General Mills · 10-Q · Item 2 MD&A

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

INTRODUCTION

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in

conjunction with the MD&A included in our Annual Report on Form 10-K for the fiscal year ended May 31, 2026, for important

background regarding, among other things, our key business drivers. Significant trademarks and service marks used in our business

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

Our key priorities in fiscal 2027 are to strengthen our organic net sales growth, accelerate our enterprise transformation efforts, and

drive disciplined capital allocation and returns. T1Amid a continued challenging macroeconomic backdrop for consumers, we expect

category growth to be consistent with recent trends and below our long-term growth projections. With our price investments

completed in fiscal 2026, T2our plans in fiscal 2027 are focused on delivering product innovation and renovation news centered on the

benefits that matter most to today’s consumers, including better-for-you benefits like protein and fiber, bold flavors, fun and

indulgence, and pet humanization, all of which should help support stronger topline growth. T3We expect to generate at least $750

million in total savings from our ongoing Holistic Margin Management (HMM) productivity program, our global transformation

initiative, and other cost savings actions. T4These savings are part of our $3 billion cumulative cost savings target through fiscal 2030

and will help offset our forecast for 4 to 5 percent input cost inflation and increased investments in product innovation and renovation

in fiscal 2027. In addition to these factors, we expect decreases of approximately 9 points on operating profit and 11 points on EPS in

fiscal 2027 from lapping the 53rd week in fiscal 2026, normalizing corporate incentive expense, and the impact of fiscal 2026

divestitures.

CONSOLIDATED RESULTS OF OPERATIONS

First Quarter Results

In the first quarter of fiscal 2027, net sales decreased 3 percent, including the impact of the divestiture of our United States yogurt

business (Divestiture) in the first quarter of fiscal 2026. Organic net sales essentially matched the same period last year. T5Operating

profit decreased 63 percent to $634 million, primarily driven by a gain related to the Divestiture in the first quarter of fiscal 2026,

higher input costs, and a decrease in contributions from volume growth, partially offset by favorable net price realization and mix and

a favorable change in the mark-to-market valuation of certain commodity positions and grain inventories. Operating profit margin of

14.4 percent decreased 2,380 basis points. Adjusted operating profit of $634 million decreased 11 percent on a constant-currency

basis, primarily driven by higher input costs and a decrease in contributions from volume growth, partially offset by favorable net

price realization and mix. Adjusted operating profit margin decreased 130 basis points to 14.4 percent. Diluted earnings per share of

$0.74 decreased 67 percent in the first quarter of fiscal 2027. Adjusted diluted earnings per share of $0.75 decreased 13 percent on a

constant-currency basis compared to the first quarter of fiscal 2026. 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 the first quarter of fiscal 2027 follows:

In millions,

except per share

Quarter Ended

Percent

of Net

Sales

Constant-

Currency

Growth (a)

Net sales

(3)

%

Operating profit

%

Net earnings attributable to General Mills

%

Diluted earnings per share

%

Organic net sales growth rate (a)

Flat

Adjusted operating profit (a)

%

Adjusted diluted earnings per share (a)

%

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

Consolidated net sales were as follows:

Quarter Ended

Net sales (in millions)

(3)

%

Contributions from volume growth (a)

(4)

pts

Net price realization and mix

1

pt

Foreign currency exchange

Flat

Note: Table may not foot due to rounding.

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

Net sales in the first quarter of fiscal 2027 decreased 3 percent compared to the same period in fiscal 2026, driven by a decrease in

contributions from volume growth, partially offset by favorable net price realization and mix, both of which include the impact of the

Divestiture.

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

Contributions from organic volume growth (a)

(1)

pt

Organic net price realization and mix

Flat

Organic net sales growth

Flat

Foreign currency exchange

Flat

Divestiture

(3)

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 the first quarter of fiscal 2027 essentially matched the same period in fiscal 2026.

