Net Sales Grew 6 Percent to $12.4 Billion;
Segment Operating Profits Increased 7 Percent to $2.3 Billion;
Diluted Earnings per Share Increased 10 Percent to $3.18;
Company Sees Continued Good Sales and Earnings Growth in 2008
MINNEAPOLIS--(BUSINESS WIRE)--June 28, 2007--General Mills
(NYSE:GIS) today reported results for the fourth quarter and full 2007
fiscal year.
For the fiscal year ended May 27, 2007, General Mills net sales
grew 6 percent to $12.4 billion, outpacing 4 percent growth in unit
volume. Segment operating profits increased 7 percent to $2.3 billion.
Diluted earnings per share (EPS) totaled $3.18, up 10 percent from
$2.90 in 2006.
Chairman and Chief Executive Officer Steve Sanger said, "For the
second year in a row, all three of our business segments achieved
solid gains in net sales and operating profit. We increased our level
of consumer marketing investment, which will help sustain our brands'
growth momentum going forward. And we returned $1.8 billion in cash to
shareholders through increased dividends and share repurchases." Total
return to General Mills shareholders in fiscal 2007 through stock
price appreciation and dividends exceeded 19 percent.
Fourth Quarter Results
Net sales for the fourth quarter of 2007 increased 7 percent to
$3.1 billion, driven by 5 percent unit volume growth. Segment
operating profits of $492 million matched prior year levels despite
higher input costs and a 16 percent increase in consumer marketing
expense in the quarter. Net earnings grew 1 percent to $224 million.
These results included restructuring and impairment expenses discussed
below in the sections titled Joint Ventures and Corporate Items.
Fourth-quarter diluted earnings per share rose 2 percent to 62 cents.
U.S. Retail Segment Results
Fiscal 2007 net sales for General Mills' domestic retail
operations grew 4 percent to nearly $8.5 billion. Unit volume also
increased 4 percent. Segment operating profits rose 5 percent to reach
nearly $1.9 billion.
Net sales for the Snacks division increased 10 percent to exceed
$1 billion for the first time, led by grain snacks such as Nature
Valley granola bars and new Fiber One bars. Yoplait sales grew 6
percent, led by Yoplait light varieties, Go-gurt and Yoplait Kids
yogurt fortified with DHA Omega 3. Net sales for the Meals division
grew 5 percent, reflecting strong growth of Progresso ready-to-serve
soups and Hamburger Helper mixes. Net sales for Pillsbury USA and the
Baking Products division each grew 3 percent. Big G cereals posted a 2
percent sales increase, with strong performance from the
market-leading Cheerios franchise and new cereals introduced during
the year.
For the fourth quarter, U.S. Retail net sales and unit volume each
grew 6 percent. Operating profit declined 2 percent, primarily due to
double-digit growth in consumer marketing expense for the period.
International Segment Results
International net sales grew 16 percent in 2007 to exceed $2.1
billion. Unit volume grew 8 percent and favorable currency exchange
contributed 4 points of sales growth. Operating profits rose 11
percent to $216 million despite double-digit growth in consumer
marketing expense.
For the fourth quarter, International net sales grew 19 percent to
$564 million, driven by a 10 percent increase in unit volume.
Operating profits grew even faster, rising 24 percent to $56 million.
Bakeries & Foodservice Segment Results
Net sales for the Bakeries & Foodservice division grew 5 percent
to exceed $1.8 billion. Unit volume grew 1 percent, and pricing,
favorable sales mix and productivity boosted operating profits 28
percent to $148 million.
Fourth-quarter net sales for Bakeries & Foodservice increased 1
percent to $466 million. Unit volume declined 2 percent, reflecting
the loss of contributions from divested product lines, and operating
profits of $30 million were down 3 percent.
Joint Ventures
After-tax earnings from joint ventures totaled $73 million in
2007, up 6 percent on strong earnings growth for Cereal Partners
Worldwide (CPW). These results include restructuring expense of $8
million after-tax in both years related to the CPW plant restructuring
under way in the United Kingdom.
Fourth quarter after-tax earnings from joint ventures totaled $15
million, up from $12 million a year earlier. CPW restructuring
expenses included in the quarterly results totaled $1 million in 2007
and $8 million in 2006.
