- Net sales increased 4 percent to $4.5 billion; organic net
sales1 were up 2 percent
- Operating profit declined 1 percent to $844 million;
constant-currency adjusted operating profit was down 2
percent
- Diluted earnings per share (EPS) totaled $1.02, down 1
percent from the prior year; adjusted diluted EPS of $0.99 was down
2 percent in constant currency
- Company reaffirms full-year fiscal 2022 outlook
¹ Please see Note 7 to the Consolidated Financial Statements
below for reconciliation of this and other non-GAAP measures used
in this release.
General Mills (NYSE: GIS) today reported results for the first
quarter ended August 29, 2021.
“I’m proud of the way our team is performing in a dynamic and
challenging operating environment,” said General Mills Chairman and
Chief Executive Officer Jeff Harmening. “Our strong execution in
the first quarter enabled us to deliver top- and bottom-line
results ahead of our expectations. We delivered these good results
while continuing to advance our Accelerate strategy, including
making important progress on portfolio reshaping in the
quarter.”
General Mills is executing its Accelerate strategy to drive
sustainable, profitable growth and top-tier shareholder returns
over the long term. The strategy focuses on four pillars to create
competitive advantages and win: boldly building brands,
relentlessly innovating, unleashing scale, and being a force for
good. The company is prioritizing its core markets, global
platforms, and local gem brands that have the best prospects for
profitable growth and is committed to reshaping its portfolio with
strategic acquisitions and divestitures, including the acquisition
of Tyson Foods’ pet treats business and the planned divestiture of
its European Yoplait operations, to further enhance its growth
profile.
General Mills expects changes in consumer behaviors driven by
the COVID-19 pandemic will result in ongoing elevated consumer
demand for food at home, relative to pre-pandemic levels. These
changes include more time spent working from home and increased
consumer appreciation for cooking and baking. In addition, an
increase in the pet population and further humanization and
premiumization of pet food during the pandemic are expected to
create tailwinds for the pet food category. The company plans to
capitalize on these opportunities, addressing evolving consumer
needs through its leading brands, innovation, and advantaged
capabilities to generate profitable growth.
First Quarter Results
Summary
- Net sales increased 4 percent to $4.5 billion, including
1 point of favorable foreign currency exchange. Organic net sales
increased 2 percent, including contributions from positive organic
net price realization and mix and higher organic pound volume.
- Gross margin was down 120 basis points to 35.2 percent
of net sales, primarily driven by higher input costs, partially
offset by favorable net price realization and mix and
mark-to-market effects. Adjusted gross margin was down 150 basis
points to 34.7 percent of net sales, driven by input cost
inflation, higher other supply chain costs, and fixed cost
deleverage in the supply chain, partially offset by Holistic Margin
Management (HMM) cost savings and favorable net price realization
and mix.
- Operating profit of $844 million was down 1 percent,
primarily driven by the comparison to net gains on certain
corporate investments in the prior year, partially offset by higher
gross profit dollars. Operating profit margin of 18.6
percent was down 100 basis points. Constant-currency adjusted
operating profit declined 2 percent, driven by lower adjusted gross
profit dollars, partially offset by lower administrative expenses.
Adjusted operating profit margin decreased 110 basis points to 18.0
percent.
- Net earnings attributable to General Mills was down 2
percent to $627 million and diluted EPS was down 1 percent
to $1.02, primarily reflecting lower operating profit. Adjusted
diluted EPS of $0.99 was down 2 percent in constant currency,
primarily driven by lower adjusted operating profit.
Portfolio Reshaping
General Mills took important steps to advance its portfolio
reshaping efforts in the first quarter. On July 6, the company
completed the acquisition of Tyson Foods’ pet treats business,
including the Nudges, True Chews, and Top Chews brands. The
acquisition strengthens the company’s position as the leading
natural pet food manufacturer in the $37 billion U.S. pet food
category. The company estimates the acquisition will add
approximately 2 cents to fiscal 2022 adjusted diluted EPS. In
addition, on August 27, General Mills signed a definitive agreement
in relation to the previously announced divestiture of its European
Yoplait operations. The divestiture is scheduled to close by the
end of calendar 2021.
Operating Segment
Results
Note: Tables may not foot due to rounding.
