General Mills Reports 7% Growth in Annual Net Sales
27 Jun 2013 --- General Mills reported results for the fourth quarter and full fiscal year ended May 26, 2013. Contributions from new businesses in fiscal 2013 primarily reflect results for Yoki Alimentos in Brazil and Yoplait International.
Fiscal 2013 Results Summary
- Net sales grew 7 percent to $17.8 billion. New businesses contributed 6 points of net sales growth. Excluding new businesses, net sales grew 1 percent.
- Segment operating profit grew 6 percent to $3.2 billion.
- Diluted earnings per share (EPS) totaled $2.79, up 19 percent from $2.35 a year ago.
- Adjusted diluted EPS, which excludes certain items affecting comparability of results, totaled $2.69 compared to $2.56 a year ago.
General Mills Chairman and Chief Executive Officer Ken Powell said, "Our 2013 results reflect good growth from established product lines and important contributions from new businesses added during the year. Each of our three operating segments posted profit growth. Our cash flow from operating activities rose 22 percent, and we returned nearly $1.9 billion in cash to shareholders through dividends and share repurchase activity. In addition, we exited the year with momentum that enabled us to finish 2013 a bit better than our original estimates."
Fiscal 2013 net sales increased 7 percent to $17.8 billion. Pound volume contributed 9 points of net sales growth, primarily reflecting the addition of new businesses. Net price realization and mix reduced net sales growth by 1 percentage point. Foreign currency exchange also reduced net sales growth by 1 point. Gross margin excluding mark-to-market effects was below prior-year levels, reflecting changes in business mix (Please see Note 11 for reconciliation of this non-GAAP measure). Advertising and media expense of $895 million was 2 percent below strong year-ago levels. Total segment operating profit increased 6 percent to $3.2 billion (Please see Note 11 for reconciliation of this non-GAAP measure). Earnings attributable to General Mills totaled $1.9 billion and diluted EPS totaled $2.79. Adjusted diluted earnings per share totaled $2.69 compared to $2.56 a year ago. (Please see Note 11 for reconciliation of this non-GAAP measure).
Products making the strongest contributions to U.S. Retail segment net sales growth in 2013 included new items such as Honey Nut Cheerios Medley Crunch cereal, Yoplait Greek 100 calorie yogurt and Nature Valley Protein Bars, along with established brands including Lucky Charms cereal, Progresso ready-to-serve soups, Fiber One snack bars, Totino's frozen snacks, and Pillsbury refrigerated baked goods. For the international segment, double-digit growth by Haagen Dazs ice cream and Wanchai Ferry frozen dim sum in China, and the newly acquired Yoki and Kitano brands in Brazil, led the overall sales increase. In the Bakeries and Foodservice segment, items including Chex Mix snack varieties, Pillsbury heat-and-serve breakfast items, and Yoplait Parfait Pro Greek yogurt made strong contributions to 2013 sales.
Fourth Quarter Results Summary
Net sales for the fourth quarter of 2013 rose 8 percent to $4.4 billion, with pound volume up 11 percent. Net price realization and mix reduced net sales growth by 1 percentage point, and foreign exchange reduced sales growth by 2 points. New businesses contributed 7 points of the net sales growth. Excluding new businesses, net sales grew 1 percent, including 2 points of pound volume growth. Segment operating profit declined 2 percent to $722 million, primarily reflecting higher input costs and increased in-store merchandising activity compared to the year-ago period (Please see Note 11 for reconciliation of this non-GAAP measure). Advertising and media expense was 5 percent above year-ago levels. Net earnings attributable to General Mills increased 13 percent to $366 million and diluted EPS grew to $0.55 per share. Adjusted diluted EPS totaled $0.53 compared to $0.60 a year earlier.
U.S. Retail Segment Results
Fiscal 2013 net sales for General Mills' U.S. Retail operations grew 1 percent to $10.6 billion, reflecting higher pound volume. The Snacks, Small Planet Foods, Baking Products and Meals divisions led US Retail sales growth for the year. Advertising and media expense was 5 percent below strong year-ago levels. U.S. Retail segment operating profit rose 4 percent to $2.4 billion.
Fourth-quarter net sales for the U.S. Retail segment grew 2 percent to $2.5 billion. Higher pound volume contributed 2 points of net sales growth. Segment operating profit totaled $517 million, below year-ago levels primarily due to higher input costs and higher levels of in-store merchandising activity compared to the year-ago period.
International Segment Results
Fiscal 2013 net sales for General Mills' consolidated international businesses grew 24 percent to $5.2 billion. Pound volume contributed 34 points of net sales growth, including 32 points from new businesses. Net price realization and mix reduced net sales growth by 6 percentage points, and foreign-currency translation subtracted 4 points of net sales growth. Fiscal 2013 international results include 13 months of business results for our Europe region, as part of a long-term plan to conform the fiscal year-ends of all our operations. Fiscal 2012 international results included 13 months for our China operations. These changes in reporting period had no material impact on our consolidated results.
