EXHIBIT 99.1
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma information is presented to show the estimated
effect of our acquisition of Diageo's worldwide Pillsbury operations
("Pillsbury"). The acquisition was effected as described in Item 2 to our Form
8-K filed November 2, 2001.
The pro forma combined statement of earnings combines the companies' respective
earnings statements as if the acquisition had occurred at the beginning of the
period presented. Since the acquisition was effected on October 31, 2001, our
consolidated statement of earnings for the twenty-six weeks ended November 25,
2001 is combined with Pillsbury's combined statement of operations for the five
months ended October 31, 2001, including an additional month of Pillsbury's
international operations to adjust for those international operations being
reported on a one-month lag basis following the acquisition. The unaudited pro
forma combined statement of earnings is based on the assumptions and adjustments
described in the accompanying notes.
The pro forma adjustments reflecting the consummation of the acquisition are
based upon the purchase method of accounting and upon the assumptions set forth
in the notes hereto, including the issuance of 134 million shares of General
Mills common stock and the subsequent repurchase from Diageo of 55 million
shares under a put option exercised by Diageo. This pro forma financial
information should be read in conjunction with the historical financial
statements of General Mills, filed as part of our Annual Report on Form 10-K for
the year ended May 27, 2001 and the historical financial statements of
Pillsbury, which are contained in the Registrant's current report on Form 8-K/A
filed on January 11, 2002.
The pro forma adjustments do not reflect cost savings from synergies which may
be realized subsequent to the acquisition.
The unaudited pro forma combined statement of earnings is not necessarily
indicative of the operating results that would have occurred had the acquisition
been consummated at the beginning of the period, for which the consummation of
the acquisition is being given effect. Therefore this unaudited pro forma
combined statement of earnings should not be construed as representative of
future operations. For purposes of preparing the General Mills' consolidated
financial statements, subsequent to the acquisition, General Mills will
establish a new basis for Pillsbury's assets and liabilities based upon the fair
values thereof and the General Mills purchase price, including the costs of the
acquisition. A final determination of required purchase accounting adjustments,
1
including the allocation of the purchase price to the assets acquired and
liabilities assumed based on their respective fair values, has not yet been
completed. Accordingly, the purchase accounting adjustments made in connection
with the development of the pro forma combined statement of earnings are
preliminary and have been made solely for purposes of developing such pro forma
combined financial information. General Mills has undertaken a study to
determine the fair value of certain of Pillsbury's assets and liabilities and
will make appropriate purchase accounting adjustments upon completion of that
study. The actual results of operations will differ, perhaps significantly, from
the pro forma amounts reflected herein.
PRO FORMA COMBINED STATEMENT OF EARNINGS
26 WEEKS ENDED NOVEMBER 25, 2001
(IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
PRO FORMA (A)
------------------------------------------
GENERAL
MILLS PILLSBURY DIVESTED MERGER
HISTORICAL HISTORICAL BUSINESSES ADJUSTMENTS COMBINED
---------- ---------- ---------- ----------- ----------
Sales .................................. $ 4,114 $ 2,600 $ (291) $ (B) $ 6,423
Cost of sales .......................... 1,760 1,465 (150) 3,075
Selling, general and administrative .... 1,656 860 (82) (87)(C) 2,347
Interest, net .......................... 118 255 (98)(D) 275
Unusual items .......................... 94 100 194
---------- ---------- ---------- ---------- ----------
Earnings (losses) before taxes and
earnings(losses) of joint ventures .. 486 (80) (59) 185 532
Income tax expense (benefit) ........... 176 7 (24) 47 (E) 206
Earnings (losses) from joint ventures .. 12 21 (3) 30
---------- ---------- ---------- ---------- ----------
Earnings (losses) before cumulative
effect of change in accounting
principle ........................... 322 (66) (38) 138 356
Cumulative effect of change in
accounting principle ................ (3) (3)
---------- ---------- ---------- ---------- ----------
Net earnings (losses)................... $ 319 $ (66) $ (38) $ 138 $ 353
