MINNEAPOLIS, Sept. 20, 2017 /PRNewswire/ -- General Mills
(NYSE: GIS) today reported results for the first quarter ended
August 27, 2017.
"Our number one priority in fiscal 2018 is strengthening our
topline performance," said General Mills Chief Executive Officer
Jeff Harmening. "Our
first-quarter net sales finished in line with our expectations, and
our focus on our global growth priorities drove important
improvement in our retail sales trends. This included a 300
basis point improvement in the U.S., with better results in each of
our top 5 categories. We anticipated a slow start to the year
on the bottom line, and we continue to expect sequential
improvement in profitability in the coming quarters. Looking
ahead, we're taking deliberate steps through innovation, brand
building, and increased organizational agility to position the
company for long-term top- and bottom-line growth, in line with our
shareholder return model."
General Mills' approach to long-term shareholder value creation
focuses on generating a balance of topline growth and margin
expansion, combined with disciplined focus on cash conversion and
cash returns. The company is pursuing its Consumer First
strategy by increasing investment in innovation and brand building
to drive improved net sales performance. For fiscal 2018, the
company has identified four global growth priorities: 1) growing
cereal globally, including CPW; 2) improving U.S. yogurt through
innovation; 3) investing in differential growth opportunities
including Häagen-Dazs ice cream, snack bars, Old
El Paso Mexican food, and its
portfolio of natural and organic food brands; and 4) managing
Foundation brands with appropriate investment. By directing
resources toward these global priorities, General Mills expects to
drive a 200 to 300 basis point improvement in its organic net sales
trends in fiscal 2018, which represents an important step in
returning the business to consistent organic net sales
growth.
First Quarter Results Summary
- Reported net sales declined 4 percent to $3.77 billion. Organic net sales was also down 4
percent, primarily reflecting volume declines in the North America
Retail and Asia & Latin America segments.
- Gross margin decreased 150 basis points to 34.8 percent
of net sales. Adjusted gross margin, which excludes certain items
affecting comparability, decreased 230 basis points to 35.1
percent, driven by higher input costs including currency-driven
inflation on imported products, deleverage, and unfavorable trade
expense phasing.
- Operating profit totaled $626
million, down 3 percent from last year due to lower sales
partially offset by lower restructuring costs. Operating profit
margin of 16.6 percent increased 10 basis points. Adjusted
operating profit margin decreased 210 basis points to 17.1 percent,
primarily reflecting lower adjusted gross margin and a 1 percent
increase in advertising and media expense, partially offset by
benefits from cost savings initiatives.
- Total segment operating profit of $664 million was down 16 percent in constant
currency.
- Net earnings attributable to General Mills totaled
$405 million, down 1 percent from a
year ago. Diluted EPS of $0.69
increased 3 percent, with lower net earnings offset by 4 percent
fewer average diluted shares outstanding.
- Adjusted diluted EPS, which excludes certain items
affecting comparability of results, totaled $0.71 in the first quarter, down 9 percent from
the prior year. Constant-currency adjusted diluted EPS also
declined 9 percent, reflecting lower adjusted operating profit,
partially offset by lower interest, taxes, and average diluted
shares outstanding in the quarter.
Operating Segment Results
Components of
Fiscal 2018 Reported Net Sales Growth
|
First
Quarter
|
Volume
|
Price/Mix
|
Foreign
Exchange
|
Reported
Net Sales
|
North America
Retail
|
(3) pts
|
(2) pts
|
--
|
(5)%
|
Convenience Stores
& Foodservice
|
--
|
--
|
--
|
Flat
|
Europe &
Australia
|
(1) pt
|
3 pts
|
1 pt
|
3%
|
Asia & Latin
America
|
(17) pts
|
9 pts
|
--
|
(8)%
|
Total
|
(4) pts
|
--
|
--
|
(4)%
|
Components of
Fiscal 2018 Organic Net Sales Growth
|
First
Quarter
|
Organic
Volume
|
Organic
Price/Mix
|
Organic
Net Sales
|
Foreign
Exchange
|
Acquisitions
&
Divestitures
|
Reported
Net Sales
|
North America
Retail
|
(3) pts
|
(2) pts
|
(5)%
|
--
|
--
|
(5)%
|
Convenience Stores
& Foodservice
|
--
|
--
|
Flat
|
--
|
--
|
Flat
|
Europe &
Australia
|
(1) pt
|
3 pts
|
2%
|
1 pt
|
--
|
3%
|
Asia & Latin
America
|
(17) pts
|
9 pts
|
(8)%
|
--
|
--
|
(8)%
|
Total
|
(4) pts
|
--
|
(4)%
|
--
|
--
|
(4)%
|
Fiscal 2018
Segment Operating Profit Growth
|
First
Quarter
|
% Change as
Reported
|
% Change in
Constant Currency
|
North America
Retail
|
(15)%
|
(15)%
|
Convenience Stores
& Foodservice
|
(8)%
|
(8)%
|
Europe &
Australia
|
(30)%
|
(31)%
|
Asia & Latin
America
|
(31)%
|
(33)%
|
Total
|
(16)%
|
(16)%
|
North America Retail Segment
First-quarter net sales for General Mills' North America Retail
segment totaled $2.44 billion, down 5
percent from the prior year, reflecting low single-digit declines
in contributions from volume and net price realization and
mix. Organic net sales also declined 5 percent. Net
sales were down double-digits in the U.S. Yogurt operating unit,
driven by continued declines for Yoplait Greek and
Yoplait Light products, partially offset by benefits from
the new Oui by Yoplait product launch. Net sales in
the U.S. cereal operating unit were down 7 percent, reflecting a
reduction in customer inventory levels and unfavorable trade
expense phasing, though cereal retail sales performance was much
stronger, with sales in Nielsen-measured outlets down 1
percent. U.S. Snacks net sales declined 2 percent in the
quarter, with declines on Fiber One partially offset by
growth on Lärabar and Nature Valley. Segment
operating profit of $533 million was
down 15 percent due primarily to lower volume, unfavorable trade
expense phasing, higher input costs, and an increase in advertising
and media expense.