Cost of sales decreased $82 million to $2,902 million in the first quarter of fiscal 2027 compared to the same period in fiscal 2026.

The decrease was primarily driven by a $118 million decrease attributable to lower volume, partially offset by a $73 million increase

attributable to product rate and mix, both of which include the impact of the Divestiture. We recorded a $30 million net decrease in

cost of sales related to the mark-to-market valuation of certain commodity positions and grain inventories in the first quarter of fiscal

2027, compared to an $8 million net increase in the first quarter of fiscal 2026. We also recorded $1 million of integration costs

recorded in the first quarter of fiscal 2027 related to the Whitebridge Pet Brands acquisition in fiscal 2025.

Selling, general, and administrative (SG&A) expenses decreased $13 million to $832 million in the first quarter of fiscal 2027

compared to the same period in fiscal 2026, primarily driven by lower transactions costs. SG&A expenses as a percent of net sales in

the first quarter of fiscal 2027 increased 30 basis points compared to the first quarter of fiscal 2026.

Divestitures gain totaled $1,054 million in the first quarter of fiscal 2026, primarily related to the sale of our United States yogurt

business (please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report).

Restructuring, transformation, impairment, and other exit costs totaled $21 million in the first quarter of fiscal 2027, compared to

$16 million in the same period last year. In the first quarter of fiscal 2027, we recorded an additional $24 million non-cash pre-tax

valuation loss related to the planned divestiture of our Brazil business (please refer to Note 3 to the Consolidated Financial Statements

in Part I, Item 1 of this report).

Benefit plan non-service income totaled $11 million in the first quarter of fiscal 2027, compared to $15 million in the same period

last year, primarily driven by lower expected return on plan assets and higher interest costs.

Interest, net for the first quarter of fiscal 2027 totaled $142 million, up $9 million from the first quarter of fiscal 2026, primarily

driven by higher interest rates.

The effective tax rate for the first quarter of fiscal 2027 was 24.5 percent compared to 25.6 percent for the first quarter of fiscal 2026.

The 1.1 percentage point decrease was primarily due to certain unfavorable tax components related to the Divestiture in fiscal 2026

and favorable earnings mix by jurisdiction in fiscal 2027, partially offset by certain nonrecurring discrete tax costs in fiscal 2027. Our

effective tax rate excluding certain items affecting comparability was 23.4 percent in the first quarter of fiscal 2027, compared to 24.1

percent in the same period last year (see the “Non-GAAP Measures” section below for a description of our use of measures not

defined by GAAP). The 0.7 percentage point decrease was primarily due to favorable earnings mix by jurisdiction in fiscal 2027,

partially offset by certain nonrecurring discrete tax costs in fiscal 2027.

After-tax earnings from joint ventures for the first quarter of fiscal 2027 increased to $19 million compared to $7 million in the

same period in fiscal 2026, primarily due to our share of asset impairment charges and transaction costs related to certain assets held

for sale at Cereal Partners Worldwide (CPW) in fiscal 2026. On a constant-currency basis, after-tax earnings from joint ventures

increased 178 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:

CPW

HDJ (a)

Total

Contributions from volume growth (b)

pts

(7)

pts

Net price realization and mix

5

pts

5

pts

Net sales growth in constant currency

(4)

pts

(3)

pts

(4)

pts

Foreign currency exchange

Flat

(9)

pts

(2)

pts

Net sales growth

(5)

pts

pts

(6)

pts

Note: Table may not foot due to rounding.

(a)Häagen-Dazs Japan, Inc. (HDJ).

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

Average diluted shares outstanding decreased by 5 million in the first quarter of fiscal 2027 from the same period a year ago

primarily due to share repurchases in fiscal 2026.

SEGMENT OPERATING RESULTS

Our businesses are organized into four operating segments: North America Retail, International, North America Pet, and North

America Foodservice. Please refer to Note 15 of the Consolidated Financial Statements in Part I, Item 1 of this report for a description

of our operating segments.

