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General Mills (GIS).

U.S. Retail

Representing the largest part of our net sales--$10.6 billion in fiscal 2014--we divided U.S. Retail into seven business segments.

Big G Cereals

$2.3, billion Our breakfast lineup features several iconic brands, including Cheerios, Wheaties, Cinnamon Toast Crunch, Lucky Charms and Fiber One.

Snacks

$1.8 billion, Grain snacks, fruit snacks and salty snacks. We've got them all, with well-loved brands such as Nature Valley, Fiber One, Chex Mix and Betty Crocker.

Meals

$1.4 billion Our convenient dinners provide choices for everyone, including Hamburger Helper and Old El Paso dinner kits; Betty Crocker side dishes; and Progresso soups.

Small Planet Foods

$348 million we're a leader in natural and organic foods. Our Small Planet Foods brands include Cascadian Farm, Muir Glen, Larabar and Food Should Taste Good.

Baking Products

$1.8 billion Our baking products - including Betty Crocker, Pillsbury, Immaculate Bakery, Bisquick and Gold Medal flour - help make every day special.

Frozen Foods

$1.5 billion we make meal times special with frozen products such as Green Giant vegetables, Totino's Party Pizzas, Wanchai Ferry dinners and Pillsbury Toaster Strudel. Through Old El Paso, Mexican flavors have a home in the freezer case, too.

Yoplait USA

$1.3 billion Yoplait provides consumers with many ways to enjoy yogurt, from Yoplait Original to Light, from Greek 100 to Go-Gurt. All provide convenience and taste.

International

Our sales from wholly owned businesses outside the U.S. represented more than 30 percent of sales in fiscal 2014.

Haagen-Dazs, Yoplait, Old El Paso, Nature Valley, Cheerios, Green Giant, Pillsbury, Betty Crocker and Wanchai Ferry. These global brands increasingly are found in homes around the world, reflecting our dedication to quality and great taste.

In addition to global brands, we also market several local brands, such as Latina pasta in Australia, La Saltena pastas and tapas in Argentina, and Jus-Rol pastry in the U.K.

Europe continues to be our largest market, followed by our long-established operations in Canada. Today, Latin America is our fastest-growing region.

Reflecting the rapid growth of recent years, our International group posted record sales in 2014. The heightened revenue has been fueled by existing businesses as well as acquisitions.

In fiscal 2012, we acquired a controlling interest in French based Yoplait, setting the stage for expansion of the popular yogurt brand around the world.

A year later, we completed the purchase of Brazilian food maker Yoki in a move that more than doubled General Mills' annual sales in Latin America. Established in 1960, Yoki holds leading market positions in several food categories, including snacks, convenient meals, basic foods and seasonings.

Joint Ventures $1.3 billion

We participate in two international joint ventures: Cereal Partners Worldwide and Haagen-Dazs Japan. Our proportionate share of these sales was $1.3 billion in fiscal 2014.

Cereal Partners Worldwide: CPW is a 50-50 partnership with Nestle that markets breakfast cereals in 140 countries. It accounts for 84 percent of our joint venture sales.

Haagen-Dazs Japan: This partnership operates our ice cream business in Japan and represents 16 percent of our joint venture sales.

Convenience & Foodservice

Convenience & food service is a $2 billion business that reaches millions of consumers each day through multiple channels.

The General Mills Convenience & food service group provides a wide array of products to convenience stores and food service operators, including health care facilities, schools, restaurants, and colleges and universities. The division's six key platforms are cereal, yogurt, frozen breakfast, snacks, biscuits and baking mixes.

Trusted brands the world over

Our brands are known around the world for quality, starting with Gold Medal flour, which was launched in 1880 and to this day, remains the No. 1 selling branded flour in the United States. Several of our other brands also occupy the No. 1 or No. 2 market positions--from Pillsbury refrigerated dough to Green Giant frozen vegetables, and from Cheerios cereal to Betty Crocker dessert mixes.