Convenience Stores & Foodservice Segment
First-quarter net sales for the Convenience Stores &
Foodservice segment were essentially flat to year-ago levels at
$447 million, due largely to growth
in cereal and frozen meals offset by declines in yogurt and
biscuits. Organic net sales were also flat to last
year. Segment operating profit totaled $85 million compared to $93 million in the prior year, driven by higher
input costs, unfavorable mix, and a comparison to 16 percent profit
growth in the year-ago period.
Europe & Australia
Segment
First-quarter net sales for the Europe & Australia segment increased 3 percent to
$492 million, with benefits from net
price realization and mix and favorable foreign currency exchange,
partially offset by a modest decline in contributions from
volume. Organic net sales increased 2 percent.
Innovation, brand-building, and geographic expansion drove sales
and share growth for Häagen-Dazs ice cream and Nature
Valley and Fiber One snacks, while Yoplait yogurt
sales declined. Segment operating profit of $31 million was down $13
million versus the prior year, primarily driven by
significant input cost inflation, including currency-driven
inflation on products imported into the U.K.
Asia & Latin America
Segment
First-quarter net sales for the Asia & Latin
America segment totaled $392
million, down 8 percent from the prior year, primarily due
to the timing shift in reporting calendar in fiscal 2017 and
challenges related to an enterprise reporting system implementation
in Brazil. Organic net sales also declined 8 percent.
Segment operating profit decreased to $16 million from $22
million a year ago, reflecting lower sales as well as
currency-driven inflation on imported products.
Joint Venture Summary
First-quarter net sales for Cereal Partners Worldwide (CPW) grew
2 percent in constant currency, and constant-currency net sales for
Häagen-Dazs Japan (HDJ) increased 14 percent. Combined
after-tax earnings from joint ventures declined 2 percent to
$24 million. On a
constant-currency basis, after-tax earnings from joint ventures
were down 1 percent.
Other Income Statement Items
Unallocated corporate items totaled $33
million net expense in the first quarter of fiscal 2018,
compared to $82 million net expense a
year ago. Excluding mark-to-market valuation effects and
other items affecting comparability, unallocated corporate items
totaled $22 million net expense this
year compared to $37 million net
expense last year.
Restructuring, impairment, and other exit costs totaled
$5 million in the quarter compared to
$59 million a year ago. An
additional $14 million of
restructuring and project-related charges were recorded in cost of
sales this year compared to $27
million a year ago (please see Note 4 below for more
information on these charges).
Net interest expense totaled $72
million in the first quarter, a decrease of 2 percent from
year-ago levels. The effective tax rate in the quarter was
30.4 percent, compared to 30.9 percent last year (please see
Note 7 below for more information on our effective tax
rate). Excluding items affecting comparability, the
adjusted effective tax rate was 30.5 percent, compared to 31.4
percent a year ago.
Cash Flow Generation and Cash Returns
Cash provided by operating activities totaled $590 million in the first quarter of fiscal 2018,
up 59 percent from the prior year due to further improvements in
accounts payable as well as changes in trade and incentive
accruals. Capital investments in the quarter totaled
$116 million, down 24 percent from
the prior year. Dividends paid totaled $284 million. General Mills repurchased
10.9 million shares of common stock for a total of $600 million. Average diluted shares
outstanding for the first quarter declined 4 percent to 587
million.
Outlook
Harmening said, "We're encouraged by the improvement we saw in
first-quarter retail sales trends, and we're confident that
improved momentum will translate into stronger organic net sales
results in the rest of the year, beginning in the second
quarter. Importantly, we remain on track to deliver our
fiscal 2018 goals in a challenging and dynamic environment."
General Mills reiterated its key full-year fiscal 2018
targets:
- Organic net sales are expected to decline 1 to 2
percent, an improvement of 200 to 300 basis points over fiscal 2017
results.
- Constant-currency total segment operating profit is
expected to be in a range between flat and up 1 percent.
- Adjusted operating profit margin is expected to be above
year-ago levels.
- Constant-currency adjusted diluted EPS is expected to
increase 1 to 2 percent from the base of $3.08 earned in fiscal 2017. The company now
estimates currency translation will be a 1
cent benefit to full-year fiscal 2018 adjusted diluted
EPS.
General Mills will hold a briefing for investors today,
September 20, 2017, beginning at
8:30 a.m. Eastern time. You can
access the webcast from General Mills' internet home page:
generalmills.com.
