MINNEAPOLIS, March 21, 2018 /PRNewswire/ -- General Mills
(NYSE: GIS) today reported results for the third quarter ended
February 25, 2018.
"Our primary goal this year has been to strengthen our topline
performance while maintaining our efficiency," said General Mills
Chairman and Chief Executive Officer Jeff
Harmening. "While I'm pleased that we're delivering on
the first part of that goal, with strong consumer marketing,
innovation, and in-store execution leading to a second consecutive
quarter of organic net sales growth, I'm disappointed in our
results on the bottom line. Our third-quarter operating
profit fell well short of our expectations, and cost pressures are
impacting our full-year outlook. Like the broader industry,
we're seeing sharp increases in input costs, including inflation in
freight and commodities. Because of our improved volume
performance, we're also incurring higher operational costs."
Harmening continued, "We are moving urgently to address this
increasingly dynamic cost inflation environment. We've taken
actions to improve profitability in the near term, and we've
launched initiatives that will reduce our long-term cost
structure. While these actions will only partially offset the
cost headwinds in fiscal 2018, we are confident they will
strengthen our bottom-line results beginning in fiscal 2019."
The company is responding to rising cost pressure with actions
that will lower costs and improve profitability in the short and
medium term. Initiatives that will have a near-term impact
include:
- Various actions to mitigate rising freight costs, including
increasing the number of qualified freight carriers and utilizing
different modes of transportation.
- Increasingly tight control of all expenditures in the balance
of fiscal 2018.
- Targeted Strategic Revenue Management actions to improve net
price realization. Specific actions will vary across categories and
geographies, with benefits being realized beginning in the fourth
quarter of fiscal 2018.
Initiatives that will benefit fiscal 2019 and beyond
include:
- Optimizing the distribution network between the factory and the
customer to better align with the manufacturing footprint
reorganization completed over the last three years.
- Optimizing the global administrative structure through new
cost-savings initiatives.
- Delivering ongoing productivity savings via Holistic Margin
Management.
- Maximizing the impact of the new global sourcing
capability.
- Other Enterprise Process Transformation projects designed to
streamline global processes and enhance connectivity across key
global functions.
In addition to implementing the initiatives listed above,
General Mills will continue to pursue its Consumer First strategy
and execute against its three key growth priorities: 1)
competing effectively on all brands and across all geographies
through strong innovation, effective consumer marketing, and
excellent in-store execution; 2) accelerating growth on its four
differential growth platforms including Häagen-Dazs ice
cream, snack bars, Old El
Paso Mexican food, and its portfolio of natural and
organic food brands; and 3) reshaping its portfolio through
growth-enhancing transactions. The company recently announced
the proposed acquisition of Blue Buffalo Pet Products, Inc. ("Blue
Buffalo"), which accelerates its portfolio shaping efforts by
adding the leading brand in the fast-growing Wholesome Natural pet
food category in the U.S. The Blue Buffalo acquisition is
expected to close before the end of fiscal 2018. The company
will also pursue divestitures of growth-dilutive businesses to
further reshape its portfolio. By focusing on these
priorities, General Mills expects to generate consistent topline
growth, which, when balanced with a disciplined focus on margin
expansion, cash conversion, and cash returns, will create
significant value for shareholders.
Third Quarter Results Summary
- Reported net sales increased 2 percent to $3.88 billion. Organic net sales increased 1
percent.
- Gross margin decreased 220 basis points to 32.3 percent
of net sales. Adjusted gross margin, which excludes certain items
affecting comparability, decreased 250 basis points to 32.5
percent. This was driven by higher input costs, including increased
freight and logistics costs, commodity inflation, and other
operational costs, as well as higher merchandising expense.
- Operating profit totaled $593
million, up 9 percent from last year due to lower
restructuring, impairment, and other exit costs. Operating
profit margin of 15.3 percent increased 100 basis points.
Adjusted operating profit margin decreased 120 basis points to 15.7
percent, primarily reflecting lower adjusted gross margin,
partially offset by lower selling, general, & administrative
expense (SG&A), including a 22 percent decrease in advertising
and media expense.
- Total segment operating profit of $628 million was down 6 percent in constant
currency.
- The effective tax rate in the quarter was an 85.9 percent
benefit compared to a 23.0 percent charge last year, primarily
driven by the provisional net benefit related to the Tax Cuts and
Jobs Act (TCJA) (please see Note 6 below for more information on
our effective tax rate). Excluding items affecting
comparability, the adjusted effective tax rate was 15.2 percent
compared to 24.7 percent a year ago, driven by the lower blended
U.S. statutory tax rate, including an adjustment for the
application of the new rate to earnings from the first half of
fiscal 2018.
- Net earnings attributable to General Mills totaled
$941 million, up 163 percent from a
year ago primarily driven by the impact of the TCJA. Diluted EPS
totaled $1.62 compared to
$0.61 in the prior year.
- Adjusted diluted EPS, which excludes certain items
affecting comparability of results, totaled $0.79 in the third quarter, up 10 percent from
the prior year. Constant-currency adjusted diluted EPS increased 8
percent, reflecting lower taxes and average diluted shares
outstanding in the quarter.
Nine Month Results Summary
- Reported net sales of $11.85
billion were in line with year-ago levels. Organic net sales
declined 1 percent, primarily reflecting volume declines in the
Asia & Latin America and Europe & Australia segments.
- Gross margin decreased 210 basis points to 33.8 percent
of net sales. Adjusted gross margin was down 240 basis points to
34.0 percent.
- Operating profit totaled $1.95
billion, essentially matching the prior year. Operating
profit margin of 16.4 percent was down 20 basis points.
Adjusted operating profit margin decreased 190 basis points to 16.7
percent.
- Total segment operating profit of $2.06 billion was down 10 percent in constant
currency.
- Net earnings attributable to General Mills totaled
$1.78 billion. Diluted EPS of
$3.05 increased 47 percent from the
prior year.
- Adjusted diluted EPS of $2.32 was down 1 percent as reported and down 2
percent on a constant-currency basis.