We're one of the largest food companies in the world, marketing in more than 100 countries on six continents. About half of our 43,000 employees work outside the United States.

In fiscal 2014, our global net sales were $17.9 billion. We categorize sales into three core business segments: U.S. Retail, International, and Convenience & Foodservice

Today, General Mills will provide:

* 60 million servings of whole grain cereal

* 27 million servings of Yoplait dairy products

* 12 million Nature Valley bars

* 5 million Pillsbury cookies

* 5 million servings of Yoki popcorn

* 2 million Wanchai Ferry dumplings

* 2 million pounds of Green Giant vegetables

* 1 million servings of Haagen-Dazs ice cream

A broad portfolio satisfies consumers around the world

A box of Cheerios sits on the kitchen table. A cup of Yoplait yogurt rests on the refrigerator shelf, and the sweet aroma of Pillsbury Cinnamon Rolls fills the room. It's breakfast time in the U.S.

Throughout the day--and throughout the world--consumers turn to General Mills products.

The day may start with frozen pancakes in Mexico, Nature Valley granola bars in India or a bowl of Fibre One cereal in Canada.

What's for lunch? In China it's a quick meal of Wanchai Ferry dumplings, while in the U.S., it's a hot bowl of Progresso soup and an afternoon snack of Food Should Taste Good chips.

The dinner hour presents many choices. Its lasagna made with Muir Glen organic tomatoes, served with a side of Green Giant green beans and a loaf of Pillsbury bread in homes throughout America. It's an Old El Paso Mexican meal in France and a Brazilian barbecue served with Yoki's farofa on the side.

An after-dinner or special occasion treat is the perfect way to end the day. It's a scoop of Haagen-Dazs ice cream in dozens of countries, including Japan, Indonesia and Spain. And it's a Betty Crocker cake in Australia, Saudi Arabia and Taiwan.

http://www.generalmills.com/en/Company/Businesses/~/media/A907E68AEE5E4A53B47CDC42092C9649.ashx

General Mills Reports Strong Fiscal 2019 Third-Quarter Results And Updates Full-Year Guidance

March 20, 2019

* Net sales increased 8 percent to $4.2 billion, and were up 10 percent in constant currency(1); organic net sales grew 1 percent

* Operating profit increased 14 percent; adjusted operating profit increased 25 percent in constant currency

* Diluted earnings per share (EPS) of $0.74 declined 54 percent from the year-ago period that included benefits from U.S. tax reform; adjusted diluted EPS of $0.83 increased 6 percent in constant currency

* Company raises full-year fiscal 2019 guidance for adjusted diluted EPS and free cash flow conversion; narrows guidance ranges for net sales and adjusted operating profit

* Please see Note 7 to the Consolidated Financial Statements below for reconciliation of this and other non-GAAP measures used in this release.

MINNEAPOLIS, March 20, 2019/PRNewswire/--General Mills (NYSE: GIS) today reported results for the third quarter ended February 24, 2019. Financial results for the third quarter and first nine months of fiscal 2019 include contributions from Blue Buffalo Pet Products, Inc. ("Blue Buffalo"), which was acquired on April 24, 2018.

"We had a strong third quarter, with positive organic sales growth and significant operating margin expansion," said General Mills Chairman and Chief Executive Officer Jeff Harmening. "Our year-to-date performance and fourth-quarter plans give us confidence that we will meet or exceed all of our key fiscal 2019 targets. For the full year, we now expect adjusted diluted EPS and free cash flow conversion will exceed our initial targets, net sales will finish toward the lower end of our guidance range, and adjusted operating profit will finish toward the higher end of the range. Our improved execution and strengthened performance this year reinforce our view that a balanced approach to top and bottom-line growth, centered on our Consumer First strategy, will drive long-term value for our shareholders."

