ITEM 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

EXECUTIVE OVERVIEW

We are a global packaged foods company. We develop distinctive value-added food products and market them under unique brand names. We work continuously to improve our core products and to create new products that meet consumers’ evolving needs and preferences. In addition, we build the equity of our brands over time with strong consumer-directed marketing, innovative new products, and effective merchandising. We believe our brand-building approach is the key to winning and sustaining leading share positions in markets around the globe.

Our fundamental financial goal is to generate competitively differentiated returns for our shareholders over the long term. We believe achieving that goal requires us to generate a consistent balance of net sales growth, margin expansion, cash conversion, and cash return to shareholders over time.

Our long-term growth objectives are to deliver the following performance on average over time:

2 to 3 percent annual growth in organic net sales;

mid-single-digit annual growth in adjusted operating profit;

mid- to high-single-digit annual growth in adjusted diluted earnings per share (EPS);

free cash flow conversion of at least 95 percent of adjusted net earnings after tax; and

cash return to shareholders of 80 to 90 percent of free cash flow, including an attractive dividend yield.

We are executing our Accelerate strategy to drive sustainable, profitable growth and top-tier shareholder returns over the long term. The strategy focuses on four pillars to create competitive advantages and win: boldly building brands, relentlessly innovating, unleashing our scale, and being a force for good. We are prioritizing our core markets, global platforms, and local gem brands that have the best prospects for profitable growth and we are committed to reshaping our portfolio with strategic acquisitions and divestitures to further enhance our growth profile.

We expect that changes in consumer behaviors driven by the COVID-19 pandemic will result in ongoing elevated consumer demand for food at home, relative to pre-pandemic levels. These changes include more time spent working from home and increased consumer appreciation for cooking and baking. We plan to capitalize on these opportunities, addressing evolving consumer needs through our leading brands, innovation, and advantaged capabilities to generate profitable growth.

In fiscal 2021, we executed well amid the uncertain environment caused by the pandemic, delivering strong growth in organic net sales, adjusted operating profit, and adjusted diluted EPS. We achieved each of the three priorities we established at the beginning of the year:

We competed effectively, everywhere we play, highlighted by market share gains across each of our five global platforms: cereal, pet food, ice cream, snack bars, and Mexican food. Our positive market share performance amid pandemic-driven elevated demand for food at home helped drive organic net sales growth in our North America Retail, Europe & Australia, and Asia & Latin America segments. Conversely, lower away-from-home food demand stemming from the pandemic resulted in a decline in organic net sales for our Convenience Stores & Foodservice segment. For our Pet segment, which was largely unaffected by the pandemic, we were able to generate organic net sales growth despite the comparison against an extra month of results in the prior year.

We drove efficiency to fuel investment in our brands and capabilities. We generated strong levels of Holistic Margin Management (HMM) cost savings and were able to meaningfully increase our investment in brand building activities and in strategic capabilities such as E-commerce, Digital, Data & Analytics, and Strategic Revenue Management.

We reduced our debt leverage and increased our financial flexibility. As a result of our continued cash discipline, we were able to reduce our debt and generate a reduction in our leverage ratio. Due to our improved balance sheet position, we were able to resume dividend growth and share repurchase activity during fiscal 2021.

We also announced important transactions during fiscal 2021 intended to reshape our portfolio for growth, in line with our Accelerate strategy. In March 2021, we announced the proposed sale of our European Yoplait operations to Sodiaal, in exchange for full ownership of the Canadian Yoplait business and a reduced royalty rate for the use of the Yoplait and Liberté brands in the United States and Canada. The proposed transaction would be anticipated to close by the end of calendar 2021, subject to appropriate labor consultations, regulatory filings, and other customary closing conditions. In May 2021, we reached a definitive agreement to acquire Tyson Foods’ pet treats business for $1.2 billion in cash. The acquisition is expected to close in the first quarter of fiscal 2022, subject to regulatory approval and other customary closing conditions.

Our consolidated net sales for fiscal 2021 rose 3 percent to $18.1 billion. On an organic basis, net sales increased 4 percent compared to year-ago levels. Operating profit of $3.1 billion increased 6 percent. Adjusted operating profit of $3.2 billion increased 2 percent on a constant-currency basis. Diluted EPS of $3.78 was up 6 percent compared to fiscal 2020 results. Adjusted diluted EPS of $3.79 increased 4 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 $3.0 billion in fiscal 2021 representing a conversion rate of 127 percent of net earnings, including earnings attributable to redeemable and noncontrolling interests. This cash generation supported capital investments totaling $531 million, and our resulting free cash flow was $2.4 billion at a conversion rate of 103 percent of adjusted net earnings, including earnings attributable to redeemable and noncontrolling interests. We returned cash to shareholders through dividends totaling $1.2 billion and share repurchases totaling $301 million, and we reduced total debt outstanding by $928 million. Our ratio of net debt-to-operating cash flow was 3.7 in fiscal 2021, and our net debt-to-adjusted earnings before net interest, income taxes, depreciation and amortization (net debt-to-adjusted EBITDA) ratio was 2.9 (See the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

A detailed review of our fiscal 2021 performance compared to fiscal 2020 appears below in the section titled “Fiscal 2021 Consolidated Results of Operations.” A detailed review of our fiscal 2020 performance compared to our fiscal 2019 performance is set forth in Part II, Item 7 of our Form 10-K for the fiscal year ended May 31, 2020 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Fiscal 2020 Results of Consolidated Operations,” which is incorporated herein by reference.

In fiscal 2022, we expect to continue to compete effectively in a dynamic environment, work aggressively to navigate a turbulent cost environment, and successfully execute our portfolio and organization reshaping actions. We expect the largest factors impacting our performance will be the relative balance of at-home versus away-from-home consumer food demand and the inflationary cost environment, both of which remain uncertain. We expect at-home food demand will decline year over year across most of our core markets, though will remain above pre-pandemic levels. Conversely, we expect away-from-home food demand to continue to recover, though not fully to pre-pandemic levels. With roughly 85 percent of our net sales representing at-home food occasions, we expect these dynamics to result in lower aggregate consumer demand in our categories in fiscal 2022 compared to fiscal 2021 levels.

Total input cost inflation is expected to be approximately 7 percent of cost of goods sold in fiscal 2022. We are addressing the inflationary environment with strong HMM cost savings expected to total roughly 4 percent of cost of goods sold and with positive net price realization generated through our Strategic Revenue Management capability.

Based on these assumptions, our key full-year fiscal 2022 targets are summarized below:

Organic net sales are expected to decline 1 to 3 percent, which is generally in line with the expected level of aggregate category demand in fiscal 2022.

Constant-currency adjusted operating profit is expected to decline 2 to 4 percent from the base of $3.2 billion reported in fiscal 2021.

Constant-currency adjusted diluted EPS are expected to range between flat and down 2 percent from the base of $3.79 earned in fiscal 2021.

Relative to pre-pandemic levels in fiscal 2019, the midpoints of these fiscal 2022 guidance ranges equate to 3-year compound annual growth rates of approximately 2 percent for organic net sales, approximately 2 percent for constant-currency adjusted operating profit, and approximately 5 percent for constant-currency adjusted diluted EPS.

Free cash flow conversion is expected to be approximately 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 2021 CONSOLIDATED RESULTS OF OPERATIONS

Fiscal 2021 had 52 weeks compared to 53 weeks in fiscal 2020. Fiscal 2020 included 13 months of Pet operating segment results as we changed the Pet operating segment’s reporting period from an April fiscal year end to a May fiscal year end to match our fiscal calendar.