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
that are based on our current expectations and assumptions. These
forward-looking statements, including the statements under the
caption "Outlook," and statements made by Mr. Harmening, are
subject to certain risks and uncertainties that could cause actual
results to differ materially from the potential results discussed
in the forward-looking statements. In particular, our predictions
about future net sales and earnings could be affected by a variety
of factors, including: competitive dynamics in the consumer foods
industry and the markets for our products, including new product
introductions, advertising activities, pricing actions, and
promotional activities of our competitors; economic conditions,
including changes in inflation rates, interest rates, tax rates, or
the availability of capital; product development and innovation;
consumer acceptance of new products and product improvements;
consumer reaction to pricing actions and changes in promotion
levels; acquisitions or dispositions of businesses or assets;
changes in capital structure; changes in the legal and regulatory
environment, including labeling and advertising regulations and
litigation; impairments in the carrying value of goodwill, other
intangible assets, or other long-lived assets, or changes in the
useful lives of other intangible assets; changes in accounting
standards and the impact of significant accounting estimates;
product quality and safety issues, including recalls and product
liability; changes in consumer demand for our products;
effectiveness of advertising, marketing, and promotional programs;
changes in consumer behavior, trends, and preferences, including
weight loss trends; consumer perception of health-related issues,
including obesity; consolidation in the retail environment; changes
in purchasing and inventory levels of significant customers;
fluctuations in the cost and availability of supply chain
resources, including raw materials, packaging, and energy;
disruptions or inefficiencies in the supply chain; effectiveness of
restructuring and cost savings initiatives; volatility in the
market value of derivatives used to manage price risk for certain
commodities; benefit plan expenses due to changes in plan asset
values and discount rates used to determine plan liabilities;
failure or breach of our information technology systems; foreign
economic conditions, including currency rate fluctuations; and
political unrest in foreign markets and economic uncertainty due to
terrorism or war. The company undertakes no obligation to
publicly revise any forward-looking statement to reflect any future
events or circumstances.
Consolidated
Statements of Earnings and Supplementary Information
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions, Except per Share Data)
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Aug.
27,
|
|
Aug.
28,
|
|
|
|
|
2017
|
|
2016
|
|
%
Change
|
Net sales
|
$
|
3,769.2
|
|
$
|
3,907.9
|
|
(3.5)
|
%
|
Cost of
sales
|
|
2,459.1
|
|
|
2,491.0
|
|
(1.3)
|
%
|
Selling,
general, and administrative expenses
|
|
679.1
|
|
|
712.2
|
|
(4.6)
|
%
|
Restructuring,
impairment, and other
exit
costs
|
|
5.2
|
|
|
58.9
|
|
(91.2)
|
%
|
Operating
profit
|
|
625.8
|
|
|
645.8
|
|
(3.1)
|
%
|
Interest,
net
|
|
72.4
|
|
|
73.9
|
|
(2.0)
|
%
|
Earnings before
income taxes and after-tax
earnings from
joint ventures
|
|
553.4
|
|
|
571.9
|
|
(3.2)
|
%
|
Income
taxes
|
|
168.5
|
|
|
176.6
|
|
(4.6)
|
%
|
After-tax earnings
from joint ventures
|
|
23.7
|
|
|
24.2
|
|
(2.1)
|
%
|
Net earnings,
including earnings attributable
to redeemable
and noncontrolling interests
|
|
408.6
|
|
|
419.5
|
|
(2.6)
|
%
|
Net earnings
attributable to redeemable
and
noncontrolling interests
|
|
3.9
|
|
|
10.5
|
|
(62.9)
|
%
|
Net earnings
attributable to General Mills
|
$
|
404.7
|
|
$
|
409.0
|
|
(1.1)
|
%
|
Earnings per share -
basic
|
$
|
0.70
|
|
$
|
0.68
|
|
2.9
|
%
|
Earnings per share -
diluted
|
$
|
0.69
|
|
$
|
0.67
|
|
3.0
|
%
|
Dividends per
share
|
$
|
0.49
|
|
$
|
0.48
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Aug.
27,
|
|
Aug.
28,
|
|
Basis
Pt
|
|
Comparisons as a % of
net sales:
|
|
2017
|
|
2016
|
|
Change
|
|
Gross
margin
|
|
34.8
%
|
|
|
36.3 %
|
|
(150)
|
|
Selling,
general, and administrative expenses
|
|
18.0
%
|
|
|
18.2 %
|
|
(20)
|
|
Operating
profit
|
|
16.6
%
|
|
|
16.5 %
|
|
10
|
|
Net earnings
attributable to General Mills
|
|
10.7
%
|
|
|
10.5 %
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
Comparisons as a % of
net sales excluding
|
|
Aug.
27,
|
|
Aug.
28,
|
|
Basis
Pt
|
|
certain
items affecting comparability (a):
|
|
2017
|
|
2016
|
|
Change
|
|
Adjusted gross
margin
|
|
35.1
%
|
|
|
37.4 %
|
|
(230)
|
|
Adjusted
operating profit
|
|
17.1
%
|
|
|
19.2 %
|
|
(210)
|
|
Adjusted net
earnings attributable to General Mills
|
|
11.0
%
|
|
|
12.2 %
|
|
(120)
|
|
|
(a) See Note 8 for a
reconciliation of these measures not defined by generally accepted
accounting principles (GAAP).
|
See accompanying
notes to consolidated financial statements.