Components of Fiscal 2022
Reported Net Sales Growth
First Quarter
Volume
Price/Mix
Foreign Exchange
Reported Net Sales
North America Retail
(7) pts
4 pts
1 pt
(3)%
Pet
13 pts
12 pts
--
25%
Convenience Stores & Foodservice
12 pts
11 pts
--
23%
Europe & Australia
2 pts
(1) pt
5 pts
5%
Asia & Latin America
(6) pts
10 pts
5 pts
8%
Total
--
3 pts
1 pt
4%
Components of Fiscal 2022
Organic Net Sales Growth
First Quarter
Organic Volume
Organic Price/Mix
Organic Net Sales
Foreign Exchange
Acquisitions &
Divestitures
Reported Net Sales
North America Retail
(7) pts
4 pts
(3)%
1 pt
--
(3)%
Pet
12 pts
8 pts
20%
--
5 pts
25%
Convenience Stores & Foodservice
12 pts
11 pts
23%
--
--
23%
Europe & Australia
2 pts
(1) pt
Flat
5 pts
--
5%
Asia & Latin America
1 pt
4 pts
6%
5 pts
(2) pts
8%
Total
1 pt
2 pts
2%
1 pt
--
4%
Fiscal 2022 Segment Operating
Profit Growth
First Quarter
% Change as Reported
% Change in Constant
Currency
North America Retail
(11)%
(12)%
Pet
28%
28%
Convenience Stores & Foodservice
47%
47%
Europe & Australia
(15)%
(22)%
Asia & Latin America
(23)%
(26)%
Total
(3)%
(4)%
North America Retail Segment
First-quarter net sales for General Mills’ North America Retail
segment declined 3 percent to $2.64 billion, driven by lower
at-home food demand and the comparison to the prior-year period
when net sales benefited from retailers rebuilding inventory that
had been drawn down at the onset of the pandemic. Organic net sales
also were down 3 percent. On a 2-year compound growth basis,
relative to pre-pandemic levels, first-quarter organic net sales
were up 5 percent. Net sales declined 7 percent in U.S. Meals &
Baking and 6 percent in U.S. Cereal, and were up 3 percent in U.S.
Snacks and up 3 percent in constant currency in Canada. U.S. Yogurt
net sales essentially matched year-ago levels. Segment operating
profit of $618 million was down 11 percent as reported and down 12
percent in constant currency, primarily driven by higher input
costs and lower volume, partially offset by favorable net price
realization and mix and lower administrative expenses. On a 2-year
compound growth basis, segment operating profit was up 4 percent in
constant currency.
Pet Segment
First-quarter net sales for the Pet segment increased 25 percent
to $488 million, driven by strong volume growth and favorable net
price realization and mix. Net sales growth included 5 points of
benefit from the acquisition of Tyson Foods’ pet treats business,
which closed on July 6 and is being accounted for on a 1-month lag.
Organic net sales were up 20 percent, including double-digit growth
for both dog food and cat food. Organic net sales growth benefited
from the comparison to the prior-year period that was negatively
impacted by a reduction in at-home pet food inventory, and on a
2-year compound growth basis, first-quarter organic net sales were
up 13 percent. The Blue Buffalo brand continued to drive strong
retail sales growth and market share gains in measured channels in
the quarter. In addition, retail sales for the recently acquired
pet treat brands were up 20 percent in measured channels. Segment
operating profit increased 28 percent to $115 million, primarily
driven by favorable net price realization and mix and higher
volume, partially offset by higher input costs and higher selling,
general, and administrative (SG&A) expenses. On a 2-year
compound growth basis, segment operating profit was up 20 percent
in constant currency.
Convenience Stores & Foodservice
Segment
First-quarter net sales for the Convenience Stores &
Foodservice segment increased 23 percent to $482 million,
reflecting sequential recovery in key away-from-home food channels
including schools, restaurants, lodging, and convenience stores. On
a 2-year compound growth basis, relative to pre-pandemic levels,
first-quarter organic net sales were up 4 percent. Segment
operating profit increased 47 percent to $102 million, driven by
favorable net price realization and mix and higher volume,
partially offset by higher input costs. On a 2-year compound growth
basis, segment operating profit was up 6 percent.
Europe & Australia Segment
First-quarter net sales for the Europe & Australia segment
increased 5 percent to $518 million, driven by favorable foreign
currency exchange. Organic net sales essentially matched year-ago
levels. On a 2-year compound growth basis, relative to pre-pandemic
levels, first-quarter organic net sales were up 3 percent. Net
sales growth for snack bars and yogurt was offset by a decline in
ice cream. Segment operating profit of $45 million was down 15
percent as reported and down 22 percent in constant currency,
primarily driven by input cost inflation and unfavorable product
mix, partially offset by HMM cost savings. On a 2-year compound
growth basis, segment operating profit was up 21 percent in
constant currency.
Asia & Latin America
Segment
First-quarter net sales for the Asia & Latin America segment
increased 8 percent to $413 million, driven by favorable net price
realization and mix and foreign currency exchange, partially offset
by lower volume. Organic net sales increased 6 percent. On a 2-year
compound growth basis, relative to pre-pandemic levels,
first-quarter organic net sales were up 11 percent. Net sales
performance was led by Yoki meals and snacks in Brazil and
Häagen-Dazs ice cream in China. Segment operating profit of $15
million was down 23 percent as reported and down 26 percent in
constant currency, primarily driven by higher input costs and
higher SG&A expenses, partially offset by favorable net price
realization and mix. On a 2-year compound growth basis, segment
operating profit was up 11 percent in constant currency.
Joint Venture Summary
First-quarter net sales for Cereal Partners Worldwide (CPW) were
down 5 percent in constant currency, reflecting the comparison
against elevated demand for food at home a year ago in the early
stages of the pandemic. Constant-currency net sales increased 14
percent for Häagen-Dazs Japan (HDJ), driven by strong new product
performance. Combined after-tax earnings from joint ventures
totaled $29 million compared to $41 million a year ago, primarily
driven by lower net sales and higher media investment at CPW.
Other Income Statement
Items
Unallocated corporate items totaled $56 million net expense in
the first quarter of fiscal 2022, compared to $74 million net
expense a year ago. Excluding mark-to-market valuation effects and
other items affecting comparability, unallocated corporate items
totaled $77 million net expense this year compared to $96 million
net expense last year.