In fiscal 2021, net sales increased 3 percent compared to fiscal 2020 and organic net sales increased 4 percent compared to last year. Operating profit margin of 17.3 percent was up 50 basis points from year-ago levels primarily driven by favorable net price realization and mix, a favorable change to the mark-to-market valuation of certain commodity positions and grain inventories, and favorable net corporate investment activity, partially offset by higher input costs, higher restructuring charges, and the loss on the sale of our

Laticínios Carolina business in Brazil. Adjusted operating profit margin increased 10 basis points to 17.4 percent, primarily driven by favorable net price realization and mix and lower selling, general, and administrative (SG&A) expenses, partially offset by higher input costs. Diluted earnings per share of $3.78 increased 6 percent compared to fiscal 2020. Adjusted diluted earnings per share of $3.79 increased 4 percent on a constant-currency basis (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

A summary of our consolidated financial results for fiscal 2021 follows:

Net earnings attributable to General Mills 2,339.8 7 %

Diluted earnings per share $ 3.78 6 %

Organic net sales growth rate (a) 4 %

Adjusted operating profit (a) 3,153.2 3 % 17.4 % 2 %

Adjusted diluted earnings per share (a) $ 3.79 5 % 4 %

Consolidated net sales were as follows:

Contributions from volume growth (a) Flat

Net price realization and mix 2 pts

Foreign currency exchange 1 pt

Note: Table may not foot due to rounding

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

The 3 percent increase in net sales in fiscal 2021 reflects favorable net price realization and mix and favorable foreign currency exchange.

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

Contributions from organic volume growth (a) 2 pts

Organic net price realization and mix 2 pts

Organic net sales growth 4 pts

Foreign currency exchange 1 pt

53rd week (2) pts

Net sales growth 3 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 2021 increased 4 percent compared to fiscal 2020, driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix.

Cost of sales increased $182 million in fiscal 2021 to $11,679 million. The increase was primarily driven by a $366 million increase attributable to product rate and mix and a $43 million increase due to higher volume. We recorded a $139 million net decrease in cost of sales related to mark-to-market valuation of certain commodity positions and grain inventories in fiscal 2021, compared to a net increase of $25 million in fiscal 2020 (please see Note 8 to the Consolidated Financial Statements in Item 8 of this report for additional information). In fiscal 2021, we recorded $2 million of restructuring charges in cost of sales, compared to $26 million of restructuring charges and $2 million of restructuring initiative project-related costs in fiscal 2020 (please see Note 4 to the Consolidated Financial Statements in Item 8 of this report for additional information). In fiscal 2020, we recorded a $19 million charge related to a product recall in our international Green Giant business. In fiscal 2020, we recorded an $18 million increase in certain compensation and benefits expenses.

Gross margin increased 5 percent in fiscal 2021 versus fiscal 2020. Gross margin as a percent of net sales increased 80 basis points to 35.6 percent compared to fiscal 2020.

SG&A expenses decreased $72 million to $3,080 million in fiscal 2021 compared to fiscal 2020. The decrease in SG&A expenses primarily reflects favorable net corporate investment activity and decreased administrative expenses, partially offset by higher media and advertising expenses. SG&A expenses as a percent of net sales in fiscal 2021 decreased 90 basis points compared to fiscal 2020.

Divestiture loss totaled $54 million in fiscal 2021 due to the sale of our Laticínios Carolina business in Brazil (please see Note 3 of the Consolidated Financial Statements in Item 8 of this report).

Restructuring, impairment, and other exit costs totaled $170 million in fiscal 2021 compared to $24 million in fiscal 2020. In fiscal 2021, we approved restructuring actions designed to better align our organizational structure and resources with strategic initiatives. As a result, we recorded $157 million of charges in fiscal 2021. We also recorded $11 million of charges related to Asia & Latin America segment route-to-market and supply chain optimization actions in fiscal 2021. We did not undertake any new restructuring actions in fiscal 2020. Please see Note 4 to the Consolidated Financial Statements in Item 8 of this report for additional information.

Benefit plan non-service income totaled $133 million in fiscal 2021 compared to $113 million in fiscal 2020, primarily reflecting lower interest costs, partially offset by lower expected returns on plan assets (please see Note 2 to the Consolidated Financial Statements in Item 8 of this report for additional information).

Interest, net for fiscal 2021 totaled $420 million, $46 million lower than fiscal 2020, primarily driven by lower rates and lower average debt balances.

Our effective tax rate for fiscal 2021 was 22.0 percent compared to 18.5 percent in fiscal 2020. The 3.5 percentage point increase was primarily due to the net benefit related to the reorganization of certain wholly owned subsidiaries in fiscal 2020, the non-deductible loss associated with the sale of our Laticínios Carolina business in Brazil in fiscal 2021, and certain nonrecurring discrete tax benefits in fiscal 2020. Our adjusted effective tax rate was 21.1 percent in fiscal 2021 compared to 20.7 percent in fiscal 2020 (see the “Non-GAAP Measures” section below for a description of our use of measures not defined by GAAP).

After-tax earnings from joint ventures increased 29 percent to $118 million in fiscal 2021 compared to fiscal 2020, primarily driven by higher net sales at CPW and HDJ. On a constant-currency basis, after-tax earnings from joint ventures increased 26 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 2021 vs. Fiscal 2020 CPW HDJ Total

Contributions from volume growth (a) 4 pts 2 pts

Net price realization and mix 1 pt 4 pts

Net sales growth in constant currency 5 pts 6 pts 5 pts

Foreign currency exchange 1 pt 2 pts 1 pt

Net sales growth 6 pts 8 pts 6 pts

Note: Table may not foot due to rounding

(a) Measured in tons based on the stated weight of our product shipments

Net earnings attributable to redeemable and noncontrolling interests decreased 79 percent to $6 million primarily due to the redeemable interest’s 49 percent share of the loss on sale of the Laticínios Carolina business in Brazil.

Average diluted shares outstanding increased by 6 million in fiscal 2021 from fiscal 2020 primarily due to option exercises.

RESULTS OF SEGMENT OPERATIONS

Our businesses are organized into five operating segments: North America Retail; Europe & Australia; Convenience Stores & Foodservice; Pet, and Asia & Latin America. Fiscal 2020 includes 13 months of Pet operating segment results as we changed the Pet operating segment’s reporting period from an April fiscal year end to a May fiscal year end to match our fiscal calendar.

The following tables provide the dollar amount and percentage of net sales and operating profit from each segment for fiscal 2021 and fiscal 2020:

Fiscal Year

In Millions Dollars Percent of Total Dollars Percent of Total

Net Sales

Segment Operating Profit

Segment operating profit as reviewed by our executive management excludes unallocated corporate items, net gain/loss on divestitures, and restructuring, impairment, and other exit costs that are centrally managed.

NORTH AMERICA RETAIL SEGMENT

Our North America Retail operating segment reflects business with a wide variety of grocery stores, mass merchandisers, membership stores, natural food chains, drug, dollar and discount chains, 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, snack bars, and refrigerated yogurt.

North America Retail net sales were as follows:

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.

The 2 percent increase in North America Retail net sales for fiscal 2021 was primarily driven by favorable net price realization and mix and an increase in contributions from volume growth. The 53rd week in fiscal 2020 contributed 2 percentage points of net sales decline in fiscal 2021, reflecting 2 percentage points of decline from volume.