|
|
Operating Segment
Results and Supplementary Information
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Aug. 27,
2017
|
|
|
Aug. 28,
2016
|
|
%
Change
|
|
Net sales:
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
2,438.2
|
|
$
|
2,557.0
|
|
(4.6)
|
%
|
Europe &
Australia
|
|
491.9
|
|
|
478.4
|
|
2.8
|
%
|
Convenience Stores
& Foodservice
|
|
447.1
|
|
|
446.3
|
|
0.2
|
%
|
Asia & Latin
America
|
|
392.0
|
|
|
426.2
|
|
(8.0)
|
%
|
Total
|
$
|
3,769.2
|
|
$
|
3,907.9
|
|
(3.5)
|
%
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
533.2
|
|
$
|
628.2
|
|
(15.1)
|
%
|
Europe &
Australia
|
|
30.6
|
|
|
43.9
|
|
(30.3)
|
%
|
Convenience Stores
& Foodservice
|
|
84.8
|
|
|
92.7
|
|
(8.5)
|
%
|
Asia & Latin
America
|
|
15.5
|
|
|
22.3
|
|
(30.5)
|
%
|
Total segment
operating profit
|
|
664.1
|
|
|
787.1
|
|
(15.6)
|
%
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
items
|
|
33.1
|
|
|
82.4
|
|
(59.8)
|
%
|
Restructuring,
impairment, and
other exit
costs
|
|
5.2
|
|
|
58.9
|
|
(91.2)
|
%
|
Operating
profit
|
$
|
625.8
|
|
$
|
645.8
|
|
(3.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Aug. 27,
2017
|
|
|
Aug. 28,
2016
|
|
Basis Pt
Change
|
|
Segment operating
profit as a
% of net
sales:
|
|
|
|
|
|
|
|
|
North America
Retail
|
|
21.9%
|
|
|
24.6%
|
|
(270)
|
|
Europe &
Australia
|
|
6.2%
|
|
|
9.2%
|
|
(300)
|
|
Convenience Stores
& Foodservice
|
|
19.0%
|
|
|
20.8%
|
|
(180)
|
|
Asia & Latin
America
|
|
4.0%
|
|
|
5.2%
|
|
(120)
|
|
Total segment
operating profit
|
|
17.6%
|
|
|
20.1%
|
|
(250)
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
Consolidated
Balance Sheets
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(In Millions, Except
Par Value)
|
|
|
|
|
|
|
|
|
|
|
|
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
|
May 28,
2017
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
820.8
|
|
$
|
765.7
|
|
$
|
766.1
|
Receivables
|
|
|
1,546.5
|
|
|
1,446.1
|
|
|
1,430.1
|
Inventories
|
|
|
1,595.2
|
|
|
1,547.5
|
|
|
1,483.6
|
Prepaid
expenses and other current assets
|
|
|
376.0
|
|
|
433.7
|
|
|
381.6
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,338.5
|
|
|
4,193.0
|
|
|
4,061.4
|
|
|
|
|
|
|
|
|
|
|
Land, buildings, and
equipment
|
|
|
3,648.1
|
|
|
3,655.3
|
|
|
3,687.7
|
Goodwill
|
|
|
8,832.3
|
|
|
8,758.2
|
|
|
8,747.2
|
Other intangible
assets
|
|
|
4,593.3
|
|
|
4,552.2
|
|
|
4,530.4
|
Other
assets
|
|
|
797.4
|
|
|
754.4
|
|
|
785.9
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
22,209.6
|
|
$
|
21,913.1
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,172.9
|
|
$
|
1,944.8
|
|
$
|
2,119.8
|
Current
portion of long-term debt
|
|
|
604.7
|
|
|
1,103.4
|
|
|
604.7
|
Notes
payable
|
|
|
1,660.3
|
|
|
690.5
|
|
|
1,234.1
|
Other
current liabilities
|
|
|
1,452.0
|
|
|
1,476.4
|
|
|
1,372.2
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
5,889.9
|
|
|
5,215.1
|
|
|
5,330.8
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
7,822.7
|
|
|
7,078.0
|
|
|
7,642.9
|
Deferred income
taxes
|
|
|
1,761.0
|
|
|
1,442.7
|
|
|
1,719.4
|
Other
liabilities
|
|
|
1,485.6
|
|
|
2,047.7
|
|
|
1,523.1
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
16,959.2
|
|
|
15,783.5
|
|
|
16,216.2
|
|
|
|
|
|
|
|
|
|
|
Redeemable
interest
|
|
|
967.5
|
|
|
841.0
|
|
|
910.9
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, 754.6 shares issued, $0.10 par value
|
|
|
75.5
|
|
|
75.5
|
|
|
75.5
|
Additional paid-in capital
|
|
|
1,070.7
|
|
|
1,185.1
|
|
|
1,120.9
|
Retained
earnings
|
|
|
13,259.3
|
|
|
12,734.6
|
|
|
13,138.9
|
Common stock in
treasury, at cost,
shares of 186.4, 160.0 and 177.7
|
|
|
(8,269.7)
|
|
|
(6,602.2)
|
|
|
(7,762.9)
|
Accumulated other comprehensive loss
|
|
|
(2,232.0)
|
|
|
(2,484.7)
|
|
|
(2,244.5)
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
3,903.8
|
|
|
4,908.3
|
|
|
4,327.9
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
|
|
379.1
|
|
|
380.3
|
|
|
357.6
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
4,282.9
|
|
|
5,288.6
|
|
|
4,685.5
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
22,209.6
|
|
$
|
21,913.1
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions)
|
|
Quarter
Ended
|
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
Cash Flows -
Operating Activities
|
|
|
|
|
|
Net
earnings, including earnings attributable to redeemable
|
|
|
|
|
|
and noncontrolling interests
|
$
|
408.6
|
|
$
|
419.5
|