Restructuring, impairment, and other exit costs totaled a $4
million net recovery in the quarter and were an insignificant
amount a year ago (please see Note 3 below for more information on
these charges).
Net interest expense totaled $96 million in the first quarter
compared to $111 million a year ago, primarily driven by lower
rates and lower average debt balances. The effective tax rate in
the quarter was 21.7 percent compared to 22.0 percent last year
(please see Note 6 below for more information on our effective tax
rate). The adjusted effective tax rate was 21.7 percent compared to
21.9 percent a year ago.
Cash Flow
Generation and Cash Returns
Cash provided by operating activities totaled $370 million in
the first quarter of fiscal 2022 compared to $584 million in the
prior year, primarily driven by timing-related changes in accounts
payable and accounts receivable. Capital investments totaled $104
million compared to $117 million a year ago. Dividends paid
increased to $312 million. General Mills repurchased approximately
2.5 million shares of common stock in the first quarter for a total
of $150 million. Average diluted shares outstanding decreased 1
percent to 615 million.
Fiscal 2022
Outlook
General Mills reaffirmed its key full-year fiscal 2022
targets:
- Organic net sales are expected to be toward the higher
end of the company’s initial guidance range of down 1 to 3 percent,
reflecting stronger-than-expected net sales performance in the
first quarter.
- Constant-currency adjusted operating profit and
constant-currency adjusted diluted EPS are each expected to
be toward the higher end of the company’s initial guidance ranges
of down 2 to 4 percent and flat to down 2 percent, respectively,
largely due to the impact of the pet treats acquisition, which is
estimated to add approximately 2 cents to fiscal 2022 adjusted
diluted EPS.
- Free cash flow conversion is expected to be
approximately 95 percent of adjusted after-tax earnings.
- The above targets exclude the impact of the European Yoplait
divestiture, which is scheduled to close by the end of the calendar
year.
General Mills will issue pre-recorded management remarks today,
September 22, 2021, at approximately 6:30 a.m. Central time (7:30
a.m. Eastern time) and will hold a live, webcasted question and
answer session beginning at 8:00 a.m. Central time (9:00 a.m.
Eastern time). The pre-recorded remarks and the webcast will be
made available at www.generalmills.com/investors.
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 “Fiscal 2022 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: the impact of the
coronavirus (COVID-19) pandemic on our business, suppliers,
consumers, customers, and employees; disruptions or inefficiencies
in the supply chain, including any impact of the coronavirus
(COVID-19) pandemic; 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 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, energy, and
transportation; 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
Aug. 29,
Aug. 30,
2021
2020
% Change
Net sales
$
4,539.9
$
4,364.0
4
%
Cost of sales
2,942.5
2,773.6
6
%
Selling, general, and administrative
expenses
757.4
736.2
3
%
Restructuring, impairment, and other exit
costs (recoveries)
(4.3
)
0.5
NM
Operating profit
844.3
853.7
(1
)%
Benefit plan non-service income
(29.6
)
(33.3
)
(11
)%
Interest, net
95.9
111.1
(14
)%
Earnings before income taxes and
after-tax
earnings from joint ventures
778.0
775.9
-
%
Income taxes
168.9
170.8
(1
)%
After-tax earnings from joint ventures
29.1
41.3
(30
)%
Net earnings, including earnings
attributable to
redeemable and noncontrolling
interests
638.2
646.4
(1
)%
Net earnings attributable to redeemable
and
noncontrolling interests
11.2
7.5
49
%
Net earnings attributable to General
Mills
$
627.0
$
638.9
(2
)%
Earnings per share – basic
$
1.03
$
1.04
(1
)%
Earnings per share – diluted
$
1.02
$
1.03
(1
)%
Quarter Ended
Aug. 29,
Aug. 30,
Basis Pt
Comparisons as a % of net sales:
2021
2020
Change
Gross margin
35.2
%
36.4
%
(120
)
Selling, general, and administrative
expenses
16.7
%
16.9
%
(20
)
Operating profit
18.6
%
19.6
%
(100
)
Net earnings attributable to General
Mills
13.8
%
14.6
%
(80
)
Quarter Ended
Comparisons as a % of net sales
excluding
Aug. 29,
Aug. 30,
Basis Pt
certain items affecting comparability
(a):
2021
2020
Change
Adjusted gross margin
34.7
%
36.2
%
(150
)
Adjusted operating profit
18.0
%
19.1
%
(110
)
Adjusted net earnings attributable to
General Mills
13.4
%
14.3
%
(90
)
(a) See Note 7 for a reconciliation of
these measures not defined by generally accepted accounting
principles (GAAP).
See accompanying notes to consolidated
financial statements.