North America Retail Segment Results

North America Retail net sales were as follows:

Quarter Ended

Net sales (in millions)

(7)

%

Contributions from volume growth (a)

(9)

pts

Net price realization and mix

2

pts

Foreign currency exchange

Flat

Note: Table may not foot due to rounding.

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

North America Retail net sales decreased 7 percent in the first quarter of fiscal 2027 compared to the same period in fiscal 2026,

T6driven by a decrease in contributions from volume growth, partially offset by favorable net price realization and mix, both of which

include the impact of the Divestiture.

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

Quarter Ended

Contributions from organic volume growth (a)

(2)

pts

Organic net price realization and mix

(1)

pt

Organic net sales growth

(3)

pts

Foreign currency exchange

Flat

Divestiture (b)

(4)

pts

Net sales growth

(7)

pts

Note: Table may not foot due to rounding.

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

(b)Divestiture of the United States yogurt business in the first quarter of fiscal 2026. Please refer to Note 2 to the Consolidated Financial

Statements in Part I, Item 1 of this report.

North America Retail organic net sales decreased 3 percent in the first quarter of fiscal 2027 compared to the same period in fiscal

2026, driven by a decrease in contributions from organic volume growth and unfavorable organic net price realization and mix.

North America Retail net sales percentage change by operating unit are shown in the following table:

Quarter Ended

Big G Cereal & Canada (a)

%

U.S. Snacks

(6)

%

U.S. Meals & Baking Solutions

Flat

Total

(7)

%

(a)The Big G Cereal & Canada operating unit includes the impact of the Divestiture. Please refer to Note 2 to the Consolidated Financial

Statements in Part I, Item 1 of this report.

Segment operating profit decreased 15 percent to $479 million in the first quarter of fiscal 2027, compared to $564 million in the same

period in fiscal 2026, including the impact of the Divestiture, primarily driven by a decrease in contributions from volume growth and

higher input costs, partially offset by favorable net price realization and mix and lower SG&A expenses. Segment operating profit

decreased 15 percent on a constant-currency basis in the first quarter of fiscal 2027, compared to the same period in fiscal 2026 (see

the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

International Segment Results

International net sales were as follows:

Quarter Ended

Net sales (in millions)

4

%

Contributions from volume growth (a)

6

pts

Net price realization and mix

(3)

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.

International net sales increased 4 percent in the first quarter of fiscal 2027 compared to the same period in fiscal 2026, driven by an

increase in contributions from volume growth and favorable foreign currency exchange impacts, partially offset by unfavorable net

price realization and mix.

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

Quarter Ended

Contributions from organic volume growth (a)

6

pts

Organic net price realization and mix

(3)

pts

Organic net sales growth

4

pts

Foreign currency exchange

1

pt

Net sales growth

4

pts

Note: Table may not foot due to rounding.

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

International organic net sales increased 4 percent in the first quarter of fiscal 2027 compared to the same period in fiscal 2026, driven

by an increase in contributions from organic volume growth, partially offset by unfavorable organic net price realization and mix.

Segment operating profit increased 14 percent to $75 million in the first quarter of fiscal 2027, compared to $66 million in the same

period in fiscal 2026, primarily driven by an increase in contributions from volume growth and lower input costs, partially offset by

unfavorable price realization and mix and higher SG&A expenses, including increased media and advertising expenses. Segment

operating profit increased 15 percent on a constant-currency basis in the first quarter of fiscal 2027, compared to the same period in

fiscal 2026 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

North America Pet Segment Results

North America Pet net sales were as follows:

Quarter Ended

Net sales (in millions)

Flat

Contributions from volume growth (a)

(6)

pts

Net price realization and mix

7

pts

Foreign currency exchange

Flat

Note: Table may not foot due to rounding.

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

North America Pet net sales in the first quarter of fiscal 2027 essentially matched the same period in fiscal 2026.