On a constant-currency basis, International segment net sales grew 28 percent overall, with sales up 11 percent in the Asia / Pacific region; sales more than doubling in Latin America including Yoki; 15 percent growth in Europe; and sales up 22 percent in Canada including Yoplait. (Please see note 11 below for reconciliation of this non-GAAP measure).
International segment operating profit grew 14 percent to $490 million including a 10 percent increase in advertising and media expense, as well as the negative effects of Venezuelan currency devaluation.
In the fourth quarter, International segment net sales grew 27 percent to $1.4 billion. Pound volume contributed 35 points of net sales growth, including 32 points from new businesses. Price realization and mix reduced sales growth by 3 points, and foreign exchange reduced sales growth by 5 points. Advertising and media expense grew at a double-digit rate. Segment operating profit grew 8 percent to $129 million.
Bakeries and Foodservice Segment Results
Fiscal 2013 net sales for the Bakeries and Foodservice segment totaled $2.0 billion, slightly below prior-year results due to 1 percent lower pound volume. Segment operating profit grew 10 percent to $315 million, and segment operating profit margin expanded to exceed 16 percent.
In the fourth quarter, Bakeries and Foodservice pound volume was down 1 percent and segment net sales declined 2 percent to $502 million. Segment operating profit of $75 million was 7 percent lower, primarily reflecting higher manufacturing costs year-over-year.
Joint Venture Summary
Combined after-tax earnings from the Cereal Partners Worldwide (CPW) and Haagen Dazs Japan (HDJ) joint ventures rose 12 percent in fiscal 2013 to reach $99 million. Constant-currency net sales grew 2 percent for CPW and 5 percent for HDJ. In the fourth quarter, after-tax earnings of $22 million increased at a strong double-digit rate from year-ago results that were hindered by a higher tax rate.
Corporate Items
Unallocated corporate items represented net expense of $326 million in 2013 compared to net expense of $348 million in 2012. Excluding the effects of changes in mark-to-market valuation of certain commodity positions, unallocated corporate items totaled $330 million net expense this year compared to $243 million in 2012. This includes pension expense, which increased $40 million in fiscal 2013 compared to 2012.
Restructuring, impairment and other exit costs totaled $20 million in 2013 compared to $102 million in 2012. Costs in both years are primarily associated with a companywide productivity and savings plan announced in the fourth quarter of fiscal 2012.
Net interest expense in 2013 totaled $317 million, 10 percent below prior-year levels due to changes in debt mix. The effective tax rate for 2013 was 29.2 percent. Excluding certain items affecting comparability of results, the effective tax rate was 32.4 percent in 2013 matching last year's rate. For the fourth quarter, the effective tax rate excluding items affecting comparability was 35.1 percent in 2013 compared to 31.1 percent in 2012 (Please see Note 11 below for reconciliation of this non-GAAP measure).
Cash Flow Items
Cash provided by operating activities totaled $2.9 billion in 2013, including a $200 million voluntary contribution to the company's domestic pension plan made during the fourth quarter. Capital investments totaled $614 million in 2013. Dividends paid rose 8 percent to $868 million. General Mills repurchased approximately 24 million shares of common stock in 2013 for a total of $1.0 billion. Average diluted shares outstanding in 2013 were 666 million, approximately 1 million shares lower than the 2012 average balance.
Outlook
"Our business plans for 2014 include strong levels of innovation on established product lines and a high-quality lineup of new products," Powell said. "We also will have three months of incremental contribution from Yoki and Yoplait Canada. In total, we expect our net sales to grow at a low single-digit rate in 2014 to exceed $18 billion."
General Mills said that strong holistic margin management efforts companywide are expected to offset input cost inflation, estimated at 3 percent in 2014. The company expects to generate mid single-digit growth in segment operating profit for the year.
Fiscal 2014 adjusted diluted earnings per share are expected to grow at a high single-digit rate, to a range of $2.87 to $2.90 per share. Planned share repurchases are expected to reduce average net diluted shares outstanding by 2 percent.
General Mills will hold a briefing for investors, June 26, 2013, beginning at 8:30 a.m. Eastern time. You may access the web cast from General Mills' internet home page: generalmills.com.
Adjusted diluted EPS, total segment operating profit, international sales excluding foreign currency translation effects, and adjusted effective tax rate are each non-GAAP measures. Reconciliations of these measures to their relevant GAAP measures appear in Note 11 to the attached Consolidated Financial Statements.