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

Contributions from organic volume growth (a) 3 pts

Organic net price realization and mix 1 pt

Organic net sales growth 4 pts

Foreign currency exchange Flat

53rd week (2) 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.

North America Retail organic net sales increased 4 percent in fiscal 2021 compared to fiscal 2020, primarily driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix.

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

(a)On a constant currency basis, Canada operating unit net sales increased 3 percent in fiscal 2021. See the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP.

Segment operating profit of $2,623 million in fiscal 2021 essentially matched fiscal 2020 levels, as higher input costs were offset by favorable net price realization and mix and an increase in contributions from volume growth. Segment operating profit was flat on a constant-currency basis in fiscal 2021 compared to fiscal 2020 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

EUROPE & AUSTRALIA SEGMENT

Our Europe & Australia operating segment reflects retail and foodservice businesses in the greater Europe and Australia regions. Our product categories include refrigerated yogurt, meal kits, snack bars, super-premium ice cream, refrigerated and frozen dough products, shelf stable vegetables, and dessert and baking mixes. Revenues from franchise fees are reported in the region or country where the franchisee is located.

Europe & Australia net sales were as follows:

Contributions from volume growth (a) (3) pts

Net price realization and mix 3 pts

Foreign currency exchange 7 pts

Note: Table may not foot due to rounding.

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

The 8 percent increase in Europe & Australia net sales in fiscal 2021 was primarily driven by favorable foreign currency exchange and favorable net price realization and mix, partially offset by a decrease in contributions from volume growth. The 53rd week in fiscal 2020 contributed 2 percentage points of net sales decline in fiscal 2021, reflecting 2 percentage points of decline from volume.

The components of Europe & Australia organic net sales growth are shown in the following table:

Contributions from organic volume growth (a) Flat

Organic net price realization and mix 4 pts

Organic net sales growth 3 pts

Foreign currency exchange 7 pts

Divestiture (1) pt

53rd week (2) pts

Net sales growth 8 pts

Note: Table may not foot due to rounding

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

The 3 percent increase in Europe & Australia organic net sales growth in fiscal 2021 was primarily driven by favorable organic net price realization and mix.

Segment operating profit increased 33 percent to $151 million in fiscal 2021 compared to $114 million in 2020, primarily driven by favorable net price realization and mix, partially offset by higher input costs. Segment operating profit increased 24 percent on a constant-currency basis in fiscal 2021 compared to fiscal 2020 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

CONVENIENCE STORES & FOODSERVICE SEGMENT

Our major product categories in our Convenience Stores & 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, convenience stores, vending, and supermarket bakeries in the United States.

Convenience Stores & Foodservice net sales were as follows:

Contributions from volume growth (a) (4) pts

Net price realization and mix Flat

Note: Table may not foot due to rounding.

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

Convenience Stores & Foodservice net sales decreased 4 percent in fiscal 2021 primarily driven by a decrease in contributions from volume growth. The 53rd week in fiscal 2020 contributed 1 percentage point of net sales decline in fiscal 2021, reflecting 1 percentage point of decline from volume.

The components of Convenience Stores & Foodservice organic net sales growth are shown in the following table:

Contributions from organic volume growth (a) (2) pts

Organic net price realization and mix (1) pt

Organic net sales growth (3) pts

53rd week (1) pt

Net sales growth (4) pts

Note: Table may not foot due to rounding

(a)Measured in tons based on the standard weight of our product shipments

The 3 percent decrease in Convenience Stores & Foodservice organic net sales growth in fiscal 2021 was primarily driven by a decrease in contributions from organic volume growth and unfavorable organic net price realization and mix.

Segment operating profit decreased 9 percent to $306 million in fiscal 2021, compared to $337 million in fiscal 2020, primarily driven by higher input costs, unfavorable net price realization and mix, and a decrease in contributions from volume growth.

PET SEGMENT

Our Pet operating segment includes pet food products sold primarily in the United States in national pet superstore chains, e-commerce retailers, grocery stores, regional pet store chains, mass merchandisers, and veterinary clinics and hospitals. Our product categories include dog and cat food (dry foods, wet foods, and treats) made with whole meats, fruits, and vegetables and other high-quality natural ingredients. Our tailored pet product offerings address specific dietary, lifestyle, and life-stage needs and span different product types, diet types, breed sizes for dogs, lifestages, flavors, product functions and textures, and cuts for wet foods.

Fiscal 2021 included 12 months of results. Fiscal 2020 included 13 months of Pet operating segment results as we changed the Pet operating segment’s reporting period from an April fiscal year end to a May fiscal year end to match our fiscal calendar.

Pet net sales were as follows:

Contributions from volume growth (a) 2 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.

Pet net sales increased 2 percent in fiscal 2021 compared to fiscal 2020, primarily driven by an increase in contributions from volume growth.

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

Contributions from organic volume growth (a) 2 pts

Organic net price realization and mix Flat

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 stated weight of our product shipments.

The 2 percent increase in Pet organic net sales growth in fiscal 2021 was primarily driven by an increase in contributions from organic volume growth.

Pet operating profit increased 6 percent to $415 million in fiscal 2021, compared to $391 million in fiscal 2020, primarily driven by an increase in contributions from volume growth, lower SG&A expenses, and favorable net price realization and mix, partially offset by higher input costs. Segment operating profit increased 6 percent on a constant-currency basis in fiscal 2021 compared to fiscal 2020 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

ASIA & LATIN AMERICA SEGMENT

Our Asia & Latin America operating segment consists of retail and foodservice businesses in the greater Asia and South America regions. Our product categories include super-premium ice cream and frozen desserts, meal kits, dessert and baking mixes, snack bars, salty snacks, refrigerated and frozen dough products, and wellness beverages. We also sell super-premium ice cream and frozen desserts directly to consumers through owned retail shops. Our Asia & Latin America 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. Revenues from export activities and franchise fees are reported in the region or country where the end customer or franchisee is located.

Asia & Latin America net sales were as follows:

Contributions from volume growth (a) 10 pts

Net price realization and mix 4 pts

Foreign currency exchange (4) pts

Note: Table may not foot due to rounding.

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

Asia & Latin America net sales increased 10 percent in fiscal 2021 compared to fiscal 2020, primarily driven by an increase in contributions from volume growth and favorable net price realization and mix, partially offset by unfavorable foreign currency exchange. The 53rd week in fiscal 2020 contributed 2 percentage points of net sales decline in fiscal 2021, reflecting 2 percentage points of decline in volume.

The components of Asia & Latin America organic net sales growth are shown in the following table:

Contributions from organic volume growth (a) 12 pts

Organic net price realization and mix 3 pts

Organic net sales growth 15 pts

Foreign currency exchange (4) pts

53rd week (2) pts

Net sales growth 10 pts

Note: Table may not foot due to rounding.

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

The 15 percent increase in Asia & Latin America organic net sales in fiscal 2021 was primarily driven by an increase in contributions from organic volume growth and favorable organic net price realization and mix.

Segment operating profit increased $67 million to $86 million in fiscal 2021, compared to $19 million in fiscal 2020, primarily driven by favorable net price realization and mix, an increase in contributions from volume growth, and favorable foreign currency exchange, partially offset by higher input costs.