Adjustments to reconcile net earnings to net cash
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
145.1
|
|
|
152.5
|
After-tax earnings from joint ventures
|
|
(23.7)
|
|
|
(24.2)
|
Distributions of earnings from joint ventures
|
|
29.0
|
|
|
26.4
|
Stock-based compensation
|
|
29.6
|
|
|
38.8
|
Deferred income taxes
|
|
38.2
|
|
|
36.0
|
Pension and other postretirement benefit plan
contributions
|
|
(5.9)
|
|
|
(11.3)
|
Pension and other postretirement benefit plan costs
|
|
1.1
|
|
|
8.9
|
Restructuring, impairment, and other exit costs
|
|
(9.2)
|
|
|
56.6
|
Changes in current assets and liabilities
|
|
(17.8)
|
|
|
(327.6)
|
Other, net
|
|
(4.5)
|
|
|
(4.8)
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
590.5
|
|
|
370.8
|
|
|
|
|
|
|
Cash Flows -
Investing Activities
|
|
|
|
|
|
Purchases of land, buildings, and equipment
|
|
(116.3)
|
|
|
(153.5)
|
Investments in affiliates, net
|
|
(6.6)
|
|
|
8.1
|
Proceeds
from disposal of land, buildings, and equipment
|
|
0.4
|
|
|
0.4
|
Exchangeable note
|
|
-
|
|
|
13.0
|
Other,
net
|
|
(0.3)
|
|
|
4.7
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
(122.8)
|
|
|
(127.3)
|
|
|
|
|
|
|
Cash Flows -
Financing Activities
|
|
|
|
|
|
Change
in notes payable
|
|
413.8
|
|
|
419.6
|
Proceeds
from common stock issued on exercised options
|
|
41.0
|
|
|
63.6
|
Purchases of common stock for treasury
|
|
(600.3)
|
|
|
(399.7)
|
Dividends paid
|
|
(284.3)
|
|
|
(290.9)
|
Distributions to noncontrolling and redeemable interest
holders
|
|
(1.5)
|
|
|
(1.2)
|
Other,
net
|
|
(20.0)
|
|
|
(29.6)
|
|
|
|
|
|
|
Net cash used by financing activities
|
|
(451.3)
|
|
|
(238.2)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
38.3
|
|
|
(3.3)
|
Increase in cash and
cash equivalents
|
|
54.7
|
|
|
2.0
|
Cash and cash
equivalents - beginning of year
|
|
766.1
|
|
|
763.7
|
|
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$
|
820.8
|
|
$
|
765.7
|
|
|
|
|
|
|
Cash Flow from
changes in current assets and liabilities:
|
|
|
|
|
|
Receivables
|
$
|
(88.1)
|
|
$
|
(81.7)
|
Inventories
|
|
(89.9)
|
|
|
(122.2)
|
Prepaid
expenses and other current assets
|
|
12.1
|
|
|
(34.2)
|
Accounts
payable
|
|
78.6
|
|
|
(49.7)
|
Other
current liabilities
|
|
69.5
|
|
|
(39.8)
|
|
|
|
|
|
|
Changes in current
assets and liabilities
|
$
|
(17.8)
|
|
$
|
(327.6)
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The accompanying
Consolidated Financial Statements of General Mills, Inc. (we, us,
our, General Mills, or the Company) have been prepared in
accordance with accounting principles generally accepted in
the United States for annual and
interim financial information. In the opinion of management, all
adjustments considered necessary for a fair presentation have been
included and are of a normal recurring nature.
(2) In the third quarter of
fiscal 2017, we announced a new global organization structure to
streamline our leadership, enhance global scale, and drive improved
operational agility to maximize our growth capabilities. As a
result of this global reorganization, beginning in the third
quarter of fiscal 2017, we report results for our four operating
segments as follows: North America Retail; Convenience Stores &
Foodservice; Europe &
Australia; and Asia & Latin
America. We have restated our net sales by segment and
segment operating profit amounts to reflect our new operating
segments. These segment changes had no effect on previously
reported consolidated net sales, operating profit, net earnings
attributable to General Mills, or earnings per share.
Our North America Retail operating segment
consists of our former U.S. Retail operating units and our
Canada region. Within our North
America Retail operating segment, our former U.S. Meals operating
unit and U.S. Baking operating unit have been combined into one
operating unit: U.S. Meals & Baking. Our Convenience Stores
& Foodservice operating segment was unchanged. Our Europe & Australia operating segment consists of our
former Europe region. Our
Asia & Latin America operating segment consists of
our former Asia/Pacific and
Latin America regions.
(3) During the second quarter of
fiscal 2017, we sold our Martel,
Ohio manufacturing facility in our Convenience Stores &
Foodservice segment and simultaneously entered into a co-packing
arrangement with the purchaser. We received $17.5 million in cash, and recorded a
pre-tax loss of $13.5 million.