Operating Segment
Results
|
|
Components of
Fiscal 2018 Reported Net Sales Growth
|
Third
Quarter
|
Volume
|
Price/Mix
|
Foreign
Exchange
|
Reported
Net Sales
|
North America
Retail
|
1 pt
|
(1) pt
|
1 pt
|
1%
|
Convenience Stores
& Foodservice
|
1 pt
|
2 pts
|
--
|
3%
|
Europe &
Australia
|
(3) pts
|
2 pts
|
12 pts
|
11%
|
Asia & Latin
America
|
(9) pts
|
9 pts
|
3 pts
|
3%
|
Total
|
(1) pt
|
1 pt
|
2 pts
|
2%
|
Nine
Months
|
|
|
|
|
North America
Retail
|
--
|
(1) pt
|
--
|
(1)%
|
Convenience Stores
& Foodservice
|
1 pt
|
2 pts
|
--
|
3%
|
Europe &
Australia
|
(1) pt
|
2 pts
|
6 pts
|
7%
|
Asia & Latin
America
|
(11) pts
|
8 pts
|
2 pts
|
(1)%
|
Total
|
(1) pt
|
--
|
1 pt
|
Flat
|
Components of
Fiscal 2018 Organic Net Sales Growth
|
Third
Quarter
|
Organic
Volume
|
Organic
Price/Mix
|
Organic
Net Sales
|
Foreign
Exchange
|
Acquisitions
&
Divestitures
|
Reported
Net Sales
|
North America
Retail
|
1 pt
|
--
|
1%
|
1 pt
|
(1) pt
|
1%
|
Convenience Stores
& Foodservice
|
1 pt
|
2 pts
|
3%
|
--
|
--
|
3%
|
Europe &
Australia
|
(3) pts
|
2 pts
|
(1)%
|
12 pts
|
--
|
11%
|
Asia & Latin
America
|
(9) pts
|
9 pts
|
Flat
|
3 pts
|
--
|
3%
|
Total
|
--
|
1 pt
|
1%
|
2 pts
|
(1) pt
|
2%
|
Nine
Months
|
|
|
|
|
|
|
North America
Retail
|
--
|
(1) pt
|
(1)%
|
--
|
--
|
(1)%
|
Convenience Stores
& Foodservice
|
1 pt
|
2 pts
|
3%
|
--
|
--
|
3%
|
Europe &
Australia
|
(1) pt
|
2 pts
|
1%
|
6 pts
|
--
|
7%
|
Asia & Latin
America
|
(11) pts
|
8 pts
|
(3)%
|
2 pts
|
--
|
(1)%
|
Total
|
(1) pt
|
Flat
|
(1)%
|
1 pt
|
--
|
Flat
|
Fiscal 2018
Segment Operating Profit Growth
|
Third
Quarter
|
% Change as
Reported
|
% Change in
Constant Currency
|
North America
Retail
|
Flat
|
Flat
|
Convenience Stores
& Foodservice
|
(10)%
|
(10)%
|
Europe &
Australia
|
(35)%
|
(46)%
|
Asia & Latin
America
|
(121)%
|
(134)%
|
Total
|
(5)%
|
(6)%
|
Nine
Months
|
|
|
North America
Retail
|
(7)%
|
(7)%
|
Convenience Stores
& Foodservice
|
(7)%
|
(7)%
|
Europe &
Australia
|
(33)%
|
(38)%
|
Asia & Latin
America
|
(51)%
|
(56)%
|
Total
|
(9)%
|
(10)%
|
North America Retail Segment
Third-quarter net sales for General Mills' North America Retail
segment totaled $2.52 billion, up 1
percent from the prior year. Net sales increased 6 percent in
the Canada operating unit, 3
percent in U.S. Snacks, and 2 percent in U.S. Meals & Baking,
and net sales were down 8 percent in U.S. Yogurt and 1 percent in
U.S. Cereal. Organic net sales increased 1 percent in the
quarter. Segment operating profit of $518 million essentially matched prior-year
results, with higher net sales and lower SG&A expense offset by
higher input costs.
Through nine months, North America Retail segment net sales were
down 1 percent to $7.73
billion. Net sales declines of 14 percent in the U.S.
Yogurt operating unit and 1 percent in U.S. Cereal were partially
offset by a 4 percent increase in Canada and a 2 percent increase in U.S.
Snacks. U.S. Meals & Baking net sales were essentially in
line with year-ago levels. Organic net sales also declined 1
percent. Segment operating profit totaled $1.67 billion, down 7 percent from a year ago due
to higher input costs, unfavorable trade expense phasing, and
higher merchandising activity, partially offset by lower SG&A
expenses.
Convenience Stores & Foodservice Segment
Third-quarter net sales for the Convenience Stores &
Foodservice segment increased 3 percent to $460 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 3 percent. Segment operating profit
of $84 million was 10 percent below
last year, driven by higher input costs.
Through nine months, Convenience Stores & Foodservice net
sales increased 3 percent to $1.42
billion, 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 $276 million, 7 percent below
last year due to higher input costs and a comparison to 8 percent
operating profit growth in the year-ago period.
Europe & Australia
Segment
Third-quarter net sales for the Europe & Australia segment increased 11 percent to
$470 million, driven by favorable
foreign currency exchange. Organic net sales were down 1
percent. Sales growth for the snack bars platform was offset
by declines in other platforms. Segment operating profit
totaled $27 million compared to
$42 million a year ago, primarily
driven by input cost inflation, including currency-driven inflation
on products imported into the U.K.
Through nine months, Europe
& Australia net sales
increased 7 percent to $1.43 billion,
reflecting favorable foreign currency exchange and benefits from
net price realization and mix. Organic net sales increased 1
percent. Sales growth for the ice cream and snack bars
platforms offset declines in other platforms. Segment
operating profit totaled $85 million
compared to $127 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
Third-quarter net sales for the Asia & Latin
America segment increased 3 percent to $435 million, driven by favorable foreign
currency exchange. Organic net sales essentially matched
year-ago levels. Net sales growth across Asia markets was offset by lower net sales
across Latin America
markets. Segment operating profit decreased to a $2 million loss compared to a $10 million profit a year ago, driven by lower
volume, higher input costs including currency-driven inflation, and
higher SG&A expenses.
Through nine months, Asia &
Latin America net sales declined 1
percent to $1.27 billion, reflecting
unfavorable contributions from volume partially offset by benefits
from net price realization and mix and favorable foreign currency
exchange. Organic net sales declined 3 percent. A net
sales increase in Asia markets,
including growth on ice cream and snack bars, 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 $30
million compared to $61
million a year ago, driven by lower volume and input cost
inflation, including currency-driven inflation on imported
products.
Joint Venture Summary
Third-quarter net
sales for CPW increased 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
$17 million compared to $11 million a year ago. On a
constant-currency basis, after-tax earnings from joint ventures
were up 30 percent from the year-ago period, driven primarily by
higher sales for CPW. Through nine months, after-tax earnings
from joint ventures totaled $64
million, down 2 percent as reported and down 4 percent in
constant currency.
Other Income Statement Items
Unallocated corporate items totaled $28
million net expense in the third quarter of fiscal 2018,
compared to $42 million net expense a
year ago. Excluding mark-to-market valuation effects and
other items affecting comparability, unallocated corporate items
totaled $18 million net expense this
year compared to $22 million net
expense a year ago.
Restructuring, impairment, and other exit costs totaled
$8 million in the quarter compared to
$78 million a year ago. An
additional $3 million of
restructuring and project-related charges were recorded in cost of
sales this year compared to $28
million a year ago (please see Note 3 below for more
information on these charges).
Net interest expense totaled $89
million in the third quarter compared to $76 million a year ago, driven by a charge
related to the timing of the proposed acquisition of Blue
Buffalo. The effective tax rate in the quarter was an 85.9
percent benefit compared to a 23.0 percent charge last year,
primarily driven by the impact of the TCJA (please see Note 6
below). Excluding items affecting comparability, the
adjusted effective tax rate was 15.2 percent compared to 24.7
percent a year ago, driven by the lower blended U.S. statutory tax
rate, including an adjustment for the application of the new rate
to earnings from the first half of fiscal 2018.
Cash Flow Generation and Cash Returns
Cash
provided by operating activities totaled $2.14 billion through nine months of fiscal 2018,
up 29 percent from the prior year due to improvements in accounts
payable and inventory balances, as well as changes in incentive
accruals and income taxes payable. Capital investments
through the first nine months totaled $398
million. Dividends paid year-to-date totaled
$846 million. During the first
nine months of 2018, General Mills repurchased 10.9 million shares
of common stock for a total of $601
million. Average diluted shares outstanding through
nine months declined 3 percent to 583
million.