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

Quarter Ended

Contributions from organic volume growth (a)

(6)

pts

Organic net price realization and mix

7

pts

Organic net sales growth

Flat

Foreign currency exchange

Flat

Net sales growth

Flat

Note: Table may not foot due to rounding.

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

North America Pet organic net sales in the first quarter of fiscal 2027 essentially matched the same period in fiscal 2026.

Segment operating profit decreased 12 percent to $100 million in the first quarter of fiscal 2027, compared to $113 million in the same

period in fiscal 2026, primarily driven by higher input costs, a decrease in contributions from volume growth, and higher SG&A

expenses, partially offset by favorable price realization and mix. Segment operating profit decreased 12 percent on a constant-currency

basis in the first quarter of fiscal 2027, compared to the same period in fiscal 2026 (see the “Non-GAAP Measures” section below for

our use of this measure not defined by GAAP).

North America Foodservice Segment Results

North America Foodservice net sales were as follows:

Quarter Ended

Net sales (in millions)

1

%

Contributions from volume growth (a)

(3)

pts

Net price realization and mix

4

pts

Foreign currency exchange

Flat

Note: Table may not foot due to rounding.

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

North America Foodservice net sales increased 1 percent in the first quarter of fiscal 2027 compared to the same period in fiscal 2026,

driven by favorable net price realization and mix, partially offset by a decrease in contributions from volume growth, both of which

include the impact of the Divestiture.

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

Quarter Ended

Contributions from organic volume growth (a)

(1)

pt

Organic net price realization and mix

5

pts

Organic net sales growth

4

pts

Foreign currency exchange

Flat

Divestiture (b)

(2)

pts

Net sales growth

1

pt

Note: Table may not foot due to rounding.

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

(b)Divestiture of the United States yogurt business in the first quarter of fiscal 2026. Please refer to Note 2 to the Consolidated Financial

Statements in Part I, Item 1 of this report.

North America Foodservice organic net sales increased 4 percent in the first quarter of fiscal 2027 compared to the same period in

fiscal 2026, driven by favorable organic net price realization and mix, partially offset by a decrease in contributions from organic

volume growth.

Segment operating profit increased 12 percent to $79 million in the first quarter of fiscal 2027 compared to $71 million in the same

period in fiscal 2026, primarily driven by favorable net price realization and mix, partially offset by higher input costs. Segment

operating profit increased 12 percent on a constant-currency basis in the first quarter of fiscal 2027, compared to the same period in

fiscal 2026 (see the “Non-GAAP Measures” section below for our use of this measure not defined by GAAP).

UNALLOCATED CORPORATE ITEMS

Unallocated corporate expenses totaled $78 million in the first quarter of fiscal 2027, compared to $126 million in the same period in

fiscal 2026. In the first quarter of fiscal 2027, we recorded a $30 million net decrease in expense related to the mark-to-market

valuation of certain commodity positions and grain inventories, compared to an $8 million net increase in expense in the same period

last year. Additionally, in the first quarter of fiscal 2027, we recorded $4 million of transaction costs primarily related to the definitive

agreement to sell our Brazil business, compared to $12 million of transaction costs related to the Divestiture in the same period last

year. We recorded $2 million of integration costs in the first quarter of fiscal 2027 compared to $1 million of integration costs during

the same period last year, both of which related to the Whitebridge Pet Brands acquisition in fiscal 2025. We also recorded $2 million

of restructuring charges in cost of sales in the first quarter of fiscal 2027, which essentially matched the same period last year.

LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of fiscal 2027, cash provided by operations was $298 million compared to $397 million in the same period last

year. The $99 million decrease was primarily driven by a $310 million change in current assets and liabilities largely driven by lower

accrued federal income taxes payable, which included tax expense of $277 million associated with the Divestiture in fiscal 2026. This

was partially offset by a $248 million increase in net earnings, excluding the pretax gain on the Divestiture in fiscal 2026.

