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Item 2. Management’s Discussion and Analysis

2022-01-06 compared with 2021-10-07 · 199 added, 106 removed, 180 unchanged (63% of the section changed)

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The discussion that follows should be read together with the unaudited Condensed Consolidated Financial Statements and related notes contained in this report and with the financial statements, related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended May 30, 2021 and subsequent filings with the SEC.

Results for the first quarter of fiscal 2022 are not necessarily indicative of results that may be attained in the future.

Results for the second quarter of fiscal 2022 are not necessarily indicative of results that may be attained in the future.

EXECUTIVE OVERVIEW

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Its iconic brands such as Birds Eye ® , Marie Callender's ® , Banquet ® , Healthy Choice ® , Slim Jim ® , Reddi-wip ® , and Vlasic ® as well as emerging brands, including Angie's ® BOOMCHICKAPOP ® , Duke's ® , Earth Balance ® , Gardein ® , and Frontera ® , offer choices for every occasion.

Fiscal 2022 First Quarter Results

In the first quarter of fiscal 2022, results reflected a decrease in net sales, with organic (excludes the impacts of foreign exchange and divested businesses) decreases in our Grocery & Snacks and Refrigerated & Frozen segments offset by organic

increases in our International and Foodservice segments , in each case compared to the first quarter of fiscal 2021 .

Overall gross profit de creased due to de creased net sales, input cost inflation, higher transportation costs, and lost profits from divested businesses, which were partially offset by supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and lower COVID-19 pandemic- related expenses.

Fiscal 2022 Second Quarter Results

In the second quarter of fiscal 2022, results reflected an increase in net sales, with organic (excludes the impacts of foreign exchange and divested businesses) increases in our Refrigerated & Frozen, International, and Foodservice segments partially offset by

organic de creases in our Grocery & Snacks segment , in each case compared to the second quarter of fiscal 2021 .

Overall gross profit de creased primarily as a result of input cost inflation, higher transportation costs, and lost profits from divested businesses, which were partially offset by higher organic net sales, supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and lower COVID-19 pandemic- related expenses.

Overall segment operating profit de creased in all of our operating segment s .

Corporate expenses wer e lower primarily due to items impacting comparability, as discussed below .

T here w ere in creased selling, general and administrative ( " SG&A " ) expenses primarily due to higher advertising and promotion expenses offset by lower stock-based compensation expense .

We recognized higher equity method investment earnings , lower interest expense, and lower income tax expense, in each case compared to the first quarter of fiscal 2021 .

Excluding items impacting comparability, our effective tax rate was slightly higher compared to the first quarter of fiscal 2021 .

Diluted earnings per share in the first quarter of fiscal 2022 were $0.49.

Diluted earnings per share in the first quarter of fiscal 2021 were $0.67.

Diluted earnings per share were affected by lower net income in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021.

In the first quarter of fiscal 2022, we experienced higher than expected input cost inflation, including higher transportation and supply chain costs, that negatively impacted gross margins.

T here w ere lower selling, general and administrative ( " SG&A " ) expenses primarily due to lower stock-based and incentive compensation offset by higher advertising and promotion expenses .

We recognized higher equity method investment earnings , lower interest expense, and higher income tax expense, in each case compared to the second quarter of fiscal 2021 .

Excluding items impacting comparability, our effective tax rate was slightly lower compared to the second quarter of fiscal 2021 .

Diluted earnings per share in the second quarter of fiscal 2022 were $0.57.

Diluted earnings per share in the second quarter of fiscal 2021 were $0.77.

Diluted earnings per share were affected by lower net income in the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021.

In the second quarter of fiscal 2022, we continued to experience higher than expected input cost inflation, including higher transportation and supply chain costs, that negatively impacted gross margins.

We expect input cost inflation to remain elevated throughout the rest of fiscal 2022.

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Segment presentation of gains and losses from derivatives used for economic hedging of anticipated commodity input costs and economic hedging of foreign currency exchange rate risks of anticipated transactions is discussed in the "Segment Review" below.

Items of note impacting comparability for the first quarter of fiscal 2022 included the following:

charges totaling $15.8 million ($11.9 million after-tax) in connection with our restructuring plans and

an income tax benefit of $3.6 million related to the settlement of a tax matter that was previously reserved.

Items of note impacting comparability for the first quarter of fiscal 2021 included the following:

Items of note impacting comparability for the second quarter of fiscal 2022 included the following:

charges totaling $39.2 million ($32.2 million after-tax) related to the impairment of businesses held for sale,

a gain of $14.6 million ($11.0 million after-tax) related to a legal settlement,

charges totaling $12.4 million ($9.3 million after-tax) in connection with our restructuring plans, and

an income tax benefit of $7.6 million related to certain final tax regulations on prior year federal tax matters.

During the fourth quarter of fiscal 2021, we completed the sale of our Egg Beaters ® business for net proceeds of $50.6 million, subject to final working capital adjustments.

a gain of $3.3 million ($2.8 million after-tax) related to proceeds received from the sale of a legacy investment.

Items of note impacting comparability for the second quarter of fiscal 2021 included the following:

charges totaling $44.3 million ($33.2 million after-tax) related to early extinguishment of debt,

charges totaling $20.7 million ($15.4 million after-tax) in connection with our restructuring plans,

a gain of $5.3 million ($3.5 million after tax) associated with the divestiture of a business, and

an income tax benefit of $25.3 million related to a release of a valuation allowance associated with the planned divestiture of the Peter Pan ® peanut butter business.

Items of note impacting comparability for the first half of fiscal 2022 included the following:

charges totaling $39.2 million ($32.2 million after-tax) related to the impairment of businesses held for sale,

charges totaling $28.2 million ($21.2 million after-tax) in connection with our restructuring plans,

a gain of $14.6 million ($11.0 million after-tax) related to a legal settlement,

an income tax benefit of $3.6 million related to the settlement of a tax matter that was previously reserved, and

a gain of $3.3 million ($2.8 million after-tax) related to proceeds received from the sale of a legacy investment.