Operating Segment Results and
Supplementary Information
GENERAL MILLS, INC. AND
SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 29, 2021
Aug. 30, 2020
% Change
Net sales:
North America Retail
$
2,638.9
$
2,707.0
(3
)%
Europe & Australia
517.5
491.0
5
%
Pet
488.0
391.7
25
%
Convenience Stores & Foodservice
482.4
391.6
23
%
Asia & Latin America
413.1
382.7
8
%
Total
$
4,539.9
$
4,364.0
4
%
Operating profit:
North America Retail
$
618.0
$
695.4
(11
)%
Europe & Australia
45.2
53.2
(15
)%
Pet
115.2
90.3
28
%
Convenience Stores & Foodservice
102.4
69.6
47
%
Asia & Latin America
15.4
20.1
(23
)%
Total segment operating profit
$
896.2
$
928.6
(3
)%
Unallocated corporate items
56.2
74.4
(24
)%
Restructuring, impairment, and other exit
costs (recoveries)
(4.3
)
0.5
NM
Operating profit
$
844.3
$
853.7
(1
)%
Quarter Ended
Aug. 29, 2021
Aug. 30, 2020
Basis Pt Change
Segment operating profit as a % of net
sales:
North America Retail
23.4
%
25.7
%
(230
)
Europe & Australia
8.7
%
10.8
%
(210
)
Pet
23.6
%
23.1
%
50
Convenience Stores & Foodservice
21.2
%
17.8
%
340
Asia & Latin America
3.7
%
5.3
%
(160
)
Total segment operating profit
19.7
%
21.3
%
(160
)
See accompanying notes to consolidated
financial statements.
Consolidated Balance
Sheets
GENERAL MILLS, INC. AND
SUBSIDIARIES
(In Millions, Except Par
Value)
Aug. 29, 2021
Aug. 30, 2020
May. 30, 2021
(Unaudited)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
710.6
$
1,796.7
$
1,505.2
Receivables
1,691.7
1,633.0
1,638.5
Inventories
1,935.2
1,605.1
1,820.5
Prepaid expenses and other current
assets
734.3
320.0
790.3
Assets held for sale
1,248.4
-
-
Total current assets
6,320.2
5,354.8
5,754.5
Land, buildings, and equipment
3,343.2
3,557.0
3,606.8
Goodwill
14,549.9
14,010.1
14,062.4
Other intangible assets
6,831.0
7,150.4
7,150.6
Other assets
1,287.9
1,189.9
1,267.6
Total assets
$
32,332.2
$
31,262.2
$
31,841.9
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,288.0
$
3,184.4
$
3,653.5
Current portion of long-term debt
1,590.5
2,625.7
2,463.8
Notes payable
1,035.5
162.7
361.3
Other current liabilities
1,673.9
1,639.9
1,787.2
Liabilities held for sale
547.5
-
-
Total current liabilities
8,135.4
7,612.7
8,265.8
Long-term debt
10,326.9
10,832.9
9,786.9
Deferred income taxes
2,076.0
1,924.5
2,118.4
Other liabilities
1,224.1
1,549.3
1,292.7
Total liabilities
21,762.4
21,919.4
21,463.8
Redeemable interest
584.0
584.9
604.9
Stockholders' equity:
Common stock, 754.6 shares issued, $0.10
par value
75.5
75.5
75.5
Additional paid-in capital
1,345.0
1,335.5
1,365.5
Retained earnings
17,384.5
16,312.5
17,069.8
Common stock in treasury, at cost, shares
of 148.3, 143.3 and 146.9
(6,715.0
)
(6,370.2
)
(6,611.2
)
Accumulated other comprehensive loss
(2,397.7
)
(2,908.7
)
(2,429.2
)
Total stockholders' equity
9,692.3
8,444.6
9,470.4
Noncontrolling interests
293.5
313.3
302.8
Total equity
9,985.8
8,757.9
9,773.2
Total liabilities and equity
$
32,332.2
$
31,262.2
$
31,841.9
See accompanying notes to consolidated
financial statements.
Consolidated Statements of
Cash Flows
GENERAL MILLS, INC. AND
SUBSIDIARIES
(Unaudited) (In Millions)
Quarter Ended
Aug. 29, 2021
Aug. 30, 2020
Cash Flows - Operating Activities
Net earnings, including earnings
attributable to redeemable and noncontrolling interests
$
638.2
$
646.4
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
145.8
146.1
After-tax earnings from joint ventures
(29.1
)
(41.3
)
Distributions of earnings from joint
ventures
22.6
19.9
Stock-based compensation
26.8
28.3
Deferred income taxes
19.6
23.0
Pension and other postretirement benefit
plan contributions
(5.4
)
(5.6
)
Pension and other postretirement benefit
plan costs
(7.2
)
(8.6
)
Restructuring, impairment, and other exit
costs
(19.5
)
(2.7
)
Changes in current assets and liabilities,
excluding the effects of acquisition
(389.5
)
(157.8
)
Other, net
(32.5
)
(64.1
)
Net cash provided by operating
activities
369.8
583.6
Cash Flows - Investing Activities
Purchases of land, buildings, and
equipment
(104.0
)
(117.0
)
Acquisition
(1,198.6
)
-
Investments in affiliates, net
5.7
(0.7
)
Proceeds from disposal of land, buildings,
and equipment
0.3
0.3
Other, net
(1.3
)
(5.6
)
Net cash used by investing activities
(1,297.9
)
(123.0
)
Cash Flows - Financing Activities
Change in notes payable
698.7
(120.9
)
Issuance of long-term debt
582.2
595.2
Payment of long-term debt
(612.1
)
(555.1
)
Proceeds from common stock issued on
exercised options
7.9
30.0
Purchases of common stock for treasury
(150.1
)
-
Dividends paid
(312.3
)
(302.8
)
Distributions to noncontrolling and
redeemable interest holders
(1.1
)
(1.1
)
Other, net
(18.2
)
(18.0
)
Net cash provided (used) by financing
activities
195.0
(372.7
)
Effect of exchange rate changes on cash
and cash equivalents
(18.1
)
31.0
(Decrease) increase in cash and cash
equivalents
(751.2
)
118.9
Cash and cash equivalents - beginning of
year
1,505.2
1,677.8
Cash and cash equivalents - end of period
(includes $43.4 million of cash classified as
held for sale as of August 29, 2021)
$
754.0
$
1,796.7
Cash Flow from changes in current assets
and liabilities, excluding the effects of acquisition:
Receivables
$
(145.3
)
$
7.2
Inventories
(116.1
)
(158.6
)
Prepaid expenses and other current
assets
39.0
88.2
Accounts payable
(214.9
)
(45.9
)
Other current liabilities
47.8
(48.7
)
Changes in current assets and
liabilities
$
(389.5
)
$
(157.8
)
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.
(2)
During the first quarter of
fiscal 2022, we acquired the Tyson Foods’ pet treats business for
$1.2 billion in cash. We financed the transaction with a
combination of cash on hand and short-term debt. We consolidated
the Tyson Foods’ pet treats business into our Consolidated Balance
Sheets and recorded goodwill of $759 million, indefinite-lived
intangible assets for the Nudges, Top Chews and True Chews brands
totaling $330 million in aggregate, and a finite-lived customer
relationship asset of $40 million. We recorded acquisition
integration costs of $12 million in the first quarter of fiscal
2022.
During the first quarter of
fiscal 2022, we entered into a definitive agreement to sell our 51
percent controlling interest in Yoplait SAS, and our 50 percent
interest in Yoplait Marques SNC and Liberté Marques Sàrl to Sodiaal
International (Sodiaal) in exchange for full ownership of the
Canadian Yoplait business, a reduced royalty rate for the use of
Yoplait and Liberté brands in the United States and Canada, and
cash. This transaction is expected to be completed by the end of
calendar year 2021. We have reclassified all Yoplait SAS, Yoplait
Marques SNC and Liberté Marques Sàrl assets and liabilities as held
for sale as of August 29, 2021. We recorded transaction costs of
$11 million in the first quarter of fiscal 2022.
(3)
Restructuring charges relating to
actions previously announced are recorded in our Consolidated
Statements of Earnings as follows:
Quarter Ended
In Millions
Aug. 29, 2021
Aug. 30, 2020
Restructuring, impairment, and other exit
costs (recoveries)
$
(4.3
)
$
0.5
Cost of sales
0.2
0.5
Total restructuring charges
(recoveries)
$
(4.1
)
$
1.0
During the first quarter of
fiscal 2022, we did not undertake any new restructuring actions. We
recorded a $4 million net recovery of restructuring charges in the
first quarter of fiscal 2022 and $1 million of restructuring
charges in the first quarter of fiscal 2021 for previously
announced restructuring actions. Certain actions are subject to
union negotiations and works counsel consultations, where required.
We expect these actions to be completed by the end of fiscal
2023.
(4)
Unallocated corporate expense
totaled $56 million in the first quarter of fiscal 2022 compared to
$74 million in the same period in fiscal 2021. We recorded a $24
million net decrease in expense related to the mark-to-market
valuation of certain commodity positions and grain inventories in
the first quarter of fiscal 2022 compared to a $16 million net
decrease in expense in the same period last year. We recorded $1
million of net losses related to valuation adjustments on certain
corporate investments in the first quarter of fiscal 2022 compared
to $13 million of net gains related to valuation adjustments in the
first quarter of fiscal 2021. In addition, we recorded $12 million
of integration costs related to our acquisition of Tyson Foods’ pet
treats business and $11 million of transaction costs related to the
agreement to sell our 51 percent controlling interest in Yoplait
SAS and our 50 percent interest in Yoplait Marques SNC and Liberté
Marques Sàrl in the first quarter of fiscal 2022. We also recorded
a $21 million recovery related to a Brazil indirect tax item and a
$13 million insurance recovery in the first quarter of fiscal 2022.
In the first quarter of fiscal 2021, we recorded a $7 million
charge related to a product recall in our international Green Giant
business.
(5)
Basic and diluted earnings per
share (EPS) were calculated as follows:
Quarter Ended
In Millions, Except per Share
Data
Aug. 29, 2021
Aug. 30, 2020
Net earnings attributable to General
Mills
$
627.0
$
638.9
Average number of common shares - basic
EPS
610.4
614.1
Incremental share effect from: (a)
Stock options
2.1
3.2
Restricted stock units and performance
share units
2.3
2.5
Average number of common shares - diluted
EPS
614.8
619.8
Earnings per share – basic
$
1.03
$
1.04
Earnings per share – diluted
$
1.02
$
1.03
(a) Incremental shares from stock options,
restricted stock units, and performance share units are computed by
the treasury stock method.