Cash used by investing activities during the first quarter of fiscal 2027 was $116 million compared to $1,695 million provided by

investing activities for the same period in fiscal 2026. In the first quarter of fiscal 2026, we completed the sale of our United States

yogurt business for $1,798 million cash. We also received an additional $6 million of cash related to a sale price adjustment related to

the sale of our Canada yogurt business in the first quarter of fiscal 2026. In addition, during the first quarter of fiscal 2027, we spent

$90 million on purchases of land, buildings, and equipment, compared to $110 million in the same period last year.

Cash used by financing activities during the first quarter of fiscal 2027 was $210 million compared to $1,507 million in the same

period in fiscal 2026. We had $133 million of net debt issuances in the first quarter of fiscal 2027 compared to $655 million of net

debt payments in the same period a year ago. In addition, we purchased $500 million of common stock for treasury in the first quarter

of fiscal 2026. We paid $330 million of dividends in the first quarter of fiscal 2027, essentially matching the same period last year.

As of August 30, 2026, we had $406 million of cash and cash equivalents 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.

The following table details the credit facilities and lines of credit we had available as of August 30, 2026:

In Millions

Borrowing

Capacity

Borrowed

Amount

Committed credit facility expiring October 2029

$—

Uncommitted credit facilities and lines of credit

Total

To ensure availability of funds, we maintain bank credit lines and have commercial paper programs available to us in the United States

and Europe.

Certain of our long-term debt agreements and our credit facilities contain restrictive covenants. We are in compliance with all of these

covenants.

We have $1,047 million of long-term debt maturing in the next 12 months that is classified as current, including €500 million of

floating-rate senior notes due October 22, 2026 and €400 million of 1.5 percent fixed-rate senior notes due April 22, 2027. 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.

CRITICAL ACCOUNTING ESTIMATES

Our significant accounting policies are described in Note 2 to the Consolidated Financial Statements included in our Annual Report on

Form 10-K for the fiscal year ended May 31, 2026. The accounting policies used in preparing our interim fiscal 2027 Consolidated

Financial Statements are the same as those described in our Form 10-K. Please refer to Note 1 to the Consolidated Financial

Statements in Part I, Item 1 of this report for additional information.

Our critical accounting estimates are those that have meaningful impact on the reporting of our financial condition and results of

operations. These estimates include our accounting for revenue recognition, valuation of long-lived assets, intangible assets, income

taxes, and defined benefit pension, other postretirement benefit, and postemployment benefit plans. The assumptions and

methodologies used in the determination of those estimates as of August 30, 2026, are the same as those described in our Annual

Report on Form 10-K for the fiscal year ended May 31, 2026.

Our annual goodwill and indefinite-lived intangible assets impairment test was performed on the first day of the second quarter of

fiscal 2026. As a result of lower future sales and profitability projections for the business supporting our Uncle Toby’s brand

intangible asset, we determined that the fair value of the brand intangible asset no longer exceeded its carrying value and recorded a

$53 million non-cash impairment charge.

In addition, we identified a triggering event due to a sustained decline in market capitalization and stock price in the fourth quarter of

fiscal 2026 reflecting heightened macroeconomic uncertainty and lower market multiples in our industry, which caused a related

increase in our discount rates and required an interim impairment assessment. We performed the interim impairment assessment of our

goodwill and other intangible assets as of May 31, 2026, and determined that the fair values of our North America Pet reporting unit

and our Nudges and True Chews brand intangible assets no longer exceeded the carrying values of the respective assets, primarily

driven by an increase in the discount rates. As a result, in the fourth quarter of fiscal 2026 we recorded $1,750 million of non-cash

impairment charges, of which $1,500 million related to the North America Pet reporting unit goodwill and $250 million related to the

brand intangible assets, all of which are included within our North America Pet segment. The $1,500 million goodwill impairment

charge is not deductible for tax purposes.