UNALLOCATED CORPORATE ITEMS

Unallocated corporate items include corporate overhead expenses, variances to planned domestic employee benefits and incentives, contributions to the General Mills Foundation, asset and liability remeasurement impact of hyperinflationary economies, restructuring initiative project-related costs, and other items that are not part of our measurement of segment operating performance. This includes gains and losses from the mark-to-market valuation of certain commodity positions until passed back to our operating segments in accordance with our policy as discussed in Note 8 to the Consolidated Financial Statements in Item 8 of this report.

In fiscal 2021, unallocated corporate expense decreased $297 million to $212 million compared to $509 million last year. In fiscal 2021, we recorded a $139 million net decrease in expense related to mark-to-market valuation of certain commodity positions and grain inventories, compared to a $25 million net increase in expense in the prior year. In addition, we recorded $2 million of restructuring charges in cost of sales in fiscal 2021, compared to $26 million of restructuring charges and $2 million of restructuring initiative project-related costs in cost of sales in fiscal 2020. We also recorded a $4 million favorable adjustment related to a product recall in our international Green Giant business in fiscal 2021, compared to a $19 million charge in fiscal 2020. In fiscal 2021, we recorded $76 million of net gains related to valuation adjustments and the gain on sale of certain corporate investments, compared to $8 million of net losses related to valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020. In fiscal 2021, we recorded $10 million of transaction costs related to our non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business and our planned acquisition of Tyson Foods’ pet treats business. In addition, we recorded a $9 million gain related to a Brazil indirect tax item in fiscal 2021.

IMPACT OF INFLATION

We experienced input cost inflation of 4 percent in fiscal 2021 and 4 percent in fiscal 2020, primarily on commodity inputs. We expect input cost inflation of approximately 7 percent in fiscal 2022. We attempt to minimize the effects of inflation through HMM, strategic revenue management, planning, and operating practices. Our 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 $6.6 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 and acquisitions. We typically use a combination of cash, notes payable, and long-term debt, and occasionally issue shares of common stock, to finance significant acquisitions. Our sources of liquidity were not materially impacted from the COVID-19 pandemic.

As of May 30, 2021, we had $687 million of cash and cash equivalents held in foreign jurisdictions. In anticipation of repatriating funds from foreign jurisdictions, we record local country withholding taxes on our international earnings, as applicable. We may repatriate our cash and cash equivalents held by our foreign subsidiaries without such funds being subject to further U.S. income tax liability. Earnings prior to fiscal 2018 from our foreign subsidiaries remain permanently reinvested in those jurisdictions.

Cash Flows from Operations

Fiscal Year

Depreciation and amortization 601.3 594.7

After-tax earnings from joint ventures (117.7) (91.1)

Distributions of earnings from joint ventures 95.2 76.5

Stock-based compensation 89.9 94.9

Pension and other postretirement benefit plan contributions (33.4) (31.1)

Pension and other postretirement benefit plan costs (33.6) (32.3)

Divestiture loss 53.5 -

Restructuring, impairment, and other exit costs 150.9 43.6

Net cash provided by operating activities $ 2,983.2 $ 3,676.2

During fiscal 2021, cash provided by operations was $2,983 million compared to $3,676 million in the same period last year. The $693 million decrease was primarily driven by a $950 million change in current assets and liabilities, partially offset by a $148 million change in deferred income taxes and a $135 million increase in net earnings. The $950 million change in current assets and liabilities was primarily driven by a $458 million change in inventory balances and a $296 million change in other current liabilities, primarily driven by changes in income taxes payable, incentive accruals, and trade and advertising accruals.

We strive to grow core working capital at or below the rate of growth in our net sales. For fiscal 2021, core working capital increased 6 percent, compared to a net sales increase of 3 percent. As of May 30, 2021, our core working capital balance was a net liability of $194 million compared to a net liability of $206 million in fiscal 2020. The $12 million change was primarily due to lower inventory balances in fiscal 2020 driven by the surge in at-home demand at the outset of the pandemic, partially offset by an increase in accounts payable in fiscal 2021 due to increased costs incurred to service demand. In fiscal 2020, core working capital decreased $591 million, compared to a net sales increase of 5 percent.

Cash Flows from Investing Activities

Fiscal Year

Purchases of land, buildings, and equipment $ (530.8) $ (460.8)

Investments in affiliates, net 15.5 (48.0)

Proceeds from disposal of land, buildings, and equipment 2.7 1.7

Proceeds from divestiture 2.9 -

Net cash used by investing activities $ (512.8) $ (486.2)

In fiscal 2021, we used $513 million of cash through investing activities compared to $486 million in fiscal 2020. We invested $531 million in land, buildings, and equipment in fiscal 2021, an increase of $70 million from fiscal 2020.

We expect capital expenditures to be approximately 3.5 percent of reported net sales in fiscal 2022. These expenditures will fund initiatives that are expected to fuel growth, support innovative products, and continue HMM initiatives throughout the supply chain.

Cash Flows from Financing Activities

Fiscal Year

Change in notes payable $ 71.7 $ (1,158.6)

Debt exchange participation incentive cash payment (201.4) -

Proceeds from common stock issued on exercised options 74.3 263.4

Purchases of common stock for treasury (301.4) (3.4)

Distributions to redeemable and noncontrolling interest holders (48.9) (72.5)

Net cash used by financing activities $ (2,715.5) $ (1,941.5)

Financing activities used $2.7 billion of cash in fiscal 2021 compared to $1.9 billion in fiscal 2020. We had $961 million of net debt repayments in fiscal 2021 compared to $917 million of net debt repayments in fiscal 2020. In addition, we paid a participation incentive of $201 million related to a debt exchange in fiscal 2021. 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 2021, we received $74 million of net proceeds from common stock issued on exercised options compared to $263 million in fiscal 2020.

During fiscal 2021, we repurchased 5 million shares of our common stock for $301 million. Share repurchases in fiscal 2020 were insignificant.

Dividends paid in fiscal 2021 totaled $1,246 million, or $2.02 per share. Dividends paid in fiscal 2020 totaled $1,196 million, or $1.96 per share.

Selected Cash Flows from Joint Ventures

Selected cash flows from our joint ventures are set forth in the following table:

Fiscal Year

Investments in affiliates, net $ 15.5 $ (48.0)

The following table details the fee-paid committed and uncommitted credit lines we had available as of May 30, 2021:

In Billions Facility Amount Borrowed Amount

Credit facility expiring:

Total committed credit facilities 2.9 -

Uncommitted credit facilities 0.6 0.4

Total committed and uncommitted credit facilities $ 3.5 $ 0.4

To ensure availability of funds, we maintain bank credit lines and have commercial paper programs available to us in the United States and Europe. In response to uncertainty surrounding the availability and cost of commercial paper borrowings as a result of the COVID-19 pandemic, we issued $750 million of fixed-rate notes in April 2020 and reduced our borrowings under commercial paper programs. As the COVID-19 pandemic evolves, we will continue to evaluate its impact to our sources of liquidity. We also have uncommitted and asset-backed credit lines that support our foreign operations.

We have material contractual obligations that arise in the normal course of business and we believe that cash flows from operations will be adequate to meet our liquidity and capital needs for at least the next 12 months.

Certain of our long-term debt agreements, our credit facilities, and our noncontrolling interests contain restrictive covenants. As of May 30, 2021, we were in compliance with all of these covenants.

We have $2,464 million of long-term debt maturing in the next 12 months that is classified as current, including €200 million of 2.2 percent fixed-rate notes due June 2021, €500 million of 0.0 percent fixed-rate notes due August 2021, €500 million of 0.0 percent fixed-rate notes due November 2021, and $1 billion of 3.15 percent fixed-rate notes due December 2021. We believe that cash flows from operations, together with available short- and long-term debt financing, will be adequate to meet our liquidity and capital needs for at least the next 12 months.

