MINNEAPOLIS, Sept. 21, 2016 /PRNewswire/ -- General Mills
(NYSE: GIS) today reported results for the first quarter ended
August 28, 2016.
"Our first-quarter profit margin expansion and EPS results
reflect continued good progress on our productivity and
cost-savings initiatives," said General Mills Chairman and Chief
Executive Officer Ken Powell.
"However, our net sales performance did not meet our expectations
due to the challenging macro environment, a difficult
year-over-year comparison, and a slower start to the year on
certain businesses. We are taking actions to improve our net
sales performance going forward, leveraging our Consumer First
focus. At the same time, we have a number of encouraging
examples across our global portfolio where our efforts to adapt to
evolving consumer interests are driving positive results."
¹ Please see Note 7 to the Consolidated Financial Statements
below for reconciliation of this and other non-GAAP measures used
in this release.
First Quarter Results Summary
- Reported net sales declined 7 percent to $3.9 billion due to lower organic net sales, the
divestiture of the North American Green Giant business, and the
impact of foreign exchange. Organic net sales declined 4 percent,
with increases in U.S. natural and organic brands and emerging
markets more than offset by declines in Foundation businesses and
U.S. Yogurt.
- Gross margin decreased from 36.9 percent to 36.3 percent of net
sales. Adjusted gross margin, which excludes mark-to-market effects
and certain other items affecting comparability, decreased 30 basis
points from last year's result that was up 290 basis points.
- Operating profit totaled $646
million, down 6 percent compared to the prior year.
Operating profit margin increased 30 basis points to 16.5 percent
of net sales. Adjusted operating profit margin increased 80 basis
points to 19.2 percent of net sales.
- Total segment operating profit of $787
million was down 5 percent. Total segment operating profit
was down 4 percent in constant currency, reflecting lower net
sales.
- Net earnings attributable to General Mills totaled $409 million and diluted earnings per share (EPS)
were $0.67, down 3 percent from
$0.69 a year ago.
- Adjusted diluted EPS, which excludes certain items affecting
comparability of results, totaled $0.78 in the first quarter, down 1 percent from
the prior year. Constant-currency adjusted diluted EPS were also
down 1 percent.
Operating Segment Results
First Quarter
Components of Reported Net Sales Growth
|
|
Volume
|
Price/Mix
|
Foreign
Exchange
|
Reported
Net Sales
|
U.S.
Retail
|
(12) pts
|
4 pts
|
--
|
(8)%
|
International
|
(4) pts
|
2 pts
|
(4) pts
|
(6)%
|
Convenience Stores
& Foodservice
|
(2) pts
|
(5) pts
|
--
|
(7)%
|
Total
|
(8) pts
|
2 pts
|
(1) pt
|
(7)%
|
First Quarter
Components of Organic Net Sales Growth
|
|
Organic
Volume
|
Organic
Price/Mix
|
Organic
Net Sales
|
Foreign
Exchange
|
Acquisitions
&
Divestitures
|
Reported
Net Sales
|
U.S.
Retail
|
(7) pts
|
2 pts
|
(5)%
|
--
|
(3) pts
|
(8)%
|
International
|
(4) pts
|
3 pts
|
(1)%
|
(4) pts
|
(1) pt
|
(6)%
|
Convenience Stores
& Foodservice
|
(2) pts
|
(5) pts
|
(7)%
|
--
|
--
|
(7)%
|
Total
|
(6) pts
|
2 pts
|
(4)%
|
(1) pt
|
(2) pts
|
(7)%
|
First Quarter
Segment Operating Profit Growth
|
|
% Change as
Reported
|
% Change in
Constant Currency
|
U.S.
Retail
|
(6)%
|
|
International
|
(14)%
|
(11)%
|
Convenience Stores
& Foodservice
|
16%
|
|
Total
|
(5)%
|
(4)%
|
U.S. Retail Segment
First-quarter net sales for General Mills' U.S. Retail segment
totaled $2.33 billion, down 8 percent
from the prior year with an increase in the Snacks operating unit
more than offset by declines in the other units. Organic net
sales declined 5 percent. Annie's and Lärabar
natural and organic products, Nature Valley cereals, and
Old El Paso Mexican
products posted particularly strong results in the quarter, offset
by declines in Yoplait yogurt and Progresso
soup. Segment operating profit declined 6 percent from the
year-ago period that saw a 38 percent profit increase.
International Segment
First-quarter net sales for General Mills' International segment
totaled $1.13 billion, down 6 percent
from the prior year driven primarily by foreign exchange headwinds
and the divestiture of Green Giant in Canada. On a
constant-currency basis, net sales increases in the Latin America and Asia/Pacific regions were offset by declines
in Europe and Canada.
Organic net sales declined 1 percent from year-ago levels that
increased 5 percent. Products contributing particularly
strong results in the quarter included Yoplait yogurt and
Wanchai Ferry frozen meals in
China, Old El Paso Mexican products in Canada and Yoki snacks in Brazil, offset by declines in Europe on Häagen-Dazs ice cream and
Yoplait yogurt. International segment operating profit
declined 14 percent as reported and 11 percent in constant
currency, reflecting currency-driven inflation on products imported
into Canada and the U.K., as well
as the Green Giant divestiture.
Convenience Stores and Foodservice Segment
First-quarter net sales for the Convenience Stores and
Foodservice segment declined 7 percent to $446 million, primarily due to market index
pricing on bakery flour, partially offset by increases for the
yogurt, biscuits, and cereal platforms. Organic net sales
were also down 7 percent. Segment operating profit increased
16 percent in the quarter, reflecting lower input costs and higher
grain merchandising earnings.
Joint Venture Summary
Combined after-tax earnings from the Cereal Partners Worldwide
(CPW) and Häagen-Dazs Japan (HDJ) joint ventures were $24 million compared to $26 million a year ago. On a
constant-currency basis, after-tax earnings from joint ventures
declined 10 percent. Net sales for CPW grew 1 percent in
constant currency, and constant-currency net sales for HDJ
essentially matched year-ago results that were up 9
percent.
Other Income Statement Items
Unallocated corporate items totaled $82
million net expense in the first quarter of fiscal 2017,
compared to $83 million net expense
in 2016. Excluding mark-to-market valuation effects and other
items affecting comparability, unallocated corporate items totaled
$37 million net expense this year
compared to $51 million net expense a
year ago.
Restructuring, impairment, and other exit costs totaled
$59 million in 2017 compared to
$60 million in 2016. An
additional $27 million of
restructuring and project-related charges were recorded in cost of
sales this year compared to $35
million a year ago (please see Note 3 below for more
information on these charges).
Net interest expense totaled $74
million in this year's first quarter, compared to
$75 million a year ago. The
effective tax rate was 30.9 percent in the first quarter, compared
to 32.7 percent last year (please see Note 6 below for more
information on our effective tax rate). Excluding items
affecting comparability, the adjusted effective tax rate of 31.4
percent was below the rate of 32.3 percent a year ago, driven by
discrete state tax benefits and favorable impacts of U.S. federal
legislation passed in fiscal 2016.
Cash Flow Generation and Cash Returns
Cash provided by operating activities totaled $288 million, down 33 percent from the prior year
primarily due to the timing of accounts payable, changes in trade
and advertising accruals, and changes in income taxes
payable. Capital investments in the first quarter totaled
$154 million. General Mills
paid $291 million in dividends, an
increase of 9 percent over last year's first quarter. The
company repurchased 5.6 million shares of common stock for a total
of $400 million. Average
diluted shares outstanding for the first quarter declined 1 percent
to 612 million.
Outlook
Powell said, "We expect our organic net sales performance will
improve over the remainder of the year as key Consumer First
initiatives gain traction and as our prior-year comparisons
ease. At the same time, our commitment to our Growth and
Foundation portfolio segmentation – and our progress on Holistic
Margin Management and our other cost savings initiatives – gives us
good visibility to achieving our previously announced profit goals
for fiscal 2017 as well as our target of 20 percent adjusted
operating profit margin by fiscal 2018."
General Mills reiterated its key fiscal 2017 targets,
including:
- Organic net sales growth ranging from flat to down 2
percent;
- Constant-currency total segment operating profit increasing 6
to 8 percent;
- Adjusted operating profit margin increasing approximately 150
basis points; and
- Constant-currency adjusted diluted EPS growing 6 to 8 percent
from the base of $2.92 earned in
fiscal 2016. At current exchange rates, the company estimates a
2 cent headwind from currency
translation in 2017.
General Mills will hold a briefing for investors today,
September 21, 2016, beginning at
8:30 a.m. Eastern time. You may
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. Powell, 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. 28,
2016
|
|
|
Aug. 30,
2015
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
3,907.9
|
|
$
|
4,207.9
|
|
(7.1)
|
%
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
|
2,491.0
|
|
|
2,653.3
|
|
(6.1)
|
%
|
|
|
|
|
|
|
|
|
|
Selling,
general, and administrative expenses
|
|
712.2
|
|
|
811.2
|
|
(12.2)
|
%
|
|
|
|
|
|
|
|
|
|
Restructuring,
impairment, and other
exit
costs
|
|
58.9
|
|
|
60.1
|
|
(2.0)
|
%
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
645.8
|
|
|
683.3
|
|
(5.5)
|
%
|
|
|
|
|
|
|
|
|
|
Interest,
net
|
|
73.9
|
|
|
75.3
|
|
(1.9)
|
%
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes and after-tax
earnings from
joint ventures
|
|
571.9
|
|
|
608.0
|
|
(5.9)
|
%
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
176.6
|
|
|
198.6
|
|
(11.1)
|
%
|
|
|
|
|
|
|
|
|
|
After-tax earnings
from joint ventures
|
|
24.2
|
|
|
25.7
|
|
(5.8)
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings,
including earnings attributable
to redeemable
and noncontrolling interests
|
|
419.5
|
|
|
435.1
|
|
(3.6)
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to redeemable
and
noncontrolling interests
|
|
10.5
|
|
|
8.5
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills
|
$
|
409.0
|
|
$
|
426.6
|
|
(4.1)
|
%
|
|
|
|
|
|
|
|
|
|
Earnings per share -
basic
|
$
|
0.68
|
|
$
|
0.71
|
|
(4.2)
|
%
|
|
|
|
|
|
|
|
|
|
Earnings per share -
diluted
|
$
|
0.67
|
|
$
|
0.69
|
|
(2.9)
|
%
|
|
|
|
|
|
|
|
|
|
Dividends per
share
|
$
|
0.48
|
|
$
|
0.44
|
|
9.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
Comparisons as a % of
net sales:
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
|
Basis Pt
Change
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
|
36.3
%
|
|
|
36.9 %
|
|
(60)
|
|
|
|
|
|
|
|
|
|
|
Selling,
general, and administrative expenses
|
|
18.2
%
|
|
|
19.3 %
|
|
(110)
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
16.5
%
|
|
|
16.2 %
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills
|
|
10.5
%
|
|
|
10.1 %
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
Comparisons as a % of
net sales excluding
certain items
affecting comparability (a):
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
|
Basis Pt
Change
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross
margin
|
|
37.4
%
|
|
|
37.7 %
|
|
(30)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
|
19.2
%
|
|
|
18.4 %
|
|
80
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
earnings attributable to General Mills
|
|
12.2
%
|
|
|
11.6 %
|
|
60
|
|
|
|
|
|
|
|
|
|
|
(a) See Note 7 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. 28,
2016
|
|
|
Aug. 30,
2015
|
|
%
Change
|
|
Net sales:
|
|
|
|
|
|
|
|
|
U.S.
Retail
|
$
|
2,331.8
|
|
$
|
2,531.2
|
|
(7.9)
|
%
|
International
|
|
1,129.8
|
|
|
1,199.0
|
|
(5.8)
|
%
|
Convenience
Stores and Foodservice
|
|
446.3
|
|
|
477.7
|
|
(6.6)
|
%
|
Total
|
$
|
3,907.9
|
|
$
|
4,207.9
|
|
(7.1)
|
%
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
U.S.
Retail
|
$
|
594.4
|
|
$
|
629.7
|
|
(5.6)
|
%
|
International
|
|
100.0
|
|
|
117.0
|
|
(14.5)
|
%
|
Convenience
Stores and Foodservice
|
|
92.7
|
|
|
79.8
|
|
16.2
|
%
|
Total segment
operating profit
|
|
787.1
|
|
|
826.5
|
|
(4.8)
|
%
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
items
|
|
82.4
|
|
|
83.1
|
|
(0.8)
|
%
|
Restructuring,
impairment, and
other exit
costs
|
|
58.9
|
|
|
60.1
|
|
(2.0)
|
%
|
Operating
profit
|
$
|
645.8
|
|
$
|
683.3
|
|
(5.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
|
Basis Pt
Change
|
|
Segment operating
profit as a
% of net
sales:
|
|
|
|
|
|
|
|
|
U.S.
Retail
|
|
25.5%
|
|
|
24.9%
|
|
60
|
|
International
|
|
8.8%
|
|
|
9.8%
|
|
(100)
|
|
Convenience
Stores and Foodservice
|
|
20.8%
|
|
|
16.7%
|
|
410
|
|
Total segment
operating profit
|
|
20.1%
|
|
|
19.6%
|
|
50
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
Consolidated
Balance Sheets
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(In Millions, Except
Par Value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
|
|
May 29,
2016
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
765.7
|
|
$
|
450.6
|
|
$
|
763.7
|
Receivables
|
|
|
1,446.1
|
|
|
1,531.5
|
|
|
1,360.8
|
Inventories
|
|
|
1,547.5
|
|
|
1,795.8
|
|
|
1,413.7
|
Prepaid
expenses and other current assets
|
|
|
433.7
|
|
|
439.6
|
|
|
399.0
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,193.0
|
|
|
4,217.5
|
|
|
3,937.2
|
|
|
|
|
|
|
|
|
|
|
Land, buildings, and
equipment
|
|
|
3,655.3
|
|
|
3,679.2
|
|
|
3,743.6
|
Goodwill
|
|
|
8,758.2
|
|
|
8,857.7
|
|
|
8,741.2
|
Other intangible
assets
|
|
|
4,552.2
|
|
|
4,655.0
|
|
|
4,538.6
|
Other
assets
|
|
|
754.4
|
|
|
825.9
|
|
|
751.7
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
21,913.1
|
|
$
|
22,235.3
|
|
$
|
21,712.3
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
1,944.8
|
|
$
|
1,759.6
|
|
$
|
2,046.5
|
Current
portion of long-term debt
|
|
|
1,103.4
|
|
|
1,000.3
|
|
|
1,103.4
|
Notes
payable
|
|
|
690.5
|
|
|
823.7
|
|
|
269.8
|
Other
current liabilities
|
|
|
1,476.4
|
|
|
1,716.3
|
|
|
1,595.0
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
5,215.1
|
|
|
5,299.9
|
|
|
5,014.7
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
7,078.0
|
|
|
7,609.7
|
|
|
7,057.7
|
Deferred income
taxes
|
|
|
1,442.7
|
|
|
1,473.1
|
|
|
1,399.6
|
Other
liabilities
|
|
|
2,047.7
|
|
|
1,714.0
|
|
|
2,087.6
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
15,783.5
|
|
|
16,096.7
|
|
|
15,559.6
|
|
|
|
|
|
|
|
|
|
|
Redeemable
interest
|
|
|
841.0
|
|
|
786.6
|
|
|
845.6
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, 754.6 shares issued, $0.10 par value
|
|
|
75.5
|
|
|
75.5
|
|
|
75.5
|
Additional paid-in capital
|
|
|
1,185.1
|
|
|
1,232.1
|
|
|
1,177.0
|
Retained
earnings
|
|
|
12,734.6
|
|
|
12,150.9
|
|
|
12,616.5
|
Common
stock in treasury, at cost,
shares of 160.0, 155.4 and 157.8
|
|
|
(6,602.2)
|
|
|
(6,089.2)
|
|
|
(6,326.6)
|
Accumulated other comprehensive loss
|
|
|
(2,484.7)
|
|
|
(2,420.2)
|
|
|
(2,612.2)
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
4,908.3
|
|
|
4,949.1
|
|
|
4,930.2
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
|
|
380.3
|
|
|
402.9
|
|
|
376.9
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
5,288.6
|
|
|
5,352.0
|
|
|
5,307.1
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
21,913.1
|
|
$
|
22,235.3
|
|
$
|
21,712.3
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions)
|
|
Three-Month Period
Ended
|
|
Aug. 28,
2016
|
|
Aug. 30,
2015
|
Cash Flows -
Operating Activities
|
|
|
|
|
|
Net
earnings, including earnings attributable to redeemable
|
|
|
|
|
|
and noncontrolling interests
|
$
|
419.5
|
|
$
|
435.1
|
Adjustments to reconcile net earnings to net cash
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
152.5
|
|
|
143.9
|
After-tax earnings from joint ventures
|
|
(24.2)
|
|
|
(25.7)
|
Distributions of earnings from joint ventures
|
|
26.4
|
|
|
19.1
|
Stock-based compensation
|
|
38.8
|
|
|
31.3
|
Deferred income taxes
|
|
36.0
|
|
|
20.7
|
Tax
benefit on exercised options
|
|
(53.0)
|
|
|
(37.4)
|
Pension and other postretirement benefit plan
contributions
|
|
(11.3)
|
|
|
(10.6)
|
Pension and other postretirement benefit plan costs
|
|
8.9
|
|
|
29.5
|
Restructuring, impairment, and other exit costs
|
|
56.6
|
|
|
47.5
|
Changes in current assets and liabilities
|
|
(357.1)
|
|
|
(200.2)
|
Other, net
|
|
(4.8)
|
|
|
(22.3)
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
288.3
|
|
|
430.9
|
|
|
|
|
|
|
Cash Flows -
Investing Activities
|
|
|
|
|
|
Purchases of land, buildings, and equipment
|
|
(153.5)
|
|
|
(147.2)
|
Investments in affiliates, net
|
|
8.1
|
|
|
1.0
|
Proceeds
from disposal of land, buildings, and equipment
|
|
0.4
|
|
|
0.4
|
Exchangeable note
|
|
13.0
|
|
|
-
|
Other,
net
|
|
4.7
|
|
|
6.7
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
(127.3)
|
|
|
(139.1)
|
|
|
|
|
|
|
Cash Flows -
Financing Activities
|
|
|
|
|
|
Change
in notes payable
|
|
419.6
|
|
|
211.7
|
Payment
of long-term debt
|
|
-
|
|
|
(0.2)
|
Proceeds