We recorded these impairment charges in restructuring, transformation, impairment, and other exit costs in our Consolidated

Statements of (Loss) Earnings in the fourth quarter of fiscal 2026. Our estimates of the fair values were determined based on a

discounted cash flow model using inputs which included our long-range cash flow projections for the businesses, royalty rates,

discount rates, and tax rates. These fair values are Level 3 assets in the fair value hierarchy.

In addition, while having significant coverage as of our May 31, 2026, assessment date, the Blue Buffalo brand intangible asset had

risk of decreasing coverage due to the increase in our discount rates. The Progresso brand intangible asset also had risk of decreasing

coverage. We will continue to monitor applicable businesses for potential impairment. All other reporting unit and intangible asset fair

values were substantially in excess of the carrying values.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In September 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-06,

amending the accounting for costs related to internal-use software. The ASU removes reference to software development project

stages. Additionally, the ASU requires capitalization of software costs to begin when management has authorized and committed to

funding the software and it is probable that the project will be completed and the software will be used to perform the function

intended. The requirements of the new standard are effective for annual periods beginning after December 15, 2027, and interim

periods within those annual periods, which for us is the first quarter of fiscal 2029. Early adoption is permitted and the amendments

may be applied on a prospective, retrospective, or modified basis. We are in the process of analyzing the impact on our results of

operations and financial position.

In November 2024, the FASB issued ASU 2024-03 requiring additional income statement disclosures. The ASU requires the

disaggregation of specific categories of expenses underlying the line items presented on the income statement. Additionally, the ASU

requires enhanced disclosure of selling expenses. The requirements of the ASU are effective for annual periods beginning after

December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. For us, annual reporting requirements

will be effective for fiscal 2028 and interim reporting requirements will be effective beginning with our first quarter of fiscal 2029.

Early adoption is permitted and the amendments should be applied on a prospective basis. Retrospective application is permitted. We

are in the process of analyzing the impact of the ASU on our related disclosures.

NON-GAAP MEASURES

We have included in this report measures of financial performance that are not defined by GAAP. We believe that these measures

provide useful information to investors, and include these measures in other communications to investors.

For each of these non-GAAP financial measures, we are providing below a reconciliation of the differences between the non-GAAP

measure and the most directly comparable GAAP measure, an explanation of why we believe the non-GAAP measure provides useful

information to investors, and any additional material purposes for which our management or Board of Directors uses the non-GAAP

measure. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.

Significant Items Impacting Comparability

Several measures below are presented on an adjusted basis. The adjustments are either items resulting from infrequently occurring

events or items that, in management’s judgment, significantly affect the year-to-year assessment of operating results.

The following are descriptions of significant items impacting comparability of our results.

Mark-to-market effects

Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items. Please refer to Note 6 to the

Consolidated Financial Statements in Part I, Item 1 of this report.

Valuation loss on held for sale business

Non-cash valuation loss related to the planned divestiture of our Brazil business recorded in fiscal 2027. Please refer to Note 2 to the

Consolidated Financial Statements in Part I, Item 1 of this report.

Transaction costs

Fiscal 2027 transaction costs primarily related to the definitive agreement to sell our Brazil business. Fiscal 2026 transaction costs

related to the sale of our United States yogurt business. Please refer to Note 2 to the Consolidated Financial Statements in Part I, Item

1 of this report.

Acquisition integration costs

Integration costs related to the Whitebridge Pet Brands acquisition in fiscal 2025 recorded in fiscal 2027 and fiscal 2026, and the

acquisition of a pet food business in Europe in fiscal 2024 recorded in fiscal 2026.

Restructuring and transformation charges

Restructuring and transformation charges related to previously announced actions recorded in fiscal 2027 and fiscal 2026. Please refer

to Note 3 to the Consolidated Financial Statements in Part I, Item 1 of this report.

Divestitures gain

Divestitures gain recorded in fiscal 2026 related to the sale of our United States yogurt business in fiscal 2026 and Canada yogurt

business in fiscal 2025. Please refer to Note 2 to the Consolidated Financial Statements in Part I, Item 1 of this report.

