EXHIBIT 99.1
FOR IMMEDIATE RELEASE
June 25, 2003
CONTACTS: (Media) Marybeth Thorsgaard (763) 764-6364
-------- (Analysts) Kris Wenker (763) 764-2607
GENERAL MILLS REPORTS FISCAL 2003 RESULTS
(MINNEAPOLIS, MINN.) - General Mills (NYSE:GIS) today reported strong
results for the fourth quarter and full 2003 fiscal year. Diluted earnings per
share (EPS) were $2.43 for the fiscal year ended May 25, 2003, up 81 percent
from $1.34 in 2002. Net earnings doubled to $917 million from $458 million
earned in 2002. Both years included certain costs primarily related to the
company's acquisition of Pillsbury on October 31, 2001. These costs (described
in detail below) are the restructuring and other exit costs identified on the
consolidated statements of earnings, and merger-related costs included in
selling, general and administrative expenses. These costs amounted to $132
million pretax, $85 million after tax in 2003, and $186 million pretax, $118
million after tax in 2002. Excluding these restructuring, other exit and
merger-related costs, fiscal 2003 diluted earnings per share would total $2.65,
up 56 percent from $1.70 earned last year.
Annual net sales increased 32 percent to $10.5 billion, reflecting good
business growth and an incremental five months of Pillsbury results. On a
comparable basis (as if General Mills had owned Pillsbury for all 12 months of
2003 and 2002) net sales grew 6 percent.
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Fourth quarter net sales grew 10 percent to exceed $2.5 billion. Net
earnings totaled $225 million compared to $57 million in last year's fourth
quarter. Fourth quarter restructuring, other exit and merger-related costs
totaled $31 million pretax, $19 million after tax in 2003, down from $56 million
pretax, $36 million after tax in 2002. The merger-related costs are included in
selling, general and administrative expense, as detailed below. Diluted EPS
totaled 59 cents compared to 15 cents a year earlier. Excluding restructuring,
other exit and merger-related costs, fourth quarter earnings would total 64
cents per diluted share compared to 25 cents last year.
General Mills Chairman and Chief Executive Officer Steve Sanger said
the results met or exceeded the company's major performance objectives for the
year. "In our first fiscal year after the Pillsbury acquisition, we achieved
strong sales growth, significant cost synergies and earnings-per-share that beat
the target we set last June by a nickel. That performance enabled us to deliver
a positive return to our shareholders in a down market." Total return to General
Mills shareholders in fiscal 2003 was 6 percent, as compared to a negative 12
percent return for the S&P 500 Index over the same time period.
Restructuring, Other Exit and Merger-related Costs
- --------------------------------------------------
General Mills recorded certain costs in 2003 and 2002 relating to the Pillsbury
acquisition. We have separately identified these costs because they represent
expenses associated with an infrequently occurring event, and we believe
identifying them improves the comparability of year-to-year results of
operations. These costs include the restructuring and other exit costs
segregated on the consolidated statement of earnings and merger-related costs
(including consulting, system conversions, relocation, training and
communications) included in selling, general and administrative expense. In
light of the magnitude of the Pillsbury acquisition, we have consistently
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attempted to provide investors with information regarding the costs of the
acquisition and integration that we believe is important for their understanding
of such costs in addition to our ongoing operations. A reconciliation of
earnings and EPS with and without these costs appears in the table below.
Earnings and earnings per share excluding restructuring, other exit and
merger-related costs are measures of performance that are not defined by
generally accepted accounting principles (GAAP) and should be viewed in addition
to, and not in lieu of, our net earnings and diluted earnings per share as
reported on a GAAP basis. Please refer to our consolidated financial statements
and accompanying footnotes for additional information regarding our
classification of these items and for presentation of results in accordance with
generally accepted accounting principles.