(4) We are currently pursuing
several multi-year restructuring initiatives designed to increase
our efficiency and focus our business behind our key growth
strategies. Charges related to these activities were as
follows:
|
|
Quarter
Ended
|
In
Millions
|
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
Cost of
sales
|
$
|
12.3
|
$
|
13.6
|
Restructuring,
impairment, and other exit costs
|
|
5.2
|
|
58.9
|
Total restructuring
charges
|
|
17.5
|
|
72.5
|
Project-related costs
classified in cost of sales
|
$
|
1.2
|
$
|
13.8
|
Details of our current restructuring initiatives were as
follows:
|
As
Reported
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Fiscal
Years
|
|
Estimated
|
In
Millions
|
Aug. 27,
2017
|
Aug. 28,
2016
|
|
2015 -
2017
|
|
Future
|
Total
|
|
|
Charge
|
Cash
|
Charge
|
Cash
|
|
Charge
|
Cash
|
|
Charge
|
Cash
|
Charge
|
Cash
|
Savings
(b)
|
Global
reorganization
|
$0.8
|
$15.6
|
$-
|
$-
|
|
$72.1
|
$20.0
|
|
$2
|
$39
|
$75
|
$75
|
|
Closure of Melbourne,
Australia plant
|
2.1
|
0.8
|
-
|
-
|
|
21.9
|
1.6
|
|
10
|
1
|
34
|
3
|
|
Restructuring of
certain international product lines
|
-
|
-
|
36.4
|
3.3
|
|
45.1
|
10.3
|
|
(3)
|
(10)
|
42
|
-
|
|
Closure of Vineland,
New Jersey plant
|
13.4
|
6.0
|
20.9
|
-
|
|
41.4
|
7.3
|
|
-
|
(1)
|
55
|
12
|
|
Project
Compass
|
(0.2)
|
2.4
|
1.0
|
4.3
|
|
54.3
|
48.9
|
|
-
|
3
|
54
|
54
|
|
Project
Century
|
1.4
|
1.6
|
14.2
|
7.6
|
|
408.4
|
95.5
|
|
4
|
46
|
414
|
143
|
|
Project
Catalyst
|
-
|
-
|
-
|
(0.4)
|
|
140.9
|
94.1
|
|
-
|
-
|
141
|
94
|
|
Combination of
certain operational facilities
|
|
0.3
|
-
|
1.1
|
|
13.3
|
16.3
|
|
2
|
(3)
|
15
|
14
|
|
Total restructuring
charges (a)
|
17.5
|
26.7
|
72.5
|
15.9
|
|
797.4
|
294.0
|
|
15
|
75
|
830
|
395
|
|
Project-related
costs
|
1.2
|
2.7
|
13.8
|
16.7
|
|
114.6
|
111.1
|
|
12
|
16
|
128
|
130
|
|
Restructuring charges
and project-related costs
|
$18.7
|
$29.4
|
$86.3
|
$32.6
|
|
$912.0
|
$405.1
|
|
$27
|
$91
|
$958
|
$525
|
$700
|
(a)
|
Includes $12.3
million of restructuring charges recorded in cost of sales in the
first quarter of fiscal 2018 and $13.6 million in the first quarter
of fiscal 2017.
|
(b)
|
Cumulative annual
savings versus fiscal 2015 base, targeted by fiscal 2018. Includes
savings from SG&A cost reduction projects.
|
(5) Unallocated corporate expense
totaled $33 million in the first
quarter of fiscal 2018 compared to $82
million in the same period in fiscal 2017. In the first
quarter of fiscal 2018, we recorded $12
million of restructuring charges and $1 million of restructuring initiative
project-related costs in cost of sales compared to $14 million of restructuring charges and
$14 million of restructuring
initiative project-related costs in cost of sales in the same
period last year. In addition, we recorded a $2 million net decrease in expense related to the
mark-to-market valuation of certain commodity positions and grain
inventories in the first quarter of fiscal 2018 compared to a
$17 million net increase in expense
in the same period last year.
(6) Basic and diluted earnings per
share (EPS) were calculated as follows:
|
|
|
Quarter
Ended
|
In Millions,
Except per Share Data
|
|
|
Aug. 27,
2017
|
|
|
Aug. 28,
2016
|
Net earnings
attributable to General Mills
|
|
$
|
404.7
|
|
$
|
409.0
|
|
|
|
|
|
|
|
Average number of
common shares - basic EPS
|
|
|
576.5
|
|
|
600.0
|
Incremental share
effect from: (a)
|
|
|
|
|
|
|
Stock
options
|
|
|
8.3
|
|
|
9.5
|
Restricted
stock, restricted stock units, and other
|
|
|
2.1
|
|
|
2.9
|
Average number of
common shares - diluted EPS
|
|
|
586.9
|
|
|
612.4
|
Earnings per share -
basic
|
|
$
|
0.70
|
|
$
|
0.68
|
Earnings per share -
diluted
|
|
$
|
0.69
|
|
$
|
0.67
|
(a)
|
Incremental shares
from stock options, restricted stock units, and performance share
units are computed by the treasury stock method.
|
(7) The effective tax rate for
the first quarter of fiscal 2018 was 30.4 percent compared to 30.9
percent for the first quarter of fiscal 2017. The 0.5 percentage
point decrease was primarily due to the impact of the prospective
adoption of the new accounting standard related to windfall tax
benefits from stock-based payments, partially offset by certain
discrete items.
(8) We have included measures in this
release that are not defined by GAAP. 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 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.