General Mills is pursuing its Consumer First strategy and executing against its three key global growth priorities to drive consistent topline growth: 1) competing effectively through strong innovation, effective consumer marketing, and excellent in-store execution; 2) accelerating growth on its four differential growth platforms including Haagen-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 acquisitions and divestitures, including the acquisition of Blue Buffalo, the leading brand in the fast-growing wholesome natural pet food category in the U.S. By combining consistent topline growth, margin expansion, and disciplined cash conversion and cash returns, General Mills expects to generate top-tier total shareholder returns over the long term.

Third Quarter Results Summary

* Net sales increased 8 percent to $4.20 billion and were up 10 percent in constant currency, driven primarily by the addition of Blue Buffalo. Organic net sales increased 1 percent, with positive net price realization and mix partially offset by lower contributions from volume. Organic net sales growth in the Asia & Latin America, North America Retail, and Convenience Stores & food service segments was partially offset by a decline in Europe & Australia.

* Gross margin increased 200 basis points to 34.4 percent of net sales. Adjusted gross margin, which excludes certain items affecting comparability, increased 170 basis points to 34.2 percent, driven by cost savings, benefits from net price realization and mix, and the addition of Blue Buffalo, partially offset by higher input costs.

* Operating profit totaled $651 million, up 14 percent from last year due primarily to higher net sales and gross margin, partially offset by higher restructuring, impairment, and other exit costs and a loss on the sale of our La Saltena fresh pasta and refrigerated dough business in Argentina. Adjusted operating profit of $730 million increased 25 percent in constant currency, primarily driven by higher net sales, including the addition of Blue Buffalo, and higher adjusted gross margin. Operating profit margin of 15.5 percent increased 80 basis points. Adjusted operating profit margin increased 230 basis points to 17.4 percent.

* Net earnings attributable to General Mills totaled $447 million compared to $941 million a year ago, primarily reflecting benefits from the Tax Cuts and Jobs Act (TCJA) in last year's third quarter.

* Diluted EPS totaled $0.74, down 54 percent from the prior year. Adjusted diluted EPS totaled $0.83 in the third quarter, up 6 percent from the prior year in constant currency, driven by higher adjusted operating profit, partially offset by higher net interest expense, effective tax rate, and average diluted shares outstanding in the quarter.

Nine Month Results Summary

* Net sales increased 7 percent to $12.70 billion and were up 9 percent in constant currency, driven by the addition of Blue Buffalo. Organic net sales essentially matched year-ago levels, with positive net price realization and mix offset by lower contributions from volume. Organic net sales growth in the Asia & Latin America and Convenience Stores & food service segments was offset by a decline in North America Retail.

* Gross margin decreased 10 basis points to 33.8 percent of net sales. Adjusted gross margin increased 10 basis points to 34.1 percent, despite a 40 basis point headwind from a first-quarter purchase accounting adjustment related to the Blue Buffalo acquisition.

* Operating profit totaled $1.80 billion, down 4 percent from the prior year. Constant-currency adjusted operating profit increased 11 percent. Operating profit margin of 14.2 percent was down 170 basis points. Adjusted operating profit margin increased 60 basis points to 16.8 percent.

* Net earnings attributable to General Mills totaled $1.18 billion.

* Diluted EPS of $1.96 was 36 percent below prior-year levels. Adjusted diluted EPS of $2.39 was up 3 percent on a constant-currency basis.

North America Retail Segment

Third-quarter net sales for General Mills' North America Retail segment totaled $2.52 billion, essentially matching the prior year, with growth in the U.S. Cereal and U.S. Meals & Baking operating units offset by declines in Canada, U.S. Snacks, and U.S. Yogurt. Organic net sales were up modestly, rounding to flat versus last year. Segment operating profit of $582 million increased 12 percent as reported and in constant currency, driven by benefits from cost savings initiatives, lower selling, general, & administrative (SG&A) expenses, and positive net price realization and mix, partially offset by input cost inflation.

Through nine months, North America Retail segment net sales were down 2 percent to $7.58 billion. Organic net sales declined 1 percent. Segment operating profit totaled $1.75 billion, up 4 percent from a year ago as reported and up 5 percent in constant currency due to benefits from cost savings initiatives and lower SG&A expenses, partially offset by lower net sales and input cost inflation.