EARNINGS SUMMARY
(in millions, except per share data)
Fourth Quarter Fiscal Year
-------------- -----------
2003 2002 2003 2002
---- ---- ---- ----
EARNINGS AFTER TAX
Before restructuring, other exit and merger-related $ 244 $ 93 $ 1,002 $ 579
costs
Restructuring and other exit costs (2) (16) (40) (84)
Merger-related costs (1) (17) (20) (45) (34)
Adoption of SFAS No. 133 -- -- -- (3)
NET EARNINGS $ 225 $ 57 $ 917 $ 458
AVG. DILUTED SHARES OUTSTANDING 379 378 378 342
DILUTED EARNINGS PER SHARE
Before restructuring, other exit and merger-related $ .64 $ .25 $ 2.65 $ 1.70
costs
Restructuring and other exit costs -- (.04) (.11) (.25)
Merger-related costs (1) (.05) (.05) (.12) (.10)
Adoption of SFAS No. 133 -- -- -- (.01)
DILUTED EPS $ .59 $ .15 $ 2.43 $ 1.34
(1) Included in selling, general and administrative expense
Note: Numbers may not add due to rounding
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U.S. Retail Segment Results
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Net sales for General Mills' U.S. Retail operations grew 25 percent to exceed
$7.4 billion in fiscal 2003. On a comparable basis, as if General Mills had
owned Pillsbury for all of 2002, net sales grew 6 percent. Comparable unit
volume (shipments) increased 4 percent and retail consumer sales for the
company's major product lines rose 5 percent. Segment operating profits grew 66
percent to $1.75 billion.
Big G cereal unit volume grew 7 percent compared to a 3 percent decline
in 2002. The gain reflects the successful January 2003 launch of Berry Burst
Cheerios, growth by major established brands, and continued good performance by
Big G Milk `n Cereal bars, which contributed 1 percentage point of the volume
gain. Yoplait yogurt shipments grew 14 percent with continued growth from
established lines plus good contributions from Yoplait Whips! and new Yoplait
Nouriche yogurt beverages. Meals Division unit volume increased 2 percent on a
comparable basis, led by growth from Progresso soup and Betty Crocker dinner
mixes. Pillsbury USA reported a 1 percent comparable volume increase led by the
Home Baked Classics frozen baked goods line and Totino's frozen pizza and hot
snacks. Baking Products unit volume declined 3 percent due to intense
competitive promotional activity in the dessert mix market. Snacks unit volume
grew 4 percent, led by Nature Valley granola bars, which recorded its fifth
consecutive year of double-digit growth.
In the fourth quarter, U.S. Retail net sales grew 13 percent to exceed
$1.7 billion, and operating profits more than doubled to reach $449 million.
Bakeries and Foodservice Segment Results
- ----------------------------------------
Sales for the company's Bakeries and Foodservice operations increased to $1.8
billion in fiscal 2003. However, comparable unit volume was essentially
unchanged from the
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prior year, reflecting weak foodservice industry trends. Operating profit also
was unchanged from 2002 levels, due to the weak volumes and higher supply chain
costs caused by manufacturing realignment activities.
Fourth quarter net sales for Bakeries and Foodservice totaled $459
million, down 2 percent. Operating profits totaled $23 million compared to $53
million in last year's fourth quarter, reflecting the volume and supply chain
cost factors cited above as well as slow net realization of pricing taken to
offset higher commodity costs.
International Segment Results
- -----------------------------
Sales for General Mills' consolidated international operations totaled $1.3
billion in fiscal 2003 compared to $778 million in 2002. Operating profits
doubled to $91 million. Comparable unit volume fell 1 percent for the year, with
losses in economically challenged Latin American markets offsetting gains of 3
percent in Canada, 6 percent in Asia, and 4 percent in Europe.
Fourth-quarter international sales grew 9 percent to $345 million, and
operating profits grew 13 percent to $27 million.