As of May 30, 2021, our total debt, including the impact of derivative instruments designated as hedges, was 88 percent in fixed-rate and 12 percent in floating-rate instruments, compared to 87 percent in fixed-rate and 13 percent in floating-rate instruments on May 31, 2020.

Our net debt to operating cash flow ratio increased to 3.7 in fiscal 2021 from 3.2 in fiscal 2020, primarily driven by a decrease in cash provided by operations. Our net debt-to-adjusted EBITDA ratio declined to 2.9 in fiscal 2021 from 3.2 in fiscal 2020 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal International (Sodiaal) holds the remaining interests in each of these entities. We consolidate these entities into our consolidated financial statements. We record Sodiaal’s 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl as noncontrolling interests, and its 49 percent interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets. These euro- and Canadian dollar-denominated interests are reported in U.S. dollars on our Consolidated Balance Sheets. Sodiaal has the ability to put all or a portion of its redeemable interest to us at fair value once per year, up to three times before December 2024. As of May 30, 2021, the redemption value of the redeemable interest was $605 million which approximates its fair value.

In March 2021, we entered into a non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business to Sodiaal. As part of the proposed transaction, we would obtain Sodiaal’s 49 percent ownership interest in our Canadian yogurt business, making the Canadian yogurt business a wholly owned subsidiary. The proposed transaction would be anticipated to close in fiscal 2022, subject to labor consultations, regulatory filings, and other customary closing conditions.

The third-party holder of the General Mills Cereals, LLC (GMC) Class A Interests receives quarterly preferred distributions from available net income based on the application of a floating preferred return rate to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $252 million). On June 1, 2021, the floating preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 160 basis points. The preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction.

We have an option to purchase the Class A Interests for consideration equal to the then current capital account value, plus any unpaid preferred return and the prescribed make-whole amount. If we purchase these interests, any change in the third-party holder’s capital account from its original value will be charged directly to retained earnings and will increase or decrease the net earnings used to calculate EPS in that period.

CRITICAL ACCOUNTING ESTIMATES

For a complete description of our significant accounting policies, please see Note 2 to the Consolidated Financial Statements in Item 8 of this report. Our critical accounting estimates are those that have a meaningful impact on the reporting of our financial condition and results of operations. These estimates include our accounting for revenue recognition, valuation of long-lived assets, intangible assets, redeemable interest, stock-based compensation, income taxes, and defined benefit pension, other postretirement benefit, and postemployment benefit plans.

Considerations related to the COVID-19 pandemic

The continuing impact that the recent COVID-19 pandemic will have on our consolidated results of operations is uncertain. We saw increased orders from retail customers across all geographies in response to increased consumer demand for food at home. We also experienced a COVID-19-related decrease in consumer traffic in away-from-home food outlets. In fiscal 2022, we expect at-home food demand will decline year over year across most of our core markets though will remain above pre-pandemic levels. Conversely, we expect away-from home food demand to continue to recover, though not fully to pre-pandemic levels. We expect one of the largest factors impacting our performance will be relative balance of at-home versus away-from-home consumer food demand, primarily driven by the level of virus control in markets around the world, which remains uncertain. We have considered the potential impacts of the COVID-19 pandemic in our significant accounting estimates as of May 30, 2021, and will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations.

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 $508 million as of May 30, 2021, and $471 million as of May 31, 2020. 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 30, 2021, we had $21 billion of goodwill and indefinite-lived intangible assets. While we currently believe that the fair value of each intangible exceeds its carrying value and that those intangibles will contribute indefinitely to our cash flows, materially different assumptions regarding future performance of our businesses or a different weighted-average cost of capital could result in material impairment losses and amortization expense. We performed our fiscal 2021 assessment of our intangible assets as of 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.

Redeemable Interest

The significant assumptions used to estimate the redemption value of the redeemable interest include projected revenue growth and profitability from our long-range plan, capital spending, depreciation and taxes, foreign currency exchange rates, and a discount rate. As of May 30, 2021, the redemption value of the redeemable interest was $605 million.

Stock-based Compensation

The valuation of stock options is a significant accounting estimate that requires us to use judgments and assumptions that are likely to have a material impact on our financial statements. Annually, we make predictive assumptions regarding future stock price volatility, employee exercise behavior, dividend yield, and the forfeiture rate. For more information on these assumptions, please see Note 12 to the Consolidated Financial Statements in Item 8 of this report.

The estimated fair values of stock options granted and the assumptions used for the Black-Scholes option-pricing model were as follows:

Fiscal Year

Estimated fair values of stock options granted $ 8.03 $ 7.10 $ 5.35

Assumptions:

Risk-free interest rate 0.7 % 2.0 % 2.9 %

Expected term 8.5 years 8.5 years 8.5 years

Dividend yield 3.3 % 3.6 % 4.3 %

The risk-free interest rate for periods during the expected term of the options is based on the U.S. Treasury zero-coupon yield curve in effect at the time of grant. An increase in the expected term by 1 year, leaving all other assumptions constant, would increase the grant date fair value by less than 1 percent. If all other assumptions are held constant, a one percentage point increase in our fiscal 2021 volatility assumption would increase the grant date fair value of our fiscal 2021 option awards by 7 percent.

To the extent that actual outcomes differ from our assumptions, we are not required to true up grant-date fair value-based expense to final intrinsic values. Historical data has a significant bearing on our forward-looking assumptions. Significant variances between actual and predicted experience could lead to prospective revisions in our assumptions, which could then significantly impact the year-over-year comparability of stock-based compensation expense.

Any corporate income tax benefit realized upon exercise or vesting of an award in excess of that previously recognized in earnings (referred to as a windfall tax benefit) is presented in the Consolidated Statements of Cash Flows as an operating cash flow. The actual impact on future years’ cash flows will depend, in part, on the volume of employee stock option exercises during a particular year and the relationship between the exercise-date market value of the underlying stock and the original grant-date fair value previously determined for financial reporting purposes.

Realized windfall tax benefits and shortfall tax deficiencies related to the exercise or vesting of stock-based awards are recognized in the Consolidated Statement of Earnings. Because employee stock option exercise behavior is not within our control, it is possible that significantly different reported results could occur if different assumptions or conditions were to prevail.

Income Taxes

We apply a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. Future changes in judgment related to the expected ultimate resolution of uncertain tax positions will affect earnings in the period of such change. For more information on income taxes, please see Note 15 to the Consolidated Financial Statements in Item 8 of this report.

Defined Benefit Pension, Other Postretirement Benefit, and Postemployment Benefit Plans

We have defined benefit pension plans covering many employees in the United States, Canada, Switzerland, France, 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 11.4 percent, 10.8 percent, 9.3 percent, 8.0 percent, and 8.3 percent for the 1, 5, 10, 15, and 20 year periods ended May 30, 2021.

On a weighted-average basis, the expected rate of return for all defined benefit plans was 5.72 percent for fiscal 2021, 6.95 percent for fiscal 2020, and 7.25 percent for fiscal 2019. For fiscal 2022, we increased our weighted-average expected rate of return on plan assets for our principal defined benefit pension and other postretirement plans in the United States to 5.96 percent due to expected long-term asset returns.