Items of note impacting comparability for the first half of fiscal 2021 included the following:

charges totaling $46.6 million ($34.9 million after-tax) in connection with our restructuring plans,

charges totaling $44.3 million ($33.2 million after-tax) related to early extinguishment of debt,

a gain of $5.3 million ($3.5 million after-tax) associated with the divestiture of a business,

an income tax benefit of $7.6 million related to certain final tax regulations on prior year federal tax matters, and

an income tax benefit of $25.3 million related to a release of a valuation allowance associated with the planned divestiture of the Peter Pan ® peanut butter business.

During the fourth quarter of fiscal 2021, we completed the sale of our Egg Beaters ® business for net proceeds of $50.7 million, including working capital adjustments.

The results of operations of the divested Egg Beaters ® business were primarily included in our Refrigerated & Frozen segment, and to a lesser extent within our International and Foodservice segments, for the periods preceding the completion of the transaction.

During the third quarter of fiscal 2021, we completed the sale of our Peter Pan ® peanut butter business for net proceeds of $101.5 million, including working capital adjustments but subject to final adjustments for certain tax benefits.

During the third quarter of fiscal 2021, we completed the sale of our Peter Pan ® peanut butter business for net proceeds of $101.5 million, including working capital adjustments.

The results of operations of the divested Peter Pan ® peanut butter business are primarily included in our Grocery & Snacks segment, and to a lesser extent within our International and Foodservice segments, for the periods preceding the completion of the transaction.

Restructuring Plans

In December 2018, our Board of Directors (the "Board") approved a restructuring and integration plan related to the ongoing integration of the operations of Pinnacle Foods, Inc., which we acquired in October 2018 (the "Pinnacle Integration Restructuring Plan"), for the purpose of achieving significant cost synergies between the companies, as a result of which we expect to incur material charges for exit and disposal activities under U.S.

In December 2018, our Board of Directors (the "Board") approved a restructuring and integration plan related to the ongoing integration of the operations of Pinnacle Foods, Inc.

(the "Pinnacle Integration Restructuring Plan"), for the purpose of achieving significant cost synergies between the companies, as a result of which we expect to incur material charges for exit and disposal activities under U.S.

generally accepted accounting principles.

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The Board and/or our senior management have authorized incurrence of these charges.

In the first quarter of fiscal 2022 and 2021, we recognized charges of $7.3 million and $8.6 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

In the second quarter and first half of fiscal 2022, we recognized charges of $5.8 million and $13.1 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

In the second quarter and first half of fiscal 2021, we recognized charges of $10.2 million and $18.8 million, respectively, in connection with the Pinnacle Integration Restructuring Plan.

We expect to incur costs related to the Pinnacle Integration Restructuring Plan over a multi-year period.

In fiscal 2019, senior management initiated a restructuring plan (the " Conagra Restructuring Plan " ) for costs incurred in connection with actions taken to improve SG&A expense effectiveness and efficiencies and to optimize our supply chain network.

Although we remain unable to make good faith estimates relating to the entire Conagra Restructuring Plan, we are reporting on actions initiated through the end of the first quarter of fiscal 2022 , including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows.

As of August 29, 2021 , we ha ve approved the incurrence of $ 17 2.6 million ($ 4 5.8 million of cash charges and $ 126.8 million of non-cash charges) for several projects associated with the Conagra Restructuring Plan.

We have incurred or expect to incur $1 44.7 million of charges ($ 3 6.0 million of cash charges and $ 1 08.7 million of non-cash charges) for actions identified to date under the Conagra Restructuring Plan.

In the first quarter of fiscal 2022 and 2021 , we recognized charges of $ 8 .

5 million and $ 1 7 .

3 million , respectively, in connection with the Conagra Restructuring Plan.

In fiscal 2019, senior management initiated a restructuring plan for costs incurred in connection with actions taken to improve SG&A expense effectiveness and efficiencies and to optimize our supply chain network (the "Conagra Restructuring Plan").

Although we remain unable to make good faith estimates relating to the entire Conagra Restructuring Plan, we are reporting on actions initiated through the end of the second quarter of fiscal 2022, including the estimated amounts or range of amounts for each major type of costs expected to be incurred, and the charges that have resulted or will result in cash outflows.

As of November 28, 2021, we have approved the incurrence of $172.6 million ($45.8 million of cash charges and $126.8 million of non-cash charges) for several projects associated with the Conagra Restructuring Plan.

As of November 28, 2021, we have incurred or expect to incur $143.4 million of charges ($40.2 million of cash charges and $103.2 million of non-cash charges) for actions identified to date under the Conagra Restructuring Plan.

In the second quarter and first half of fiscal 2022, we recognized charges of $6.6 million and $15.1 million, respectively, in connection with the Conagra Restructuring Plan.

In the second quarter and first half of fiscal 2021, we recognized charges of $10.5 million and $27.8 million, respectively, in connection with the Conagra Restructuring Plan.

We expect to incur costs related to the Conagra Restructuring Plan over a multi-year period.

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We continue to monitor the impact of the COVID-19 pandemic on all aspects of our business.

During the first quarter of fiscal 2022, we continued to experience elevated demand for our products in the retail segments, but net sales were lower compared to the first quarter of fiscal 2021 as we began to lap the initial surge in demand at the beginning of the pandemic.

We experienced higher demand for our foodservice products across all of our major markets during the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 as consumer traffic in away-from-home food outlets increased from the initial months of the pandemic.

During the first quarter of fiscal 2022, we incurred $25.4 million of supply chain costs associated with the COVID-19 pandemic, which was a decrease in comparison to the first quarter of fiscal 2021.

During the second quarter of fiscal 2022, we continued to experience elevated demand for our products in the retail segments, but volumes were lower compared to the second quarter of fiscal 2021 as we lap the surge in demand in at-home food consumption from the pandemic.

We experienced higher demand for our foodservice products across all of our major markets during the second quarter of fiscal 2022 compared to the second quarter of fiscal 2021 as consumer traffic in away-from-home food outlets continue to recover from the impacts of the pandemic.