Joint Venture Summary
- ---------------------
Total after-tax earnings from joint-venture operations reached $61 million in
fiscal 2003, nearly doubling the $33 million reported a year earlier. Cereal
Partners Worldwide (CPW) and Snack Ventures Europe (SVE) together contributed
$45 million in profits, up from $31 million in 2002. Unit volume trends were
strong for both ventures, as CPW unit volume rose 7 percent and SVE shipments
grew 8 percent. Contributions from the Haagen-Dazs joint ventures were more than
double the partial-year profits included in General Mills' 2002 results. Total
joint venture profits in both years include modest losses by our soy products
joint venture with Dupont, which is currently expanding 8th Continent
refrigerated soy milk to nationwide distribution.
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Fourth-quarter joint venture earnings totaled $17 million after tax
compared to $13 million in 2002.
Financial Highlights
- --------------------
Interest expense in 2003 was up 31 percent to $547 million, reflecting the
full-year impact of higher debt levels associated with the Pillsbury
acquisition. Fourth-quarter interest expense was $130 million, lower than a year
earlier due to favorable rates and debt mix. At year-end, General Mills' total
debt was $8.9 billion, down $582 million from a year earlier. General Mills
currently estimates its fiscal 2004 interest expense will be approximately $500
to $530 million. The effective tax rate was 35 percent, in line with 2003
expectations and the company's plans for 2004.
Dividends in 2003 totaled $1.10 per share, a payout of 45 percent of
net diluted earnings per share. General Mills intends to maintain the prevailing
$1.10 annual dividend rate per share in 2004. Fixed asset investments totaled
about $750 million in 2003, including acquisition-related costs associated with
consolidation of the company's Minneapolis headquarters and integration of
information systems companywide. Plans call for capital investment spending to
moderate beginning in 2004, when fixed asset spending is expected to total
approximately $650 million.
Outlook
- -------
Sanger said General Mills is positioned to deliver good growth and returns in
the years ahead. "Over the next three years, our plans call for 5 to 6 percent
compound growth in net sales and at least 11 percent compound growth in diluted
earnings per share. For fiscal 2004 specifically, we expect sales growth at the
top end of our range -- 6 percent -- and earnings per share growth should beat
our target."
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Sales growth in 2004 is expected to benefit from a strong line-up of
new products beginning to enter the market now. In addition, fiscal 2004
includes a 53rd week. The company expects profit growth to benefit from an
additional $125 million of acquisition-related synergies in 2004, as well as
productivity savings. Net earnings per share are expected to increase from the
$2.43 reported in 2003 to approximately $2.85 to $2.90 in 2004--an increase of
17 to 19 percent. This 2004 earnings per share guidance includes estimated
restructuring, other exit and merger-related costs of between 10 and 15 cents
per share.
General Mills will hold a briefing for investors today, June 25, 2003, beginning
at 9:15 a.m. EDT. You may access the web cast from General Mills' corporate home
page: www.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 management's
current expectations and assumptions. These forward-looking statements,
including the statements under the caption "Outlook" and statements made by Mr.
Sanger, 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 volume
and earnings could be affected by difficulties resulting from the Pillsbury
acquisition, such as integration problems; failure to achieve synergies;
unanticipated liabilities; inexperience in new business lines; and changes in
the competitive environment. Our future results also could be affected by a
variety of additional factors such as: competitive dynamics in the U.S.
ready-to-eat cereal market, including pricing and promotional spending levels by
competitors; the impact of competitive products and pricing; product development
and the success of new items; actions of competitors other than as described
above; acquisitions or disposals of businesses or assets; changes in capital
structure; changes in laws and regulations, including changes in accounting
standards; customer demand; effectiveness of advertising and marketing spending
or programs; consumer perception of health-related issues; economic conditions,
including changes in inflation rates or interest rates; fluctuation in the cost
and availability of supply chain resources, foreign economic conditions,
including currency rate fluctuations; political unrest in foreign markets and
economic uncertainty due to terrorism or war. The company undertakes no
obligations to publicly revise any forward-looking statements to reflect future
events or circumstances.
