2021, and we determined there was no impairment of our intangible assets as their related fair values were substantially in excess of the carrying values.

 

While having significant coverage as of our fiscal 2021 assessment date, the Europe & Australia reporting unit and the Progresso, Green Giant, and EPIC brand intangible assets had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.

11


 

(4) Inventories

 

The components of inventories were as follows:

 

In Millions

 

Nov. 29, 2020

 

 

May 31, 2020

Raw materials and packaging

$

432.8

 

$

392.2

Finished goods

 

1,360.4

 

 

1,142.6

Grain

 

113.3

 

 

93.6

Excess of FIFO over LIFO cost

 

(194.0)

 

 

(202.1)

Total

$

1,712.5

 

$

1,426.3

 

(5) Risk Management Activities

 

Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to manage price risk for our principal ingredients and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), dairy products, natural gas, and diesel fuel. Our primary objective when entering into these derivative contracts is to achieve certainty with regard to the future price of commodities purchased for use in our supply chain. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions and generally seek to acquire the inputs at as close to our planned cost as possible.

 

We use derivatives to manage our exposure to changes in commodity prices. We do not perform the assessments required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings.

 

Although we do not meet the criteria for cash flow hedge accounting, we believe that these instruments are effective in achieving our objective of providing certainty in the future price of commodities purchased for use in our supply chain. Accordingly, for purposes of measuring segment operating performance, these gains and losses are reported in unallocated corporate items outside of segment operating results until such time that the exposure we are managing affects earnings. At that time we reclassify the gain or loss from unallocated corporate items to segment operating profit, allowing our operating segments to realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in unallocated corporate items.

 

Unallocated corporate items for the quarters and six-month periods ended November 29, 2020, and November 24, 2019, included:

 

 

Quarter Ended

 

Six-Month

Period Ended

In Millions

 

Nov. 29, 2020

 

Nov. 24, 2019

 

 

Nov. 29, 2020

 

Nov. 24, 2019

Net gain (loss) on mark-to-market valuation of certain commodity positions

$

33.6

$

9.7

 

$

44.0

$

(11.0)

Net loss on commodity positions reclassified from unallocated

corporate items to segment operating profit

 

4.7

 

4.0

 

 

16.7

 

15.3

Net mark-to-market revaluation of certain grain inventories

 

7.6

 

8.9

 

 

1.6

 

3.3

Net mark-to-market valuation of certain commodity positions recognized

in unallocated corporate items

$

45.9

$

22.6

 

$

62.3

$

7.6

 

 

As of November 29, 2020, the net notional value of commodity derivatives was $319.6 million, of which $69.8 million related to energy inputs and $249.8 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months.

 

In advance of planned debt financing, in the fourth quarter of fiscal 2020, we entered into $300.0 million of treasury locks due January 13, 2022 with an average fixed rate of 0.85 percent.

 

During the third quarter of fiscal 2020, we entered into a €600.0 million interest rate swap to convert our €600.0 million fixed rate notes due January 15, 2026, to a floating rate.

 

During the second quarter of fiscal 2020, we entered into a $500.0 million interest rate swap to convert a portion of our $850.0 million floating-rate notes due April 16, 2021, to a fixed rate.

 

12


 

The fair values of the derivative positions used in our risk management activities and other assets recorded at fair value were not material as of November 29, 2020, and were Level 1 or Level 2 assets and liabilities in the fair value hierarchy. We did not significantly change our valuation techniques from prior periods.

 

We offer certain suppliers access to third party services that allow them to view our scheduled payments online. The third party services also allow suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third parties, or any financial institutions concerning these services. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of November 29, 2020, $1,405.6 million of our total accounts payable were payable to suppliers who utilize these third party services.

 

(6) Debt

 

The components of notes payable were as follows:

 

In Millions

 

Nov. 29, 2020

 

May 31, 2020

U.S. commercial paper

$

-

$

99.9

Financial institutions

 

126.2

 

179.1

Total

$

126.2

$

279.0

 

To ensure availability of funds, we maintain bank credit lines and have commercial paper programs available to us in the United States and Europe. We also have committed and asset-backed credit lines that support our foreign operations.

 

The following table details the fee-paid committed and uncommitted credit lines we had available as of November 29, 2020:

 

In Billions

 

Facility Amount

 

 

Borrowed Amount

Credit facility expiring: