MINNEAPOLIS, Dec. 20, 2017 /PRNewswire/ -- General Mills
(NYSE: GIS) today reported results for the second quarter ended
November 26, 2017.
"I'm pleased with the breadth of the topline improvement we
delivered this quarter across our geographies, product platforms,
and channels," said General Mills Chief Executive Officer
Jeff Harmening. "We're
executing better, with stronger innovation, more effective brand
building, and better merchandising leading to market share gains in
the majority of our key global platforms. I'm also pleased
that we delivered topline growth in absolute terms."
Harmening continued, "At the same time, we still have important
work to do to achieve our full-year goals. Our profit was
down in the first half, but I'm confident we will deliver profit
growth in the second half. With two quarters behind us and
good visibility to the impact of our strong second-half plans,
we're raising our 2018 organic sales guidance and maintaining our
outlook for profit and EPS. I'm encouraged by the step that
fiscal 2018 represents in our effort to return our business to
consistent top- and bottom-line growth for the long term."
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 Cereal Partners Worldwide (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 significant
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.
Second Quarter Results Summary
- Reported net sales increased 2 percent to $4.20 billion. Organic net sales increased
1 percent, with growth across all four operating
segments.
- Gross margin decreased 260 basis points to 34.4 percent
of net sales. Adjusted gross margin, which excludes certain
items affecting comparability, decreased 240 basis points to 34.4
percent, driven by higher input costs including currency-driven
inflation on imported products, as well as unfavorable trade
expense phasing.
- Operating profit totaled $730
million, down 5 percent from last year due to lower gross
margins partially offset by higher net sales. Operating
profit margin of 17.4 percent declined 130 basis points.
Adjusted operating profit margin decreased 220 basis points to 17.4
percent, primarily reflecting lower adjusted gross margin and a 7
percent increase in advertising and media expense, partially offset
by benefits from cost savings initiatives.
- Total segment operating profit of $773 million was down 8 percent in constant
currency.
- The effective tax rate in the quarter was 35.9 percent compared
to 32.8 percent last year, driven by a $42
million prior-year adjustment (please see Note 7 below
for more information on our effective tax rate).
Excluding items affecting comparability, the adjusted effective tax
rate was 29.3 percent compared to 32.4 percent a year ago.
- Net earnings attributable to General Mills totaled
$430 million, down 11 percent from a
year ago. Diluted EPS of $0.74
declined 8 percent, with lower net earnings offset by 3 percent
fewer average diluted shares outstanding.
- Adjusted diluted EPS, which excludes certain items
affecting comparability of results, totaled $0.82 in the second quarter, down 4 percent from
the prior year. Constant-currency adjusted diluted EPS
declined 5 percent, reflecting lower adjusted operating profit,
partially offset by lower taxes and average diluted shares
outstanding in the quarter.
Six Month Results Summary
- Reported net sales declined 1 percent to $7.97 billion. Organic net sales were also
down 1 percent, primarily reflecting volume declines in the North
America Retail and Asia &
Latin America segments.
- Gross margin decreased 210 basis points to 34.5 percent
of net sales. Adjusted gross margin was down 240 basis points
to 34.7 percent.
- Operating profit totaled $1.36
billion, down 4 percent from the prior year.
Operating profit margin of 17.0 percent was down 60 basis
points. Adjusted operating profit margin decreased 220 basis
points to 17.2 percent.
- Total segment operating profit of $1.44 billion was down 12 percent in constant
currency.
- Net earnings attributable to General Mills totaled
$835 million. Diluted EPS of
$1.43 declined 3 percent from the
prior year.
- Adjusted diluted EPS of $1.53 was down 6 percent as reported and down 7
percent on a constant-currency basis.
Operating Segment
Results
|
Components of
Fiscal 2018 Reported Net Sales Growth
|
Second
Quarter
|
Volume
|
Price/Mix
|
Foreign
Exchange
|
Reported
Net Sales
|
North America
Retail
|
1 pt
|
(1) pt
|
1 pt
|
1%
|
Convenience Stores
& Foodservice
|
3 pts
|
2 pts
|
--
|
5%
|
Europe &
Australia
|
1 pt
|
--
|
6 pts
|
7%
|
Asia & Latin
America
|
(7) pts
|
7 pts
|
2 pts
|
2%
|
Total
|
--
|
1 pt
|
1 pt
|
2%
|
Six
Months
|
|
|
|
|
North America
Retail
|
(1) pt
|
(1) pt
|
--
|
(2)%
|
Convenience Stores
& Foodservice
|
2 pts
|
1 pt
|
--
|
3%
|
Europe &
Australia
|
--
|
2 pts
|
3 pts
|
5%
|
Asia & Latin
America
|
(12) pts
|
8 pts
|
1 pt
|
(3)%
|
Total
|
(1) pt
|
--
|
--
|
(1)%
|
Components of
Fiscal 2018 Organic Net Sales Growth
|
Second
Quarter
|
Organic
Volume
|
Organic
Price/Mix
|
Organic
Net
Sales
|
Foreign
Exchange
|
Acquisitions
&
Divestitures
|
Reported
Net
Sales
|
North America
Retail
|
1 pt
|
(1) pt
|
Flat
|
1 pt
|
--
|
1%
|
Convenience Stores
& Foodservice
|
3 pts
|
2 pts
|
5%
|
--
|
--
|
5%
|
Europe &
Australia
|
1 pt
|
--
|
1%
|
6 pts
|
--
|
7%
|
Asia & Latin
America
|
(7) pts
|
7 pts
|
Flat
|
2 pts
|
--
|
2%
|
Total
|
--
|
1 pt
|
1%
|
1 pt
|
--
|
2%
|
Six
Months
|
|
|
|
|
|
|
North America
Retail
|
(1) pt
|
(1) pt
|
(2)%
|
--
|
--
|
(2)%
|
Convenience Stores
& Foodservice
|
2 pts
|
1 pt
|
3%
|
--
|
--
|
3%
|
Europe &
Australia
|
--
|
2 pts
|
2%
|
3 pts
|
--
|
5%
|
Asia & Latin
America
|
(12) pts
|
8 pts
|
(4)%
|
1 pt
|
--
|
(3)%
|
Total
|
(1) pt
|
Flat
|
(1)%
|
--
|
--
|
(1)%
|
Fiscal 2018
Segment Operating Profit Growth
|
Second
Quarter
|
% Change as
Reported
|
% Change in
Constant Currency
|
North America
Retail
|
(4)%
|
(5)%
|
Convenience Stores
& Foodservice
|
(2)%
|
(2)%
|
Europe &
Australia
|
(35)%
|
(40)%
|
Asia & Latin
America
|
(42)%
|
(46)%
|
Total
|
(7)%
|
(8)%
|
Six
Months
|
|
|
North America
Retail
|
(10)%
|
(10)%
|
Convenience Stores
& Foodservice
|
(5)%
|
(5)%
|
Europe &
Australia
|
(32)%
|
(35)%
|
Asia & Latin
America
|
(37)%
|
(40)%
|
Total
|
(11)%
|
(12)%
|
North America Retail Segment
Second-quarter net sales for General Mills' North America Retail
segment totaled $2.77 billion, up 1
percent from the prior year, primarily driven by a 7 percent
increase for the U.S. Cereal operating unit and a 5 percent
increase for U.S. Snacks. The Canada unit delivered 1 percent net sales
growth in constant currency. Net sales for the U.S. Meals
& Baking operating unit declined 2 percent, and U.S. Yogurt net
sales were down 11 percent. Organic net sales were flat to
last year. The increase in U.S. Cereal net sales was due in
part to growth in non-measured channels and strong sell-in for new
Chocolate Peanut Butter Cheerios. Taste-oriented
cereals including Lucky Charms, Cinnamon Toast
Crunch, Reese's Puffs, and Cocoa Puffs led
performance in Nielsen-measured outlets. U.S. Snacks net
sales growth was driven by Lärabar and Nature Valley
snack bars and fruit snacks offsetting declines on Fiber One
snack bars. U.S. Yogurt net sales trends in the second
quarter improved 11 percentage points over the first quarter, as
continued declines for Yoplait Greek and Yoplait
Light products were partially offset by increasing benefits
from the new Oui by Yoplait and Yoplait Mix-Ins
product launches. Segment operating profit of $623 million was down 4 percent due primarily to
unfavorable trade expense phasing, higher input costs, and an
increase in advertising and media expense, partially offset by
favorable product mix and reductions in other selling, general, and
administrative (SG&A) expenses, including benefits from cost
savings initiatives.
Through six months, North America Retail segment net sales were
down 2 percent to $5.21
billion. Organic net sales also declined 2
percent. Net sales declines in the U.S. Yogurt and U.S. Meals
& Baking operating units were partially offset by an increase
in the U.S. Snacks unit. Net sales for the Canada operating unit were down modestly on a
constant-currency basis. Year-to-date U.S. Cereal net sales
were essentially in line with year-ago levels, as were
Nielsen-measured retail sales. Segment operating profit
totaled $1.16 billion, down 10
percent from a year ago due to lower volume, unfavorable trade
expense phasing, higher input costs, and an increase in advertising
and media expense, partially offset by reductions in other SG&A
expenses, including benefits from cost savings
initiatives.
Convenience Stores & Foodservice Segment
Second-quarter net sales for the Convenience Stores &
Foodservice segment increased 5 percent to $512 million, driven by growth for the Focus 6
platforms, including frozen meals, cereal, and snacks, as well as
benefits from market index pricing on bakery flour. Organic
net sales also increased 5 percent. Segment operating profit
of $106 million was 2 percent below
last year, driven by higher input costs.
Through six months, Convenience Stores & Foodservice net
sales increased 3 percent to $959
million, driven by growth for the Focus 6 platforms and
benefits from market index pricing on bakery flour. Organic
net sales also increased 3 percent. Segment operating profit
totaled $191 million, 5 percent below
last year due to higher input costs and a comparison to 11 percent
profit growth in the year-ago period.
Europe & Australia
Segment
Second-quarter net sales for the Europe & Australia segment increased 7 percent to
$467 million, driven by favorable
foreign currency exchange and contributions from volume.
Organic net sales increased 1 percent. Innovation,
brand-building, and geographic expansion continued to drive sales
and share growth for Häagen-Dazs ice cream and Nature
Valley and Fiber One snacks. Segment operating
profit totaled $27 million compared
to $41 million a year ago, primarily
driven by input cost inflation, including currency-driven inflation
on products imported into the U.K.
Through six months, Europe
& Australia net sales
increased 5 percent to $959 million,
reflecting favorable foreign currency exchange and benefits from
net price realization and mix. Organic net sales increased 2
percent. Sales growth for the ice cream and snack bars
platforms offset a decline in yogurt. Segment operating
profit totaled $58 million compared
to $85 million a year ago, primarily
driven by input cost inflation, including currency-driven inflation
on products imported into the U.K.
Asia & Latin America
Segment
Second-quarter net sales for the Asia & Latin
America segment increased 2 percent to $448 million, driven by favorable foreign
currency exchange and benefits from net price realization and mix
more than offsetting unfavorable contributions from volume.
Organic net sales essentially matched year-ago levels. Net
sales growth across Asia markets
was partially offset by lower net sales across Latin America markets. Segment operating
profit decreased to $17 million from
$29 million a year ago, reflecting
input cost inflation, including currency-driven inflation on
imported products, and an increase in advertising and media
expense.
Through six months, Asia &
Latin America net sales declined 3
percent to $840 million, reflecting
unfavorable contributions from volume partially offset by benefits
from net price realization and mix and favorable foreign currency
exchange. Organic net sales declined 4 percent. A net
sales increase in Asia markets,
including growth on Wanchai
Ferry dumplings in China and Pillsbury snack bars in
India, was more than offset by
declines in Brazil, reflecting a
timing shift in reporting calendar in fiscal 2017 and challenges
related to an enterprise reporting system implementation.
Segment operating profit totaled $32
million compared to $51
million a year ago, driven by lower sales as well as
currency-driven inflation on imported products.
Joint Venture Summary
Second-quarter net sales for CPW declined 2 percent in constant
currency, and constant-currency net sales for Häagen-Dazs Japan
(HDJ) were down 3 percent. Combined after-tax earnings from
joint ventures were $24 million
compared to $30 million a year
ago. On a constant-currency basis, after-tax earnings from
joint ventures were down 19 percent, reflecting a difficult
comparison to 27 percent growth in last year's second
quarter. Through six months, after-tax earnings from joint
ventures totaled $48 million, down 12
percent as reported and down 11 percent in constant
currency.
Other Income Statement Items
Unallocated corporate items totaled $42
million net expense in the second quarter of fiscal 2018,
compared to $19 million net expense a
year ago. Excluding mark-to-market valuation effects and
other items affecting comparability, unallocated corporate items
totaled $41 million net expense this
year compared to $24 million net
expense last year.
Restructuring, impairment, and other exit costs totaled
$2 million in the quarter compared to
$29 million a year ago. An
additional $5 million of
restructuring and project-related charges were recorded in cost of
sales this year compared to $24
million a year ago (please see Note 4 below for more
information on these charges).
Net interest expense totaled $75
million in the second quarter compared to $76 million a year ago. The effective tax
rate in the quarter was 35.9 percent compared to 32.8 percent last
year, driven by a $42 million
prior-year adjustment (please see Note 7 below).
Excluding items affecting comparability, the adjusted
effective tax rate was 29.3 percent compared to 32.4 percent a year
ago.
Cash Flow Generation and Cash Returns
Cash provided by operating activities totaled $1.57 billion through six months of fiscal 2018,
up 45 percent from the prior year due to further improvements in
accounts payable as well as changes in trade and incentive
accruals. Capital investments through the first six months
totaled $260 million. Dividends
paid year-to-date totaled $565
million. During the first six months of 2018, General
Mills repurchased 10.9 million shares of common stock for a total
of $600 million. Average
diluted shares outstanding through six months declined 4 percent to
584 million.
Outlook
General Mills updated its key full-year fiscal 2018 targets:
- Organic net sales are expected to range between flat and
down 1 percent, above the previous range of a decline of 1 to 2
percent. This updated target represents a 300 to 400 basis
point improvement over fiscal 2017 results. In addition, the
company now estimates currency translation will increase reported
net sales by approximately 1 percentage point in fiscal 2018.
- Constant-currency total segment operating profit is
expected to be in a range between flat and up 1 percent, which is
unchanged from previous guidance. After an 11 percent decline
in first-half constant-currency total segment operating profit, the
company expects to generate double-digit growth in the second half
of fiscal 2018, driven by favorable net price realization and mix
and increased cost savings, including savings from its new global
sourcing initiative.
- Adjusted operating profit margin is expected to be below
year-ago levels, compared to the previous expectation of
year-over-year improvement.
- Constant-currency adjusted diluted EPS is expected to
increase 1 to 2 percent from the base of $3.08 earned in fiscal 2017, which is unchanged
from previous guidance. This outlook excludes any impact from
proposed U.S. tax reform legislation. The company continues
to estimate currency translation will be a 1
cent benefit to fiscal 2018 adjusted diluted EPS.
General Mills will hold a briefing for investors today,
December 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 tax reform legislation, 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
|
|
Six-Month Period
Ended
|
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
|
|
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
|
|
|
|
2017
|
|
|
2016
|
|
%
Change
|
|
|
2017
|
|
|
2016
|
|
%
Change
|
Net sales
|
$
|
4,198.7
|
|
$
|
4,112.1
|
|
2.1
|
%
|
|
$
|
7,967.9
|
|
$
|
8,020.0
|
|
(0.6)
|
%
|
Cost of
sales
|
|
2,755.7
|
|
|
2,592.6
|
|
6.3
|
%
|
|
|
5,214.8
|
|
|
5,083.6
|
|
2.6
|
%
|
Selling,
general, and administrative expenses
|
|
711.6
|
|
|
708.1
|
|
0.5
|
%
|
|
|
1,390.7
|
|
|
1,420.3
|
|
(2.1)
|
%
|
Divestiture
loss
|
|
-
|
|
|
13.5
|
|
NM
|
|
|
|
-
|
|
|
13.5
|
|
NM
|
|
Restructuring,
impairment, and other
exit
costs
|
|
1.6
|
|
|
29.0
|
|
(94.5)
|
%
|
|
|
6.8
|
|
|
87.9
|
|
(92.3)
|
%
|
Operating
profit
|
|
729.8
|
|
|
768.9
|
|
(5.1)
|
%
|
|
|
1,355.6
|
|
|
1,414.7
|
|
(4.2)
|
%
|
Interest,
net
|
|
74.9
|
|
|
75.5
|
|
(0.8)
|
%
|
|
|
147.3
|
|
|
149.4
|
|
(1.4)
|
%
|
Earnings before
income taxes and after-tax
earnings from
joint ventures
|
|
654.9
|
|
|
693.4
|
|
(5.6)
|
%
|
|
|
1,208.3
|
|
|
1,265.3
|
|
(4.5)
|
%
|
Income
taxes
|
|
234.9
|
|
|
227.4
|
|
3.3
|
%
|
|
|
403.4
|
|
|
404.0
|
|
(0.1)
|
%
|
After-tax earnings
from joint ventures
|
|
23.8
|
|
|
29.8
|
|
(20.1)
|
%
|
|
|
47.5
|
|
|
54.0
|
|
(12.0)
|
%
|
Net earnings,
including earnings attributable
to redeemable
and noncontrolling interests
|
|
443.8
|
|
|
495.8
|
|
(10.5)
|
%
|
|
|
852.4
|
|
|
915.3
|
|
(6.9)
|
%
|
Net earnings
attributable to redeemable
and
noncontrolling interests
|
|
13.3
|
|
|
14.0
|
|
(5.0)
|
%
|
|
|
17.2
|
|
|
24.5
|
|
(29.8)
|
%
|
Net earnings
attributable to General Mills
|
$
|
430.5
|
|
$
|
481.8
|
|
(10.6)
|
%
|
|
$
|
835.2
|
|
$
|
890.8
|
|
(6.2)
|
%
|
Earnings per share -
basic
|
$
|
0.75
|
|
$
|
0.82
|
|
(8.5)
|
%
|
|
$
|
1.46
|
|
$
|
1.50
|
|
(2.7)
|
%
|
Earnings per share -
diluted
|
$
|
0.74
|
|
$
|
0.80
|
|
(7.5)
|
%
|
|
$
|
1.43
|
|
$
|
1.47
|
|
(2.7)
|
%
|
Dividends per
share
|
$
|
0.49
|
|
$
|
0.48
|
|
2.1
|
%
|
|
$
|
0.98
|
|
$
|
0.96
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Six-Month Period
Ended
|
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
Basis
Pt
|
|
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
Basis
Pt
|
|
Comparisons as a % of
net sales:
|
|
2017
|
|
|
2016
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
Change
|
|
Gross
margin
|
|
34.4
%
|
|
|
37.0 %
|
|
(260)
|
|
|
|
34.5
%
|
|
|
36.6 %
|
|
(210)
|
|
Selling,
general, and administrative expenses
|
|
16.9
%
|
|
|
17.2 %
|
|
(30)
|
|
|
|
17.4
%
|
|
|
17.7 %
|
|
(30)
|
|
Operating
profit
|
|
17.4
%
|
|
|
18.7 %
|
|
(130)
|
|
|
|
17.0
%
|
|
|
17.6 %
|
|
(60)
|
|
Net earnings
attributable to General Mills
|
|
10.3
%
|
|
|
11.7 %
|
|
(140)
|
|
|
|
10.5
%
|
|
|
11.1 %
|
|
(60)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Six-Month Period
Ended
|
Comparisons as a % of
net sales excluding
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
Basis
Pt
|
|
|
|
Nov.
26,
|
|
|
Nov.
27,
|
|
Basis
Pt
|
|
certain
items affecting comparability (a):
|
|
2017
|
|
|
2016
|
|
Change
|
|
|
|
2017
|
|
|
2016
|
|
Change
|
|
Adjusted gross
margin
|
|
34.4
%
|
|
|
36.8 %
|
|
(240)
|
|
|
|
34.7
%
|
|
|
37.1 %
|
|
(240)
|
|
Adjusted
operating profit
|
|
17.4
%
|
|
|
19.6 %
|
|
(220)
|
|
|
|
17.2
%
|
|
|
19.4 %
|
|
(220)
|
|
Adjusted net
earnings attributable to General Mills
|
|
11.3
%
|
|
|
12.4 %
|
|
(110)
|
|
|
|
11.1
%
|
|
|
12.3 %
|
|
(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
|
|
|
Six-Month Period
Ended
|
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
%
Change
|
|
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
2,771.8
|
|
$
|
2,748.8
|
|
0.8
|
%
|
|
$
|
5,210.0
|
|
$
|
5,305.8
|
|
(1.8)
|
%
|
Convenience Stores
& Foodservice
|
|
512.2
|
|
|
487.5
|
|
5.1
|
%
|
|
|
959.3
|
|
|
933.8
|
|
2.7
|
%
|
Europe &
Australia
|
|
466.7
|
|
|
435.1
|
|
7.3
|
%
|
|
|
958.6
|
|
|
913.5
|
|
4.9
|
%
|
Asia & Latin
America
|
|
448.0
|
|
|
440.7
|
|
1.7
|
%
|
|
|
840.0
|
|
|
866.9
|
|
(3.1)
|
%
|
Total
|
$
|
4,198.7
|
|
$
|
4,112.1
|
|
2.1
|
%
|
|
$
|
7,967.9
|
|
$
|
8,020.0
|
|
(0.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
622.9
|
|
$
|
651.0
|
|
(4.3)
|
%
|
|
$
|
1,156.1
|
|
$
|
1,279.2
|
|
(9.6)
|
%
|
Convenience Stores
& Foodservice
|
|
106.5
|
|
|
109.1
|
|
(2.4)
|
%
|
|
|
191.3
|
|
|
201.8
|
|
(5.2)
|
%
|
Europe &
Australia
|
|
26.9
|
|
|
41.3
|
|
(34.9)
|
%
|
|
|
57.5
|
|
|
85.2
|
|
(32.5)
|
%
|
Asia & Latin
America
|
|
16.7
|
|
|
29.0
|
|
(42.4)
|
%
|
|
|
32.2
|
|
|
51.3
|
|
(37.2)
|
%
|
Total segment
operating profit
|
|
773.0
|
|
|
830.4
|
|
(6.9)
|
%
|
|
|
1,437.1
|
|
|
1,617.5
|
|
(11.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
items
|
|
41.6
|
|
|
19.0
|
|
118.9
|
%
|
|
|
74.7
|
|
|
101.4
|
|
(26.3)
|
%
|
Divestiture
loss
|
|
-
|
|
|
13.5
|
|
(100.0)
|
%
|
|
|
-
|
|
|
13.5
|
|
(100.0)
|
%
|
Restructuring,
impairment, and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exit
costs
|
|
1.6
|
|
|
29.0
|
|
(94.5)
|
%
|
|
|
6.8
|
|
|
87.9
|
|
(92.3)
|
%
|
Operating
profit
|
$
|
729.8
|
|
$
|
768.9
|
|
(5.1)
|
%
|
|
$
|
1,355.6
|
|
$
|
1,414.7
|
|
(4.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Six-Month Period
Ended
|
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
Basis Pt
Change
|
|
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
Basis
Pt
Change
|
|
Segment operating
profit as a
% of net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
|
22.5%
|
|
|
23.7%
|
|
(120)
|
|
|
|
22.2%
|
|
|
24.1%
|
|
(190)
|
|
Convenience Stores
& Foodservice
|
|
20.8%
|
|
|
22.4%
|
|
(160)
|
|
|
|
19.9%
|
|
|
21.6%
|
|
(170)
|
|
Europe &
Australia
|
|
5.8%
|
|
|
9.5%
|
|
(370)
|
|
|
|
6.0%
|
|
|
9.3%
|
|
(330)
|
|
Asia & Latin
America
|
|
3.7%
|
|
|
6.6%
|
|
(290)
|
|
|
|
3.8%
|
|
|
5.9%
|
|
(210)
|
|
Total segment
operating profit
|
|
18.4%
|
|
|
20.2%
|
|
(180)
|
|
|
|
18.0%
|
|
|
20.2%
|
|
(220)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(In Millions, Except
Par Value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
|
|
May
28,
2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
962.1
|
|
$
|
809.7
|
|
$
|
766.1
|
Receivables
|
|
|
1,510.5
|
|
|
1,382.7
|
|
|
1,430.1
|
Inventories
|
|
|
1,516.5
|
|
|
1,525.5
|
|
|
1,483.6
|
Prepaid
expenses and other current assets
|
|
|
345.0
|
|
|
393.6
|
|
|
381.6
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,334.1
|
|
|
4,111.5
|
|
|
4,061.4
|
|
|
|
|
|
|
|
|
|
|
Land, buildings, and
equipment
|
|
|
3,631.4
|
|
|
3,571.3
|
|
|
3,687.7
|
Goodwill
|
|
|
8,828.3
|
|
|
8,679.1
|
|
|
8,747.2
|
Other intangible
assets
|
|
|
4,581.8
|
|
|
4,487.4
|
|
|
4,530.4
|
Other
assets
|
|
|
815.9
|
|
|
752.8
|
|
|
785.9
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
22,191.5
|
|
$
|
21,602.1
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,467.0
|
|
$
|
1,938.3
|
|
$
|
2,119.8
|
Current
portion of long-term debt
|
|
|
200.5
|
|
|
1,507.6
|
|
|
604.7
|
Notes
payable
|
|
|
1,298.0
|
|
|
1,421.7
|
|
|
1,234.1
|
Other
current liabilities
|
|
|
1,384.0
|
|
|
1,376.8
|
|
|
1,372.2
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
5,349.5
|
|
|
6,244.4
|
|
|
5,330.8
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
8,228.3
|
|
|
6,542.0
|
|
|
7,642.9
|
Deferred income
taxes
|
|
|
1,790.9
|
|
|
1,506.4
|
|
|
1,719.4
|
Other
liabilities
|
|
|
1,439.7
|
|
|
1,981.8
|
|
|
1,523.1
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
16,808.4
|
|
|
16,274.6
|
|
|
16,216.2
|
|
|
|
|
|
|
|
|
|
|
Redeemable
interest
|
|
|
793.4
|
|
|
801.7
|
|
|
910.9
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, 754.6 shares issued, $0.10 par value
|
|
|
75.5
|
|
|
75.5
|
|
|
75.5
|
Additional paid-in capital
|
|
|
1,243.3
|
|
|
1,179.4
|
|
|
1,120.9
|
Retained
earnings
|
|
|
13,408.9
|
|
|
12,931.8
|
|
|
13,138.9
|
Common
stock in treasury, at cost,
shares of 186.0, 174.4 and 177.7
|
|
|
(8,252.6)
|
|
|
(7,529.2)
|
|
|
(7,762.9)
|
Accumulated other comprehensive loss
|
|
|
(2,244.4)
|
|
|
(2,476.9)
|
|
|
(2,244.5)
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
4,230.7
|
|
|
4,180.6
|
|
|
4,327.9
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
|
|
359.0
|
|
|
345.2
|
|
|
357.6
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
4,589.7
|
|
|
4,525.8
|
|
|
4,685.5
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
22,191.5
|
|
$
|
21,602.1
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions)
|
|
Six-Month Period
Ended
|
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
Cash Flows -
Operating Activities
|
|
|
|
|
|
Net
earnings, including earnings attributable to redeemable
|
|
|
|
|
|
and noncontrolling interests
|
$
|
852.4
|
|
$
|
915.3
|
Adjustments to reconcile net earnings to net cash
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
290.8
|
|
|
301.1
|
After-tax earnings from joint ventures
|
|
(47.5)
|
|
|
(54.0)
|
Distributions of earnings from joint ventures
|
|
45.1
|
|
|
31.9
|
Stock-based compensation
|
|
48.2
|
|
|
56.2
|
Deferred income taxes
|
|
70.2
|
|
|
94.6
|
Pension and other postretirement benefit plan
contributions
|
|
(12.6)
|
|
|
(22.6)
|
Pension and other postretirement benefit plan costs
|
|
2.4
|
|
|
17.9
|
Divestiture loss
|
|
-
|
|
|
13.5
|
Restructuring, impairment, and other exit costs
|
|
(7.4)
|
|
|
71.0
|
Changes in current assets and liabilities
|
|
362.3
|
|
|
(340.9)
|
Other, net
|
|
(37.1)
|
|
|
(5.3)
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
1,566.8
|
|
|
1,078.7
|
|
|
|
|
|
|
Cash Flows -
Investing Activities
|
|
|
|
|
|
Purchases of land, buildings, and equipment
|
|
(260.0)
|
|
|
(318.3)
|
Investments in affiliates, net
|
|
(7.4)
|
|
|
(7.7)
|
Proceeds
from disposal of land, buildings, and equipment
|
|
0.6
|
|
|
0.4
|
Proceeds
from divestiture
|
|
-
|
|
|
17.5
|
Exchangeable note
|
|
-
|
|
|
13.0
|
Other,
net
|
|
(3.9)
|
|
|
15.1
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
(270.7)
|
|
|
(280.0)
|
|
|
|
|
|
|
Cash Flows -
Financing Activities
|
|
|
|
|
|
Change
in notes payable
|
|
53.1
|
|
|
1,164.5
|
Issuance
of long-term debt
|
|
500.0
|
|
|
-
|
Payment
of long-term debt
|
|
(500.1)
|
|
|
(0.1)
|
Proceeds
from common stock issued on exercised options
|
|
50.6
|
|
|
77.0
|
Purchases of common stock for treasury
|
|
(600.5)
|
|
|
(1,349.9)
|
Dividends paid
|
|
(565.2)
|
|
|
(575.5)
|
Distributions to noncontrolling and redeemable interest
holders
|
|
(45.3)
|
|
|
(4.6)
|
Other,
net
|
|
(23.6)
|
|
|
(31.4)
|
|
|
|
|
|
|
Net cash used by financing activities
|
|
(1,131.0)
|
|
|
(720.0)
|
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
30.9
|
|
|
(32.7)
|
Increase in cash and
cash equivalents
|
|
196.0
|
|
|
46.0
|
Cash and cash
equivalents - beginning of year
|
|
766.1
|
|
|
763.7
|
|
|
|
|
|
|
Cash and cash
equivalents - end of period
|
$
|
962.1
|
|
$
|
809.7
|
|
|
|
|
|
|
Cash Flow from
changes in current assets and liabilities:
|
|
|
|
|
|
Receivables
|
$
|
(53.9)
|
|
$
|
(45.3)
|
Inventories
|
|
(15.6)
|
|
|
(120.7)
|
Prepaid
expenses and other current assets
|
|
42.3
|
|
|
(2.3)
|
Accounts
payable
|
|
377.0
|
|
|
(19.9)
|
Other
current liabilities
|
|
12.5
|
|
|
(152.7)
|
|
|
|
|
|
|
Changes in current
assets and liabilities
|
$
|
362.3
|
|
$
|
(340.9)
|
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.
In the second quarter of fiscal 2018, we recorded an adjustment
related to a prior year which increased income tax expense and
total liabilities by $42.2 million in
our Consolidated Financial Statements. We determined the
adjustment to be immaterial to our estimated Consolidated
Statements of Earnings for the fiscal year ended May 27, 2018.
(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
|
|
|
Six-Month Period
Ended
|
In
Millions
|
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
|
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
Cost of
sales
|
$
|
0.6
|
$
|
12.8
|
|
$
|
12.9
|
$
|
26.4
|
Restructuring,
impairment, and other exit costs
|
|
1.6
|
|
29.0
|
|
|
6.8
|
|
87.9
|
Total restructuring
charges
|
|
2.2
|
|
41.8
|
|
|
19.7
|
|
114.3
|
Project-related costs
classified in cost of sales
|
$
|
4.2
|
$
|
11.1
|
|
$
|
5.4
|
$
|
24.9
|
Details of our current restructuring initiatives were as
follows:
|
Six-Month Period
Ended
|
Fiscal 2017, 2016
and
2015
|
Estimated
|
In
Millions
|
Nov. 26,
2017
|
Nov. 27,
2016
|
Total
|
Future
|
Total
|
|
|
Charge
|
Cash
|
Charge
|
Cash
|
Charge
|
Cash
|
Charge
|
Cash
|
Charge
|
Cash
|
Savings
(b)
|
Global
reorganization
|
$1.4
|
$26.7
|
$-
|
$-
|
$72.1
|
$20.0
|
$2
|
$29
|
$76
|
$76
|
|
Closure of Melbourne,
Australia plant
|
4.9
|
3.4
|
12.0
|
-
|
21.9
|
1.6
|
7
|
(2)
|
34
|
3
|
|
Restructuring of
certain international product lines
|
-
|
-
|
43.3
|
10.4
|
45.1
|
10.3
|
(3)
|
(10)
|
42
|
-
|
|
Closure of Vineland,
New Jersey plant
|
12.1
|
(3.1)
|
27.9
|
1.2
|
41.4
|
7.3
|
1
|
7
|
54
|
11
|
|
Project
Compass
|
(0.2)
|
3.0
|
1.0
|
8.0
|
54.3
|
48.9
|
-
|
2
|
54
|
54
|
|
Project
Century
|
1.5
|
(3.4)
|
30.1
|
20.6
|
408.4
|
95.5
|
4
|
51
|
414
|
143
|
|
Project
Catalyst
|
-
|
-
|
-
|
0.5
|
140.9
|
94.1
|
-
|
-
|
141
|
94
|
|
Combination of
certain operational facilities
|
-
|
0.5
|
-
|
2.6
|
13.3
|
16.3
|
2
|
(3)
|
15
|
14
|
|
Total restructuring
charges (a)
|
19.7
|
27.1
|
114.3
|
43.3
|
797.4
|
294.0
|
13
|
74
|
830
|
395
|
|
Project-related
costs
|
5.4
|
5.0
|
24.9
|
28.6
|
114.6
|
111.1
|
8
|
14
|
128
|
130
|
|
Restructuring charges
and project-related costs
|
$25.1
|
$32.1
|
$139.2
|
$71.9
|
$912.0
|
$405.1
|
$21
|
$88
|
$958
|
$525
|
$700
|
(a) Includes $12.9
million of restructuring charges recorded in cost of sales during
fiscal 2018 and $26.4 million in 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 $42 million in the second
quarter of fiscal 2018 compared to $19
million in the same period in fiscal 2017. In the second
quarter of fiscal 2018, we recorded $1
million of restructuring charges and $4 million of restructuring initiative
project-related costs in cost of sales compared to $13 million of restructuring charges and
$11 million of restructuring
initiative project-related costs in cost of sales in the same
period last year. In addition, we recorded a $4 million net decrease in expense related to the
mark-to-market valuation of certain commodity positions and grain
inventories in the second quarter of fiscal 2018 compared to a
$29 million net decrease in expense
in the same period last year.
Unallocated corporate expense totaled $75
million in the six-month period ended November 26, 2017, compared to $101 million in the same period last year. In the
six-month period ended November 26,
2017, we recorded $13 million
of restructuring charges and $5
million of restructuring initiative project-related costs
compared to $26 million of
restructuring charges and $25 million
of restructuring initiative project-related costs in the same
period last year. In addition, we recorded a $6 million net decrease in expense related to the
mark-to-market valuation of certain commodity positions and grain
inventories in the six-month period ended November 26, 2017, compared to a $12 million net decrease in expense in the same
period a year ago.
(6) Basic and diluted earnings per share
(EPS) were calculated as follows:
|
|
|
Quarter
Ended
|
|
|
Six-Month
Period
Ended
|
In Millions,
Except per Share Data
|
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
Net earnings
attributable to General Mills
|
|
$
|
430.5
|
|
$
|
481.8
|
|
$
|
835.2
|
|
$
|
890.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of
common shares - basic EPS
|
|
|
571.3
|
|
|
588.8
|
|
|
574.0
|
|
|
594.4
|
Incremental share
effect from: (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
7.0
|
|
|
8.1
|
|
|
7.6
|
|
|
8.8
|
Restricted
stock, restricted stock units, and other
|
|
|
2.0
|
|
|
2.8
|
|
|
2.0
|
|
|
2.8
|
Average number of
common shares - diluted EPS
|
|
|
580.3
|
|
|
599.7
|
|
|
583.6
|
|
|
606.0
|
Earnings per share -
basic
|
|
$
|
0.75
|
|
$
|
0.82
|
|
$
|
1.46
|
|
$
|
1.50
|
Earnings per share -
diluted
|
|
$
|
0.74
|
|
$
|
0.80
|
|
$
|
1.43
|
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
second quarter of fiscal 2018 was 35.9 percent compared to 32.8
percent for the second quarter of fiscal 2017. The 3.1 percentage
point increase was primarily due to a $42
million prior year adjustment (see Note 1), partially offset
by favorable impacts from certain changes in French tax law and the
prospective adoption of the new accounting standard related to
windfall tax benefits from stock-based payments.
The effective tax rate for the six-month period ended
November 26, 2017, was 33.4 percent
compared to 31.9 percent for the six-month period ended
November 27, 2016. The 1.5 percentage
point increase was primarily due to a $42
million prior year adjustment recorded in the second quarter
of fiscal 2018 (see Note 1), partially offset by the prospective
adoption of the new accounting standard related to windfall tax
benefits from stock-based payments.
The United States Congress is currently working on enacting a
tax reform bill, which would result in significant changes to the
U.S. tax system. We expect that if a bill is enacted, it
could have a material impact on our Consolidated Financial
Statements in future periods. We are continuing to monitor
developments and assess the impact to General Mills.
(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, mark-to-market effects, unusual tax items,
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 impact of changes in foreign
currency exchange rates and commodity prices or the timing or
impact of restructuring actions, unusual tax items, acquisitions,
and divestitures 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 increase net
sales by approximately 1 percent; foreign currency exchange rates
to have an immaterial impact on total segment operating profit and
adjusted diluted EPS growth; total restructuring charges and
project-related costs related to actions previously announced to
total $40 million; and unusual tax
items previously announced to total approximately $42 million of expense.