####
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In Millions, Except per Share Data)
Fiscal Year Ended
--------------------------------
May 25, May 26, May 27,
2003 2002 2001
------- ------- -------
Net Sales $10,506 $ 7,949 $ 5,450
Costs & Expenses:
Cost of sales 6,109 4,662 2,841
Selling, general and administrative 2,472 2,070 1,393
Interest, net 547 416 206
Restructuring and other exit costs 62 134 12
------- ------- -------
Total Costs and Expenses 9,190 7,282 4,452
Earnings before Taxes and Earnings
from Joint Ventures 1,316 667 998
Income Taxes 460 239 350
Earnings from Joint Ventures 61 33 17
------- ------- -------
Earnings before cumulative effect of change
in accounting principle $ 917 $ 461 $ 665
Cumulative effect of change in accounting principle -- (3) --
------- ------- -------
Net Earnings $ 917 $ 458 $ 665
======= ======= =======
Earnings per Share - Basic:
Earnings before cumulative effect of change
in accounting principle $ 2.49 $ 1.39 $ 2.34
Cumulative effect of change in accounting principle -- (0.01) --
------- ------- -------
Earnings per Share - Basic $ 2.49 $ 1.38 $ 2.34
======= ======= =======
Average Number of Shares - Basic 369 331 284
======= ======= =======
Earnings per Share - Diluted:
Earnings before cumulative effect of change
in accounting principle $ 2.43 $ 1.35 $ 2.28
Cumulative effect of change in accounting principle -- (0.01) --
------- ------- -------
Earnings per Share - Diluted $ 2.43 $ 1.34 $ 2.28
======= ======= =======
Average Number of Shares - Assuming Dilution 378 342 292
======= ======= =======
See accompanying notes.
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
13 Weeks Ended
-----------------
May 25, May 26,
2003 2002
------ ------
Net Sales $2,546 $2,324
Costs & Expenses:
Cost of sales 1,482 1,464
Selling, general and administrative 611 613
Interest, net 130 152
Restructuring and other exit costs 4 26
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Total Costs and Expenses 2,227 2,255
Earnings before Taxes and Earnings from Joint Venture 319 69
Income Taxes 111 25
Earnings from Joint Ventures 17 13
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Net Earnings $ 225 $ 57
====== ======
Earnings per Share - Basic $ .61 $ .16
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Average Number of Shares - Basic 370 367
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Earnings per Share - Diluted $ .59 $ .15
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Average Number of Shares - Assuming Dilution 379 378
====== ======
See accompanying notes.
GENERAL MILLS, INC.
OPERATING SEGMENTS
(Unaudited) (In Millions)
13 Weeks Ended 52 Weeks Ended
---------------------- ------------------------------------
May 25, May 26, May 25, May 26, May 27,
2003 2002 2003 2002 2001
-------- -------- -------- -------- --------
Net Sales:
U.S. Retail $ 1,742 $ 1,536 $ 7,407 $ 5,907 $ 4,565
Bakeries and Foodservice 459 471 1,799 1,264 622
International 345 317 1,300 778 263
-------- -------- -------- -------- --------
Total $ 2,546 $ 2,324 $ 10,506 $ 7,949 $ 5,450
======== ======== ======== ======== ========
Operating Profit:
U.S. Retail $ 449 $ 170 $ 1,754 $ 1,057 $ 1,053
Bakeries and Foodservice 23 53 156 155 95
International 27 24 91 45 17
-------- -------- -------- -------- --------
Total 499 247 2,001 1,257 1,165
Unallocated corporate income (expense) (46) -- (76) (40) 51
Restructuring and other exit costs (4) (26) (62) (134) (12)
Interest, net (130) (152) (547) (416) (206)
-------- -------- -------- -------- --------
Earnings before taxes and earnings
from Joint Ventures $ 319 $ 69 $ 1,316 $ 667 $ 998
======== ======== ======== ======== ========
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
May 25, May 26,
2003 2002
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 703 $ 975
Receivables 980 1,010
Inventories 1,082 1,055
Prepaid expenses and other 184 156
Deferred income taxes 230 241
-------- --------
Total Current Assets 3,179 3,437
-------- --------
Land, Buildings and Equipment 4,929 4,618
Less accumulated depreciation (1,949) (1,854)
-------- --------
Net Land, Buildings and Equipment 2,980 2,764
Goodwill 6,650 8,473
Other Intangible Assets 3,622 90
Other Assets 1,796 1,776
-------- --------
Total Assets $ 18,227 $ 16,540
======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 1,303 $ 1,217