CPW asset impairments and transaction costs

CPW asset impairment charges and transaction costs related to certain assets held for sale recorded in fiscal 2026.

Investment activity, net

Valuation adjustments of certain corporate investments in fiscal 2026.

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,

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 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 basis.

Our adjusted operating profit margins are calculated as follows:

Quarter Ended

In Millions

Value

Percent of Net

Sales

Value

Percent of Net

Sales

Operating profit as reported

Mark-to-market effects

Valuation loss on held for sale business

—

—%

Transaction costs

Acquisition integration costs

—%

—%

Restructuring and transformation charges

—%

Divestitures gain

—

—%

Investment activity, net

—

—%

—%

Adjusted operating profit

Note: Table may not foot due to rounding.

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

Adjusted Operating Profit and Related Constant-currency Growth Rate

This measure is used in reporting to our Board of Directors and executive management and as a component of the measurement of our

performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is

the operating profit measure we use to evaluate operating profit performance on a comparable year-to-year basis. Additionally, the

measure is evaluated on a constant-currency basis by excluding the effect that foreign currency exchange rate fluctuations have on

year-to-year comparability given the volatility in foreign currency exchange rates.

Our adjusted operating profit growth on a constant-currency basis is calculated as follows:

Quarter Ended

In Millions

Change

Operating profit as reported

Mark-to-market effects

Valuation loss on held for sale business

—

Transaction costs

Acquisition integration costs

Restructuring and transformation charges

Divestitures gain

—

Investment activity, net

—

Adjusted operating profit

Foreign currency exchange impact

Flat

Adjusted operating profit growth, on a constant-currency basis

Note: Table may not foot due to rounding.

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

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 rates follows:

Quarter Ended

Per Share Data

Change

Diluted earnings per share, as reported

Valuation loss on held for sale business

—

Mark-to-market effects

Transaction costs

Restructuring and transformation charges

—

Divestitures gain

—

CPW asset impairments and transaction costs

—

Adjusted diluted earnings per share

Foreign currency exchange impact

Flat

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

Note: Table may not foot due to rounding.

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

See our reconciliation below of the effective income tax rate as reported to the adjusted effective income tax rate for the tax impact of

each item affecting comparability.

Constant-currency After-tax Earnings from Joint Ventures Growth Rates

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 rates on a constant-currency basis are calculated as follows:

Percentage Change in

After-Tax Earnings from Joint

Ventures as Reported

Impact of Foreign

Currency

Exchange

Percentage Change in After-Tax

Earnings from Joint Ventures

on Constant-Currency Basis

Flat

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:

Percentage Change in

Operating Profit

as Reported

Impact of Foreign

Currency

Exchange

Percentage Change in

Operating Profit on

Constant-Currency Basis

North America Retail

Flat

International

(1) pt

North America Pet

Flat

North America Foodservice

Flat

Note: Table may not foot due to rounding.

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:

Quarter Ended

In Millions

(Except Per Share Data)

Pretax

Earnings

(a)

Income

Taxes

Pretax

Earnings

(a)

Income

Taxes

As reported

Mark-to-market effects

Valuation loss on held for sale business

—

—

—

Transaction costs

Acquisition integration costs

Restructuring and transformation charges

—

Divestitures gain

—

—

Investment activity, net

—

—

As adjusted

Effective tax rate:

As reported

As adjusted

Sum of adjustments to income taxes

Average number of common shares - diluted EPS

Impact of income tax adjustments on adjusted diluted EPS

Note: Table may not foot due to rounding.

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

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

Glossary

AOCI. Accumulated other comprehensive income (loss).

Adjusted diluted EPS. Diluted EPS adjusted for certain items affecting year-to-year comparability.

Adjusted operating profit. Operating profit adjusted for certain items affecting year-to-year comparability.