During the second quarter of fiscal 2022, we incurred $21.0 million of supply chain costs associated with the COVID-19 pandemic, which was a decrease in comparison to the second quarter of fiscal 2021.

As we progress through fiscal 2022, we generally expect retail demand levels to remain elevated versus pre-pandemic levels and we continue to expect foodservice demand levels to return to more historical norms.

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the federal, state, and local government actions taken in response;

continued vaccine availability and effectiveness;

vaccine effectiveness;

and the macroeconomic environment.

In fiscal 2022, we continue to expect to see inflationary headwinds but anticipate that they will be partially mitigated by supply chain realized productivity and price increases that have either taken effect or are expected to take effect in the remaining part of the fiscal year.

We also continue to expect a decrease in costs related to the COVID-19 pandemic and a decrease in supply chain costs as we continue to recover our supply and service levels.

In the second half of fiscal 2022, we continue to expect to see inflationary headwinds but anticipate that they will be partially mitigated by supply chain realized productivity and sales price increases that have either taken effect or are expected to take effect in the remaining part of the fiscal year.

We also continue to expect

a decrease in costs related to the COVID-19 pandemic and a decrease in supply chain costs as we continue to recover our supply and service levels.

However, we do not expect full realization of such benefits to occur in time to fully offset the higher costs overall in fiscal 2022.

We will continue to evaluate the extent to which the COVID-19 pandemic will impact our business, consolidated results of operations, and financial condition.

Beginning in February 2020 and over the course of the COVID-19 pandemic, we created COVID-19 pandemic, Return to Office, and Vaccine Preparedness teams, in order to review and assess the evolving COVID-19 pandemic, and to recommend risk mitigation actions for the health and safety of our employees.

In order to enhance the safety of our employees during the COVID-19 pandemic, these teams have recommended and implemented various measures, including the installation of physical barriers between employees in production facilities, cleaning and sanitation protocols for both production and office spaces, execution of a phased return to office approach to enable in-person work for corporate personnel, implementation of work-from-home initiatives for certain office personnel, and increased access to vaccines for employees at our production facilities and corporate locations.

Beginning in February 2020 and over the course of the COVID-19 pandemic, we created cross functional teams in order to review and assess the evolving COVID-19 pandemic, and to recommend risk mitigation actions for the health and safety of our employees.

In order to enhance the safety of our employees during the COVID-19 pandemic, these teams have recommended and implemented various measures, including the installation of physical barriers between employees, cleaning and sanitation protocols, execution of a phased return to office approach to enable in-person work for corporate personnel, implementation of work-from-home initiatives, and increased access to vaccines for employees.

The implementation of such safety measures has not resulted in any meaningful change to our financial control environment.

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Reporting Segment

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International

Net sales for the first quarter of fiscal 2022 in our Grocery & Snacks segment included a decrease in volumes of 3%, excluding the impact of divestitures, compared to the prior-year period.

Net sales for the second quarter of fiscal 2022 in our Grocery & Snacks segment included a decrease in volumes of 5%, excluding the impact of divestitures, compared to the prior-year period.

The decrease in volumes was primarily due to lapping the prior year's surge in at-home food consumption from the COVID-19 pandemic.

Price/mix increased 5% for the second quarter of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorability in net pricing and favorable brand mix.

The second quarter of fiscal 2021 included $9.1 million of net sales related to our Peter Pan ® peanut butter business, which was sold in the third quarter of fiscal 2021.

The second quarter of fiscal 2021 also included $1.7 million of net sales related to our H.K.

Anderson ® business, which was sold in the second quarter of fiscal 2021.

Net sales for the first half of fiscal 2022 in our Grocery & Snacks segment included a decrease in volumes of 4%, excluding the impact of divestitures, compared to the prior-year period.

The decrease in volumes was primarily due to lapping the prior year's surge in at-home food consumption from the COVID-19 pandemic and replenishment of customer inventory levels in connection with the COVID-19 pandemic.

Price/mix was flat for the first quarter of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorability in net pricing offset by unfavorable brand mix and a benefit in the prior year of $7.4 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

The first quarter of fiscal 2021 included $16.8 million of net sales related to our Peter Pan ® peanut butter business, which was sold in the third quarter of fiscal 2021.

The first quarter of fiscal 2021 also included $1.9 million of net sales related to our H.K.

Price/mix increased 2% for the first half of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorability in net pricing and a benefit in the prior-year period of $7.4 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

The first half of fiscal 2021 included $25.9 million of net sales related to our Peter Pan ® peanut butter business, which was sold in the third quarter of fiscal 2021.

The first half of fiscal 2021 also included $3.6 million of net sales related to our H.K.

Anderson ® business, which was sold in the second quarter of fiscal 2021.

Net sales for the first quarter of fiscal 2022 in our Refrigerated & Frozen segment reflected a decrease in volumes of 4%, excluding the impact of divestitures, compared to the prior-year period due to lapping the prior year's surge in at-home food consumption from the COVID-19 pandemic and replenishment of inventory levels in connection with the COVID-19 pandemic.

Price/mix increased by 2% for the first quarter of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorable brand mix and slight favorability in net pricing partially offset by a benefit in the prior year of $7.4 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

The first quarter of fiscal 2021 included $9.2 million of net sales related to our Egg Beaters ® business, which was sold in the fourth quarter of fiscal 2021.

Net sales for the first quarter of fiscal 2022 in our International segment reflected a 5% decrease in volume, a 6% increase due to favorable foreign exchange rates, and a 7% increase in price/mix, excluding the impact of divestitures, in each case compared to the prior-year period.

The decrease in volumes was driven by the prior year's surge in demand from the COVID-19 pandemic.

The increase in price/mix was primarily due to inflation-justified pricing and favorable product mix offset by a benefit in the prior year of $2.8 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

N et sales for the first quarter of fiscal 2022 in our Foodservice segment reflected a 20% in crease in volume , excluding the impact of divestitures, compared to the prior-year period.

Net sales for the second quarter of fiscal 2022 in our Refrigerated & Frozen segment reflected a decrease in volumes of 5%, excluding the impact of divestitures, compared to the prior-year period primarily due to lapping the prior year's surge in at-home food consumption from the COVID-19 pandemic.