Corporate Items
Net interest expense in 2007 totaled $427 million, up 7 percent
from the previous year due to higher rates and changes in the mix of
debt. Fourth quarter interest expense was $105 million, unchanged from
last year. The effective tax rate for 2007 was 34.3 percent, largely
consistent with the prior year. This year's fourth quarter tax rate
was 30.5 percent, reflecting a settlement of tax audits and increased
benefits of our international tax structure.
Corporate unallocated expense totaled $163 million in 2007, up
from $123 million in the prior year. At the beginning of 2007, General
Mills adopted accounting standard SFAS 123R for stock-based
compensation, and this had an incremental expense impact of $69
million for the year.
Restructuring, impairment and other exit costs totaled $39 million
in 2007, including $41 million in the fourth quarter. This compares to
$30 million of restructuring, impairment and other exit costs recorded
in 2006.
Cash Flow Items
Cash flow from operations totaled nearly $1.8 billion in 2007.
Capital expenditures totaled $460 million for the year. Dividends paid
in 2007 grew 7.5 percent to $1.44 per share. On June 25, 2007, the
company announced a 2-cent increase in the quarterly dividend rate to
39 cents per share, effective with the August 1, 2007, payment.
Average diluted shares outstanding declined from 379 million in
2006 to 360 million in 2007. The average diluted share balance for
2006 includes the impact of accounting for contingently convertible
debt which ended in December 2005. During 2007, General Mills
repurchased 24 million shares of common stock at an average price of
$54.41.
Fiscal 2008 Outlook
"We expect fiscal 2008 to be another year of strong operating
performance, consistent with our long-term goals," Sanger said. "Our
growth model calls for low single-digit growth in net sales, mid
single-digit growth in segment operating profits, and high
single-digit growth in earnings per share. We expect to meet these
targets in 2008 despite the estimated 5 percent input-cost inflation
and increased consumer marketing investment that is included in our
plans."
The company has established a targeted range for 2008 earnings per
share of $3.39 to $3.43, which would represent growth of 7 to 8
percent from 2007 results.
General Mills will hold a briefing for investors today, June 28,
2007, beginning at 9:00 a.m. EDT. You may access the web cast from
General Mills' corporate home page: www.generalmills.com
Total company segment operating profit is a non-GAAP measure. A
reconciliation of this measure to the relevant GAAP measure, Operating
Profit, is included in the attached Operating Segments schedule.
This press release contains forward-looking statements within the
meaning of The Private Securities Litigation Reform Act of 1995 that
are based on management's current expectations and assumptions. These
forward-looking statements, including the statements under the caption
"Outlook" and statements made by Mr. Sanger, are subject to certain
risks and uncertainties that could cause actual results to differ
materially from the potential results discussed in the forward-looking
statements. In particular, our predictions about future 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 or tax rates; 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; impairments in the carrying
value of goodwill, other intangible assets, or other long-lived
assets; changes in laws and regulations, including labeling and
advertising regulations; changes in accounting standards and the
impact of significant accounting estimates; product quality and safety
issues, including recalls and product liability; changes in customer
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; benefit plan expenses due to
changes in plan asset values and discount rates used to determine plan
liabilities; resolution of uncertain income tax matters; 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 statements to reflect future events or
circumstances.
GENERAL MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Fiscal 2007 Unaudited) (In Millions, Except per Share Data)
52 Weeks 52 Weeks 52 Weeks
Ended Ended Ended
May 27, May 28, May 29,
2007 2006 2005
-------- -------- --------
Net Sales $12,442 $11,712 $11,308
Cost of sales 7,955 7,545 7,326
Selling, general and administrative 2,390 2,179 1,998
Restructuring, impairment and other exit
costs 39 30 84
-------- -------- --------
Operating Profit 2,058 1,958 1,900
Divestitures (gain) -- -- (499)
Debt repurchase costs -- -- 137
Interest expense, net 427 399 455
-------- -------- --------
Earnings before Income Taxes and After-tax
Earnings from Joint Ventures 1,631 1,559 1,807
Income Taxes 560 538 661
After-tax Earnings from Joint Ventures 73 69 94
-------- -------- --------
Net Earnings $1,144 $1,090 $1,240
======== ======== ========
Earnings per Share - Basic $3.30 $3.05 $3.34
======== ======== ========
Earnings per Share - Diluted $3.18 $2.90 $3.08
======== ======== ========
Dividends per Share $1.44 $1.34 $1.24
======== ======== ========
See accompanying notes.