Lowering the expected long-term rate of return on assets by 100 basis points would increase our net pension and postretirement expense by $72 million for fiscal 2022. A market-related valuation basis is used to reduce year-to-year expense volatility. The market-related valuation recognizes certain investment gains or losses over a five-year period from the year in which they occur. Investment gains or losses for this purpose are the difference between the expected return calculated using the market-related value of assets and the actual return based on the market-related value of assets. Our outside actuaries perform these calculations as part of our determination of annual expense or income.

Discount Rates

We estimate the service and interest cost components of the net periodic benefit expense for our United States and most of our international defined benefit pension, other postretirement benefit, and postemployment benefit plans utilizing a full yield curve approach by applying the specific spot rates along the yield curve used to determine the benefit obligation to the relevant projected cash flows. Our discount rate assumptions are determined annually as of May 31 for our defined benefit pension, other postretirement benefit, and postemployment benefit plan obligations. We work with our outside actuaries to determine the timing and amount of expected future cash outflows to plan participants and, using the Aa Above Median corporate bond yield, to develop a forward interest rate curve, including a margin to that index based on our credit risk. This forward interest rate curve is applied to our expected future cash outflows to determine our discount rate assumptions.

Our weighted-average discount rates were as follows:

Effective rate for fiscal 2022 interest costs 2.42 % 2.08 % 1.48 %

Effective rate for fiscal 2021 interest costs 2.54 % 2.32 % 1.41 %

Effective rate for fiscal 2020 interest costs 3.47 % 3.28 % 2.84 %

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 2022 by approximately $54 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 6.3 percent for retirees age 65 and over and 6.0 percent for retirees under age 65 at the end of fiscal 2021. Rates are graded down annually until the ultimate trend rate of 4.5 percent is reached in 2029 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 2021, we recorded net defined benefit pension, other postretirement benefit, and postemployment benefit plan expense of $4 million compared to $2 million of income in fiscal 2020 and $24 million of expense in fiscal 2019. As of May 30, 2021, we had cumulative unrecognized actuarial net losses of $2 billion on our defined benefit pension plans and cumulative unrecognized actuarial net gains of $179 million on our postretirement and postemployment benefit plans, mainly as the result of liability increases from lower interest rates, partially offset by recent increases in the values of plan assets. These unrecognized actuarial net losses will result in increases in our future pension and postretirement benefit expenses because they currently exceed the corridors defined by GAAP.

Actual future net defined benefit pension, other postretirement benefit, and postemployment benefit plan income or expense will depend on investment performance, changes in future discount rates, changes in health care cost trend rates, and other factors related to the populations participating in these plans.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In March 2020, the Financial Accounting Standards Board (FASB) issued optional accounting guidance for a limited period of time to ease the potential burden in accounting for reference rate reform. The new standard provides expedients and exceptions to existing accounting requirements for contract modifications and hedge accounting related to transitioning from discontinued reference rates, such as LIBOR, to alternative reference rates, if certain criteria are met. The new accounting requirements can be applied as of the beginning of the interim period including March 12, 2020, or any date thereafter, through December 31, 2022. We are in the process of reviewing our contracts and arrangements that will be affected by a discontinued reference rate and are analyzing the impact of this guidance on our results of operations and financial position.

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.

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.

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 53rd 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 Growth on a Constant-currency Basis

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

Restructuring charges (a) 172.7 50.2

Project-related costs (a) - 1.5

Mark-to-market effects (b) (138.8) 24.7

Investment activity, net (c) (76.4) 8.4

Divestiture loss (d) 53.5 -

Transaction costs (e) 9.5 -

Non-income tax gain (f) (8.8) -

Product recall adjustment, net (g) (3.5) 19.3

Foreign currency exchange impact 1 pt

Adjusted operating profit growth, on a constant-currency basis 2 %

Note: Table may not foot due to rounding.

(a)Restructuring charges related to actions designed to better align our organizational structure and resources with strategic initiatives, Asia & Latin America route-to-market and supply chain optimization actions, and previously announced restructuring actions in fiscal 2021. Restructuring and project-related charges for previously announced restructuring actions in fiscal 2020. Please see Note 4 to the Consolidated Financial Statements in Item 8 of this report.

(b)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(c)Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020.

(d)Divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(e)Transaction costs related to our non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business and transaction costs related to our planned acquisition of Tyson Foods’ pet treats business.

(f)Gain related to Brazil indirect tax item.

(g)Net product recall adjustment related to our international Green Giant business in fiscal 2021. Product recall costs related to our international Green Giant business in fiscal 2020.

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

Diluted earnings per share, as reported $ 3.78 $ 3.56 6 %

Restructuring charges (a) 0.22 0.06

Mark-to-market effects (b) (0.17) 0.03

Investment activity, net (c) (0.10) -

Divestiture loss (d) 0.04 -

Transaction costs (f) 0.01 -

Non-income tax gain (g) (0.01) -

Product recall (h) - 0.03

CPW restructuring charges (i) - 0.01

Adjusted diluted earnings per share $ 3.79 $ 3.61 5 %

Foreign currency exchange impact 1 pt

Adjusted diluted earnings per share growth, on a constant-currency basis 4 %

Note: Table may not foot due to rounding.

(a)Restructuring charges related to actions designed to better align our organizational structure and resources with strategic initiatives, Asia & Latin America route-to-market and supply chain optimization actions, and previously announced restructuring actions in fiscal 2021. Restructuring charges for previously announced restructuring actions in fiscal 2020. Please see Note 4 to the Consolidated Financial Statements in Item 8 of this report.

(b)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(c)Valuation adjustments and the gain on sale of certain corporate investments.

(d)Our 51 percent share of the divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(e)Tax item related to amendments to reorganize certain U.S. retiree health and welfare benefit plans in fiscal 2021. Discrete tax benefit related to the reorganization of certain wholly owned subsidiaries in fiscal 2020. Please see Note 15 to the Consolidated Financial Statements in Item 8 of this report.

(f)Transaction costs related to our non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business and our planned acquisition of Tyson Foods’ pet treats business.

(g)Gain related to Brazil indirect tax item.

(h)Product recall costs related to our international Green Giant business in fiscal 2020.

(i)CPW restructuring charges related to previously announced restructuring actions.

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.

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 2021

Restructuring charges, net of tax (a) 137.2

Mark-to-market effects, net of tax (b) (106.9)

Investment activity, net, net of tax (c) (60.8)

Divestiture loss, net of tax (d) 53.1

Tax item (e) 11.2

Transaction costs, net of tax (f) 7.2

Non-income tax gain, net of tax (g) (5.8)

Product recall adjustment, net, net of tax (h) (3.1)

CPW restructuring charges, net of tax (i) 1.9

Net cash provided by operating activities 2,983.2

Purchases of land, buildings, and equipment (530.8)

Net cash provided by operating activities conversion rate 127%

Free cash flow conversion rate 103%

Note: Table may not foot due rounding.

(a)Restructuring charges related to actions designed to better align our organizational structure and resources with strategic initiatives, Asia & Latin America route-to-market and supply chain optimization actions, and previously announced restructuring actions. Please see Note 4 to the Consolidated Financial Statements in Item 8 of this report.

(b)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(c)Valuation adjustments and the gain on sale of certain corporate investments.

(d)Divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(e)Tax item related to amendments to reorganize certain U.S. retiree health and welfare benefit plans.

(g)Gain related to Brazil indirect tax item.

(h)Net product recall adjustment related to our international Green Giant business.

(i)CPW restructuring charges related to previously announced restructuring actions.

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.