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
|
|
Six-Month
Period
Ended
|
|
Per Share
Data
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
Change
|
|
|
Nov.
26,
2017
|
|
|
Nov.
27,
2016
|
|
Change
|
|
Diluted earnings per
share, as reported
|
$
|
0.74
|
|
$
|
0.80
|
(8)%
|
|
$
|
1.43
|
|
$
|
1.47
|
|
(3)%
|
|
Tax adjustment
(a)(e)
|
|
0.07
|
|
|
-
|
|
|
|
0.07
|
|
|
-
|
|
|
|
Mark-to-market
effects (b)(e)
|
|
-
|
|
|
(0.03)
|
|
|
|
-
|
|
|
(0.01)
|
|
|
|
Divestiture
loss, net (c)(e)
|
|
-
|
|
|
0.01
|
|
|
|
-
|
|
|
0.01
|
|
|
|
Restructuring
charges (d)(e)
|
|
-
|
|
|
0.05
|
|
|
|
0.02
|
|
|
0.13
|
|
|
|
Project-related costs (d)(e)
|
|
0.01
|
|
|
0.02
|
|
|
|
0.01
|
|
|
0.03
|
|
|
|
Diluted earnings per
share, excluding
certain
items affecting
comparability
|
$
|
0.82
|
|
$
|
0.85
|
(4)%
|
|
$
|
1.53
|
|
$
|
1.63
|
|
(6)%
|
|
Foreign currency
exchange impact
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Diluted earnings per
share growth,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
excluding certain items affecting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comparability, on a constant-currency basis
|
|
|
|
|
|
(5)%
|
|
|
|
|
|
|
|
(7)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) See Note
1.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b) See Note 5.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) See Note
3.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(d) See Note 4.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e) 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 Nov.
26, 2017
|
|
(7)%
|
|
1
|
pt
|
(8)%
|
|
Six-Month Period
Ended Nov. 26, 2017
|
|
(11)%
|
|
1
|
pt
|
(12)%
|
|
|
|
|
|
|
|
|
|
Constant-currency
Segment Operating Profit Growth Rates
|
|
|
|
|
|
|
|
Quarter Ended Nov.
26, 2017
|
|
|
|
Percentage Change
in
Operating
Profit
as
Reported
|
Impact of
Foreign
Currency
Exchange
|
Percentage Change
in Operating
Profit on
Constant-Currency
Basis
|
|
North America
Retail
|
|
(4)%
|
|
1
|
pt
|
(5)%
|
|
|
Europe &
Australia
|
|
(35)%
|
|
5
|
pts
|
(40)%
|
|
|
Asia & Latin
America
|
|
(42)%
|
|
4
|
pts
|
(46)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month Period
Ended Nov. 26, 2017
|
|
|
|
Percentage Change
in Operating Profit
as
Reported
|
Impact of
Foreign
Currency
Exchange
|
Percentage Change
in Operating
Profit on
Constant-Currency
Basis
|
|
North America
Retail
|
|
(10)%
|
|
Flat
|
(10)%
|
|
|
Europe &
Australia
|
|
(32)%
|
|
3
|
pts
|
(35)%
|
|
|
Asia & Latin
America
|
|
(37)%
|
|
3
|
pts
|
(40)%
|
|
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 Nov.
26, 2017
|
|
(20)%
|
|
(1)
|
pt
|
(19)%
|
|
Six-Month Period
Ended Nov. 26, 2017
|
(12)%
|
|
(1)
|
pt
|
(11)%
|
|
Net Sales Growth Rates for Canada Operating Unit on a
Constant-Currency Basis
We believe that this measure of our Canada operating unit net sales provides
useful information to investors because it provides transparency to
the underlying performance for the Canada operating unit within our North America
Retail segment by excluding the effect that foreign currency
exchange rate fluctuations have on year-to-year comparability given
volatility in foreign currency exchange markets.
Net sales growth rates for our Canada operating unit on a constant-currency
basis are calculated as follows:
|
|
|
|
|
|
|
|
|
|
Percentage Change
in
Net
Sales
as
Reported
|
Impact of
Foreign
Currency
Exchange
|
Percentage Change
in
Net Sales on
Constant-
Currency
Basis
|
Quarter Ended Nov.
26, 2017
|
|
7%
|
|
6
|
pts
|
1%
|
|
Six-Month Period
Ended Nov. 26, 2017
|
|
3%
|
|
4
|
pts
|
(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
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of
Net
Sales
|
|
|
|
Value
|
|
Percent
of
Net
Sales
|
|
Gross margin as
reported (a)
|
$
|
1,443.0
|
|
34.4
|
%
|
|
$
|
1,519.5
|
|
37.0
|
%
|
Mark-to-market
effects (b)
|
|
(4.5)
|
|
(0.1)
|
%
|
|
|
(29.1)
|
|
(0.7)
|
%
|
Restructuring
charges (c)
|
|
0.6
|
|
-
|
%
|
|
|
12.8
|
|
0.3
|
%
|
Project-related costs (c)
|
|
4.2
|
|
0.1
|
%
|
|
|
11.1
|
|
0.2
|
%
|
Adjusted gross
margin
|
$
|
1,443.3
|
|
34.4
|
%
|
|
$
|
1,514.3
|
|
36.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
729.8
|
|
17.4
|
%
|
|
$
|
768.9
|
|
18.7
|
%
|
Mark-to-market
effects (b)
|
|
(4.5)
|
|
(0.1)
|
%
|
|
|
(29.1)
|
|
(0.7)
|
%
|
Restructuring
charges (c)
|
|
2.2
|
|
-
|
%
|
|
|
41.8
|
|
1.0
|
%
|
Project-related costs (c)
|
|
4.2
|
|
0.1
|
%
|
|
|
11.1
|
|
0.3
|
%
|
Divestiture
loss (d)
|
|
-
|
|
-
|
%
|
|
|
13.5
|
|
0.3
|
%
|
Adjusted operating
profit
|
$
|
731.7
|
|
17.4
|
%
|
|
$
|
806.2
|
|
19.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
430.5
|
|
10.3
|
%
|
|
$
|
481.8
|
|
11.7
|
%
|
Mark-to-market
effects, net of tax (b)(e)
|
|
(2.9)
|
|
(0.1)
|
%
|
|
|
(18.4)
|
|
(0.4)
|
%
|
Restructuring
charges, net of tax (c)(e)
|
|
2.2
|
|
-
|
%
|
|
|
30.3
|
|
0.7
|
%
|
Project-related costs, net of tax (c)(e)
|
|
2.7
|
|
0.1
|
%
|
|
|
7.1
|
|
0.2
|
%
|
Divestiture
loss (d)(e)
|
|
-
|
|
-
|
%
|
|
|
9.2
|
|
0.2
|
%
|
Tax adjustment
(f)
|
|
42.2
|
|
1.0
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted net earnings
attributable to General Mills
|
$
|
474.7
|
|
11.3
|
%
|
|
$
|
510.0
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six-Month Period
Ended
|
In
Millions
|
|
Nov. 26,
2017
|
|
|
Nov. 27,
2016
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of
Net
Sales
|
|
|
|
Value
|
|
Percent
of
Net
Sales
|
|
Gross margin as
reported (a)
|
$
|
2,753.1
|
|
34.5
|
%
|
|
$
|
2,936.4
|
|
36.6
|
%
|
Mark-to-market
effects (b)
|
|
(6.3)
|
|
(0.1)
|
%
|
|
|
(12.5)
|
|
(0.2)
|
%
|
Restructuring
costs (c)
|
|
12.9
|
|
0.2
|
%
|
|
|
26.4
|
|
0.3
|
%
|
Project-related costs (c)
|
|
5.4
|
|
0.1
|
%
|
|
|
24.9
|
|
0.4
|
%
|
Adjusted gross
margin
|
$
|
2,765.1
|
|
34.7
|
%
|
|
$
|
2,975.2
|
|
37.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
1,355.6
|
|
17.0
|
%
|
|
$
|
1,414.7
|
|
17.6
|
%
|
Mark-to-market
effects (b)
|
|
(6.3)
|
|
(0.1)
|
%
|
|
|
(12.5)
|
|
(0.1)
|
%
|
Restructuring
costs (c)
|
|
19.7
|
|
0.2
|
%
|
|
|
114.3
|
|
1.4
|
%
|
Project-related costs (c)
|
|
5.4
|
|
0.1
|
%
|
|
|
24.9
|
|
0.3
|
%
|
Divestiture
loss (d)
|
|
-
|
|
-
|
%
|
|
|
13.5
|
|
0.2
|
%
|
Adjusted operating
profit
|
$
|
1,374.4
|
|
17.2
|
%
|
|
$
|
1,554.9
|
|
19.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
835.2
|
|
10.5
|
%
|
|
$
|
890.8
|
|
11.1
|
%
|
Mark-to-market
effects, net of tax (b)(e)
|
|
(4.0)
|
|
(0.1)
|
%
|
|
|
(7.9)
|
|
(0.1)
|
%
|
Restructuring
charges, net of tax (c)(e)
|
|
13.8
|
|
0.2
|
%
|
|
|
78.6
|
|
0.9
|
%
|
Project-related costs, net of tax (c)(e)
|
|
3.6
|
|
-
|
%
|
|
|
15.9
|
|
0.3
|
%
|
Divestiture
loss (d)(e)
|
|
-
|
|
-
|
%
|
|
|
9.2
|
|
0.1
|
%
|
Tax adjustment
(f)
|
|
42.2
|
|
0.5
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted net earnings
attributable to General Mills
|
$
|
890.8
|
|
11.1
|
%
|
|
$
|
986.6
|
|
12.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Net sales less cost
of sales.
|
(b) See Note 5.
|
(c) See Note
4.
|
(d) See Note 3.
|
(e) See reconciliation
of effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
(f) See Note
7.
|
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
|
|
Six-Month Period
Ended
|
|
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
|
In Millions
(Except Per Share Data)
|
Pretax
Earnings
(a)
|
Income
Taxes
|
|
Pretax
Earnings
(a)
|
Income
Taxes
|
|
Pretax
Earnings
(a)
|
Income
Taxes
|
|
Pretax
Earnings
(a)
|
Income
Taxes
|
|
As
reported
|
$654.9
|
$234.9
|
|
$693.4
|
$227.4
|
|
$1,208.3
|
$403.4
|
|
$1,265.3
|
$404.0
|
|
Mark-to-market effects (b)
|
(4.5)
|
(1.6)
|
|
(29.1)
|
(10.7)
|
|
(6.3)
|
(2.3)
|
|
(12.5)
|
(4.6)
|
|
Restructuring charges (c)
|
2.2
|
-
|
|
41.8
|
11.5
|
|
19.7
|
5.9
|
|
114.3
|
35.7
|
|
Project-related costs (c)
|
4.2
|
1.5
|
|
11.1
|
4.0
|
|
5.4
|
1.8
|
|
24.9
|
9.0
|
|
Divestiture loss (d)
|
-
|
-
|
|
13.5
|
4.3
|
|
-
|
-
|
|
13.5
|
4.3
|
|
Tax
adjustment (e)
|
-
|
(42.2)
|
|
-
|
-
|
|
-
|
(42.2)
|
|
-
|
-
|
|
As
adjusted
|
$656.8
|
$192.6
|
|
$730.7
|
$236.5
|
|
$1,227.1
|
$366.6
|
|
$1,405.5
|
$448.4
|
|
Effective tax
rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
35.9%
|
|
|
32.8%
|
|
|
33.4%
|
|
|
31.9%
|
|
As
adjusted
|
|
29.3%
|
|
|
32.4%
|
|
|
29.9%
|
|
|
31.9%
|
|
Sum of adjustment to
income taxes
|
$
|
(42.3)
|
|
$
|
9.1
|
|
$
|
(36.8)
|
|
$
|
44.4
|
|
Average number of
common shares - diluted EPS
|
580.3
|
|
|
599.7
|
|
|
583.6
|
|
|
606.0
|
|
Impact of income tax
adjustments on diluted EPS
excluding certain items affecting comparability
|
$(0.07)
|
|
|
$0.02
|
|
|
$(0.06)
|
|
|
$0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Earnings before
income taxes and after-tax earnings from joint ventures.
|
(b) See Note 5.
|
(c) See Note
4.
|
(d) See Note 3.
|
(e) See Note
7.
|
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
|
|
Six-Month Period
Ended
|
In
Millions
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
|
Nov. 26,
2017
|
|
Nov. 27,
2016
|
Net cash provided by
operating activities
|
$976.3
|
|
$707.9
|
|
$1,566.8
|
|
$1,078.7
|
Purchases of land,
buildings, and equipment
|
(143.7)
|
|
(164.8)
|
|
(260.0)
|
|
(318.3)
|
Free cash
flow
|
$832.6
|
|
$543.1
|
|
$1,306.8
|
|
$760.4
|
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SOURCE General Mills, Inc.