GENERAL MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
13 Weeks 13 Weeks
Ended Ended
May 27, May 28,
2007 2006
-------- --------
Net Sales $3,061 $2,863
Cost of sales 1,989 1,878
Selling, general and administrative 625 560
Restructuring, impairment and other exit costs 41 14
-------- --------
Operating Profit 406 411
Interest expense, net 105 105
-------- --------
Earnings before Income Taxes and After-tax
Earnings from Joint Ventures 301 306
Income Taxes 92 96
After-tax Earnings from Joint Ventures 15 12
-------- --------
Net Earnings $224 $222
======== ========
Earnings per Share - Basic $.65 $.62
======== ========
Earnings per Share - Diluted $.62 $.61
======== ========
Dividends per Share $.37 $.34
======== ========
See accompanying notes.
GENERAL MILLS, INC. AND SUBSIDIARIES
OPERATING SEGMENTS
(Fiscal 2007 and Quarterly Periods Unaudited) (In Millions)
13 Weeks 13 Weeks
Ended Ended 52 Weeks Ended
--------------------------
May 27, May 28, May 27, May 28, May 29,
2007 2006 2007 2006 2005
-------- -------- -------- -------- --------
Net Sales:
U.S. Retail $2,031 $1,926 $8,491 $8,137 $7,891
International 564 475 2,124 1,837 1,725
Bakeries and
Foodservice 466 462 1,827 1,738 1,692
-------- -------- -------- -------- --------
Total $3,061 $2,863 $12,442 $11,712 $11,308
======== ======== ======== ======== ========
Operating Profit:
U.S. Retail $406 $414 $1,896 $1,801 $1,745
International 56 45 216 194 163
Bakeries and
Foodservice 30 31 148 116 108
-------- -------- -------- -------- --------
Total Segment
Operating Profit 492 490 2,260 2,111 2,016
Corporate unallocated
expense 45 65 163 123 32
Restructuring, impairment
and other exit costs 41 14 39 30 84
-------- -------- -------- -------- --------
Operating Profit $406 $411 $2,058 $1,958 $1,900
======== ======== ======== ======== ========
See accompanying notes.
GENERAL MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Fiscal 2007 Unaudited) (In Millions)
May 27, May 28,
2007 2006
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $417 $647
Receivables 953 912
Inventories 1,174 1,055
Prepaid expenses and other current assets 443 377
Deferred income taxes 67 314
-------- --------
Total Current Assets 3,054 3,305
-------- --------
Land, Buildings and Equipment, at Cost 6,096 5,806
Less accumulated depreciation (3,082) (2,809)
-------- --------
Net Land, Buildings and Equipment 3,014 2,997
Goodwill 6,835 6,652
Other Intangible Assets 3,694 3,607
Other Assets 1,587 1,778
-------- --------
Total Assets $18,184 $18,339
======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $778 $673
Current portion of long-term debt 1,734 2,131
Notes payable 1,254 1,503
Other current liabilities 2,079 1,831
-------- --------
Total Current Liabilities 5,845 6,138
Long-term Debt 3,218 2,415
Deferred Income Taxes 1,433 1,954
Other Liabilities 1,230 924
-------- --------
Total Liabilities 11,726 11,431
-------- --------
Minority Interests 1,139 1,136
Stockholders' Equity:
Common stock, 502 shares issued, $.10 par value 50 50
Additional paid-in capital 5,842 5,737
Retained earnings 5,745 5,107
Common stock in treasury (6,198) (5,163)
Unearned compensation -- (84)
Accumulated other comprehensive (loss) income (120) 125
-------- --------
Total Stockholders' Equity 5,319 5,772
-------- --------
Total Liabilities and Equity $18,184 $18,339
======== ========
See accompanying notes.