(6)
The effective tax rate for the first quarter of fiscal 2022 was
21.7 percent compared to 22.0 percent for the first quarter of
fiscal 2021. The 0.3 percentage point decrease was primarily due to
favorable changes in earnings mix by jurisdiction. Our adjusted
effective tax rate was 21.7 percent in the first quarter of fiscal
2022 compared to 21.9 percent in the same period last year (see
Note 7 below for a description of our use of measures not defined
by GAAP). The 0.2 percentage point decrease in the adjusted
effective tax rate was primarily due to favorable changes in
earnings mix by jurisdiction.
The United States Congress is currently
working to enact 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 continue to
monitor developments and assess the impact to General Mills.
(7)
We have included measures in this release
that are not defined by GAAP. We believe that these measures
provide useful information to investors, and include these measures
in other communications to investors. 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 material 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. This measure
is used in reporting to our Board of Directors and executive
management and as a component of the Board of Directors’
measurement of our performance for incentive compensation purposes.
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, acquisitions,
divestitures, and a 53rd fiscal 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.
Also, certain measures in this release are
presented on an adjusted basis. The adjustments are either items
resulting from infrequently occurring events or items that, in
management’s judgment, significantly affect the year-to-year
assessment of operating results.
Our fiscal 2022 outlook for organic net
sales growth, adjusted operating profit growth, adjusted diluted
EPS growth, and free cash flow conversion 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, acquisitions, divestitures, and a 53rd
week, when applicable. We are not able to reconcile these
forward-looking non-GAAP financial measures to their most directly
comparable forward-looking GAAP financial measure without
unreasonable efforts because we are unable to predict with a
reasonable degree of certainty the actual impact of changes in
foreign currency exchange rates or the timing of acquisitions and
divestitures throughout fiscal 2022. The unavailable information
could have a significant impact on our fiscal 2022 GAAP financial
results.
Our fiscal 2022 guidance does not
incorporate the potential impact of the European Yoplait
divestiture that has not yet been completed. For fiscal 2022, we
currently expect: foreign currency exchange rates (based on a blend
of forward and forecasted rates and hedge positions) and
acquisitions and divestitures to increase net sales by
approximately 2 points; foreign currency exchange rates to have an
immaterial impact on adjusted operating profit and adjusted diluted
EPS growth; and restructuring charges and project-related costs
related to actions previously announced and transaction costs and
acquisition integration costs to total approximately $50 million to
$100 million.
Significant Items Impacting Comparability
Several measures below are presented on an adjusted basis. The
adjustments are either items resulting from infrequently occurring
events or items that, in management’s judgment, significantly
affect the year-to-year assessment of operating results.
The following are descriptions of significant items impacting
comparability of our results.
Mark-to-market
effects Net mark-to-market valuation of certain commodity
positions recognized in unallocated corporate items. Please see
Note 4.
Non-income tax
recovery Recovery related to a Brazil indirect tax item
recorded in fiscal 2022. Please see Note 4.
Acquisition integration
costs Integration costs resulting from the acquisition of
Tyson Foods’ pet treats business. Please see Note 2.
Transaction
costs Transaction costs related to the definitive agreement
to sell our 51 percent controlling interest in Yoplait SAS, and our
50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl
to Sodiaal. Please see Note 2.
Restructuring
charges Restructuring charges for previously announced
restructuring actions. Please see Note 3.
Investment activity,
net Valuation adjustments of certain corporate investments
in fiscal 2022 and fiscal 2021. Please see Note 4.
Product recall
Product recall costs recorded in fiscal 2021 related to our
international Green Giant business. Please see Note 4.
CPW restructuring
charges CPW restructuring charges related to previously
announced restructuring actions.
Adjusted Operating Profit Growth on a
Constant-currency Basis
This measure is used in reporting to our Board of Directors and
executive management and as a component of the measurement of our
performance for incentive compensation purposes. We believe that
this measure provides useful information to investors because it is
the operating profit measure we use to evaluate operating profit
performance on a comparable year-to-year basis. The measure is
evaluated on a constant-currency basis by excluding the effect that
foreign currency exchange rate fluctuations have on year-to-year
comparability given the volatility in foreign currency exchange
rates.
Our adjusted operating profit growth on a constant-currency
basis is calculated as follows:
Quarter Ended
Aug. 29, 2021
Aug. 30, 2020
Change
Operating profit as reported
$
844.3
$
853.7
(1)%
Mark-to-market effects
(24.1
)
(16.4
)
Non-income tax recovery
(20.6
)
-
Acquisition integration costs
12.4
-
Transaction costs
10.6
-
Restructuring charges
(4.1
)
1.0
Investment activity, net
0.7
(13.0
)
Product recall
-
7.1
Adjusted operating profit
$
819.2
$
832.5
(2)%
Foreign currency exchange impact
1 pt
Adjusted operating profit growth, on a
constant-currency basis
(2)%
Note: Table may not foot due to
rounding.
For more information on the reconciling
items, please refer to the Significant Items Impacting
Comparability section above.
Adjusted Diluted EPS and Related
Constant-currency Growth Rate
This measure is used in reporting to our Board of Directors and
executive management. 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-to-year
basis.