Adjusted operating profit margin. Operating profit adjusted for certain items affecting year-over-year comparability, divided by net

sales.

Constant currency. Financial results translated to United States dollars using constant foreign currency exchange rates based on the

rates in effect for the comparable prior-year period. To present this information, current period results for entities reporting in

currencies other than United States dollars are translated into United States dollars at the average exchange rates in effect during the

corresponding period of the prior fiscal year, rather than the actual average exchange rates in effect during the current fiscal year.

Therefore, the foreign currency impact is equal to current year results in local currencies multiplied by the change in the average

foreign currency exchange rate between the current fiscal period and the corresponding period of the prior fiscal year.

Derivatives. Financial instruments such as futures, swaps, options, and forward contracts that we use to manage our risk arising from

changes in commodity prices, interest rates, foreign exchange rates, and stock prices.

Fair value hierarchy. For purposes of fair value measurement, we categorize assets and liabilities into one of three levels based on

the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3

generally requires significant management judgment. The three levels are defined as follows:

Level 1:Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in

active markets or quoted prices for identical assets or liabilities in inactive markets.

Level 3:Unobservable inputs reflecting management’s assumptions about the inputs used in pricing the asset or liability.

Free cash flow. Net cash provided by operating activities less purchases of land, buildings, and equipment.

Generally Accepted Accounting Principles (GAAP). Guidelines, procedures, and practices that we are required to use in recording

and reporting accounting information in our financial statements.

Goodwill. The difference between the purchase price of acquired companies plus the fair value of any noncontrolling interests and the

related fair values of net assets acquired.

Gross margin. Net sales less cost of sales.

Hedge accounting. Accounting for qualifying hedges that allows changes in a hedging instrument’s fair value to offset corresponding

changes in the hedged item in the same reporting period. Hedge accounting is permitted for certain hedging instruments and hedged

items only if the hedging relationship is highly effective, and only prospectively from the date a hedging relationship is formally

documented.

Holistic Margin Management (HMM). Company-wide initiative to use productivity savings, mix management, and price realization

to offset input cost inflation, protect margins, and generate funds to reinvest in sales-generating activities.

Mark-to-market. The act of determining a value for financial instruments, commodity contracts, and related assets or liabilities based

on the current market price for that item.

Net mark-to-market valuation of certain commodity positions. Realized and unrealized gains and losses on derivative contracts

that will be allocated to segment operating profit when the exposure we are hedging affects earnings.

Net price realization. The impact of list and promoted price changes, net of trade and other price promotion costs.

Noncontrolling interests. Interests of subsidiaries held by third parties.

Notional amount. The amount of a position or an agreed upon amount in a derivative contract on which the value of financial

instruments are calculated.

OCI. Other Comprehensive Income (Loss).

Organic net sales growth. Net sales growth adjusted for foreign currency translation, acquisitions, divestitures and a 53rd fiscal week,

when applicable.

Reporting unit. An operating segment or a business one level below an operating segment.

SOFR. Secured Overnight Financing Rate.

Strategic Revenue Management (SRM). A company-wide capability focused on generating sustainable benefits from net price

realization and mix by identifying and executing against specific opportunities to apply tools including pricing, sizing, mix

management, and promotion optimization across each of our businesses.

Supply chain input costs. Costs incurred to produce and deliver product, including costs for ingredients and conversion, inventory

management, logistics, and warehousing.

Translation adjustments. The impact of the conversion of our foreign affiliates’ financial statements to United States dollars for the

purpose of consolidating our financial statements.

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 Securities and Exchange Commission and in our reports to

stockholders.

The words or phrases “will likely result,” “are expected to,” “may 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 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: T7imposed and threatened tariffs by the United States and its trading

partners; disruptions or inefficiencies in the supply chain; 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, tariffs, 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 critical 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, transformation, 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 tariffs; 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 Part I of our Annual Report on Form 10-K for the fiscal year

ended May 31, 2026, 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.