We provide organic net sales growth rates for our
consolidated net sales and segment net sales. We believe that
organic net sales growth rates provide useful information to
investors because they provide transparency to underlying
performance in our net sales by excluding the effect that foreign
currency exchange rate fluctuations, as well as acquisitions,
divestitures, and a 53rd week, when applicable, have on
year-to-year comparability. A reconciliation of these measures to
reported net sales growth rates, the relevant GAAP measures, are
included in our Operating Segment Results above.
Certain measures in this release are presented excluding the
impact of foreign currency exchange (constant-currency). 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. We believe that these constant-currency
measures provide useful information to investors because they
provide transparency to underlying performance by excluding the
effect that foreign currency exchange rate fluctuations have on
period-to-period comparability given volatility in foreign currency
exchange markets.
Our fiscal 2018 outlook for organic net sales growth, constant
currency total segment operating profit and adjusted diluted EPS,
and adjusted operating profit margin are non-GAAP financial
measures that exclude, or have otherwise been adjusted for, items
impacting comparability, including the effect of foreign currency
exchange rate fluctuations, restructuring charges and
project-related costs, and mark-to-market effects. Our fiscal 2018
outlook for organic net sales growth also excludes the effect of
acquisitions and divestitures. We are not able to reconcile these
forward-looking non-GAAP financial measures to their most directly
comparable forward-looking GAAP financial measures without
unreasonable efforts because we are unable to predict with a
reasonable degree of certainty the actual impact of changes in
foreign currency exchange rates and commodity prices or the timing
of acquisitions, divestitures and restructuring actions throughout
fiscal 2018. The unavailable information could have a significant
impact on our fiscal 2018 GAAP financial results.
For fiscal 2018, we currently expect: foreign currency
exchange rates (based on blend of forward and forecasted rates and
hedge positions), acquisitions, and divestitures to have an
immaterial impact on net sales growth; foreign currency exchange
rates to have an immaterial impact on total segment operating
profit and adjusted diluted EPS growth; and total restructuring
charges and project-related costs related to actions previously
announced to total approximately $42
million.
Diluted EPS Excluding Certain Items Affecting Comparability and
the Related Constant-currency Growth Rates
This measure is used in reporting to our executive management
and as a component of the Board of Directors' measurement of our
performance for incentive compensation purposes. 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-over-year basis. The adjustments are either
items resulting from infrequently occurring events or items that,
in management's judgment, significantly affect the year-over-year
assessment of operating results.
|
Quarter
Ended
|
Per Share
Data
|
|
Aug. 27,
2017
|
|
|
Aug. 28,
2016
|
Change
|
|
Diluted earnings per
share, as reported
|
$
|
0.69
|
|
$
|
0.67
|
3
|
%
|
Mark-to-market
effects (a)(c)
|
|
-
|
|
|
0.02
|
|
|
Restructuring
charges (b)(c)
|
|
0.02
|
|
|
0.08
|
|
|
Project-related costs (b)(c)
|
|
-
|
|
|
0.01
|
|
|
Diluted earnings per
share, excluding
certain
items affecting
comparability
|
$
|
0.71
|
|
$
|
0.78
|
(9)
|
%
|
Foreign currency
exchange impact
|
|
|
|
|
|
Flat
|
|
Diluted earnings per
share growth,
|
|
|
|
|
|
|
|
excluding certain items affecting
|
|
|
|
|
|
|
|
comparability, on a constant-currency basis
|
|
|
|
|
|
(9)
|
%
|
(a)
|
See Note
5.
|
(b)
|
See Note
4.
|
(c)
|
See reconciliation of
effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
Total Segment Operating Profit
This measure is used in reporting to our executive management
and as a component of the Board of Directors' measurement of our
performance for incentive compensation purposes. We believe that
this measure provides useful information to investors because it is
the profitability measure we use to evaluate segment
performance. A reconciliation of total segment operating
profit to the relevant GAAP measure, operating profit, is included
in the Statements of Operating Segment Results.
Constant-currency Total Segment Operating Profit Growth
Rates
|
|
|
|
|
Percentage Change
in
Total Segment
Operating Profit as
Reported
|
Impact of
Foreign
Currency
Exchange
|
Percentage Change
in
Total Segment Operating
Profit on a Constant-
Currency Basis
|
Quarter Ended Aug.
27, 2017
|
|
(16)%
|
Flat
|
(16)%
|
|
|
|
|
|
|
|
|
Constant-currency Segment Operating Profit Growth Rates
|
|
Quarter Ended Aug.
27, 2017
|
|
|
Percentage Change
in
Segment Operating Profit
as
Reported
|
Impact of
Foreign
Currency
Exchange
|
Percentage Change
in Segment Operating
Profit on Constant-Currency
Basis
|
North America
Retail
|
|
(15)%
|
Flat
|
(15)%
|
Europe &
Australia
|
|
(30)%
|
1 pt
|
(31)%
|
Asia & Latin
America
|
|
(31)%
|
2 pts
|
(33)%
|
|
|
|
|
|
|
|
|
Constant-currency After-tax Earnings from Joint Ventures Growth
Rates
|
|
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
|
Quarter Ended Aug.
