EXHIBIT 99.1
FOR IMMEDIATE RELEASE
December 17, 2003
CONTACTS: (Media) Marybeth Thorsgaard (763) 764-6364
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(Analysts) Kris Wenker (763) 764-2607
GENERAL MILLS REPORTS RESULTS FOR FISCAL 2004 SECOND QUARTER
NET SALES INCREASED 4 PERCENT
NET DILUTED EPS ROSE 11 PERCENT
COMPANY UPDATES ANNUAL OUTLOOK
MINNEAPOLIS, MINN.---General Mills, Inc. (NYSE: GIS) today reported
results for the second quarter of fiscal 2004. Net sales for the 13 weeks ended
Nov. 23, 2003, grew 4 percent to $3.06 billion. Earnings after tax grew 12
percent to $308 million, and net diluted earnings per share (EPS) increased 11
percent from 73 cents in last year's second quarter to 81 cents this year. Net
results for both years include certain costs primarily related to the company's
acquisition of Pillsbury in fiscal 2002. 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 $28 million pre-tax, $18
million after tax in fiscal 2004, and $24 million pre-tax, $16 million after tax
in fiscal 2003. Excluding these restructuring, other exit and merger-related
costs, second quarter diluted earnings per share would total 85 cents, up 10
percent from 77 cents in last year's second quarter.
-more-
Through the first six months of fiscal 2004, General Mills net sales
grew 5 percent to $5.58 billion. Earnings after tax grew 18 percent to $535
million, and diluted EPS increased 17 percent to $1.40 per share. Six-month
cumulative restructuring, other exit and merger-related costs totaled $43
million pre-tax, $28 million after tax in fiscal 2004 and $79 million pre-tax,
$51 million after tax in 2003. Excluding these costs, first-half diluted
earnings per share would total $1.47, up 10 percent from $1.34 in last year's
first half.
Chairman and Chief Executive Officer Steve Sanger said, "Our earnings
are growing at a double-digit pace through the first half, fueled by 2 percent
growth in worldwide unit volume, operating margin improvement, and increasing
profits from joint ventures."
Restructuring, Other Exit and Merger-related Costs
- --------------------------------------------------
General Mills recorded certain costs in 2004 and 2003 primarily related 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 statements of earnings, and merger-related costs
(such as consulting, system conversions, relocation, training and
communications) that are included in selling, general and administrative
expense. Given the magnitude of the Pillsbury acquisition, we have consistently
attempted to provide investors with information to help distinguish the costs of
the acquisition and integration from costs for our ongoing operations. A
reconciliation of earnings and EPS with and without these costs appears in the
table below. Earnings and EPS 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 EPS as reported on a GAAP
basis. Please refer to our consolidated financial statements and
-more-
accompanying footnotes for additional information regarding our classification
of these items and for presentation of results in accordance with GAAP.
SECOND QUARTER / FIRST HALF EARNINGS SUMMARY
(in millions, except per share data)
Second Quarter First Half
F04 F03 F04 F03
----- ----- ----- -----
EARNINGS AFTER TAX (EAT)
Before Identified Items $ 326 $ 292 $ 563 $ 503
Restructuring and other exit costs (6) (11) (6) (37)
Merger-related costs* (12) (5) (22) (14)
----- ----- ----- -----
NET EARNINGS $ 308 $ 276 $ 535 $ 452
----- ----- ----- -----
AVG. DILUTED SHARES OUTSTANDING 383 377 383 376
DILUTED EARNINGS PER SHARE
Before Identified Items $ .85 $ .77 $1.47 $1.34
Restructuring and other exit costs (.02) (.03) (.02) (.10)
Merger-related costs* (.03) (.01) (.06) (.04)
----- ----- ----- -----
DILUTED EPS $ .81 $ .73 $1.40 $1.20
* Included in SG&A
Note: Numbers may not add due to rounding
Segment Results: U.S. Retail
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Net sales for General Mills' domestic retail operations grew 3 percent to $2.20
billion for the quarter, and operating profits increased 9 percent to $541
million. Unit volume was up 1 percent overall, as volume declines of 3 percent
for Big G cereals and 2 percent for Pillsbury USA were offset by performance
across the company's other retail businesses. Meals Division volume was up 4
percent in the second quarter, as Progresso soup posted double-digit growth
fueled by the successful introduction of 8 new Rich and Hearty varieties. Betty
Crocker dinner mixes and Old El Paso Mexican dinner kits also posted good
growth. Yoplait yogurt volume increased 6 percent for the quarter. Snacks volume
rose 5 percent in the period. Volumes for the Baking Products division were flat
for the period. Through the first six months, total U.S. retail unit volume was
up 2 percent.
-more-
Although labor strikes at several major Southern California grocery
store chains continue to hinder planned merchandising activities in those
stores, overall consumer sales trends for the company's brands are good.
Combined retail sales for the company's major product lines grew 4 percent in
the quarter and 4 percent through the first half.