The reconciliation of our GAAP measure, diluted EPS, to adjusted
diluted EPS and the related constant-currency growth rate
follows:
Quarter Ended
Per Share Data
Aug. 29, 2021
Aug. 30, 2020
Change
Diluted earnings per share, as
reported
$
1.02
$
1.03
(1
)%
Mark-to-market effects
(0.03
)
(0.02
)
Non-income tax recovery
(0.02
)
-
Acquisition integration costs
0.02
-
Restructuring charges
(0.01
)
-
Transaction costs
0.01
-
Investment activity, net
-
(0.02
)
Product recall
-
0.01
Adjusted diluted earnings per share
$
0.99
$
1.00
(1
)%
Foreign currency exchange impact
1
pt
Adjusted diluted earnings per share
growth, on a constant-currency basis
(2
)%
Note: Table may not foot due to
rounding.
For more information on the reconciling
items, please refer to the Significant Items Impacting
Comparability section above.
See our reconciliation below of the
effective income tax rate as reported to the adjusted effective
income tax rate for the tax impact of each item affecting
comparability.
Adjusted Earnings Comparisons as a Percent
of Net Sales
We believe that these measures provide useful information to
investors because they are important for assessing our adjusted
earnings comparisons as a percent of net sales on a comparable
year-to-year basis.
Our adjusted earnings comparisons as a percent of net sales are
calculated as follows:
Quarter Ended
In Millions
Aug. 29, 2021
Aug. 30, 2020
Comparisons as a % of Net Sales
Value
Percent of Net Sales
Value
Percent of Net Sales
Gross margin as reported (a)
$
1,597.4
35.2
%
$
1,590.4
36.4
%
Mark-to-market effects
(24.1
)
(0.5
)%
(16.4
)
(0.4
)%
Transaction costs
0.7
-
%
-
-
%
Restructuring charges
0.2
-
%
0.5
-
%
Acquisition integration costs
0.1
-
%
-
-
%
Product recall
-
-
%
7.1
0.2
%
Adjusted gross margin
$
1,574.3
34.7
%
$
1,581.7
36.2
%
Operating profit as reported
$
844.3
18.6
%
$
853.7
19.6
%
Mark-to-market effects
(24.1
)
(0.5
)%
(16.4
)
(0.4
)%
Transaction costs
10.6
0.2
%
-
-
%
Restructuring charges
(4.1
)
(0.1
)%
1.0
-
%
Non-income tax recovery
(20.6
)
(0.5
)%
-
-
%
Acquisition integration costs
12.4
0.3
%
-
-
%
Investment activity, net
0.7
-
%
(13.0
)
(0.3
)%
Product recall
-
-
%
7.1
0.2
%
Adjusted operating profit
$
819.2
18.0
%
$
832.5
19.1
%
Net earnings attributable to General Mills
as reported
$
627.0
13.8
%
$
638.9
14.6
%
Mark-to-market effects, net of tax (b)
(18.6
)
(0.4
)%
(12.6
)
(0.3
)%
Transaction costs, net of tax (b)
5.6
0.1
%
-
-
%
Restructuring charges, net of tax (b)
(3.2
)
(0.1
)%
0.8
-
%
Non-income tax recovery, net of tax
(b)
(13.6
)
(0.3
)%
-
-
%
Acquisition integration costs, net of tax
(b)
9.6
0.2
%
-
-
%
Investment activity, net, net of tax
(b)
0.5
-
%
(10.0
)
(0.2
)%
Product recall, net of tax (b)
-
-
%
6.3
0.1
%
CPW restructuring charges
-
-
%
0.1
-
%
Adjusted net earnings attributable to
General Mills
$
607.4
13.4
%
$
623.4
14.3
%
Note: Table may not foot due to
rounding.
For more information on the reconciling
items, please refer to the Significant Items Impacting
Comparability section above.
(a) Net sales less cost of sales.
(b) See reconciliation of adjusted
effective income tax rate below for tax impact of each
adjustment.
Constant-currency Segment Operating Profit
Growth Rates
We believe that this measure provides useful information to
investors because it provides transparency to underlying
performance of our segments by excluding the effect that foreign
currency exchange rate fluctuations have on year-to-year
comparability given volatility in foreign currency exchange
markets.
Our segments’ operating profit growth rates on a
constant-currency basis are calculated as follows:
Quarter Ended
Percentage Change in Operating
Profit as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in Operating
Profit on Constant-Currency Basis
North America Retail
(11
)%
Flat
(12
)%
Pet
28
%
Flat
28
%
Convenience Stores & Foodservice
47
%
Flat
47
%
Europe & Australia
(15
)%
6
pts
(22
)%
Asia & Latin America
(23
)%
3
pts
(26
)%
Total segment operating profit
(3
)%
1
pt
(4
)%
Note: Table may not foot due to
rounding.
Organic Net Sales on a 2-year Compound
Growth Rate Basis
We believe that this measure provides useful information to
investors as it compares our organic net sales growth in fiscal
2022 to pre-pandemic levels of activity in fiscal 2020.