GENERAL MILLS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Fiscal 2007 Unaudited) (In Millions)
52 Weeks Ended
---------------
May 27, May 28,
2007 2006
------- -------
Cash Flows - Operating Activities:
Net earnings $1,144 $1,090
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 418 424
After-tax earnings from joint ventures (73) (69)
Stock-based compensation 128 45
Deferred income taxes 26 26
Distribution of earnings from joint ventures 45 77
Tax benefit on exercised options - 41
Pension and other postretirement costs (54) (74)
Restructuring, impairment and other exit costs 39 30
Changes in current assets and liabilities 77 184
Other, net 15 74
------- -------
Net Cash Provided by Operating Activities 1,765 1,848
------- -------
Cash Flows - Investing Activities:
Purchases of land, buildings and equipment (460) (360)
Acquisitions (85) (26)
Investments in affiliates, net (100) 1
Proceeds from disposal of land, buildings &
equipment 14 11
Proceeds from dispositions of product lines 14 -
Other, net 20 5
------- -------
Net Cash Used by Investing Activities (597) (369)
------- -------
Cash Flows - Financing Activities:
Change in notes payable (280) 1,197
Issuance of long-term debt 2,650 -
Payment of long-term debt (2,323) (1,386)
Common stock issued 317 157
Tax benefit on exercised options 73 -
Purchases of common stock for treasury (1,321) (885)
Dividends paid (506) (485)
Other, net (8) (3)
------- -------
Net Cash Used by Financing Activities (1,398) (1,405)
------- -------
Increase (decrease) in Cash and Cash Equivalents (230) 74
Cash and Cash Equivalents - Beginning of Year 647 573
------- -------
Cash and Cash Equivalents - End of Year $417 $647
======= =======
Cash Flows from Changes in Current Assets and
Liabilities:
Receivables $(24) $8
Inventories (116) (6)
Prepaid expenses and other current assets (45) (33)
Accounts payable 88 (28)
Other current liabilities 174 243
------- -------
Changes in Current Assets and Liabilities $77 $184
======= =======
See accompanying notes.
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) During the fourth quarter of fiscal 2007, we reclassified
certain receivables, including accrued interest, derivatives and other
miscellaneous receivables, that were historically included in accounts
receivable to other current assets. We also reclassified valuation
allowances related to deferred income tax assets between current and
non-current classifications. We have reclassified previously reported
balance sheets to conform to the current year presentation.
At the beginning of fiscal 2007, we also reclassified certain
accrued liabilities, including trade and consumer promotion accruals,
from accounts payable to other current liabilities, and we began
classifying certain distributions from joint ventures as operating
cash flows (previously reported as investing cash flows). We have
reclassified previously reported balance sheets and statements of cash
flows to conform to the current year presentation.
At the beginning of fiscal 2007, we shifted selling responsibility
for several customers from our Bakeries and Foodservice segment to U.S
Retail. All prior year amounts have been restated for comparative
purposes. For the fourth quarter of fiscal 2006, net sales of $15
million and operating profit of $6 million previously reported in our
Bakeries and Foodservice segment have now been recorded in the U.S.
Retail segment. For the year ended May 28, 2006, net sales of $55
million and operating profit of $22 million previously reported in our
Bakeries and Foodservice segment have now been recorded in the U.S.
Retail segment. Goodwill of $216 million previously reported in our
Bakeries and Foodservice segment as of May 28, 2006, has now been
recorded in the U.S. Retail segment.
We also made certain changes in the classifications of revenues
and expenses at the beginning of fiscal 2007, including classifying
shipping costs associated with the distribution of finished products
to our customers as cost of sales (previously recorded in selling,
general and administrative expense) and classifying certain
trade-related costs and customer allowances as cost of sales or
selling, general and administrative expense (previously recorded as
reductions of net sales). We have reclassified previously reported
results to conform to the current year presentation.
(2) At the beginning of fiscal 2007, we prospectively adopted SFAS
No. 123R "Share-based Compensation." Prior to this adoption, no
compensation expense was recognized for stock options granted.
Beginning with the adoption of SFAS 123R, we have recorded
compensation expense for stock option grants based on their grant-date
fair value, and we have revised our expense attribution method for all
stock awards to recognize expense immediately for awards granted to
retirement-eligible individuals or over the period from the grant date
to the date retirement eligibility is achieved, if less than the
contractual vesting period.
For the fourth quarter and fiscal year 2007, compensation expense
for all stock-based compensation was $23 million and $128 million,
respectively. As a result of the adoption of SFAS 123R, stock-based
compensation expense was $8 million and $69 million higher for the
fourth quarter and fiscal year 2007, respectively, than if we had
continued our previous accounting method.
(3) On May 27, 2007, we adopted SFAS No. 158 "Employer's
Accounting for Defined Benefit Pension and Other Postretirement
Plans." SFAS 158 requires us to recognize in our consolidated balance
sheets an asset for a plan's over-funded status or a liability for a
plan's under-funded status. Those changes will be reported in our
comprehensive income and as a component of accumulated other
comprehensive income in stockholders' equity. We recorded an after-tax
reduction to accumulated other comprehensive income of $440 million as
a result of this adoption.