from common stock issued on exercised options
|
|
63.6
|
|
|
47.7
|
Tax
benefit on exercised options
|
|
53.0
|
|
|
37.4
|
Purchases of common stock for treasury
|
|
(399.7)
|
|
|
(152.1)
|
Dividends paid
|
|
(290.9)
|
|
|
(266.5)
|
Distributions to noncontrolling and redeemable interest
holders
|
|
(1.2)
|
|
|
(35.0)
|
Other,
net
|
|
(0.1)
|
|
|
0.1
|
|
|
|
|
|
|
Net cash used by financing activities
|
|
(155.7)
|
|
|
(156.9)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
(3.3)
|
|
|
(18.5)
|
Increase in cash and
cash equivalents
|
|
2.0
|
|
|
116.4
|
Cash and cash
equivalents - beginning of year
|
|
763.7
|
|
|
334.2
|
|
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$
|
765.7
|
|
$
|
450.6
|
|
|
|
|
|
|
Cash Flow from
changes in current assets and liabilities:
|
|
|
|
|
|
Receivables
|
$
|
(81.7)
|
|
$
|
(162.6)
|
Inventories
|
|
(122.2)
|
|
|
(275.2)
|
Prepaid
expenses and other current assets
|
|
(34.2)
|
|
|
(34.3)
|
Accounts
payable
|
|
(49.7)
|
|
|
132.8
|
Other
current liabilities
|
|
(69.3)
|
|
|
139.1
|
|
|
|
|
|
|
Changes in current
assets and liabilities
|
$
|
(357.1)
|
|
$
|
(200.2)
|
|
|
|
|
|
|
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)
|
During the second
quarter of fiscal 2016, we sold our North American Green Giant
product lines for $822.7 million in cash, and we recorded a pre-tax
gain of $199.1 million. We received net cash proceeds of $788.0
million after transaction-related costs. After the divestiture, we
retained a brand intangible asset of $30.1 million related to our
continued use of the Green Giant brand in certain markets
outside of North America.
|
|
|
(3)
|
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. 28,
2016
|
|
Aug. 30,
2015
|
Cost of
sales
|
$
|
13.6
|
$
|
21.8
|
Restructuring,
impairment, and other exit costs
|
|
58.9
|
|
60.1
|
Total restructuring
charges
|
$
|
72.5
|
$
|
81.9
|
Project-related costs
classified in cost of sales
|
$
|
13.8
|
$
|
13.1
|
In the first quarter of fiscal 2017, we announced a plan to
restructure certain product lines in our International segment. To
eliminate excess capacity, we will close our snacks manufacturing
facility in Marília, Brazil and
cease production operations for meals and snacks at our facility in
São Bernardo do Campo, Brazil. We
will also cease production of certain underperforming snack
products at our facility in Nanjing, China. These and other actions, which are
subject to appropriate consultation with employees and their
representatives where required by law or practice, will affect
approximately 420 positions in our Brazilian operations and
approximately 440 positions in our Greater China operations. In the first quarter
of fiscal 2017, we recorded $36
million of these charges, including $2 million of severance charges and $34 million of impairment charges to write down
assets to their net realizable value. We expect these actions to be
completed by the end of fiscal 2017 with total charges of
approximately $43 million, of which
approximately $8 million will be
cash.
In the first quarter of fiscal 2017, we approved a plan to close
our Vineland, New Jersey facility
to eliminate excess soup capacity in our U.S. Retail Segment supply
chain. This action will affect approximately 370 positions, and we
recorded a charge of $21 million,
including $12 million of severance
charges and $7 million of accelerated
depreciation in the first quarter of fiscal 2017. We expect to
record approximately $27 million of
additional expense in fiscal 2017, primarily accelerated
depreciation. We expect this action to be completed by the end of
fiscal 2019 with total charges of approximately $66 million, of which approximately $23 million will be cash.
In addition to the actions taken at certain facilities described
above, we incurred $15 million of
restructuring charges in the first quarter of fiscal 2017 and
$82 million in the first quarter of
fiscal 2016 relating to Project Century and Project Compass actions
previously announced.
We made cash payments totaling $16
million in the first quarter of fiscal 2017 and $34 million in the first quarter of fiscal 2016
relating to restructuring initiatives.
In addition to restructuring charges, we recorded
project-related costs of $14 million
in the first quarter of fiscal 2017 and $13
million in the first quarter of fiscal 2016. We expect to
incur approximately $38 million of
project-related costs in future periods related to our
restructuring initiatives.
Details of our current restructuring initiatives were as
follows:
|
As
Reported
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
|
Estimated
|
In
Millions
|
Aug. 28,
2016
|
Aug. 30,
2015
|
Fiscal 2016 and
2015
|
|
Future
|
Total
|
|
|
Charge
|
Cash
|
Charge
|
Cash
|
Charge
|
Cash
|
|
Charge
|
Cash
|
Charge
|
Cash
|
Savings
(b)
|
Restructuring of
certain International product lines
|
$36.4
|
$3.3
|
$-
|
$-
|
$-
|
$-
|
|
$7
|
$5
|
$43
|
$8
|
|
Closure of Vineland,
New Jersey plant
|
20.9
|
-
|
-
|
-
|
-
|
-
|
|
45
|
23
|
66
|
23
|
|
Project
Compass
|
1.0
|
4.3
|
51.5
|
8.6
|
54.7
|
36.1
|
|
4
|
20
|
60
|
60
|
|
Project
Century
|
14.2
|
7.6
|
30.2
|
5.8
|
364.4
|
46.1
|
|
55
|
105
|
434
|
159
|
|
Project
Catalyst
|
-
|
(0.4)
|
0.2
|
19.7
|
140.9
|
92.8
|
|
-
|
26
|
141
|
118
|
|
Combination of
certain operational facilities
|
-
|
1.1
|
-
|
0.2
|
13.9
|
11.0
|
|
1
|
-
|
15
|
12
|
|
Total restructuring
charges (a)
|
72.5
|
15.9
|
81.9
|
34.3
|
573.9
|
186.0
|
|
112
|
179
|
759
|
380
|
|
Project-related
costs
|
13.8
|
16.7
|
13.1
|
12.2
|
70.7
|
64.2
|
|
38
|
41
|
122
|
122
|
|
Restructuring charges
and project-related costs
|
$86.3
|
$32.6
|
$95.0
|
$46.5
|
$644.6
|
$250.2
|
|
$150
|
$220
|
$881
|
$502
|
$620
|
(a) Includes $13.6
million of restructuring charges recorded in cost of sales during
fiscal 2017 and $21.8 million in fiscal 2016.
|
(b) Cumulative annual
savings targeted by fiscal 2018. Includes savings from SG&A
cost reduction projects.
|
(4)
|
Unallocated corporate
expense totaled $82 million in the first quarter of fiscal 2017
compared to $83 million in the same period in fiscal 2016. In the
first quarter of fiscal 2017, we recorded $14 million of
restructuring charges and $14 million of restructuring initiative
project-related costs compared to $22 million of restructuring
charges and $13 million of restructuring initiative project-related
costs in the same period last year. In addition, we recorded a $17
million net increase in expense related to the mark-to-market
valuation of certain commodity positions and grain inventories in
the first quarter of fiscal 2017 compared to a $3 million net
decrease in expense in the same period last year.
|
|
|
(5)
|
Basic and diluted
earnings per share (EPS) were calculated as follows:
|
|
|
|
|
Quarter
Ended
|
In Millions,
Except per Share Data
|
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
Net earnings
attributable to General Mills
|
|
$
|
409.0
|
|
$
|
426.6
|
|
|
|
|
|
|
|
Average number of
common shares - basic EPS
|
|
|
600.0
|
|
|
601.7
|
Incremental share
effect from: (a)
|
|
|
|
|
|
|
Stock
options
|
|
|
9.5
|
|
|
10.4
|
Restricted
stock, restricted stock units, and other
|
|
|
2.9
|
|
|
3.4
|
Average number of
common shares - diluted EPS
|
|
|
612.4
|
|
|
615.5
|
Earnings per share -
basic
|
|
$
|
0.68
|
|
$
|
0.71
|
Earnings per share -
diluted
|
|
$
|
0.67
|
|
$
|
0.69
|
|
|
(a)
|
Incremental shares
from stock options, restricted stock units, and performance share
units are computed by the treasury stock method.
|
(6)
|
The effective tax
rate for the first quarter of fiscal 2017 was 30.9 percent compared
to 32.7 percent for the first quarter of fiscal 2016. The 1.8
percentage point decrease was primarily due to discrete state tax
benefits and favorable impacts of U.S. federal legislation passed
during the third quarter of fiscal 2016.
|
|
|
(7)
|
We have included the
following measures in this release that are not defined by GAAP:
(1) Organic net sales growth rates, (2) diluted EPS excluding
certain items affecting comparability, (3) diluted EPS excluding
certain items affecting comparability growth rates on a
constant-currency basis, (4) total segment operating profit, (5)
constant-currency total segment operating profit growth rates, (6)
constant-currency International segment operating profit growth
rates, (7) constant-currency net sales growth rates for our
International segment, (8) constant-currency after-tax
earnings from joint ventures growth rates, (9) earnings comparisons
as a percent of net sales excluding certain items affecting
comparability, and (10) effective income tax rates excluding
certain items affecting comparability.
|
|
|
|
Organic net sales
growth rates, diluted EPS excluding certain items affecting
comparability and the related growth rate on a constant-currency
basis, and total segment operating profit and related
constant-currency growth rates are used in reporting to our
executive management and as a component of our Board of Directors'
measurement of our performance for incentive compensation
purposes. We believe that these measures provide useful
supplemental information to assess our operating performance.
The adjustments are either items resulting from infrequently
occurring events or items that, in our management's judgment,
significantly affect the period-over-period assessment of operating
results. These measures are reconciled below to the measures
as reported in accordance with GAAP, and should be viewed in
addition to, and not in lieu of, our diluted EPS and operating
performance measures as calculated in accordance with
GAAP.
|
|
|
|
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, which are the
relevant GAAP measures, is 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.
|
|
|
Diluted EPS excluding certain items affecting comparability and
the related constant-currency growth rates follow:
|
|
Quarter
Ended
|
Fiscal
Year
|
|
Per Share
Data
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
Change
|
|
|
2016
|
|
Diluted earnings per
share, as reported
|
$
|
0.67
|
|
$
|
0.69
|
(3)
|
%
|
$
|
2.77
|
|
Mark-to-market
effects (a)(d)
|
|
0.02
|
|
|
-
|
|
|
|
(0.07)
|
|
Restructuring
charges (b)(d)
|
|
0.08
|
|
|
0.09
|
|
|
|
0.26
|
|
Project-related costs (b)(d)
|
|
0.01
|
|
|
0.01
|
|
|
|
0.06
|
|
Divestitures
(gain), net (c)(d)
|
|
-
|
|
|
-
|
|
|
|
(0.10)
|
|
Diluted earnings per
share, excluding
certain
items affecting
comparability
|
$
|
0.78
|
|
$
|
0.79
|
(1)
|
%
|
$
|
2.92
|
|
Foreign currency
exchange impact
|
|
|
|
|
|
Flat
|
|
|
|
|
Diluted earnings per
share growth,
|
|
|
|
|
|
|
|
|
|
|
excluding certain items affecting
|
|
|
|
|
|
|
|
|
|
|
comparability, on a constant-currency basis
|
|
|
|
|
|
(1)
|
%
|
|
|
|
|
(a)
|
See Note
4.
|
|
|
(b)
|
See Note
3.
|
|
|
(c)
|
See Note
2.
|
|
|
(d)
|
See reconciliation of
effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
|
|
|
|
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 rate
follows:
|
|
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.
28, 2016
|
|
(5)
|
%
|
(1)
|
pt
|
(4)
|
%
|
|
|
|
|
|
|
|
|
Constant-currency International segment operating profit growth
rate follows:
|
|
|
Percentage Change
in International Segment Operating Profit as
Reported
|
Impact of Foreign
Currency Exchange
|
Percentage Change
in International Segment Operating Profit on Constant-Currency
Basis
|
|
Quarter Ended Aug.
28, 2016
|
|
(14)
|
%
|
(3)
|
pts
|
(11)
|
%
|
|
|
|
|
|
|
|
|
|
Constant-currency International segment and region net sales
growth rates follow:
|
|
|
Quarter Ended Aug.
28, 2016
|
|
|
|
Percentage Change
in Net Sales as
Reported
|
Impact of Foreign
Currency Exchange
|
Percentage Change
in Net Sales on Constant-Currency Basis
|
|
Europe
|
|
(9)
|
%
|
(3)
|
pts
|
(6)
|
%
|
|
Canada
|
|
(4)
|
|
(2)
|
|
(2)
|
|
|
Latin
America
|
|
(4)
|
|
(7)
|
|
3
|
|
|
Asia/Pacific
|
|
(3)
|
|
(4)
|
|
1
|
|
|
Total
International
|
|
(6)
|
%
|
(4)
|
pts
|
(2)
|
%
|
|
The components of International organic net sales growth for the
quarter ended August 30, 2015, versus
the quarter ended August 24, 2014,
are as follows:
|
|
|
Quarter Ended Aug.
30, 2015 vs.
|
|
|
Quarter Ended Aug.
24, 2014
|
|
|
Contributions from
organic volume growth (a)
|
|
4
pts
|
Organic net price
realization and mix
|
|
1 pt
|
Organic net sales
growth
|
|
5
pts
|
Foreign currency
exchange
|
|
(16)pts
|
Acquisitions and
divestitures (b)
|
|
NA
|
Net sales
growth
|
|
(11)pts
|
|
Constant-currency after-tax earnings from joint ventures growth
rate follows:
|
|
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.