Net Debt-to-Adjusted Earnings before Net Interest, Income Taxes, Depreciation and Amortization (EBITDA) Ratio

We believe that this measure provides useful information to investors because it is an indicator of our ability to incur additional debt and to service our existing debt.

The reconciliation of adjusted EBITDA to net earnings, including earnings attributable to redeemable and noncontrolling interests, its GAAP equivalent, as well as the calculation of the net debt-to-adjusted EBITDA ratio are as follows:

Fiscal Year

Depreciation and amortization 601.3 594.7

After-tax earnings from joint ventures (117.7) (91.1)

Restructuring charges (b) 172.7 50.2

Project-related costs (b) - 1.5

Mark-to-market effects (c) (138.8) 24.7

Investment activity, net (d) (76.4) 8.4

Divestiture loss (e) 53.5 -

Transaction costs (f) 9.5 -

Non-income tax gain (g) (8.8) -

Product recall adjustment, net (h) (3.5) 19.3

Net debt-to-adjusted EBITDA ratio 2.9 3.2

Note: Table may not foot due to rounding.

(a)Notes payable and long-term debt, including current portion.

(b)Restructuring charges related to actions designed to better align our organizational structure and resources with strategic initiatives, Asia & Latin America route-to-market and supply chain optimization actions, and previously announced restructuring actions in fiscal 2021. Restructuring and project-related charges for previously announced restructuring actions in fiscal 2020. Please see Note 4 to the Consolidated Financial Statements in Item 8 of this report.

(c)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(d)Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020.

(e)Divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(g)Gain related to Brazil indirect tax item.

(h)Net product recall adjustment related to our international Green Giant business in fiscal 2021. Product recall costs related to our international Green Giant business in fiscal 2020.

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

Project-related costs (a) - - % 1.5 - %

Investment activity, net (c) (76.4) (0.4) % 8.4 - %

Divestiture loss (d) 53.5 0.3 % - - %

Transaction costs (e) 9.5 0.1 % - - %

Non-income tax gain (f) (8.8) - % - - %

Product recall adjustment, net (g) (3.5) - % 19.3 0.1 %

Note: Table may not foot due to rounding.

(b)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(c)Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020.

(d)Divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(e)Transaction costs related to our non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business and our planned acquisition of Tyson Foods’ pet treats business.

(f)Gain related to Brazil indirect tax item.

(g)Net product recall adjustment related to our international Green Giant business in fiscal 2021. Product recall costs related to our international Green Giant business in fiscal 2020.

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

Project-related costs (b) - - 1.5 0.3

Divestiture loss (e) 53.5 0.4 - -

Transaction costs (g) 9.5 2.3 - -

Non-income tax gain (h) (8.8) (3.0) - -

Product recall adjustment, net (i) (3.5) (0.4) 19.3 2.2

Effective tax rate:

Sum of adjustments to income taxes ($24.0) $78.0

Average number of common shares - diluted EPS 619.1 613.3

Impact of income tax adjustments on adjusted diluted EPS $0.04 $(0.13)

Note: Table may not foot due to rounding.

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

(c)Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

(d)Valuation adjustments and the gain on sale of certain corporate investments in fiscal 2021. Valuation adjustments and the loss on sale of certain corporate investments in fiscal 2020.

(e)Divestiture loss from the sale of our Laticínios Carolina business in Brazil. Please see Note 3 to the Consolidated Financial Statements in Item 8 of this report.

(f)Tax item related to amendments to reorganize certain U.S. retiree health and welfare benefit plans in fiscal 2021. Discrete tax benefit related to the reorganization of certain wholly owned subsidiaries in fiscal 2020. Please see Note 15 to the Consolidated Financial Statements in Item 8 of this report.

(g)Transaction costs related to our non-binding memorandum of understanding to sell our 51 percent controlling interest in our European Yoplait business and our planned acquisition of Tyson Foods’ pet treats business.

(h)Gain related to Brazil indirect tax item.

(i)Net product recall adjustment related to our international Green Giant business in fiscal 2021. Product recall costs related to our international Green Giant business in fiscal 2020.

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:

Percentage change in after-tax earnings from joint ventures as reported 29 %

Impact of foreign currency exchange 3 pts

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:

Percentage change in net sales as reported 6 %

Impact of foreign currency exchange 4 pts

Percentage change in net sales on a constant-currency basis 3 %

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:

North America Retail Flat Flat Flat

Europe & Australia 33 % 9 pts 24 %

Pet 6 % Flat 6 %

Note: Table may not foot due to rounding.

Forward-Looking Financial Measures

Our fiscal 2022 outlook for organic net sales growth, constant-currency adjusted operating profit, adjusted diluted EPS, and free cash flow 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 charges and project-related costs, acquisition transaction and integration costs, acquisitions, divestitures, and mark-to-market effects. 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 actions throughout fiscal 2022. The unavailable information could have a significant impact on our fiscal 2022 GAAP financial results.

For fiscal 2022, we currently expect: foreign currency exchange rates (based on a blend of forward and forecasted rates and hedge positions) and divestitures completed prior to fiscal 2022 to have an immaterial impact on net sales growth; foreign currency exchange rates to have an immaterial impact on adjusted operating profit and adjusted diluted EPS growth; and restructuring charges and project-related costs related to actions previously announced to total approximately $10 million to $60 million. Our fiscal 2022 guidance does not incorporate the potential impacts of any acquisitions and divestitures that have not yet been completed.

CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations and assumptions. We also may make written or oral forward-looking statements, including statements contained in our filings with the SEC and in our reports to shareholders.

The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “plan,” “project,” or similar expressions identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results and those currently anticipated or projected. We wish to caution you not to place undue reliance on any such forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that could affect our financial performance and could cause our actual results in future periods to differ materially from any current opinions or statements.

Our future results could be affected by a variety of factors, such as: the impact of the COVID-19 pandemic on our business, suppliers, consumers, customers, and employees; disruptions or inefficiencies in the supply chain, including any impact of the COVID-19 pandemic; competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inflation rates, interest rates, tax rates, or the availability of capital; product development and innovation; consumer acceptance of new products and product improvements; consumer reaction to pricing actions and changes in promotion levels; acquisitions or dispositions of businesses or assets, changes in capital structure; changes in the legal and regulatory environment, including tax legislation, labeling and advertising regulations, and litigation; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets, or changes in the useful lives of other intangible assets; changes in accounting standards and the impact of significant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; effectiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in purchasing and inventory levels of significant customers; fluctuations in the cost and availability of supply chain resources, including raw materials, packaging, energy, and transportation; effectiveness of restructuring and cost saving initiatives; volatility in the market value of derivatives used to manage price risk for certain commodities; benefit plan expenses due to changes in plan asset values and discount rates used to determine plan liabilities; failure or breach of our information technology systems; foreign economic conditions, including currency rate fluctuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war.

You should also consider the risk factors that we identify in Item 1A of this report, which could also affect our future results.

We undertake no obligation to publicly revise any forward-looking statements to reflect events or circumstances after the date of those statements or to reflect the occurrence of anticipated or unanticipated events.

ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk stemming from changes in interest and foreign exchange rates and commodity and equity prices. Changes in these factors could cause fluctuations in our earnings and cash flows. In the normal course of business, we actively manage our exposure to these market risks by entering into various hedging transactions, authorized under established policies that place controls on these activities. The counterparties in these transactions are generally highly rated institutions. We establish credit limits for each counterparty. Our hedging transactions include but are not limited to a variety of derivative financial instruments. For information on interest rate, foreign exchange, commodity price, and equity instrument risk, please see Note 8 to the Consolidated Financial Statements in Item 8 of this report.