Convenience Stores & food service Segment

Third-quarter net sales for the Convenience Stores & food service segment increased 3 percent to $472 million, driven by growth for the Focus 6 platforms, including frozen meals, snacks, frozen baked goods, and yogurt, partially offset by declines on bakery flour. Organic net sales were also up 3 percent. Segment operating profit increased 15 percent to $97 million, primarily driven by benefits from cost savings initiatives, positive net price realization and mix, and the comparison to a 10 percent operating profit decline in the year-ago period, partially offset by input cost inflation.

Through nine months, Convenience Stores & food service net sales increased 2 percent to $1.45 billion, due primarily to growth for the Focus 6 platforms. Organic net sales also increased 2 percent. Segment operating profit increased 10 percent to $303 million, primarily driven by benefits from cost savings initiatives and positive net price realization and mix, partially offset by input cost inflation.

Europe & Australia Segment

Third-quarter net sales for the Europe & Australia segment declined 8 percent to $433 million, primarily driven by 6 points of unfavorable foreign currency exchange. Organic net sales were down 2 percent. Sales declines for Yoplait yogurt and the negative impact of a continued challenging retail environment in France were partially offset by continued double-digit growth on snack bars and Haagen-Dazs ice cream. Segment operating profit of $24 million was down 11 percent as reported and down 1 percent in constant currency, driven by significant input cost inflation, including currency-driven inflation on products imported into the U.K, partially offset by benefits from cost savings initiatives, lower SG&A expenses, and favorable net price realization and mix.

Through nine months, Europe & Australia net sales declined 3 percent to $1.39 billion, driven by 3 points of unfavorable foreign currency exchange. Organic net sales were flat to last year. Sales growth for the snack bars, ice cream, and Mexican food platforms offset a decline in yogurt. Segment operating profit of $81 million declined 4 percent as reported and was in line with last year in constant currency, with benefits from cost savings initiatives, lower SG&A expenses, and favorable product mix offset 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 declined 2 percent to $428 million, driven by 8 points of unfavorable foreign currency exchange and a 1-point headwind from the divestiture of our La Saltena fresh pasta and refrigerated dough business in Argentina. Organic net sales increased 7 percent. Net sales performance was led by growth for Pillsbury and Nature Valley snack bars, Haagen-Dazs ice cream, and Wanchai Ferry frozen dumplings. Segment operating profit totaled $20 million compared to a loss of $2 million a year ago, driven by organic net sales growth and lower SG&A expenses, partially offset by higher input costs.

Through nine months, Asia & Latin America net sales declined 1 percent to $1.26 billion, driven by 8 points of unfavorable foreign currency exchange. Organic net sales increased 7 percent. The snack bar and ice cream platforms led net sales growth for the segment. Segment operating profit of $50 million increased 65 percent as reported and 42 percent in constant currency, driven by organic net sales growth, lower SG&A expenses, and the comparison against operating profit declines in the year-ago period, partially offset by higher input costs.

Pet Segment

Third-quarter net sales for the Pet segment totaled $347 million. On a pro forma basis, Pet segment net sales increased 4 percent, with growth in Food, Drug, and Mass (FDM) and E-commerce channels partially offset by declines in the Pet Specialty channel. Segment operating profit of $73 million was $2 million below the prior year on a pro forma basis, driven by higher input costs, plant start-up costs, and intangible asset amortization, partially offset by benefits from cost savings initiatives and synergies.

Through nine months, Pet net sales of $1.02 billion increased 3 percent on a pro forma basis. In-market results continued to show solid growth, with retail sales up high-single digits. Segment operating profit totaled $158 million, down $83 million on a pro forma basis, driven by the impact of purchase accounting, including a $53 million one-time inventory adjustment and $10 million of intangible asset amortization, as well as higher input costs and plant start-up costs, partially offset by benefits from cost savings initiatives and synergies.