Current portion of debt 105 248
Notes payable 1,236 3,600
Other current liabilities 804 682
-------- --------
Total Current Liabilities 3,448 5,747
Long-term Debt 7,516 5,591
Deferred Income Taxes 1,657 407
Other Liabilities 1,131 1,066
-------- --------
Total Liabilities 13,752 12,811
-------- --------
Minority Interest 300 153
Stockholders' Equity:
Common stock 5,684 5,733
Retained earnings 3,079 2,568
Less common stock in treasury (4,203) (4,292)
Unearned compensation (43) (57)
Accumulated other comprehensive income (342) (376)
-------- --------
Total Stockholders' Equity 4,175 3,576
-------- --------
Total Liabilities and Equity $ 18,227 $ 16,540
======== ========
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Fiscal 2002 results include only seven months of the Pillsbury business,
which was acquired October 31, 2001.
(2) Restructuring and other exit costs consist of charges related to the sale
of our Toledo, Ohio plant as required to obtain regulatory clearance for
the acquisition of Pillsbury; severance costs related to sales organization
and headquarters department realignment; charges associated with the
closure of our St. Charles, Illinois plant; expenses related to exiting
production at former Pillsbury facilities being closed; flour mill and
grain restructuring/closing charges; and charges associated with the 2001
exit from the Squeezit beverage business.
(3) Our selling, general and administrative expense includes items which are
associated with infrequently occurring events: (a) merger-related costs
which relate to the planning and execution of the integration of Pillsbury
including consulting, system conversions, relocation, training and
communications amounting to $70 million in 2003, $52 million in 2002, and
$8 million in 2001; (b) insurance settlement income relating to a 1994 oats
handling incident of $3 million in 2003, $30 million in 2002, and $55
million in 2001; and (c) a special contribution of $30 million to the
General Mills Foundation in 2002 to increase its net assets to an
appropriate level following the acquisition of Pillsbury. Our 2002 cost of
goods sold includes $4 million of costs associated with a flood at our
Cincinnati facility.
(4) The discussion of our results of operations includes earnings and earnings
per share references excluding restructuring and other exit costs described
in Note (2) above and the merger-related costs described in Note (3)(a)
above, primarily related to the acquisition of Pillsbury. The magnitude of
the acquisition of Pillsbury and the resulting combination of two companies
of near-equal size was a unique event in the history of General Mills. We
believe that it is useful to separately identify these restructuring, exit
and merger-related costs from our ordinary operating costs since these
items were incurred primarily to complete the Pillsbury acquisition and
integration and are not associated with our ongoing operations. Earnings
and earnings per share excluding restructuring, other exit and
merger-related costs are measures of performance that are not defined by
generally accepted accounting principles ("GAAP"), and should be viewed in
addition to, and not in lieu of, our net earnings and diluted earnings per
share as reported on a GAAP basis. Reviewing and analyzing results
exclusive of these items improves period-to-period comparability and
provides management with useful measures to assess the results of our
normal, ongoing operations and to plan and forecast results for future
periods. We believe that reporting this information is also useful to
investors in evaluating our operating results from period to period.
(5) Certain prior years' amounts have been reclassified to conform with the
current year presentation. Cost of sales has been decreased and selling,
general and administrative expense has been increased for costs that are
not clearly associated with production activity. In addition, items
described in Notes (2) and (3) were previously reported as "Unusual Items"
in the consolidated statements of earnings.
(6) Effective with the first quarter fiscal 2002, we adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The
cumulative effect of adopting this accounting change was a $3 million
charge, as reflected on the consolidated statements of earnings.