VALUE AT RISK

The estimates in the table below are intended to measure the maximum potential fair value we could lose in one day from adverse changes in market interest rates, foreign exchange rates, commodity prices, and equity prices under normal market conditions. A Monte Carlo value-at-risk (VAR) methodology was used to quantify the market risk for our exposures. The models assumed normal market conditions and used a 95 percent confidence level.

The VAR calculation used historical interest and foreign exchange rates, and commodity and equity prices from the past year to estimate the potential volatility and correlation of these rates in the future. The market data were drawn from the RiskMetricsTM data set. The calculations are not intended to represent actual losses in fair value that we expect to incur. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, we would expect that any loss or gain in the fair value of

our derivatives would be generally offset by an increase or decrease in the fair value of the underlying exposure. The positions included in the calculations were: debt; investments; interest rate swaps; foreign exchange forwards; commodity swaps, futures, and options; and equity instruments. The calculations do not include the underlying foreign exchange and commodities or equity-related positions that are offset by these market-risk-sensitive instruments.

The table below presents the estimated maximum potential VAR arising from a one-day loss in fair value for our interest rate, foreign currency, commodity, and equity market-risk-sensitive instruments outstanding as of May 30, 2021.

Interest rate instruments $ 37.4 $ 64.1 $ 78.8

Commodity instruments 4.2 4.5 2.6

ITEM 8 - Financial Statements and Supplementary Data

REPORT OF MANAGEMENT RESPONSIBILITIES

The management of General Mills, Inc. is responsible for the fairness and accuracy of the consolidated financial statements. The statements have been prepared in accordance with accounting principles that are generally accepted in the United States, using management’s best estimates and judgments where appropriate. The financial information throughout this Annual Report on Form 10-K is consistent with our consolidated financial statements.

Management has established a system of internal controls that provides reasonable assurance that assets are adequately safeguarded and transactions are recorded accurately in all material respects, in accordance with management’s authorization. We maintain a strong audit program that independently evaluates the adequacy and effectiveness of internal controls. Our internal controls provide for appropriate separation of duties and responsibilities, and there are documented policies regarding use of our assets and proper financial reporting. These formally stated and regularly communicated policies demand highly ethical conduct from all employees.

The Audit Committee of the Board of Directors meets regularly with management, internal auditors, and our independent registered public accounting firm to review internal control, auditing, and financial reporting matters. The independent registered public accounting firm, internal auditors, and employees have full and free access to the Audit Committee at any time.

The Audit Committee reviewed and approved the Company’s annual financial statements. The Audit Committee recommended, and the Board of Directors approved, that the consolidated financial statements be included in the Annual Report. The Audit Committee also appointed KPMG LLP to serve as the Company’s independent registered public accounting firm for fiscal 2022.

/s/ J. L. Harmening/s/ K. A. Bruce

J. L. HarmeningK. A. Bruce

Chief Executive OfficerChief Financial Officer

June 30, 2021

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

General Mills, Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of General Mills, Inc. and subsidiaries (the Company) as of May 30, 2021 and May 31, 2020, the related consolidated statements of earnings, comprehensive income, total equity and redeemable interest, and cash flows for each of the years in the three-year period ended May 30, 2021, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of May 30, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of May 30, 2021 and May 31, 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended May 30, 2021, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of May 30, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of May 27, 2019 due to the adoption of Accounting Standards Update 2016-02, Leases (Topic 842), and related amendments.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The criticalaudit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of goodwill and brand intangible assets

As discussed in Note 6 to the consolidated financial statements, the goodwill and brands and other indefinite-lived intangibles balances as of May 30, 2021 were $14,062.4 million and $6,628.1 million, respectively. The impairment tests for these assets, which are performed annually and whenever events or changes in circumstances indicate that impairment may have occurred, require the Company to estimate the fair value of the reporting units to which goodwill is assigned as well as the brands and other indefinite-lived intangible assets. The fair value estimates are derived from discounted cash flow analyses that require the Company to make judgments about highly subjective matters, including future operating results, including revenue growth rates and operating margins, and an estimate of the discount rates and royalty rates.

We identified the assessment of the valuation of certain goodwill and brand intangible assets as a critical audit matter. There was a significant degree of judgment required in evaluating audit evidence, which consists primarily of forward-looking assumptions about future operating results, specifically the revenue growth rates and operating margins, royalty rates and subjective inputs used to estimate the discount rates.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of internal controls related to the valuation of goodwill and brand intangible assets. This included controls related to the assumptions about future operating results and the discount and royalty rates used to measure the reporting units and brands intangible fair values. We performed sensitivity analyses over the revenue growth rates, operating margins, brand royalty rates and discount rates to assess the impact of other points within a range of potential assumptions. We evaluated the revenue growth rates and operating margin assumptions by comparing them to recent financial performance and external market and industry data. We evaluated whether these assumptions were consistent with evidence obtained in other areas of the audit. We involved professionals with specialized skills and knowledge, who assisted in the evaluation of the Company’s discount rates and royalty rates by comparing them against rate ranges that were independently developed using publicly available market data for comparable entities.

/s/ KPMG LLP

We have served as the Company’s auditor since 1928.

Minneapolis, Minnesota

June 30, 2021

Consolidated Statements of Earnings

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except per Share Data)

Fiscal Year

Restructuring, impairment, and other exit costs 170.4 24.4 275.1

After-tax earnings from joint ventures 117.7 91.1 72.0

Earnings per share — basic $ 3.81 $ 3.59 $ 2.92

Earnings per share — diluted $ 3.78 $ 3.56 $ 2.90

See accompanying notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions)

Fiscal Year

Other comprehensive income (loss), net of tax:

Other fair value changes:

Reclassification to earnings:

Securities - - (2.0)

Amortization of losses and prior service costs 78.9 77.9 84.6

Other comprehensive income (loss), net of tax 600.2 (308.5) (240.6)

Comprehensive income attributable to General Mills $ 2,825.0 $ 1,892.2 $ 1,556.3

See accompanying notes to consolidated financial statements.

Consolidated Balance Sheets

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except Par Value)

ASSETS

Current assets:

Prepaid expenses and other current assets 790.3 402.1

LIABILITIES AND EQUITY

Current liabilities:

Stockholders' equity:

Accumulated other comprehensive loss (2,429.2) (2,914.4)

See accompanying notes to consolidated financial statements.

Consolidated Statements of Total Equity and Redeemable Interest

GENERAL MILLS, INC. AND SUBSIDIARIES

(In Millions, Except per Share Data)

Fiscal Year

Shares Amount Shares Amount Shares Amount

Additional paid-in capital:

Stock compensation plans 6.2 (12.1) (96.4)

Unearned compensation related to stock unit awards (78.0) (85.7) (71.3)

Decrease (increase) in redemption value of redeemable interest 0.2 (33.1) 269.1

Retained earnings:

Adoption of revenue recognition accounting requirements - - (33.9)

Adoption of current expected credit loss accounting requirements (5.7) - -

GIS US Equity

GIS · 10-K · period ended 2021-05-30

ITEM 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk

ITEM 8 - Financial Statements and Supplementary Data

GIS US Equity☆

GIS · 10-K · period ended 2021-05-30

ITEM 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk

ITEM 8 - Financial Statements and Supplementary Data

GIS US Equity