Price/mix increased by 9% for the second quarter of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorable brand mix and favorability in net pricing.

The second quarter of fiscal 2021 included $10.1 million of net sales related to our Egg Beaters ® business, which was sold in the fourth quarter of fiscal 2021.

Net sales for the first half of fiscal 2022 in our Refrigerated & Frozen segment reflected a decrease in volumes of 4%, excluding the impact of divestitures, compared to the prior-year period primarily due to lapping the prior year's surge in at-home food consumption from the COVID-19 pandemic and replenishment of inventory levels in connection with the COVID-19 pandemic.

Price/mix increased by 6% for the first half of fiscal 2022, excluding the impact of divestitures, when compared to the prior-year period due to favorable brand mix and favorability in net pricing partially offset by a benefit in the prior-year period of $7.4 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

The first half of fiscal 2021 included $19.3 million of net sales related to our Egg Beaters ® business, which was sold in the fourth quarter of fiscal 2021.

Net sales for the second quarter of fiscal 2022 in our International segment reflected a 6% decrease in volumes, a 3% increase due to favorable foreign exchange rates, and an 8% increase in price/mix, excluding the impact of divestitures, in each case compared to the prior-year period.

The decrease in volumes was driven by lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.

The increase in price/mix was primarily due to inflation-driven pricing and favorable product mix.

Net sales for the first half of fiscal 2022 in our International segment reflected a 5% decrease in volumes, a 5% increase due to favorable foreign exchange rates, and a 7% increase in price/mix, excluding the impact of divestitures, in each case compared to the prior-year period.

The decrease in volumes was driven by lapping the prior year's surge in at-home food demand from the COVID-19 pandemic.

The increase in price/mix was primarily due to inflation-driven pricing and favorable product mix offset by a benefit in the prior-year period of $2.8 million related to a change in estimate associated with our fiscal 2020 fourth quarter trade accrual.

Net sales for the second quarter of fiscal 2022 in our Foodservice segment reflected a 9% increase in volumes, excluding the impact of divestitures, compared to the prior-year period.

The increase in volume reflected the continued recovery of away-from-home

food outlets from the impacts of the COVID-19 pandemic .

Price/mix , excluding the impact of divestitures, increased by 6% in the second quarter of fiscal 2022 compared to the prior-year period, reflecting inflation- driven pricing and favorable product mi x .

Net sales for the first half of fiscal 2022 in our Foodservice segment reflected a 14% increase in volumes, excluding the impact of divestitures, compared to the prior-year period.

The increase in volume reflected the continued recovery of away-from-home food outlets from the impacts of the COVID-19 pandemic.

Price/ mix , excluding the impact of divestitures, increased by 2% in the first quarter of fiscal 2022 compared to the prior-year period , reflecting inflation- justified pricing .

Price/mix, excluding the impact of divestitures, increased by 4% in the first half of fiscal 2022 compared to the prior-year period, reflecting inflation-driven pricing and favorable product mix.

SG&A Expenses (includes general corporate expenses)

SG&A expenses totaled $310.1 million for the first quarter of fiscal 2022, an increase of $9.8 million, as compared to the first quarter of fiscal 2021.

SG&A expenses for the first quarter of fiscal 2022 reflected the following:

SG&A expenses totaled $345.4 million for the second quarter of fiscal 2022, a decrease of $12.3 million, as compared to the second quarter of fiscal 2021.

SG&A expenses for the second quarter of fiscal 2022 reflected the following:

Items impacting comparability of earnings

expense of $39.2 million related to the impairment of businesses held for sale,

a net benefit of $14.6 related to a legal settlement,

a benefit of $3.3 million related to the sale of a legacy investment,

expenses of $2.5 million in connection with our restructuring plans, and

expenses of $1.0 million associated with costs incurred for planned divestitures.

Other changes in expenses compared to the first quarter of fiscal 2021

expenses of $1.7 million associated with consulting fees for certain tax matters.

Other changes in expenses compared to the second quarter of fiscal 2021

an increase in salary, wage, and fringe benefit expense of $9.8 million,

a decrease in short-term incentive expense of $9.1 million, due to the expectation of exceeding certain performance targets in the prior year,

an increase in advertising and promotion expense of $7.8 million driven primarily by higher eCommerce investments,

a decrease in share-based payment and deferred compensation expense of $6.7 million, primarily due to a decrease in our share price and market declines, and

an increase of $5.7 million in self-insurance expense due to favorable claim development in the prior year.

SG&A expenses for the second quarter of fiscal 2021 included the following items impacting the comparability of earnings:

expenses of $44.3 million associated with the early extinguishment of debt,

expenses of $11.2 million in connection with our restructuring plans, and

a gain of $5.3 million related to the divestiture of a business.

SG&A expenses totaled $655.5 million for the first half of fiscal 2022, a decrease of $2.5 million, as compared to the first half of fiscal 2021.

SG&A expenses for the first half of fiscal 2022 reflected the following:

Items impacting comparability of earnings

expense of $39.2 million related to the impairment of businesses held for sale,

a net benefit of $14.6 related to a legal settlement,

expenses of $11.9 million in connection with our restructuring plans,

a benefit of $3.3 million related to the sale of a legacy investment, and

expenses of $1.7 million associated with consulting fees for certain tax matters.

Other changes in expenses compared to the first half of fiscal 2021

an increase in advertising and promotion expense of $24.1 million driven primarily by higher eCommerce investments,

a decrease in share-based payment and deferred compensation expense of $24.0 million, due to a decrease in our share price, market declines, and a reduction of estimated level of achievement of certain performance targets,

an increase in salary, wage, and fringe benefit expense of $13.0 million,

a decrease in short-term incentive expense of $9.1 million, due to the expectation of exceeding certain performance targets in the prior year,

an increase of $6.9 million in foreign currency transaction losses, primarily due to remeasuring certain intercompany notes payable,

an increase in information technology-related expenses of $3.8 million,

an increase in salary, wage, and fringe benefit expense of $3.2 million, and

an increase of $6.8 million in self-insurance expense due to favorable claim development in the prior year,

an increase in information technology-related expenses of $5.8 million, and

an increase in professional fees of $2.7 million.