Outlook
General Mills updated its key full-year
fiscal 2018 targets. These targets exclude the impact of the
proposed Blue Buffalo acquisition.
- Organic net sales are expected to be in line with last
year, which is unchanged from previous guidance. This represents a
400 basis point improvement over the fiscal 2017 growth rate. The
company continues to estimate currency translation will increase
reported net sales by approximately 1 percentage point in fiscal
2018.
- Constant-currency total segment operating profit is now
expected to decline 5 to 6 percent, compared to the previous
expectation of a range between down 1 percent and flat. The change
in outlook was driven by higher-than-expected supply chain costs,
including freight and logistics, commodities, and other operational
costs. The company expects to generate constant-currency total
segment operating profit growth in the fourth quarter, driven by
favorable net price realization and mix and increased cost savings.
Currency translation is expected to add 1 point to full-year total
segment operating profit growth.
- The full-year fiscal 2018 adjusted effective tax rate is
now expected to be approximately 26 percent, compared to the
previous expectation of a 27 percent rate. We continue to estimate
that the TCJA will have a 2 point favorable impact on our fiscal
2018 adjusted effective tax rate.
- Constant-currency adjusted diluted EPS is now expected
to range between flat and up 1 percent from the base of
$3.08 earned in fiscal 2017, compared
to the previous guidance of a 3 to 4 percent increase. The company
now estimates currency translation will be a 3 cent benefit to fiscal 2018 adjusted diluted
EPS.
- The company continues to expect free cash flow to
increase at least 15 percent from the prior year, driven by strong
discipline on core working capital.
General Mills will hold a briefing for investors today,
March 21, 2018, 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,
including our acquisition of Blue Buffalo and issues in the
integration of Blue Buffalo and retention of key management and
employees; unfavorable reaction to our acquisition of Blue Buffalo
by customers, competitors, suppliers, and employees; 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 saving 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
|
|
Nine-Month Period
Ended
|
|
Feb.
25,
2018
|
|
Feb.
26,
2017
|
|
|
|
|
Feb.
25,
2018
|
|
Feb.
26,
2017
|
|
|
|
|
|
|
%
Change
|
|
|
|
%
Change
|
Net sales
|
$
|
3,882.3
|
|
$
|
3,793.2
|
|
2.3
|
%
|
|
$
|
11,850.2
|
|
$
|
11,813.2
|
|
0.3
|
%
|
Cost of
sales
|
|
2,627.0
|
|
|
2,485.5
|
|
5.7
|
%
|
|
|
7,841.8
|
|
|
7,569.1
|
|
3.6
|
%
|
Selling,
general, and administrative expenses
|
|
655.1
|
|
|
687.6
|
|
(4.7)
|
%
|
|
|
2,045.8
|
|
|
2,107.9
|
|
(2.9)
|
%
|
Divestiture
loss
|
|
-
|
|
|
-
|
|
NM
|
|
|
|
-
|
|
|
13.5
|
|
NM
|
|
Restructuring,
impairment, and other
exit
costs
|
|
7.5
|
|
|
77.6
|
|
(90.3)
|
%
|
|
|
14.3
|
|
|
165.5
|
|
(91.4)
|
%
|
Operating
profit
|
|
592.7
|
|
|
542.5
|
|
9.3
|
%
|
|
|
1,948.3
|
|
|
1,957.2
|
|
(0.5)
|
%
|
Interest,
net
|
|
89.3
|
|
|
76.4
|
|
16.9
|
%
|
|
|
236.6
|
|
|
225.8
|
|
4.8
|
%
|
Earnings before
income taxes and after-tax
earnings from
joint ventures
|
|
503.4
|
|
|
466.1
|
|
8.0
|
%
|
|
|
1,711.7
|
|
|
1,731.4
|
|
(1.1)
|
%
|
Income
taxes
|
|
(432.5)
|
|
|
107.0
|
|
(504.2)
|
%
|
|
|
(29.1)
|
|
|
511.0
|
|
(105.7)
|
%
|
After-tax earnings
from joint ventures
|
|
16.6
|
|
|
11.1
|
|
49.5
|
%
|
|
|
64.1
|
|
|
65.1
|
|
(1.5)
|
%
|
Net earnings,
including earnings attributable
to redeemable
and noncontrolling interests
|
|
952.5
|
|
|
370.2
|
|
157.3
|
%
|
|
|
1,804.9
|
|
|
1,285.5
|
|
40.4
|
%
|
Net earnings
attributable to redeemable
and
noncontrolling interests
|
|
11.1
|
|
|
12.4
|
|
(10.5)
|
%
|
|
|
28.3
|
|
|
36.9
|
|
(23.3)
|
%
|
Net earnings
attributable to General Mills
|
$
|
941.4
|
|
$
|
357.8
|
|
163.1
|
%
|
|
$
|
1,776.6
|
|
$
|
1,248.6
|
|
42.3
|
%
|
Earnings per share -
basic
|
$
|
1.64
|
|
$
|
0.62
|
|
164.5
|
%
|
|
$
|
3.10
|
|
$
|
2.12
|
|
46.2
|
%
|
Earnings per share -
diluted
|
$
|
1.62
|
|
$
|
0.61
|
|
165.6
|
%
|
|
$
|
3.05
|
|
$
|
2.08
|
|
46.6
|
%
|
Dividends per
share
|
$
|
0.49
|
|
$
|
0.48
|
|
2.1
|
%
|
|
$
|
1.47
|
|
$
|
1.44
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Nine-Month Period
Ended
|
|
|
Feb.
25,
|
|
Feb.
26,
|
|
Basis
Pt
|
|
|
Feb.
25,
|
|
Feb.
26,
|
|
Basis
Pt
|
Comparisons as a % of
net sales:
|
|
2018
|
|
2017
|
|
Change
|
|
|
2018
|
|
2017
|
|
Change
|
Gross
margin
|
|
32.3
%
|
|
34.5 %
|
|
(220)
|
|
|
33.8
%
|
|
35.9 %
|
|
(210)
|
Selling,
general, and administrative expenses
|
|
16.9
%
|
|
18.1 %
|
|
(120)
|
|
|
17.3
%
|
|
17.8 %
|
|
(50)
|
Operating
profit
|
|
15.3
%
|
|
14.3 %
|
|
100
|
|
|
16.4
%
|
|
16.6 %
|
|
(20)
|
Net earnings
attributable to General Mills
|
|
24.2
%
|
|
9.4 %
|
|
1,480
|
|
|
15.0
%
|
|
10.6 %
|
|
440
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Nine-Month Period
Ended
|
Comparisons as a % of
net sales excluding
|
|
Feb.
25,
|
|
Feb.
26,
|
|
Basis
Pt
|
|
|
|
Feb.
25,
|
|
Feb.