Organic net sales on a 2-year compound growth rate basis are
calculated as follows:
Quarter Ended
Reported Net Sales
Growth
Foreign Exchange
Acquisitions and
Divestitures
Organic Net Sales
Total
Aug. 30, 2020 vs. Aug. 25, 2019
9
%
(1
)
pt
-
10
%
Aug. 29, 2021 vs. Aug. 30, 2020
4
%
1
pt
-
2
%
2-year compound growth
6
%
6
%
North America Retail
Aug. 30, 2020 vs. Aug. 25, 2019
14
%
-
-
14
%
Aug. 29, 2021 vs. Aug. 30, 2020
(3
)%
1
pt
-
(3
)%
2-year compound growth
5
%
5
%
Europe & Australia
Aug. 30, 2020 vs. Aug. 25, 2019
8
%
3
pts
(1
)
pt
7
%
Aug. 29, 2021 vs. Aug. 30, 2020
5
%
5
pts
-
Flat
2-year compound growth
6
%
3
%
Convenience Stores
& Foodservice
Aug. 30, 2020 vs. Aug. 25, 2019
(12
)%
-
-
(12
)%
Aug. 29, 2021 vs. Aug. 30, 2020
23
%
-
-
23
%
2-year compound growth
4
%
4
%
Pet
Aug. 30, 2020 vs. Aug. 25, 2019
6
%
-
-
6
%
Aug. 29, 2021 vs. Aug. 30, 2020
25
%
-
5
pts
20
%
2-year compound growth
15
%
13
%
Asia & Latin America
Aug. 30, 2020 vs. Aug. 25, 2019
6
%
(10
)
pts
-
17
%
Aug. 29, 2021 vs. Aug. 30, 2020
8
%
5
pts
(2
)
pts
6
%
2-year compound growth
7
%
11
%
Note: Table may not foot due to
rounding.
Constant-currency Segment Operating Profit
on a 2-year Compound Growth Rate Basis
We believe that this measure provides useful information to
investors as it compares our constant-currency segment operating
profit growth in fiscal 2022 to pre-pandemic levels of activity in
fiscal 2020.
Our segments’ constant-currency operating profit on a 2-year
compound growth rate basis are calculated as follows:
Quarter Ended
Percentage Change in Operating
Profit as Reported
Impact of Foreign Currency
Exchange
Percentage Change in Operating
Profit on Constant-Currency Basis
Total
Aug. 30, 2020 vs. Aug. 25, 2019
21
%
-
20
%
Aug. 29, 2021 vs. Aug. 30, 2020
(3
)%
1
pt
(4
)%
2-year compound growth
8
%
7
%
North America Retail
Aug. 30, 2020 vs. Aug. 25, 2019
24
%
-
24
%
Aug. 29, 2021 vs. Aug. 30, 2020
(11
)%
-
(12
)%
2-year compound growth
5
%
4
%
Europe & Australia
Aug. 30, 2020 vs. Aug. 25, 2019
93
%
4
pts
89
%
Aug. 29, 2021 vs. Aug. 30, 2020
(15
)%
6
pts
(22
)%
2-year compound growth
28
%
21
%
Convenience Stores &
Foodservice
Aug. 30, 2020 vs. Aug. 25, 2019
(24
)%
-
(24
)%
Aug. 29, 2021 vs. Aug. 30, 2020
47
%
-
47
%
2-year compound growth
6
%
6
%
Pet
Aug. 30, 2020 vs. Aug. 25, 2019
12
%
-
12
%
Aug. 29, 2021 vs. Aug. 30, 2020
28
%
-
28
%
2-year compound growth
20
%
20
%
Asia & Latin America
Aug. 30, 2020 vs. Aug. 25, 2019
99
%
31
pts
68
%
Aug. 29, 2021 vs. Aug. 30, 2020
(23
)%
3
pts
(26
)%
2-year compound growth
24
%
11
%
Note: Table may not foot due to
rounding.
Adjusted Effective Income Tax
Rate
We believe this measure provides useful information to investors
because it presents the adjusted effective income tax rate on a
comparable year-to-year basis.
Adjusted effective income tax rates are calculated as
follows:
Quarter Ended
Aug. 29, 2021
Aug. 30, 2020
In Millions
(Except Per Share Data)
Pretax Earnings (a)
Income Taxes
Pretax Earnings (a)
Income Taxes
As reported
$
778.0
$
168.9
$
775.9
$
170.8
Mark-to-market effects
(24.1
)
(5.5
)
(16.4
)
(3.8
)
Non-income tax recovery
(20.6
)
(7.0
)
-
-
Acquisition integration costs
12.4
2.8
-
-
Transaction costs
10.6
4.6
-
-
Restructuring charges
(4.1
)
(0.9
)
1.0
0.2
Investment activity, net
0.7
0.2
(13.0
)
(3.0
)
Product recall
-
-
7.1
0.8
As adjusted
$
752.8
$
163.0
$
754.6
$
165.1
Effective tax rate:
As reported
21.7
%
22.0
%
As adjusted
21.7
%
21.9
%
Sum of adjustment to income taxes
$
(5.9
)
$
(5.7
)
Average number of common shares - diluted
EPS
614.8
619.8
Impact of income tax adjustments on
adjusted diluted EPS
$
(0.01
)
$
(0.01
)
Note: Table may not foot due to
rounding.
For more information on the reconciling
items, please refer to the Significant Items Impacting
Comparability section above.
(a) Earnings before income taxes and
after-tax earnings from joint ventures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210922005474/en/
(Investors) Jeff Siemon: +1-763-764-2301
(Media) Kelsey Roemhildt: +1-763-764-6364
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