Bakeries and Foodservice Segment Results
- ----------------------------------------
Net sales for the company's Bakeries and Foodservice operation fell 2 percent in
the second quarter to $471 million. Overall unit volume was down 3 percent, as
weak shipments to foodservice distributors and bakery channel customers more
than offset unit volume growth with convenience stores and in national
restaurant accounts. Operating profit totaled $52 million, 2 percent above last
year's second-quarter results, and sharply higher than in the previous three
quarters as major manufacturing realignment activities were completed.
International Segment Results
- -----------------------------
Net sales for General Mills' consolidated international businesses grew 19
percent to $386 million, reflecting broadly based unit volume growth and
positive currency effects. Combined unit volume grew 4 percent, with every major
geographic region reporting increases. Operating profits grew 46 percent led by
strong performance from General Mills' Canadian business.
Joint Venture Summary
- ---------------------
Earnings from joint ventures grew 9 percent in the second quarter to $16 million
after tax. Profits from the Cereal Partners Worldwide (CPW) joint venture with
Nestle and our Snack Ventures Europe (SVE) joint venture with PepsiCo together
totaled $14 million, up 40 percent versus a year ago. That profit growth
reflected unit volume gains of 4 percent for SVE and
-more-
12 percent for CPW. Unit volume for the Haagen-Dazs joint ventures in Asia grew
1 percent in the quarter. In addition, unit volume and national distribution
levels continued to grow for 8th Continent soymilk, marketed by the company's
joint venture with Dupont.
Corporate Items
- ---------------
Interest expense for the quarter totaled $127 million, down approximately $13
million from a year earlier due to lower rates. The company continues to
estimate full-year interest expense of $500 to $530 million. The effective tax
rate for the quarter was 35 percent, consistent with the company's 2004
expectations and last year's rate. Average diluted shares outstanding for the
quarter were 383 million, approximately 2 percent higher than in the prior
year's period. On Nov. 23, 2003, total basic shares outstanding were
approximately 374 million.
Outlook
- -------
Chairman and Chief Executive Officer Steve Sanger said, "While we achieved
growth in unit volume, sales and earnings through the first half of the year,
our volume trends weakened in the second quarter. Because of that, we see some
risk to fully achieving our volume targets for the year, although we do believe
the product innovation and marketing programs we have planned will result in
stronger volume growth in the second half. In addition, we see supply-chain
costs coming in above our original plans, due in large part to higher prices on
key commodities such as wheat, oil, eggs and vanilla.
"As a result, we are modifying our earnings guidance. Last June, we
estimated fiscal 2004 diluted EPS would total $2.85 to $2.90. We now expect this
year's EPS to total between $2.75 and $2.85. This range includes an estimated 10
cents of restructuring, other exit and merger-related costs, and represents
growth of 13 to 17 percent from the $2.43 cents per share earned in fiscal
2003," Sanger said.
-more-
The company reaffirmed its plans to pay down $450 million of debt in
fiscal 2004 as part of a longer-term goal of reducing net debt $2 billion by the
end of fiscal 2006. In addressing the company's longer-term growth outlook,
Sanger said, "We've said we expect compound EPS growth of at least 11 percent
for the three-year period through fiscal 2006. With the revision we've made to
this year's earnings forecast, our three-year compound growth may be lower when
restructuring and merger-related costs are excluded. But we'd still expect our
reported EPS to meet that 11 percent compound growth target over the three-year
period."
General Mills will hold a briefing for investors today, December 17, 2003,
beginning at 3:30 p.m. EDT. You may access the web cast from General Mills'
corporate home page: www.generalmills.com.
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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 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 spending levels of our competitors; product development and
innovations; consumer acceptance of new products and product improvements;
changes in customer demand for our products; changes in consumer behavior,
trends and preferences; effectiveness of advertising, marketing and promotional
programs; consumer perception of health-related issues including obesity;
changes in purchasing and inventory levels of significant customers;
acquisitions or disposals of businesses or assets; changes in capital structure;
changes in laws and regulations, including changes in accounting standards;
ability to successfully complete integration of the Pillsbury businesses and
achieve synergies, cost savings and productivity improvements; economic
conditions, including changes in inflation rates, interest rates or tax rates;
benefit plan expenses due to changes in plan asset values and/or discount rates
used to determine plan liabilities; fluctuation in the cost and availability of
supply chain resources, including raw materials, packaging and energy; 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.