26,
|
|
Basis
Pt
|
certain
items affecting comparability (a):
|
|
2018
|
|
2017
|
|
Change
|
|
|
|
2018
|
|
2017
|
|
Change
|
Adjusted gross
margin
|
|
32.5
%
|
|
35.0 %
|
|
(250)
|
|
|
|
34.0
%
|
|
36.4 %
|
|
(240)
|
Adjusted
operating profit
|
|
15.7
%
|
|
16.9 %
|
|
(120)
|
|
|
|
16.7
%
|
|
18.6 %
|
|
(190)
|
Adjusted net
earnings attributable to General
Mills
|
|
11.9
%
|
|
11.2 %
|
|
70
|
|
|
|
11.4
%
|
|
11.9 %
|
|
(50)
|
|
|
(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
|
|
|
Nine-Month Period
Ended
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
%
Change
|
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
%
Change
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
2,517.4
|
|
$
|
2,499.0
|
|
0.7
|
%
|
|
$
|
7,727.4
|
|
$
|
7,804.8
|
|
(1.0)
|
%
|
Convenience Stores
& Foodservice
|
|
460.3
|
|
|
448.5
|
|
2.6
|
%
|
|
|
1,419.6
|
|
|
1,382.3
|
|
2.7
|
%
|
Europe &
Australia
|
|
469.8
|
|
|
424.5
|
|
10.7
|
%
|
|
|
1,428.4
|
|
|
1,338.0
|
|
6.8
|
%
|
Asia & Latin
America
|
|
434.8
|
|
|
421.2
|
|
3.2
|
%
|
|
|
1,274.8
|
|
|
1,288.1
|
|
(1.0)
|
%
|
Total
|
$
|
3,882.3
|
|
$
|
3,793.2
|
|
2.3
|
%
|
|
$
|
11,850.2
|
|
$
|
11,813.2
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
$
|
518.3
|
|
$
|
516.7
|
|
0.3
|
%
|
|
$
|
1,674.4
|
|
$
|
1,795.9
|
|
(6.8)
|
%
|
Convenience Stores
& Foodservice
|
|
84.3
|
|
|
93.6
|
|
(9.9)
|
%
|
|
|
275.6
|
|
|
295.4
|
|
(6.7)
|
%
|
Europe &
Australia
|
|
27.3
|
|
|
42.0
|
|
(35.0)
|
%
|
|
|
84.8
|
|
|
127.2
|
|
(33.3)
|
%
|
Asia & Latin
America
|
|
(2.1)
|
|
|
10.0
|
|
(121.0)
|
%
|
|
|
30.1
|
|
|
61.3
|
|
(50.9)
|
%
|
Total segment
operating profit
|
|
627.8
|
|
|
662.3
|
|
(5.2)
|
%
|
|
|
2,064.9
|
|
|
2,279.8
|
|
(9.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated corporate
items
|
|
27.6
|
|
|
42.2
|
|
(34.6)
|
%
|
|
|
102.3
|
|
|
143.6
|
|
(28.8)
|
%
|
Divestiture
loss
|
|
-
|
|
|
-
|
|
NM
|
|
|
|
-
|
|
|
13.5
|
|
(100.0)
|
%
|
Restructuring,
impairment, and other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exit
costs
|
|
7.5
|
|
|
77.6
|
|
(90.3)
|
%
|
|
|
14.3
|
|
|
165.5
|
|
(91.4)
|
%
|
Operating
profit
|
$
|
592.7
|
|
$
|
542.5
|
|
9.3
|
%
|
|
$
|
1,948.3
|
|
$
|
1,957.2
|
|
(0.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
Nine-Month Period
Ended
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
Basis Pt
Change
|
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
Basis Pt
Change
|
|
Segment operating
profit as a
% of net
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
Retail
|
|
20.6%
|
|
|
20.7%
|
|
(10)
|
|
|
|
21.7%
|
|
|
23.0%
|
|
(130)
|
|
Convenience Stores
& Foodservice
|
|
18.3%
|
|
|
20.9%
|
|
(260)
|
|
|
|
19.4%
|
|
|
21.4%
|
|
(200)
|
|
Europe &
Australia
|
|
5.8%
|
|
|
9.9%
|
|
(410)
|
|
|
|
5.9%
|
|
|
9.5%
|
|
(360)
|
|
Asia & Latin
America
|
|
(0.5%)
|
|
|
2.4%
|
|
(290)
|
|
|
|
2.4%
|
|
|
4.8%
|
|
(240)
|
|
Total segment
operating profit
|
|
16.2%
|
|
|
17.5%
|
|
(130)
|
|
|
|
17.4%
|
|
|
19.3%
|
|
(190)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(In Millions, Except
Par Value)
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
May 28,
2017
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
$
|
953.1
|
|
$
|
899.1
|
|
$
|
766.1
|
Receivables
|
|
|
1,496.5
|
|
|
1,427.5
|
|
|
1,430.1
|
Inventories
|
|
|
1,452.5
|
|
|
1,461.0
|
|
|
1,483.6
|
Prepaid
expenses and other current assets
|
|
|
375.0
|
|
|
340.4
|
|
|
381.6
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
4,277.1
|
|
|
4,128.0
|
|
|
4,061.4
|
|
|
|
|
|
|
|
|
|
|
Land, buildings, and
equipment
|
|
|
3,626.2
|
|
|
3,575.2
|
|
|
3,687.7
|
Goodwill
|
|
|
8,867.3
|
|
|
8,705.8
|
|
|
8,747.2
|
Other intangible
assets
|
|
|
4,604.1
|
|
|
4,499.7
|
|
|
4,530.4
|
Other
assets
|
|
|
865.9
|
|
|
761.6
|
|
|
785.9
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
22,240.6
|
|
$
|
21,670.3
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
2,505.7
|
|
$
|
1,855.3
|
|
$
|
2,119.8
|
Current
portion of long-term debt
|
|
|
1,250.5
|
|
|
604.7
|
|
|
604.7
|
Notes
payable
|
|
|
1,210.8
|
|
|
1,942.0
|
|
|
1,234.1
|
Other
current liabilities
|
|
|
1,242.6
|
|
|
1,341.5
|
|
|
1,372.2
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
6,209.6
|
|
|
5,743.5
|
|
|
5,330.8
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
7,163.6
|
|
|
7,176.4
|
|
|
7,642.9
|
Deferred income
taxes
|
|
|
1,233.9
|
|
|
1,547.7
|
|
|
1,719.4
|
Other
liabilities
|
|
|
1,481.3
|
|
|
1,930.0
|
|
|
1,523.1
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
16,088.4
|
|
|
16,397.6
|
|
|
16,216.2
|
|
|
|
|
|
|
|
|
|
|
Redeemable
interest
|
|
|
817.5
|
|
|
869.2
|
|
|
910.9
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, 754.6 shares issued, $0.10 par value
|
|
|
75.5
|
|
|
75.5
|
|
|
75.5
|
Additional paid-in capital
|
|
|
1,235.0
|
|
|
1,129.8
|
|
|
1,120.9
|
Retained
earnings
|
|
|
14,398.4
|
|
|
13,008.8
|
|
|
13,138.9
|
Common
stock in treasury, at cost,
shares of 184.5, 178.5 and 177.7
|
|
|
(8,190.8)
|
|
|
(7,800.3)
|
|
|
(7,762.9)
|
Accumulated other comprehensive loss
|
|
|
(2,552.5)
|
|
|
(2,350.4)
|
|
|
(2,244.5)
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
|
|
4,965.6
|
|
|
4,063.4
|
|
|
4,327.9
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling
interests
|
|
|
369.1
|
|
|
340.1
|
|
|
357.6
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
5,334.7
|
|
|
4,403.5
|
|
|
4,685.5
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity
|
|
$
|
22,240.6
|
|
$
|
21,670.3
|
|
$
|
21,812.6
|
|
|
|
|
|
|
|
|
|
|
See accompanying
notes to consolidated financial statements.
