General Mills Increases Dividend

14/12/05 The General Mills Board of Directors has approved an increase in the company’s quarterly dividend to 34 cents per share, payable on Feb. 1, 2006, to shareholders of record Jan. 10, 2006. The previous quarterly dividend rate of 33 cents per share was established effective with the Aug. 1, 2005, payment and represented a 6 percent increase over the quarterly dividend rate paid in General Mills’ 2005 fiscal year. 
 
General Mills said its second dividend rate increase within the past six months is a reflection of the company’s good earnings momentum and cash flow through the first half of the 2006 fiscal year.  The company said that while second-quarter segment operating profits will be below strong prior-year levels, second-quarter net earnings are expected to increase to between 96 and 97 cents per share, including an estimated 4 to 5 cents of dilution associated with accounting for contingently convertible debt.   General Mills plans to announce its second-quarter results on December 22, 2005.
 
“Our first-half performance is running ahead of plan, which gives us the opportunity to further increase shareholder dividends this year, while we also reinvest some of our earnings in brand-building marketing programs,”  said General Mills Chairman and Chief Executive Officer Steve Sanger. “Our earnings expectations for the second half include significant year-over-year increases in consumer marketing expense and input costs.  But based on our good first-half performance, we are modestly raising 2006 earnings guidance to a range of $2.80 to $2.85 per share, including an estimated 8 cents of dilution associated with accounting for contingently convertible debt.” 

Previously, the company’s 2006 guidance was for earnings of $2.78 to $2.83 per share, including an estimated 7 cents of dilution associated with accounting for contingently convertible debt. 

General Mills recently completed a consent solicitation related to its zero coupon convertible debentures, and made an irrevocable election to satisfy in cash future repurchases or conversion of the debentures that remain outstanding.  As a result of these actions, beginning in General Mills’ 2006 fiscal third quarter no shares of common stock underlying the debentures will be considered outstanding for purposes of calculating General Mills’ diluted earnings per share.  This is consistent with the estimated 8 cents of dilution in 2006 for contingently convertible debt as noted above.