(4) In the fourth quarter of fiscal 2007, we recorded
restructuring, impairment and other exit costs of $41 million. As part
of our long-range planning process, we determined that certain product
lines in our Bakeries and Foodservice segment were underperforming. In
late May 2007, we concluded that the future cash flows generated by
these product lines will be insufficient to recover the net book value
of the related long-lived assets. Accordingly, we recorded a non-cash
impairment charge of $37 million against these assets in the fourth
quarter of fiscal 2007. We are further evaluating the future viability
of these product lines and may incur additional charges in the future,
depending upon the outcome of that evaluation. In addition, we sold
our frozen pie product line, including a plant in Rochester, New York,
at a loss of $4 million.
In the fourth quarter of fiscal 2006, we recorded restructuring,
impairment and other exit costs of $14 million, consisting of $6
million primarily for severance costs associated with the
restructuring of our plant in Montreal, Quebec; $5 million associated
with restructuring actions previously announced; and $3 million
associated with an asset impairment charge in one of our plants.
(5) In fiscal 2007, we recorded restructuring, impairment and
other exit costs of $39 million comprised of the $41 million of
expense described in Note Four; a gain of $7 million related to the
sale of our previously closed plant in San Adrian, Spain; a $6 million
loss associated with the divestiture of our par-baked bread product
line; and a gain of $1 million in relation to adjustments to other
restructuring actions previously announced.
In fiscal 2006, we recorded restructuring, impairment and other
exit costs of $30 million comprised of the $14 million charge
described in Note Four; $12 million associated with restructuring
actions previously announced; and $4 million of restructuring costs at
our Allentown, Pennsylvania frozen waffle plant, primarily related to
product and production realignment.
In fiscal 2005, we recorded restructuring, impairment and other
exit costs of $84 million primarily consisting of $44 million of
charges associated with fiscal 2005 supply chain initiatives to
further increase asset utilization and reduce manufacturing and
sourcing costs and $30 million of charges related to relocating our
frozen baked goods line from our Boston plant.
(6) Basic and diluted earnings per share (EPS), including the
impact of the adoption of SFAS 123R in fiscal 2007 and the effect of
accounting for contingently convertible debt in fiscal 2006, were
calculated as follows:
In Millions, Except Per Share
Data Quarter Ended Fiscal Year Ended
----------------------------------------------------------------------
May 27, May 28, May 27, May 28, May 29,
2007 2006 2007 2006 2005
--------------- -----------------------
Net earnings - as reported $224 $222 $1,144 $1,090 $1,240
Interest on contingently
convertible debentures, after
tax - - - 9 20
--------------- -----------------------
Net earnings for diluted EPS
calculation $224 $222 $1,144 $1,099 $1,260
--------------- -----------------------
Average number of common
shares - basic EPS 345 356 347 358 371
Incremental share effect from:
Stock options 12 6 10 6 8
Restricted stock and
restricted stock units 2 2 2 2 1
Forward purchase contract 1 - 1 - -
Contingently convertible
debentures - - - 13 29
--------------- -----------------------
Average number of common
shares - diluted EPS 360 364 360 379 409
--------------- -----------------------
Earnings per Share - Basic $0.65 $0.62 $3.30 $3.05 $3.34
Earnings per Share - Diluted $0.62 $0.61 $3.18 $2.90 $3.08
(7) During the third quarter of fiscal 2007, we completed the
acquisition of Saxby Bros. Limited, a chilled pastry company in the
U.K. for approximately $24 million. This business, which had sales of
$24 million in calendar 2006, complements our existing frozen pastry
business in the U.K. In addition, we completed an acquisition in
Greece totaling $3 million in the third quarter.
During the first quarter of fiscal 2007, Cereal Partners Worldwide
(CPW), our joint venture with Nestle, completed the acquisition of the
Uncle Tobys cereal business in Australia. We funded our 50 percent
share of the purchase price by making additional advances to and
equity contributions in CPW totaling $135 million (classified as
Investments in affiliates, net on the consolidated statements of cash
flows) and by acquiring a 50 percent undivided interest in certain
intellectual property for $58 million.
CONTACT: General Mills
Media:
Kirstie Foster, 763-764-6364
or
Analysts:
Kris Wenker, 763-764-2607
SOURCE: General Mills