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows
|
GENERAL MILLS, INC.
AND SUBSIDIARIES
|
(Unaudited) (In
Millions)
|
|
Nine-Month Period
Ended
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
Cash Flows -
Operating Activities
|
|
|
|
|
|
Net
earnings, including earnings attributable to redeemable
|
|
|
|
|
|
and noncontrolling interests
|
$
|
1,804.9
|
|
$
|
1,285.5
|
Adjustments to reconcile net earnings to net cash
|
|
|
|
|
|
provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
434.7
|
|
|
448.3
|
After-tax earnings from joint ventures
|
|
(64.1)
|
|
|
(65.1)
|
Distributions of earnings from joint ventures
|
|
60.6
|
|
|
43.7
|
Stock-based compensation
|
|
62.8
|
|
|
76.4
|
Deferred income taxes
|
|
(489.1)
|
|
|
140.1
|
Pension and other postretirement benefit plan
contributions
|
|
(20.3)
|
|
|
(34.0)
|
Pension and other postretirement benefit plan costs
|
|
3.5
|
|
|
26.9
|
Divestiture loss
|
|
-
|
|
|
13.5
|
Restructuring, impairment, and other exit costs
|
|
(12.3)
|
|
|
141.1
|
Changes in current assets and liabilities
|
|
394.9
|
|
|
(368.8)
|
Other, net
|
|
(40.3)
|
|
|
(48.6)
|
Net cash provided by operating activities
|
|
2,135.3
|
|
|
1,659.0
|
Cash Flows -
Investing Activities
|
|
|
|
|
|
Purchases of land, buildings, and equipment
|
|
(397.9)
|
|
|
(475.2)
|
Investments in affiliates, net
|
|
(15.2)
|
|
|
4.8
|
Proceeds
from disposal of land, buildings, and equipment
|
|
0.9
|
|
|
1.2
|
Proceeds
from divestiture
|
|
-
|
|
|
17.5
|
Exchangeable note
|
|
-
|
|
|
13.0
|
Other,
net
|
|
(12.7)
|
|
|
14.7
|
Net cash used by investing activities
|
|
(424.9)
|
|
|
(424.0)
|
Cash Flows -
Financing Activities
|
|
|
|
|
|
Change
in notes payable
|
|
(37.3)
|
|
|
1,681.3
|
Issuance
of long-term debt
|
|
500.0
|
|
|
750.0
|
Payment
of long-term debt
|
|
(600.0)
|
|
|
(1,003.0)
|
Proceeds
from common stock issued on exercised options
|
|
91.4
|
|
|
90.5
|
Purchases of common stock for treasury
|
|
(601.2)
|
|
|
(1,650.9)
|
Dividends paid
|
|
(846.5)
|
|
|
(856.3)
|
Distributions to noncontrolling and redeemable interest
holders
|
|
(48.3)
|
|
|
(59.5)
|
Other,
net
|
|
(27.8)
|
|
|
(35.2)
|
Net cash used by financing activities
|
|
(1,569.7)
|
|
|
(1,083.1)
|
Effect of exchange
rate changes on cash and cash equivalents
|
|
46.3
|
|
|
(16.5)
|
Increase in cash and
cash equivalents
|
|
187.0
|
|
|
135.4
|
Cash and cash
equivalents - beginning of year
|
|
766.1
|
|
|
763.7
|
Cash and cash
equivalents - end of period
|
$
|
953.1
|
|
$
|
899.1
|
Cash Flow from
changes in current assets and liabilities:
|
|
|
|
|
|
Receivables
|
$
|
(25.5)
|
|
$
|
(75.1)
|
Inventories
|
|
56.6
|
|
|
(42.1)
|
Prepaid
expenses and other current assets
|
|
13.3
|
|
|
53.3
|
Accounts
payable
|
|
413.0
|
|
|
(100.4)
|
Other
current liabilities
|
|
(62.5)
|
|
|
(204.5)
|
Changes in current
assets and liabilities
|
$
|
394.9
|
|
$
|
(368.8)
|
|
|
|
|
|
|
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 nine-month period ended February
25, 2018, we recorded an adjustment related to a prior year
which increased income tax expense and total liabilities by
$40.5 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) During the third quarter of fiscal
2018, we entered into a definitive agreement and plan of merger
with Blue Buffalo Pet Products, Inc. ("Blue Buffalo"), a publicly
held pet food company, pursuant to which a subsidiary of General
Mills will merge into Blue Buffalo, with Blue Buffalo surviving the
merger as a wholly owned subsidiary of General Mills. Equity
holders of Blue Buffalo will receive $40.00 per share in cash, representing an
enterprise value of approximately $8.0
billion in addition to the assumption of approximately
$394 million of outstanding debt
which will be repaid upon transaction close. We expect to
finance the transaction with a combination of debt, cash on hand
and approximately $1.0 billion in
equity. The transaction, which has been approved by the Boards of
Directors of General Mills and Blue Buffalo, is subject to
regulatory approvals and other customary closing conditions, and is
expected to close by the end of fiscal 2018. Invus, LP and founding
Bishop family shareholders, representing more than 50 percent of
Blue Buffalo's outstanding shares, have delivered written consents
approving the transaction and no other approval of Blue Buffalo's
Board of Directors or shareholders is required to complete the
transaction. We expect to report the consolidated results of Blue
Buffalo as a segment in future periods.
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.
(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
|
|
|
Nine-Month Period
Ended
|
In
Millions
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
Cost of
sales
|
$
|
0.1
|
$
|
16.4
|
|
$
|
13.0
|
$
|
42.8
|
Restructuring,
impairment, and other exit costs
|
|
7.5
|
|
77.6
|
|
|
14.3
|
|
165.5
|
Total restructuring
charges
|
|
7.6
|
|
94.0
|
|
|
27.3
|
|
208.3
|
Project-related costs
classified in cost of sales
|
$
|
3.0
|
$
|
11.5
|
|
$
|
8.4
|
$
|
36.4
|
Details of our current restructuring initiatives were as
follows:
|
Nine-Month Period
Ended
|
|
Fiscal 2017, 2016
and
2015
|
|
Estimated
|
In
Millions
|
Feb. 25,
2018
|
Feb. 26,
2017
|
|
Total
|
|
Future
|
Total
|
|
|
Charge
|
Cash
|
Charge
|
Cash
|
|
Charge
|
Cash
|
|
Charge
|
Cash
|
Charge
|
Cash
|
Savings
(b)
|
Global
reorganization
|
$1.4
|
$32.9
|
$73.1
|
$9.2
|
|
$72.1
|
$20.0
|
|
$2
|
$23
|
$76
|
$76
|
|
Closure of Melbourne,
Australia plant
|
8.0
|
6.6
|
17.7
|
0.1
|
|
21.9
|
1.6
|
|
4
|
(5)
|
34
|
3
|
|
Restructuring of
certain international product lines
|
-
|
-
|
45.6
|
10.6
|
|
45.1
|
10.3
|
|
(3)
|
(4)
|
42
|
6
|
|
Closure of Vineland,
New Jersey plant
|
12.3
|
(1.9)
|
35.6
|
1.5
|
|
41.4
|
7.3
|
|
-
|
5
|
54
|
11
|
|
Project
Compass
|
(0.2)
|
2.9
|
(0.4)
|
11.4
|
|
54.3
|
48.9
|
|
-
|
2
|
54
|
54
|
|
Project
Century
|
5.1
|
(2.2)
|
37.2
|
29.5
|
|
408.4
|
95.5
|
|
-
|
47
|
413
|
140
|
|
Project
Catalyst
|
-
|
-
|
-
|
1.1
|
|
140.9
|
94.1
|
|
-
|
-
|
141
|
94
|
|
Combination of
certain operational facilities
|
0.7
|
1.3
|
(0.5)
|
3.7
|
|
13.3
|
16.3
|
|
3
|
(4)
|
17
|
14
|
|
Total restructuring
charges (a)
|
27.3
|
39.6
|
208.3
|
67.1
|
|
797.4
|
294.0
|
|
6
|
64
|
831
|
398
|
|
Project-related
costs
|
8.4
|
8.0
|
36.4
|
40.2
|
|
114.6
|
111.1
|
|
5
|
11
|
128
|
130
|
|
Restructuring charges
and project-related costs
|
$35.7
|
$47.6
|
$244.7
|
$107.3
|
|
$912.0
|
$405.1
|
|
$11
|
$75
|
$959
|
$528
|
$700
|
|
(a) Includes $13.0 million of
restructuring charges recorded in cost of sales during the
nine-month period ending February 25, 2018, $42.8 million during
the same period in fiscal
2017, and $179.5
million in fiscal 2017, 2016, and 2015 combined.
|
(b) Cumulative annual savings
versus fiscal 2015 base targeted by fiscal 2018. Includes
savings from SG&A cost reduction projects.
|
(4) Unallocated corporate expense
totaled $28 million in the third
quarter of fiscal 2018 compared to $42
million in the same period in fiscal 2017. In the third
quarter of fiscal 2018, we recorded $3
million of restructuring initiative project-related costs in
cost of sales compared to $16 million
of restructuring charges and $12
million of restructuring initiative project-related costs in
cost of sales in the same period last year. In addition, we
recorded a $3 million net increase in
expense related to the mark-to-market valuation of certain
commodity positions and grain inventories in the third quarter of
fiscal 2018 compared to an $8 million
net decrease in expense in the same period last year. In
addition, we recorded $4 million of
acquisition transaction costs related to our planned acquisition of
Blue Buffalo.
Unallocated corporate expense totaled $102 million in the nine-month period ended
February 25, 2018, compared to
$144 million in the same period last
year. In the nine-month period ended February 25, 2018, we recorded $13 million of restructuring charges and
$8 million of restructuring
initiative project-related costs in cost of sales compared to
$43 million of restructuring charges
and $36 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 nine-month period ended February 25, 2018, compared to a $21 million net decrease in expense in the same
period a year ago. In addition, we recorded $4 million of acquisition transaction costs
related to our planned acquisition of Blue Buffalo.
(5) Basic and diluted earnings per share
(EPS) were calculated as follows:
|
|
|
Quarter
Ended
|
|
|
Nine-Month
Period
Ended
|
In Millions,
Except per Share Data
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
|
|
Feb. 25,
2018
|
|
|
Feb. 26,
2017
|
Net earnings
attributable to General Mills
|
|
$
|
941.4
|
|
$
|
357.8
|
|
$
|
1,776.6
|
|
$
|
1,248.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of
common shares - basic EPS
|
|
|
572.5
|
|
|
580.7
|
|
|
573.4
|
|
|
589.8
|
Incremental share
effect from: (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
7.9
|
|
|
7.8
|
|
|
7.7
|
|
|
8.5
|
Restricted
stock, restricted stock units, and other
|
|
|
2.3
|
|
|
2.9
|
|
|
2.1
|
|
|
2.8
|
Average number of
common shares - diluted EPS
|
|
|
582.7
|
|
|
591.4
|
|
|
583.2
|
|
|
601.1
|
Earnings per share -
basic
|
|
$
|
1.64
|
|
$
|
0.62
|
|
$
|
3.10
|
|
$
|
2.12
|
Earnings per share -
diluted
|
|
$
|
1.62
|
|
$
|
0.61
|
|
$
|
3.05
|
|
$
|
2.08
|
|
(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 third
quarter of fiscal 2018 was an 85.9 percent benefit compared to a
23.0 percent charge for the third quarter of fiscal 2017. The 108.9
percentage point decrease in our effective tax rate as compared to
the prior year was primarily due to the provisional net benefit of
approximately $504 million recorded
in the third quarter of fiscal 2018 related to the Tax Cuts and
Jobs Act (TCJA).
The effective tax rate for the nine-month period ended
February 25, 2018, was a 1.7 percent
benefit compared to a 29.5 percent charge for the nine-month period
ended February 26, 2017. The 31.2
percentage point decrease in our effective tax rate as compared to
the prior year was primarily due to the provisional net benefit of
approximately $504 million recorded
in the third quarter of fiscal 2018 related to the TCJA.
The TCJA was enacted on December 22,
2017 and results in significant revisions to the U.S.
corporate income tax system, including a reduction in the U.S.
corporate income tax rate, implementation of a territorial system
and a deemed repatriation tax on untaxed foreign earnings.
The TCJA also results in a U.S. federal blended statutory tax rate
of 29.4 percent for fiscal 2018. Generally, the impacts of
the new legislation would be required to be recorded in the period
of enactment, which for us is the third quarter of fiscal
2018. However, Accounting Standards Update 2018-05: Income
Taxes (Topic 740) was issued with guidance allowing for the
recognition of provisional amounts in the event that the accounting
is not complete and a reasonable estimate can be made. The
guidance allows for a measurement period of up to one year from the
enactment date to finalize the accounting related to the TCJA.