General Mills expects pro forma Pet segment net sales growth will accelerate rapidly in the fourth quarter as the company doubles distribution and increases the BLUE product assortment in FDM channels. In addition, fourth-quarter Pet segment operating profit margins will benefit from accelerated synergies, cost savings initiatives, favorable product mix, and pricing actions taken earlier in the year. The company continues to expect these actions will result in double-digit pro forma growth in Pet segment net sales and operating profit for the full year, excluding acquisition-related charges.

Joint Venture Summary

Third-quarter net sales for Cereal Partners Worldwide (CPW) increased 2 percent in constant currency, and constant-currency net sales for Haagen-Dazs Japan (HDJ) declined 5 percent. Combined after-tax earnings from joint ventures were $12 million compared to $17 million last year, driven primarily by our $4 million after-tax share of CPW restructuring charges. Through nine months, after-tax earnings from joint ventures totaled $52 million compared to $64 million a year ago, driven by our $9 million after-tax share of CPW restructuring charges as well as lower net sales and higher input costs for HDJ.

Other Income Statement Items

Unallocated corporate items totaled $49 million net expense in the third quarter of fiscal 2019, compared to $51 million net expense a year ago. Excluding mark-to-market valuation effects and other items affecting comparability, unallocated corporate items totaled $65 million net expense this year compared to $41 million net expense last year.

We recorded a $35 million pre-tax loss on the sale of the La Saltena business in Argentina in the third quarter. Restructuring, impairment, and other exit costs totaled $60 million in the quarter compared to $8 million a year ago. An additional $3 million of project-related charges were recorded in cost of sales a year ago (please see Note 3 below for more information on these charges).

Net interest expense totaled $131 million in the third quarter compared to $89 million a year ago, primarily driven by financing related to the Blue Buffalo acquisition. The effective tax rate in the quarter was a 17.7 percent charge compared to an 85.9 percent benefit last year (please see Note 6 below for more information on our effective tax rate). Excluding items affecting comparability, the adjusted effective tax rate was 19.9 percent compared to 15.2 percent a year ago, primarily driven by a year-to-date adjustment to the statutory rate during the third quarter of fiscal 2018.

Cash Flow Generation and Cash Returns

Cash provided by operating activities totaled $2.03 billion through nine months of fiscal 2019. Capital investments through the first nine months totaled $368 million. Nine-month free cash flow conversion was

113 percent of adjusted after-tax earnings. Dividends paid year-to-date totaled $884 million. Average diluted shares outstanding through nine months increased 4 percent to 604 million.

Outlook

For the fourth quarter of fiscal 2019, General Mills expects Blue Buffalo's net sales and segment operating profit growth will accelerate meaningfully, driven by significant distribution expansion in the FDM channel. Fourth-quarter results for the base business will be impacted by the comparison against the year-ago period that included the strongest quarterly performance of fiscal 2018.

Based on its year-to-date performance and fourth-quarter expectations, the company updated its full-year fiscal 2019 targets:

* Organic net sales are expected to finish toward the lower end of the initial guidance range of between flat and up 1 percent. Net sales are also expected to finish toward the lower end of the range of 9 to 10 percent growth in constant currency, including the impact of the Blue Buffalo acquisition.

* Constant-currency adjusted operating profit is expected to finish toward the upper end of the initial guidance range of 6 to 9 percent growth from the base of $2.6 billion reported in fiscal 2018.

* Constant-currency adjusted diluted EPS are now expected to range between flat and up 1 percent from the base of $3.11 earned in fiscal 2018, which is ahead of the previous range of flat to down 3 percent.

* The company now expects free cash flow conversion of at least 105 percent of adjusted after-tax earnings, which is ahead of the previous guidance of at least 95 percent.

* Currency translation is expected to reduce reported net sales by 1 to 2 percentage points in fiscal 2019 and is not expected to have a material impact on full-year adjusted operating profit or adjusted diluted EPS.

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Title Annotation:Leading Companies
Publication:United States Grains
Date:May 9, 2019
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