SG&A expenses for the first quarter of fiscal 2021 included the following items impacting the comparability of earnings:

SG&A expenses for the first half of fiscal 2021 included the following items impacting the comparability of earnings:

expenses of $44.3 million associated with the early extinguishment of debt,

expenses of $26.7 million in connection with our restructuring plans,

a gain of $5.3 million related to the divestiture of a business,

expenses of $3.2 million associated with costs incurred for planned divestitures,

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International

Operating profit in our Grocery & Snacks segment for the first quarter of fiscal 2022 reflected a decrease in gross profits of $67.4 million compared to the first quarter of fiscal 2021.

The lower gross profit was driven by the net sales decline discussed above, the impacts of input cost inflation, fixed cost leverage, and a reduction in profit associated with the divestitures of our H.K.

Operating profit in our Grocery & Snacks segment for the second quarter of fiscal 2022 reflected a decrease in gross profits of $50.8 million compared to the second quarter of fiscal 2021.

The lower gross profit was driven by the net sales decline discussed above, the impacts of input cost inflation, higher inventory write-offs, unfavorable fixed cost leverage, and a reduction in profit associated with the divestitures of our H.K.

Anderson ® and Peter Pan ® peanut butter businesses, partially offset by the benefits of supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and a decrease in COVID-19 pandemic-related costs.

Pandemic-related costs included investments in employee safety protocols, bonuses paid to supply chain employees, and costs necessary to meet elevated levels of demand.

Operating profit of the Grocery & Snacks segment was impacted by expense of $4.1 million and $13.9 million related to our restructuring plans in the first quarter of fiscal 2022 and 2021, respectively.

Advertising and promotion expenses for the first quarter of fiscal 2022 increased by $4.2 million compared to the first quarter of fiscal 2021.

O perating profit in our Refrigerated & Frozen segment for the first quarter of fiscal 2022 reflected a de crease in g ross profits of $74.9 million compared to the first quarter of fiscal 2021 .

The de crease was driven by the net sales decline discussed above, the impacts of input cost inflation, fixed cost leverage, higher inventory write-offs, and a reduction in profit associated with the divestiture of our Egg Beaters ® business, partially offset by the benefits of supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and a decrease in COVID-19 pandemic-related costs .

Operating profit of the Refrigerated & Frozen s egment was impacted by expense of $ 5 .0 million and $ 5.7 million related to our restructuring plans in the first quarter of fiscal 2022 and 2021 , respectively .

Advertising and promotion expenses for the first quarter of fiscal 2022 increased by $ 11.2 million compared to the first quarter of fiscal 2021 .

Operating profit in our International segment for the first quarter of fiscal 2022 reflected an increase in gross profits of $2.3 million when compared to the prior-year period due to the net sales growth discussed above, the benefits of supply chain realized productivity, and favorable foreign exchange rates, partially offset by the impacts of input cost inflation.

The increase in gross profit was more than offset by an increase in SG&A expenses of $6.7 million driven by higher foreign currency transaction losses, salary, wage, and fringe benefits, and commission expenses.

Operating profit in our Foodservice segment for the first quarter of fiscal 2022 reflected a decrease in gross profits of $4.5 million compared to the first quarter of fiscal 2021.

Operating profit of the Grocery & Snacks segment was impacted by expense of $2.0 million and $7.8 million related to our restructuring plans in the second quarter of fiscal 2022 and 2021, respectively.

The second quarter of fiscal 2022 included expense of $22.4 million related to the impairment of businesses held for sale.

The second quarter of fiscal 2021 included a gain of $5.3 million related to the divestiture of a business.

Operating profit in our Grocery & Snacks segment for the first half of fiscal 2022 reflected a decrease in gross profits of $118.2 million compared to the first half of fiscal 2021.

Operating profit of the Grocery & Snacks segment was impacted by expense of $6.1 million and $21.7 million related to our restructuring plans in the first half of fiscal 2022 and 2021, respectively.

The first half of fiscal 2022 included expense of $22.4 million related to the impairment of businesses held for sale.

The first half of fiscal 2021 included a gain of $5.3 million related to the divestiture of a business.

O perating profit in our Refrigerated & Frozen segment for the second quarter of fiscal 2022 reflected a de crease in g ross profits of $76.1 million compared to the second quarter of fiscal 2021 .

The de crease was driven by the impacts of input cost inflation, unfavorable fixed cost leverage, higher inventory write-offs, and a reduction in profit associated with the divestiture of our Egg Beaters ® business, partially offset by the benefits of supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and a decrease in COVID-19 pandemic-related costs .

Operating profit of the Refrigerated & Frozen s egment was impacted by expense of $ 6.8 million and $ 7.2 million related to our restructuring plans in the second quarter of fiscal 2022 and 2021 , respectively .

The second quarter of fiscal 2022 included expense of $12.0 million related to the impairment of business es held for sale.

Advertising and promotion expenses for the second quarter of fiscal 2022 increased by $ 7.2 million compared to the second quarter of fiscal 2021 .

Operating profit in our Refrigerated & Frozen segment for the first half of fiscal 2022 reflected a decrease in gross profits of $151.0 million compared to the first half of fiscal 2021.

The decrease was driven by the impacts of input cost inflation, unfavorable fixed cost leverage, higher inventory write-offs, and a reduction in profit associated with the divestiture of our Egg Beaters ® business, partially offset by the benefits of supply chain realized productivity, cost synergies associated with the Pinnacle acquisition, and a decrease in COVID-19 pandemic-related costs.

Operating profit of the Refrigerated & Frozen segment was impacted by expense of $11.8 million and $12.9 million related to our restructuring plans in the first half of fiscal 2022 and 2021, respectively.

The first half of fiscal 2022 included expense of $12.0 million related to the impairment of businesses held for sale.

Advertising and promotion expenses for the first half of fiscal 2022 increased by $18.4 million compared to the first half of fiscal 2021.