(7) 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, adjusted effective tax
rate, constant currency adjusted diluted EPS, and free cash flow
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, tax reform, 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, tax reform, 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 increase total segment operating profit and adjusted diluted EPS
growth by approximately 1 percent; total restructuring charges and
project-related costs related to actions previously announced to
total approximately $40 million;
total charges related to a global cost savings initiative approved
subsequent to the end of the third quarter of fiscal 2018 to total
approximately $40 to $60 million; and unusual tax items previously
announced to total approximately $40
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
|
|
Nine-Month
Period
Ended
|
|
Per Share
Data
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
Change
|
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
|
Change
|
|
|
Diluted earnings per
share, as reported
|
$
|
1.62
|
|
$
|
0.61
|
166
|
%
|
|
$
|
3.05
|
|
$
|
2.08
|
|
47
|
%
|
|
Provisional
net tax benefit (a)
|
|
(0.86)
|
|
|
-
|
|
|
|
|
(0.86)
|
|
|
|
|
|
|
|
Tax adjustment
(b)
|
|
-
|
|
|
-
|
|
|
|
|
0.07
|
|
|
-
|
|
|
|
|
Mark-to-market
effects (c)(f)
|
|
-
|
|
|
(0.01)
|
|
|
|
|
-
|
|
|
(0.02)
|
|
|
|
|
Divestiture
loss, net (d)(f)
|
|
-
|
|
|
-
|
|
|
|
|
-
|
|
|
0.01
|
|
|
|
|
Acquisition
transaction costs (d)(f)
|
|
0.02
|
|
|
-
|
|
|
|
|
0.02
|
|
|
-
|
|
|
|
|
Restructuring
charges (e)(f)
|
|
0.01
|
|
|
0.11
|
|
|
|
|
0.03
|
|
|
0.24
|
|
|
|
|
Project-related costs (e)(f)
|
|
-
|
|
|
0.01
|
|
|
|
|
0.01
|
|
|
0.04
|
|
|
|
|
Diluted earnings per
share, excluding
certain
items affecting
comparability
|
$
|
0.79
|
|
$
|
0.72
|
10
|
%
|
|
$
|
2.32
|
|
$
|
2.35
|
|
(1)
|
%
|
|
Foreign currency
exchange impact
|
|
|
|
|
|
2 pts
|
|
|
|
|
|
|
|
|
1 pt
|
|
|
Diluted earnings per
share growth,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
excluding certain items affecting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
comparability, on a constant-currency basis
|
|
|
|
|
|
8
|
%
|
|
|
|
|
|
|
|
(2)
|
%
|
|
|
(a) See Note
6.
|
(b) See Note
1.
|
(c) See Note
4.
|
(d) See Note 2.
Acquisition transaction costs include $15.9 million of charges
recorded in interest, net, and $3.5 million of costs recorded in
SG&A expenses for the
quarter and
nine-month periods ended February 25, 2018.
|
(e) See Note
3.
|
(f) 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 Feb.
25, 2018
|
|
(5)
|
%
|
1
|
pt
|
(6)
|
%
|
Nine-Month Period
Ended Feb. 25, 2018
|
|
(9)
|
%
|
1
|
pt
|
(10)
|
%
|
|
|
|
|
|
|
|
|
Constant-currency
Segment Operating Profit Growth Rates
|
|
|
|
|
Quarter Ended Feb.
25, 2018
|
|
|
|
Percentage Change
in Operating Profit
as
Reported
|
Impact of Foreign
Currency Exchange
|
Percentage Change
in Operating Profit on Constant-Currency Basis
|
|
North America
Retail
|
|
Flat
|
|
Flat
|
|
Flat
|
|
|
Europe &
Australia
|
|
(35)
|
%
|
11
|
pts
|
(46)
|
%
|
|
Asia & Latin
America
|
|
(121)
|
%
|
13
|
pts
|
(134)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Month Period
Ended Feb. 25, 2018
|
|
|
|
Percentage Change
in Operating Profit
as
Reported
|
Impact of Foreign
Currency Exchange
|
Percentage Change
in Operating Profit on Constant-Currency Basis
|
|
North America
Retail
|
|
(7)
|
%
|
Flat
|
|
(7)
|
%
|
|
Europe &
Australia
|
|
(33)
|
%
|
5
|
pts
|
(38)
|
%
|
|
Asia & Latin
America
|
|
(51)
|
%
|
5
|
pts
|
(56)
|
%
|
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 Feb.
25, 2018
|
51
|
%
|
21
|
pts
|
30
|
%
|
Nine-Month Period
Ended Feb. 25, 2018
|
(2)
|
%
|
2
|
pts
|
(4)
|
%
|
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
|
|
February 25,
2018
|
|
|
February 26,
2017
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of
Net
Sales
|
|
|
|
Value
|
|
Percent
of
Net
Sales
|
|
Gross margin as
reported (a)
|
$
|
1,255.3
|
|
32.3
|
%
|
|
$
|
1,307.7
|
|
34.5
|
%
|
Mark-to-market
effects (c)
|
|
2.8
|
|
0.1
|
%
|
|
|
(8.2)
|
|
(0.2)
|
%
|
Restructuring
charges (d)
|
|
0.1
|
|
-
|
%
|
|
|
16.4
|
|
0.4
|
%
|
Project-related costs (d)
|
|
3.0
|
|
0.1
|
%
|
|
|
11.5
|
|
0.3
|
%
|
Adjusted gross
margin
|
$
|
1,261.2
|
|
32.5
|
%
|
|
$
|
1,327.4
|
|
35.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
592.7
|
|
15.3
|
%
|
|
$
|
542.5
|
|
14.3
|
%
|
Mark-to-market
effects (c)
|
|
2.8
|
|
0.1
|
%
|
|
|
(8.2)
|
|
(0.2)
|
%
|
Restructuring
charges (d)
|
|
7.6
|
|
0.1
|
%
|
|
|
94.0
|
|
2.5
|
%
|
Project-related costs (d)
|
|
3.0
|
|
0.1
|
%
|
|
|
11.5
|
|
0.3
|
%
|
Acquisition
transaction costs (e)
|
|
3.5
|
|
0.1
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted operating
profit
|
$
|
609.6
|
|
15.7
|
%
|
|
$
|
639.8
|
|
16.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
941.4
|
|
24.2
|
%
|
|
$
|
357.8
|
|
9.4
|
%
|
Provisional
net tax benefit (b)
|
|
(503.8)
|
|
(13.0)
|
%
|
|
|
-
|
|
-
|
%
|
Mark-to-market
effects, net of tax (c)(g)
|
|
1.6
|
|
-
|
%
|
|
|
(5.1)
|
|
(0.1)
|
%
|
Restructuring
charges, net of tax (d)(g)
|
|
6.8
|
|
0.2
|
%
|
|
|
63.0
|
|
1.7
|
%
|
Project-related costs, net of tax (d)(g)
|
|
2.3
|
|
0.1
|
%
|
|
|
7.4
|
|
0.2
|
%
|
Acquisition
transaction costs (e)(g)
|
|
13.8
|
|
0.4
|
%
|
|
|
-
|
|
-
|
%
|
Tax adjustment
(f)
|
|
(1.7)
|
|
-
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted net earnings
attributable to General Mills
|
$
|
460.4
|
|
11.9
|
%
|
|
$
|
423.1
|
|
11.2
|
%
|
(a) Net sales less cost of
sales.
|
|
|
|
|
|
|
|
|
|
|
|
(b) See Note 6.
|
|
|
|
|
|
|
|
|
|
|
|
(c) See Note 4.
|
|
|
|
|
|
|
|
|
|
|
|
(d)
See Note 3.
|
|
|
|
|
|
|
|
|
|
|
|
(e) See Note 2.