28, 2016
|
|
(6)
|
%
|
4
|
pts
|
(10)
|
%
|
|
|
|
|
|
|
|
|
Earnings comparisons as a percent of net sales excluding certain
items affecting comparability follow:
|
|
Quarter
Ended
|
|
In
Millions
|
|
Aug. 28,
2016
|
|
|
Aug. 30,
2015
|
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of Net
Sales
|
|
|
|
Value
|
|
Percent
of Net
Sales
|
|
|
Gross margin as
reported (a)
|
$
|
1,416.9
|
|
36.3
|
%
|
|
$
|
1,554.6
|
|
36.9
|
%
|
|
Mark-to-market
effects (b)
|
|
16.6
|
|
0.4
|
%
|
|
|
(2.7)
|
|
-
|
%
|
|
Restructuring
charges (c)
|
|
13.6
|
|
0.3
|
%
|
|
|
21.8
|
|
0.5
|
%
|
|
Project-related costs (c)
|
|
13.8
|
|
0.4
|
%
|
|
|
13.1
|
|
0.3
|
%
|
|
Adjusted gross
margin
|
$
|
1,460.9
|
|
37.4
|
%
|
|
$
|
1,586.8
|
|
37.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
645.8
|
|
16.5
|
%
|
|
$
|
683.3
|
|
16.2
|
%
|
|
Mark-to-market
effects (b)
|
|
16.6
|
|
0.4
|
%
|
|
|
(2.7)
|
|
-
|
%
|
|
Restructuring
charges (c)
|
|
72.5
|
|
1.9
|
%
|
|
|
81.9
|
|
1.9
|
%
|
|
Project-related costs (c)
|
|
13.8
|
|
0.4
|
%
|
|
|
13.1
|
|
0.3
|
%
|
|
Adjusted operating
profit
|
$
|
748.7
|
|
19.2
|
%
|
|
$
|
775.6
|
|
18.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
409.0
|
|
10.5
|
%
|
|
$
|
426.6
|
|
10.1
|
%
|
|
Mark-to-market
effects, net of tax (b)(d)
|
|
10.5
|
|
0.3
|
%
|
|
|
(1.7)
|
|
-
|
%
|
|
Restructuring
charges, net of tax (c) (d)
|
|
48.3
|
|
1.2
|
%
|
|
|
56.2
|
|
1.3
|
%
|
|
Project-related costs, net of tax (c)(d)
|
|
8.8
|
|
0.2
|
%
|
|
|
8.2
|
|
0.2
|
%
|
|
Adjusted net earnings
attributable to General Mills
|
$
|
476.6
|
|
12.2
|
%
|
|
$
|
489.3
|
|
11.6
|
%
|
|
|
(a)
|
Net sales less cost
of sales.
|
|
|
(b)
|
See Note
4.
|
|
|
(c)
|
See Note
3.
|
|
|
(d)
|
See reconciliation of
effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
|
|
Quarter
Ended
|
|
|
In
Millions
|
|
Aug. 24,
2014
|
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of Net
Sales
|
|
|
Gross margin as
reported (a)
|
$
|
1,438.7
|
|
33.7
|
%
|
|
Mark-to-market
effects
|
|
49.2
|
|
1.1
|
%
|
|
Adjusted gross
margin
|
$
|
1,487.9
|
|
34.8
|
%
|
|
|
|
|
|
|
|
|
(a) Net
sales less cost of sales.
|
|
|
|
|
|
|
|
Quarter
Ended
|
Comparisons as a % of
net sales excluding
certain items
affecting comparability:
|
|
Aug. 30,
2015
|
|
|
Aug. 24,
2014
|
|
Basis Pt
Change
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross
margin
|
|
37.7
%
|
|
|
34.8 %
|
|
290
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the effective income tax rate as reported to
the effective income tax rate excluding certain items affecting
comparability follows:
|
|
Quarter
Ended
|
|
|
Aug. 28,
2016
|
|
Aug. 30,
2015
|
|
In
Millions
|
Pretax
Earnings (a)
|
Income
Taxes
|
|
Pretax
Earnings (a)
|
Income
Taxes
|
|
As
reported
|
$571.9
|
$176.6
|
|
$608.0
|
$198.6
|
|
Mark-to-market effects (b)
|
16.6
|
6.1
|
|
(2.7)
|
(1.0)
|
|
Restructuring charges (c)
|
72.5
|
24.2
|
|
81.9
|
23.6
|
|
Project-related costs (c)
|
13.8
|
5.0
|
|
13.1
|
4.9
|
|
As
adjusted
|
$674.8
|
$211.9
|
|
$700.3
|
$226.1
|
|
Effective tax
rate:
|
|
|
|
|
|
|
As
reported
|
|
30.9%
|
|
|
32.7%
|
|
As
adjusted
|
|
31.4%
|
|
|
32.3%
|
|
Sum of adjustments to
income taxes
|
|
35.3
|
|
|
27.5
|
|
Average number of
common shares - diluted EPS
|
|
612.4
|
|
|
615.5
|
|
Impact of income tax
adjustments on diluted EPS
excluding
certain items affecting comparability
|
|
$0.06
|
|
|
$0.04
|
|
|
(a)
|
Earnings before
income taxes and after-tax earnings from joint ventures.
|
|
|
(b)
|
See Note
4.
|
|
|
(c)
|
See Note
3.
|
|
|
|
|
The non-GAAP forward-looking financial measures included in this
release are not reconcilable to the equivalent GAAP measure because
we cannot accurately predict the excluded variables that may impact
these measures.
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SOURCE General Mills