Operating profit in our International segment for the second quarter of fiscal 2022 reflected an increase in gross profits of $3.3 million when compared to the prior-year period due to the net sales growth discussed above and the benefits of supply chain realized productivity, partially offset by the impacts of input cost inflation.

The increase in gross profit was more than offset by an increase in SG&A expenses of $5.7 million driven by higher foreign currency transaction losses, advertising and promotion expenses, and salary, wage, and fringe benefits.

Operating profit in our International segment for the first half of fiscal 2022 reflected an increase in gross profits of $5.6 million when compared to the prior-year period due to the net sales growth discussed above and the benefits of supply chain realized productivity, partially offset by the impacts of input cost inflation.

The increase in gross profit was more than offset by an increase in SG&A expenses of $12.4 million driven by higher foreign currency transaction losses, advertising and promotion expenses, salary, wage, and fringe benefits, and commission expenses.

Operating profit in our Foodservice segment for the second quarter of fiscal 2022 reflected a decrease in gross profits of $5.4 million compared to the second quarter of fiscal 2021.

The lower gross profit was driven by input cost inflation, which more than offset the net sales growth discussed above and the benefits of supply chain realized productivity.

The second quarter of fiscal 2022 included expense of $4.8 million related to the impairment of businesses held for sale.

Operating profit in our Foodservice segment for the first half of fiscal 2022 reflected a decrease in gross profits of $9.9 million compared to the first half of fiscal 2021.

The lower gross profit was driven by input cost inflation and higher inventory write-offs, which more than offset the net sales growth discussed above and the benefits of supply chain realized productivity.

The first half of fiscal 2022 included expense of $4.8 million related to the impairment of businesses held for sale.

Pension and Postretirement Non-service Income

In the first quarter of fiscal 2022, pension and postretirement non-service income was $16.1 million, an increase of $2.3 million compared to the first quarter of fiscal 2021.

The first quarter of fiscal 2022 reflected lower interest costs and an increase in expected returns on plan assets.

In the second quarter of fiscal 2022, pension and postretirement non-service income was $16.1 million, an increase of $2.4 million compared to the second quarter of fiscal 2021.

In the first half of fiscal 2022, pension and postretirement non-service income was $32.2 million, an increase of $4.7 million compared to the first half of fiscal 2021.

The second quarter and first half of fiscal 2022 reflected lower interest costs and an increase in expected returns on plan assets.

Interest Expense, Net

Net interest expense was $94.2 million and $113.7 million for the first quarter of fiscal 2022 and 2021, respectively.

The decrease was driven by an overall reduction of our debt balances.

Net interest expense was $94.9 million and $107.7 million for the second quarter of fiscal 2022 and 2021, respectively.

Net interest expense was $189.1 million and $221.4 million for the first half of fiscal 2022 and 2021, respectively.

The decrease was driven by a lower weighted average interest rate on outstanding debt.

See Note 4, "Long-Term Debt and Revolving Credit Facility" , to the Condensed Consolidated Financial Statements contained in this report for further discussion.

In the first quarter of fiscal 2022 and 2021, we recognized income tax expense of $69.7 million and $86.7 million, respectively.

The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 22.8% and 20.8% for the first quarter of fiscal 2022 and 2021, respectively.

In the second quarter and first half of fiscal 2022, we recognized income tax expense of $84.2 million and $153.9 million, respectively.

The effective tax rate (calculated as the ratio of income tax expense to pre-tax income, inclusive of equity method investment earnings) was approximately 23.4% and 23.1% for the second quarter and first half of fiscal 2022, respectively.

In the second quarter and first half of fiscal 2021, we recognized income tax expense of $80.7 million and $167.4 million, respectively.

The effective tax rate was approximately 17.6% and 19.1% for the second quarter and first half of fiscal 2021, respectively.

See Note 10, "Income Taxes" , to the Condensed Consolidated Financial Statements contained in this report for a discussion on the change in effective tax rates.

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Equity Method Investment Earnings

Equity method investment earnings were $20.2 million and $6.5 million for the first quarter of fiscal 2022 and 2021, respectively.

Ardent Mills earnings for the first quarter of fiscal 2022 reflected favorable market conditions.

Equity method investment earnings were $29.5 million and $23.0 million for the second quarter of fiscal 2022 and 2021, respectively.

Equity method investment earnings were $49.7 million and $29.5 million for the first half of fiscal 2022 and 2021, respectively.

Ardent Mills earnings for the second quarter and first half of fiscal 2022 reflected favorable market conditions.

Earnings Per Share

Diluted earnings per share in the first quarter of fiscal 2022 and 2021 were $0.49 and $0.67, respectively.

Diluted earnings per share in the second quarter of fiscal 2022 and 2021 were $0.57 and $0.77, respectively.

Diluted earnings per share in the first half of fiscal 2022 and 2021 were $1.06 and $1.44, respectively.

The decrease in diluted earnings per share reflected lower net income.

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We use a combination of equity and short- and long-term debt.

We use short-term debt principally to finance

ongoing operations, including our seasonal requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities) .

We are committed to maintaining solid investment grade credit rating s .

We use short-term debt principally to finance ongoing operations, including our seasonal requirements for working capital (accounts receivable, prepaid expenses and other current assets, and inventories, less accounts payable, accrued payroll, and other accrued liabilities).

We are committed to maintaining solid investment grade credit ratings.

Management believes that existing cash balances, cash flows from operations, existing credit facilities, our commercial paper program and access to capital markets will provide sufficient liquidity to meet our debt obligations, including any repayment of debt or refinancing of debt, working capital needs, planned capital expenditures, and payment of anticipated quarterly dividends for at least the next twelve months.

Borrowing Facilities and Long-Term Debt

At August 29, 2021, we had a revolving credit facility (the "Revolving Credit Facility") with a syndicate of financial institutions providing for a maximum aggregate principal amount outstanding at any one time of $1.6 billion (subject to increase to a maximum aggregate principal amount of $2.1 billion with the consent of the lenders).