Acquisition transaction costs include $15.9 million of pre-tax
charges recorded in interest, net, and $3.5 million of
pre-tax costs
recorded in SG&A expenses for the quarter ended February 25,
2018.
|
|
|
(f)
See Note 1.
|
|
|
|
|
|
|
|
|
|
|
|
(g) See reconciliation
of effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine-Month Period
Ended
|
In
Millions
|
|
February 25,
2018
|
|
|
February 26,
2017
|
|
Comparisons as a %
of Net Sales
|
|
Value
|
|
Percent
of
Net
Sales
|
|
|
|
Value
|
|
Percent
of
Net
Sales
|
|
Gross margin as
reported (a)
|
$
|
4,008.4
|
|
33.8
|
%
|
|
$
|
4,244.1
|
|
35.9
|
%
|
Mark-to-market
effects (c)
|
|
(3.5)
|
|
-
|
%
|
|
|
(20.7)
|
|
(0.2)
|
%
|
Restructuring
charges (d)
|
|
13.0
|
|
0.1
|
%
|
|
|
42.8
|
|
0.4
|
%
|
Project-related costs (d)
|
|
8.4
|
|
0.1
|
%
|
|
|
36.4
|
|
0.3
|
%
|
Adjusted gross
margin
|
$
|
4,026.3
|
|
34.0
|
%
|
|
$
|
4,302.6
|
|
36.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit as
reported
|
$
|
1,948.3
|
|
16.4
|
%
|
|
$
|
1,957.2
|
|
16.6
|
%
|
Mark-to-market
effects (c)
|
|
(3.5)
|
|
-
|
%
|
|
|
(20.7)
|
|
(0.2)
|
%
|
Restructuring
charges (d)
|
|
27.3
|
|
0.2
|
%
|
|
|
208.3
|
|
1.8
|
%
|
Project-related costs (d)
|
|
8.4
|
|
0.1
|
%
|
|
|
36.4
|
|
0.3
|
%
|
Divestiture
loss (e)
|
|
-
|
|
-
|
%
|
|
|
13.5
|
|
0.1
|
%
|
Acquisition
transaction costs (e)
|
|
3.5
|
|
-
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted operating
profit
|
$
|
1,984.0
|
|
16.7
|
%
|
|
$
|
2,194.7
|
|
18.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to General Mills as reported
|
$
|
1,776.6
|
|
15.0
|
%
|
|
$
|
1,248.6
|
|
10.6
|
%
|
Provisional
net tax benefit (b)
|
|
(503.8)
|
|
(4.2)
|
%
|
|
|
-
|
|
-
|
|
Mark-to-market
effects, net of tax (c)(g)
|
|
(2.4)
|
|
-
|
%
|
|
|
(13.0)
|
|
(0.1)
|
%
|
Restructuring
charges, net of tax (d)(g)
|
|
20.6
|
|
0.2
|
%
|
|
|
141.6
|
|
1.1
|
%
|
Project-related costs, net of tax (d)(g)
|
|
5.9
|
|
-
|
%
|
|
|
23.3
|
|
0.2
|
%
|
Divestiture
loss (e)(g)
|
|
-
|
|
-
|
%
|
|
|
9.2
|
|
0.1
|
%
|
Acquisition
transaction costs (e)(g)
|
|
13.8
|
|
0.1
|
%
|
|
|
-
|
|
-
|
%
|
Tax adjustment
(f)
|
|
40.5
|
|
0.3
|
%
|
|
|
-
|
|
-
|
%
|
Adjusted net earnings
attributable to General Mills
|
$
|
1,351.2
|
|
11.4
|
%
|
|
$
|
1,409.7
|
|
11.9
|
%
|
(a) Net sales less cost
of sales.
|
(b) See Note
6.
|
(c) See Note
4.
|
(d) See Note
3.
|
(e) See Note 2.
Acquisition transaction costs include $15.9 million of pre-tax
charges recorded in interest, net, and $3.5 million of pre-tax
costs recorded
in
SG&A expenses for the nine-month period ended February 25,
2018.
|
(f) See Note
1.
|
(g) See reconciliation
of effective income tax rate excluding certain items affecting
comparability below for tax impact of adjustment.
|
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
|
|
Nine-Month Period
Ended
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
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
|
$503.4
|
$(432.5)
|
|
$466.1
|
$107.0
|
|
$1,711.7
|
$(29.1)
|
|
$1,731.4
|
$511.0
|
Provisional tax benefit (b)
|
-
|
503.8
|
|
-
|
-
|
|
-
|
503.8
|
|
-
|
-
|
Mark-to-market effects (c)
|
2.8
|
1.2
|
|
(8.2)
|
(3.1)
|
|
(3.5)
|
(1.1)
|
|
(20.7)
|
(7.7)
|
Restructuring charges (d)
|
7.6
|
0.8
|
|
94.0
|
31.0
|
|
27.3
|
6.7
|
|
208.3
|
66.7
|
Project-related costs (d)
|
3.0
|
0.7
|
|
11.5
|
4.1
|
|
8.4
|
2.5
|
|
36.4
|
13.1
|
Divestiture loss (e)
|
-
|
-
|
|
-
|
-
|
|
-
|
-
|
|
13.5
|
4.3
|
Acquisition transaction costs (e)
|
19.4
|
5.6
|
|
-
|
-
|
|
19.4
|
5.6
|
|
-
|
-
|
Tax
adjustment (f)
|
-
|
1.7
|
|
-
|
-
|
|
-
|
(40.5)
|
|
-
|
-
|
As
adjusted
|
$536.2
|
$81.3
|
|
$563.4
|
$139.0
|
|
$1,763.3
|
$447.9
|
|
$1,968.9
|
$587.4
|
Effective tax
rate:
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
(85.9)%
|
|
|
23.0%
|
|
|
(1.7)%
|
|
|
29.5%
|
As
adjusted
|
|
15.2%
|
|
|
24.7%
|
|
|
25.4%
|
|
|
29.8%
|
Sum of adjustment to
income taxes
|
$
|
513.8
|
|
$
|
32.0
|
|
$
|
477.0
|
|
$
|
76.4
|
Average number of
common shares - diluted EPS
|
|
582.7
|
|
|
591.4
|
|
|
583.2
|
|
|
601.1
|
Impact of income tax
adjustments on diluted EPS
excluding certain items affecting comparability
|
|
$0.88
|
|
|
$0.05
|
|
|
$0.82
|
|
|
$0.13
|
(a) Earnings before
income taxes and after-tax earnings from joint ventures.
|
(b) See Note
6.
|
(c) See Note
4.
|
(d) See Note
3.
|
(e) See Note 2.
Acquisition transaction costs include $15.9 million of charges
recorded in interest, net, and $3.5 million of costs recorded in
SG&A expenses for the
quarter and
nine-month periods ended February 25, 2018.
|
(f) See Note
1.
|
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
|
|
Nine-Month Period
Ended
|
In
Millions
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
|
Feb. 25,
2018
|
|
Feb. 26,
2017
|
Net cash provided by
operating activities
|
$568.5
|
|
$580.3
|
|
$2,135.3
|
|
$1,659.0
|
Purchases of land,
buildings, and equipment
|
(137.9)
|
|
(156.9)
|
|
(397.9)
|
|
(475.2)
|
Free cash
flow
|
$430.6
|
|
$423.4
|
|
$1,737.4
|
|
$1,183.8
|
(8) Subsequent to the end of the third
quarter fiscal 2018, we approved global cost savings initiatives
designed to reduce administrative costs and align resources behind
high growth priorities. In the fourth quarter of fiscal 2018, we
expect to record total charges of approximately $40-$60 million,
primarily reflecting employee termination benefits, all of which
will be cash. The majority of these actions will be completed
by the end of fiscal 2018 with the remainder completed in fiscal
2019 subject to consultation as locally required.
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SOURCE General Mills, Inc.