========== ========== ========== ========== ==========
Earnings per share - basic:
Earnings before cumulative effect of
change in accounting principle ...... 1.09 N/A N/A N/A 0.98
Cumulative effect of change in
accounting principle ................ (0.01) N/A N/A N/A (0.01)
---------- ---------- ---------- ---------- ----------
Net earnings ........................... $ 1.08 N/A N/A N/A $ 0.97
========== ========== ========== ========== ==========
Average number of common shares ........ 296.0 N/A N/A 67.9 (F) 363.9
========== ========== ========== ========== ==========
Earnings per share - diluted:
Earnings before cumulative effect of
change in accounting principle ...... 1.05 N/A N/A N/A 0.95
Cumulative effect of change in
accounting principle ................ (0.01) N/A N/A N/A (0.01)
---------- ---------- ---------- ---------- ----------
Net earnings ........................... $ 1.04 N/A N/A N/A $ 0.94
========== ========== ========== ========== ==========
Average number of common shares -
assuming dilution ................... 306.6 N/A N/A 67.9 (F) 374.5
========== ========== ========== ========== ==========
NOTES TO PRO FORMA COMBINED STATEMENT OF EARNINGS (DOLLAR AMOUNTS IN MILLIONS)
(A) The accompanying pro forma combined statement of earnings for the
twenty-six weeks ended November 25, 2001 combines the General Mills
consolidated statement of earnings for the twenty-six weeks ended November
25, 2001 with the Pillsbury combined statement of earnings for the five
months ended October 31, 2001, including an additional month of Pillsbury's
international operations to adjust for those international operations being
reported on a one-month lag basis post acquisition, as if
2
the acquisition had been consummated at May 28, 2001. The Pillsbury
historical statement of earnings includes those revenues and expenses
either directly attributable to Pillsbury or that have been allocated based
upon methods considered reasonable by Diageo's management. Adjustments are
made to the pro forma combined statement of earnings to eliminate revenues
and expenses associated with divested businesses. The pro forma combined
statement of earnings does not include pro forma adjustments to reflect
cost savings from synergies which may be realized subsequent to the
acquisition. Not all nonrecurring transaction and integration costs
associated with the acquisition are reflected in this pro forma combined
statement of earnings. A final determination of the required purchase
accounting adjustments has not yet been made, and the earnings results will
vary from these pro forma earnings shown.
(B) Sales (and the implicit selling prices) are all as reported historically,
and have not been adjusted for any price changes.
(C) This adjustment represents the elimination of Pillsbury amortization of
intangibles. Since the study to determine the fair value of certain of
Pillsbury's assets and liabilities is not yet complete, the excess purchase
price has not been allocated to any intangible assets other than goodwill.
Therefore there is no additional amortization expense included in the pro
forma combined statement of earnings. When the study is complete and fair
value amounts are assigned to identifiable intangibles with definite lives,
there will be additional amortization expense included in the combined
statement of earnings, however we do not anticipate such amortization to be
material.
(D) The interest adjustment for the 26 weeks ended November 25, 2001 of a
reduction of $98 represents (1) the elimination of $245 of Pillsbury
interest expense on its payables to affiliates and (2) the addition of $147
for estimated interest expense (assuming a rate of 6.7%) for the debt that
will ultimately be included on the General Mills balance sheet as a result
of the Pillsbury acquisition and related divestitures.
The assumed interest rate is consistent with interest rate swaps entered
into in anticipation of the Pillsbury acquisition.
(E) The adjustment to tax expense results from providing taxes at a 37.0% rate
(net combined federal and state) on the pro forma pretax interest
adjustment. Any income tax benefit that Pillsbury had recorded associated
with its amortization of intangibles is also eliminated.
(F) This adjustment reflects the weighted impact of (1) the 134 million shares
of General Mills Common Stock issued to Diageo in the acquisition on
October 31, 2001 less (2) the 55 million shares repurchased from Diageo
under a put option exercised by Diageo on November 1, 2001. For purposes of
the pro forma information, such shares were deemed to be outstanding for
the entire pro forma period.
3