27, 2017
|
|
(2)%
|
(1)
pt
|
(1)%
|
|
|
|
|
|
|
|
|
Earnings Comparisons as a Percent of Net Sales Excluding Certain
Items Affecting Comparability
We believe that these measures provide useful information to
investors because they are important for assessing these measures
excluding certain items affecting comparability. The adjustments
are either items resulting from infrequently occurring events or
items that, in management's judgment, significantly affect the
quarter-over-quarter assessment of operating results.
|
Quarter
Ended
|
In
Millions
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of
Net
Sales
|
|
|
Value
|
|
Percent
of
Net
Sales
|
Gross margin as
reported (a)
|
$
|
1,310.1
|
|
34.8
|
%
|
|
$
|
1,416.9
|
|
36.3
|
%
|
Mark-to-market
effects (b)
|
|
(1.8)
|
|
-
|
%
|
|
|
16.6
|
|
0.4
|
%
|
Restructuring
charges (c)
|
|
12.3
|
|
0.3
|
%
|
|
|
13.6
|
|
0.3
|
%
|
Project-related costs (c)
|
|
1.2
|
|
-
|
%
|
|
|
13.8
|
|
0.4
|
%
|
Adjusted gross
margin
|
$
|
1,321.8
|
|
35.1
|
%
|
|
$
|
1,460.9
|
|
37.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
625.8
|
|
16.6
|
%
|
|
$
|
645.8
|
|
16.5
|
%
|
Mark-to-market
effects (b)
|
|
(1.8)
|
|
-
|
%
|
|
|
16.6
|
|
0.4
|
%
|
Restructuring
charges (c)
|
|
17.5
|
|
0.5
|
%
|
|
|
72.5
|
|
1.9
|
%
|
Project-related costs (c)
|
|
1.2
|
|
-
|
%
|
|
|
13.8
|
|
0.4
|
%
|
Adjusted operating
profit
|
$
|
642.7
|
|
17.1
|
%
|
|
$
|
748.7
|
|
19.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
404.7
|
|
10.7
|
%
|
|
$
|
409.0
|
|
10.5
|
%
|
Mark-to-market
effects, net of tax (b)(d)
|
|
(1.1)
|
|
-
|
%
|
|
|
10.5
|
|
0.3
|
%
|
Restructuring
charges, net of tax (c)(d)
|
|
11.6
|
|
0.3
|
%
|
|
|
48.3
|
|
1.2
|
%
|
Project-related costs, net of tax (c)(d)
|
|
0.8
|
|
-
|
%
|
|
|
8.8
|
|
0.2
|
%
|
Adjusted net earnings
attributable to General Mills
|
$
|
416.0
|
|
11.0
|
%
|
|
$
|
476.6
|
|
12.2
|
%
|
(a) Net sales less cost
of sales.
|
(b) See Note 5.
|
(c) See Note
4.
|
(d) See reconciliation of
effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
Effective Income Tax Rate Excluding Certain Items Affecting
Comparability
We believe this measure provides useful information to investors
because it is important for assessing the effective tax rate
excluding certain items affecting comparability and presents the
income tax effects of certain items affecting comparability.
|
Quarter
Ended
|
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
In Millions
(Except Per Share Data)
|
Pretax
Earnings (a)
|
Income
Taxes
|
|
Pretax
Earnings (a)
|
Income
Taxes
|
As
reported
|
$553.4
|
$168.5
|
|
$571.9
|
$176.6
|
Mark-to-market effects (b)
|
(1.8)
|
(0.7)
|
|
16.6
|
6.1
|
Restructuring charges (c)
|
17.5
|
5.9
|
|
72.5
|
24.2
|
Project-related costs (c)
|
1.2
|
0.3
|
|
13.8
|
5.0
|
As
adjusted
|
$570.3
|
$174.0
|
|
$674.8
|
$211.9
|
Effective tax
rate:
|
|
|
|
|
|
As
reported
|
|
30.4%
|
|
|
30.9%
|
As
adjusted
|
|
30.5%
|
|
|
31.4%
|
Sum of adjustment to
income taxes
|
$
|
5.5
|
|
$
|
35.3
|
Average number of
common shares - diluted EPS
|
586.9
|
|
|
612.4
|
Impact of income tax
adjustments on diluted EPS
excluding certain items affecting comparability
|
$0.01
|
|
|
$0.06
|
(a) Earnings before
income taxes and after-tax earnings from joint ventures.
|
(b) See Note 5.
|
(c) See Note
4.
|
Free Cash Flow
We believe this measure provides useful information to investors
because it is an important indication of our ability to generate
cash. We define free cash flow as net cash provided by operating
activities less purchases of land, buildings, and equipment. The
calculation of free cash flow follows:
|
Quarter
Ended
|
In
Millions
|
Aug. 27,
2017
|
|
Aug. 28,
2016
|
Net cash provided by
operating activities
|
$590.5
|
|
$370.8
|
Purchases of land,
buildings, and equipment
|
(116.3)
|
|
(153.5)
|
Free cash
flow
|
$474.2
|
|
$217.3
|
About General Mills
General Mills is a leading global food company that serves the
world by making food people love. Its brands include
Cheerios, Annie's, Yoplait, Nature
Valley, Fiber
One, Häagen-Dazs, Betty
Crocker, Pillsbury, Old El
Paso, Wanchai
Ferry, Yoki and more. Headquartered
in Minneapolis, Minnesota,
USA, General Mills generated fiscal 2017 consolidated net
sales of US $15.6 billion, as well as another US $1.0
billion from its proportionate share of joint-venture net
sales.
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SOURCE General Mills, Inc.