XXXX
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
13 Weeks Ended 26 Weeks Ended
------------------------------ ----------------------------
November 23, November 24, November 23, November 24,
2003 2002 2003 2002
------ ------ ------ ------
Net Sales $3,060 $2,953 $5,578 $5,315
Costs & Expenses:
Cost of sales 1,797 1,711 3,271 3,060
Selling, general and administrative 677 685 1,268 1,269
Interest, net 127 140 261 282
Restructuring and other exit costs 9 16 9 57
------ ------ ------ ------
Total Costs and Expenses 2,610 2,552 4,809 4,668
------ ------ ------ ------
Earnings before Taxes and Earnings from Joint Ventures 450 401 769 647
Income Taxes 158 139 270 226
Earnings from Joint Ventures 16 14 36 31
------ ------ ------ ------
Net Earnings $ 308 $ 276 $ 535 $ 452
====== ====== ====== ======
Earnings per Share - Basic $ .82 $ .75 $ 1.44 $ 1.23
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Average Number of Shares - Basic 374 368 373 368
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Earnings per Share - Diluted $ .81 $ .73 $ 1.40 $ 1.20
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Average Number of Shares - Assuming Dilution 383 377 383 376
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Notes:
1 In the second quarter of fiscal 2004, we recorded restructuring and
other exit costs of $9 million pretax, primarily related to plant
closures in the Netherlands and Atwater, California. In the second
quarter of fiscal 2003, we recorded $16 million pretax of restructuring
and other exit costs, primarily related to exiting production at former
Pillsbury facilities being closed. These costs were incurred pursuant
to integration plans established in the first year following the
acquisition date.
There were no additional restructuring and other exit costs in the
first half of fiscal 2004. In the first half of fiscal 2003, we
recorded $57 million of restructuring and other exit costs which
consisted of $41 million pretax associated with the closure of our St.
Charles, Illinois plant and $16 million pretax, primarily related to
exiting former Pillsbury facilities as described above.
2 During fiscal 2003, we reclassified certain expenses to more
appropriately categorize items that are not clearly associated with
production activity. Cost of sales decreased and selling, general and
administrative expense increased by $57 million for the second quarter
of fiscal year 2003 and by $94 million for the first six months of
fiscal year 2003. In addition, certain items reported in the second
quarter of fiscal 2003 as unusual items have been reclassified to
restructuring and other exit costs ($16 million in the second quarter,
$57 million in the first half), and to selling, general and
administrative expense ($5 million in the second quarter, $19 million
in the first half).
GENERAL MILLS, INC.
OPERATING SEGMENTS
(Unaudited) (In Millions)
13 Weeks Ended 26 Weeks Ended
----------------------------- ------------------------------
November 23, November 24, November 23, November 24,
2003 2002 2003 2002
------- ------- ------- -------
Net Sales:
U.S. Retail $ 2,203 $ 2,145 $ 3,926 $ 3,755
Bakeries and Foodservice 471 483 899 921
International 386 325 753 639
------- ------- ------- -------
Total $ 3,060 $ 2,953 $ 5,578 $ 5,315
======= ======= ======= =======
Operating Profit:
U.S. Retail $ 541 $ 494 $ 940 $ 855
Bakeries and Foodservice 52 51 81 104
International 30 21 54 43
------- ------- ------- -------
Total 623 566 1,075 1,002
Unallocated corporate items (37) (9) (36) (16)
Restructuring and other exit costs (9) (16) (9) (57)
Interest, net (127) (140) (261) (282)
------- ------- ------- -------
Earnings before taxes and earnings
from Joint Ventures $ 450 $ 401 $ 769 $ 647
======= ======= ======= =======
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
------------ ------------
November 23, November 24, May 25,
2003 2002 2003
------------ ------------ --------
ASSETS
Current Assets:
Cash and cash equivalents $ 695 $ 1,747 $ 703
Receivables 1,196 1,236 980
Inventories 1,321 1,280 1,082
Prepaid expenses and other 177 155 184
Deferred income taxes 209 264 230
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Total Current Assets 3,598 4,682 3,179
-------- -------- --------
Land, Buildings and Equipment 5,088 4,590 4,929
Less accumulated depreciation (2,075) (1,867) (1,949)
-------- -------- --------
Net Land, Buildings and Equipment 3,013 2,723 2,980
Goodwill 6,671 6,369 6,650
Other Intangible Assets 3,619 3,611 3,622
Other Assets 1,878 1,891 1,796
-------- -------- --------
Total Assets $ 18,779 $ 19,276 $ 18,227
======== ======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 1,296 $ 1,499 $ 1,303
Current portion of debt 246 100 105
Notes payable 956 2,379 1,236
Other current liabilities 637 848 800
-------- -------- --------
Total Current Liabilities 3,135 4,826 3,444
Long-term Debt 7,817 7,480 7,516
Deferred Income Taxes 1,711 1,734 1,661
Other Liabilities 1,075 1,128 1,131
-------- -------- --------
Total Liabilities 13,738 15,168 13,752
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Minority Interests 298 299 300
Stockholders' Equity:
Common stock 5,702 5,672 5,684
Retained earnings 3,409 2,818 3,079
Less common stock in treasury (4,077) (4,250) (4,203)
Unearned compensation (48) (55) (43)
Accumulated other comprehensive income (243) (376) (342)
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Total Stockholders' Equity 4,743 3,809 4,175
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Total Liabilities and Equity $ 18,779 $ 19,276 $ 18,227
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