At November 28, 2021, we had a revolving credit facility (the "Revolving Credit Facility") with a syndicate of financial institutions providing for a maximum aggregate principal amount outstanding at any one time of $1.6 billion (subject to increase to a maximum aggregate principal amount of $2.1 billion with the consent of the lenders).

The Revolving Credit Facility matures on July 11, 2024 and is unsecured.

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We have historically used a credit facility principally as a back-up for our commercial paper program.

As of August 29, 2021, there were no outstanding borrowings under the Revolving Credit Facility.

As of August 29, 2021, we had $457.0 million outstanding under our commercial paper program.

The highest level of borrowings during the first quarter of fiscal 2022 was $989.0 million.

As of November 28, 2021, there were no outstanding borrowings under the Revolving Credit Facility.

As of November 28, 2021, we had $580.3 million outstanding under our commercial paper program.

The highest level of borrowings during the first half of fiscal 2022 was $989.0 million.

We had $705.7 million outstanding under our commercial paper program as of May 30, 2021.

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For additional information about our long-term debt balances, refer to Note 4, " Long-Term Debt and Revolving Credit Facility " , to the Condensed Consolidated Financial Statements contained in this report and Note 4, " Long-Term Debt " , to the Consolidated Financial Statements contained in the Company ' s Annual Report on Form 10-K for the fiscal year ended May 30, 2021 .

The weighted average coupon interest rate of long-term debt obligations outstanding as of August 29, 2021, was approximately 4.4%.

We expect to maintain or have access to sufficient liquidity to retire or refinance long-term debt upon maturity, from operating cash flows, our commercial paper program, access to the capital markets, and our Revolving Credit Facility.

The weighted average coupon interest rate of long-term debt obligations outstanding as of November 28, 2021 , was approximately 4.4%.

We expect to maintain or have access to sufficient liquidity to retire or refinance long-term debt at maturity or otherwise, from operating cash flows, our commercial paper program, access to the capital markets, and our Revolving Credit Facility.

We continuously evaluate opportunities to refinance our debt;

however, any refinancing is subject to market conditions and other factors, including financing options that may be available to us from time to time, and there can be no assurance that we will be able to successfully refinance any debt on commercially acceptable terms at all.

As of the end of the first quarter of fiscal 2022, our senior long-term debt ratings were all investment grade.

As of the end of the second quarter of fiscal 2022, our senior long-term debt ratings were all investment grade.

A significant downgrade in our credit ratings would not affect our ability to borrow amounts under the Revolving Credit Facility, although borrowing costs would increase.

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Our most restrictive debt agreement (the Revolving Credit Facility) generally requires our ratio of EBITDA to interest expense be not less than 3.0 to 1.0 and our ratio of funded debt to EBITDA not to exceed 4.5 to 1.0, with each ratio to be calculated on a rolling four-quarter basis.

As of August 29, 2021, we were in compliance with these financial covenants.

As of November 28, 2021, we were in compliance with these financial covenants.

Equity and Dividends

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During the first quarter of fiscal 2022, we repurchased 1.5 million shares of our common stock under this authorization for an aggregate of $50.0 million.

The Company's total remaining share repurchase authorization as of August 29, 2021, was $1.07 billion.

On September 2, 2021 , the Company paid a quarterly cash dividend on shares of its common stock of $0.3125 per share to stockholders of record as of the close of business on August 3, 2021.

We did not repurchase any shares of common stock during the second quarter of fiscal 2022.

The Company's total remaining share repurchase authorization as of November 28, 2021, was $1.07 billion.

On December 1, 2021, the Company paid a quarterly cash dividend on shares of its common stock of $0.3125 per share to stockholders of record as of the close of business on November 1, 2021.

On December 8, 2021, our Board announced a quarterly dividend payment of $0.3125 per share to be paid on March 2, 2022, to stockholders of record as of close of business on January 31, 2022.

Contractual Obligations

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In addition to principal and interest payments on our outstanding long-term debt and notes payable balances, discussed above, our contractual obligations primarily consist of leases payments, income taxes, pension and postretirement benefits, and unconditional purchase obligations.

As of August 29, 2021, our finance and operating lease liabilities reported in our Condensed Consolidated Balance Sheet totaled $143.7 million and $260.8 million, respectively.

As of November 28, 2021, our finance and operating lease liabilities reported in our Condensed Consolidated Balance Sheet totaled $138.5 million and $255.5 million, respectively.

We have entered into contracts that are or contain a lease that have not yet commenced with aggregate payments totaling $279.4 million, as of November 28, 2021.

For additional information, refer to Note 15, "Leases" , to the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 2021 .

The liability for gross unrecognized tax benefits related to uncertain tax positions was $26.0 million as of August 29, 2021.

The liability for gross unrecognized tax benefits related to uncertain tax positions was $25.3 million as of November 28, 2021.

For additional information, refer to Note 10, " Income Taxes" , to the Condensed Consolidated Financial Statements contained in this report and Note 14, "Pre-Tax Income and Income Taxes" , to the Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 2021 .

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We expect to make payments totaling approximately $12.3 million and $9.0 million in fiscal 2022 to fund our pension and postretirement plans, respectively.

See Note 12 "Pension and Postretirement Benefits", to the Condensed Consolidated Financial Statements contained in this report and Note 18, "Pension and Postretirement Benefits" , to the Consolidated Financial Statements and "Critical Accounting Estimates – Employment-Related Benefits" contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 30, 2021 , for further discussion of our pension obligation and factors that could affect estimates of these obligations.

As of August 29, 2021, our unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices, such as "take-or-pay" contracts) totaled approximately $2.29 billion.

See Note 12 "Pension and Postretirement Benefits", to the

Condensed Consolidated Financial Statements contained in this report and Note 18, " Pension and Postretirement Benefits " , to the Consolidated Financial Statements and " Critical Accounting Estimate s – Employment - Related Benefits " contained in the Company ' s Annual Report on Form 10-K for the fiscal year ended May 30, 2021 , for further discussion of our pension obligation and factors that could affect estimates of these obligations.

As of November 28, 2021, our unconditional purchase obligations (i.e., obligations to transfer funds in the future for fixed or minimum quantities of goods or services at fixed or minimum prices, such as "take-or-pay" contracts) totaled approximately $1.83 billion.

Approximately $1.38 billion of this balance is due in less than one year.

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Some are not legally binding and/or may be cancellable.

Warehousing service agreements totaling approximately $400 million and obligations for leases that have not yet commenced totaling $282.2 million as of August 29, 2021, make up a majority of our remaining unconditional purchase obligations, with various terms of up to 20 years.

Warehousing service agreements totaling approximately $390 million make up a majority of our remaining unconditional purchase obligations, with various terms of up to 20 years.

Capital Expenditures

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The associated payments are included in net cash flows from operating activities within our Condensed Consolidated Statements of Cash Flows.

As of August 29, 2021 and May 31, 2020, $277.3 million and $279.3 million, respectively, of our total accounts payable was payable to suppliers who utilize this third-party service.

As of November 28, 2021 and May 31, 2020, $271.6 million and $279.3 million, respectively, of our total accounts payable was payable to suppliers who utilize this third-party service.

The program commenced at about the same time that we began an initiative to negotiate extended payment terms with our suppliers.

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A number of factors may impact our future payment terms , including our relative creditworthiness, overall market liquidity, and changes in interest rates and other general economic conditions.

During the first quarter of fiscal 2022, we used $12.2 million of cash, which was the net result of $139.8 million generated from operating activities, $154.9 million used in investing activities, $5.5 million generated from financing activities, and a decrease of $2.6 million due to the effects of changes in foreign currency exchange rates.

Cash generated from operating activities totaled $139.8 million and $284.5 million in the first quarter of fiscal 2022 and 2021, respectively.

The decrease in operating cash flows for the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 reflected the impact of realized input cost inflation.

Comparative changes in working capital balances were also negatively impacted by the timing of accounts receivable receipts.

This was partially offset by decreased tax and interest payments for the first quarter of fiscal 2022 compared to fiscal 2021.

During the first half of fiscal 2022, we used $11.5 million of cash, which was the net result of $262.1 million generated from operating activities, $244.2 million used in investing activities, $23.7 million used in financing activities, and a decrease of $5.7 million due to the effects of changes in foreign currency exchange rates.

Cash generated from operating activities totaled $262.1 million and $541.4 million in the first half of fiscal 2022 and 2021, respectively.

The decrease in operating cash flows for the first half of fiscal 2022 compared to the first half of fiscal 2021 was primarily driven by lower gross profits, which reflect the impact of realized input cost inflation and higher transportation costs.

Comparative changes in working capital balances were also negatively impacted by the timing of accounts payable payments.

This was partially offset by decreased tax, interest, and pension contribution payments for the first half of fiscal 2022 compared to fiscal 2021.

Tax payments for the first quarter of fiscal 2021 included approximately $47.0 million of fourth quarter fiscal 2020 tax payments, which were deferred due to the extension of the deadline for certain federal cash tax payments.

Operating cash flows in the first quarter of fiscal 2021 benefited from the deferral of approximately $15 million of employer payroll taxes under the Coronavirus Aid, Relief, and Economic Security Act.

Operating cash flows in the first half of fiscal 2021 benefited from the deferral of $29.2 million of employer payroll taxes under the Coronavirus Aid, Relief, and Economic Security Act.

Payments totaling 50% of such amounts will occur in the third quarter of both fiscal 2022 and 2023.

Cash used in investing activities totaled $154.9 million and $142.9 million in the first quarter of fiscal 2022 and 2021, respectively.

Net cash outflows from investing activities in the first quarter of fiscal 2022 and 2021 consisted primarily of capital expenditures totaling $154.9 million and $145.5 million, respectively.

Cash generated from financing activities totaled $5.5 million in the first quarter of fiscal 2022, compared to cash used of $259.6 million in the first quarter of fiscal 2021.

Financing activities in the first quarter of fiscal 2022 principally reflect net proceeds of $499.1 million from the issuance of $500.0 million aggregate principal amount of long-term debt, net short-term borrowing repayments of $248.8 million, cash dividends paid of $132.1 million, and common stock repurchases of $50.0 million.

Financing activities in the first quarter of fiscal 2021 consisted primarily of the repayment of long-term debt totaling $133.4 million and cash dividends paid of $103.5 million.

Cash used in investing activities totaled $244.2 million and $270.5 million in the first half of fiscal 2022 and 2021, respectively.

Net cash outflows from investing activities in the first half of fiscal 2022 and 2021 consisted primarily of capital expenditures totaling $257.5 million and $282.0 million, respectively.

Investing cash flows for the first half of fiscal 2021 also included proceeds from divestitures totaling $8.6 million, mainly from the sale of our H.K.

Anderson ® business.

Cash used in financing activities totaled $23.7 million and $760.0 million in the first half of fiscal 2022 and 2021, respectively.

Financing activities in the first half of fiscal 2022 principally reflect net proceeds of $499.1 million from the issuance of $500.0 million aggregate principal amount of long-term debt, net short-term borrowing repayments of $121.6 million, cash dividends paid of $282.0 million, and common stock repurchases of $50.0 million.

Financing activities in the first half of fiscal 2021 reflect repayments

of long-term debt of $1.88 billion, the issuance of long-term debt totaling $988.2 million, net short-term borrowings of $367.5 million, and cash dividends paid of $207.3 million.

Cash Held by International Subsidiaries

The Company had cash and cash equivalents of $67.0 million at August 29, 2021 and $79.2 million at May 30, 2021, of which $57.5 million at August 29, 2021, and $72.4 million at May 30, 2021, was held in foreign countries.

The Company had cash and cash equivalents of $68.7 million at November 28, 2021 and $79.2 million at May 30, 2021, of which $59.4 million at November 28, 2021, and $72.4 million at May 30, 2021 was held in foreign countries.

We believe that our foreign subsidiaries have invested or will invest any undistributed earnings indefinitely, or that any undistributed earnings will be remitted in a tax-neutral transaction, and, therefore, do not provide deferred taxes on the cumulative undistributed earnings of our foreign subsidiaries.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis