Slide 1: Fiscal 2014 3rd Quarter Results
General Mills Fiscal 2014 3 rd Quarter Results March 19, 2014 6582-1
Slide 2: Forward-looking statements
This presentation 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 are subject to certain risks and uncertainties that could cause actua
Slide 3: Q3 Financial Review
Q3 Financial Review Don Mulligan Executive Vice President; Chief Financial Officer 6582-3
Slide 4: Factors Behind Q3 Performance
Factors Behind Q3 Performance • Severe Weather • Foreign Exchange Headwinds • U.S. Yogurt Investment • Lapping Strong Earnings Growth Last Year 6582-4
Slide 5: Third Quarter Fiscal 2014 Financial Summary
Third Quarter Fiscal 2014 Financial Summary ($ in Millions, Except per Share) $ % Change Net Sales $4,377 -1% Adjusted Segment Operating Profit* 690 -10 Net Earnings Attributable to General Mills 411 +3 Diluted EPS $0.64 +7 Certain Items Affecting Comparability (.02) Adjusted Diluted EPS* $0.62 -6 *
Slide 6: Third Quarter Fiscal 2014 Components of Net Sales Growth
Third Quarter Fiscal 2014 Components of Net Sales Growth +1pt -1pt -1pt -1pt Foreign Price & Total Volume Exchange Mix Net Sales 6582-6
Slide 7: Third Quarter Fiscal 2014 Net Sales Results by Segment
Third Quarter Fiscal 2014 Net Sales Results by Segment ($ in Millions) $ % Change Total Net Sales $4,377 -1% U.S. Retail 2,618 -2 International 1,322 +2 Constant Currency* +7 Convenience Stores & Foodservice 437 -7 * Non-GAAP Measure. See Appendix for Reconciliation. 6582-7
Slide 8: Third Quarter Fiscal 2014 Gross Margin Performance
Third Quarter Fiscal 2014 Gross Margin Performance As Reported Underlying* • Expect Strong 34.4% 34.6% 34.9% 34.1% Underlying Gross Margin Expansion in Q4 • Annual Input Cost Inflation Estimate Still 3% Q3 F13 Q3 F14 Q3 F13 Q3 F14 * Non-GAAP Measure. See Appendix for Reconciliation. 6582-8
Slide 9: Third Quarter Fiscal 2014 Adjusted Segment Operating Profit
Third Quarter Fiscal 2014 Adjusted Segment Operating Profit* Year-ago % Change % Change Adjusted Segment Operating Profit* -10% +13% U.S. Retail -11 +13 International* +1 +14 Constant-Currency** +MSD Convenience Stores & Foodservice -17 +13 * Non-GAAP Measure. See Appendix for Reconciliation. ** Non
Slide 10: Third Quarter Fiscal 2014 Joint Venture Summary
Third Quarter Fiscal 2014 Joint Venture Summary Constant-currency JV Earnings After Tax Net Sales Growth ($ in Millions, As Reported) • CPW +1% • HDJ +13% $23 $21 Q3 F13 Q3 F14 6582-10
Slide 11: Third Quarter Fiscal 2014 Other Income Statement Items
Third Quarter Fiscal 2014 Other Income Statement Items • Interest Expense Down 1% vs. LY • Tax Rate Excluding Items Affecting Comparability 33.6% Versus 30.5% a Year Ago* • Average Diluted Shares Outstanding 4% Below LY * Non-GAAP Measure. See Appendix for Reconciliation. 6582-11
Slide 12: Fiscal 2014 Core Working Capital
Fiscal 2014 Core Working Capital ($ in Millions) 3rd Quarter F14 F13 Accounts Receivable $1,648 $1,592 Inventories 1,560 1,606 Accounts Payable 1,360 1,186 6582-12
Slide 13: Nine Months Fiscal 2014 Financial Summary
Nine Months Fiscal 2014 Financial Summary ($ in Millions, Except per Share) $ % Change Net Sales $13,626 +2% Adjusted Segment Operating Profit* 2,421 -3 Net Earnings Attributable to General Mills 1,420 -5 Diluted EPS $2.18 -3 Certain Items Affecting Comparability (.03) Adjusted Diluted EPS* $2.15 -1
Slide 14: Nine Months Fiscal 2014 U.S. Retail
Nine Months Fiscal 2014 U.S. Retail Total Segment Net Sales: Flat vs. LY Segment Operating Profit: -3% vs. LY Nine Months Net Sales (Change vs. LY) Small Planet Foods +8% Snacks +5 Big G Cereals +2 Baking Products Flat Frozen Foods Flat Yoplait -3 Meals -5 6582-14
Slide 15: Nine Months Fiscal 2014 Convenience Stores & Foodservice
Nine Months Fiscal 2014 Convenience Stores & Foodservice Total Segment Net Sales: -3% vs. LY Segment Operating Profit: -7% vs. LY • Product Mix Focus on Higher Margin Products • Sales Growth in Yogurt, Snacks, Mixes, and Frozen Breakfast 6582-15
Slide 16: Nine Months Fiscal 2014 International
Nine Months Fiscal 2014 International Segment Constant-currency Net Sales*: +11% vs. LY Constant-currency Segment Operating Profit**: +HSD vs. LY Nine Months Constant-currency Net Sales* (Change vs. LY) Latin America +50% Asia / Pacific +10 Canada +8 Europe -1 * Non-GAAP Measure. See Appendix for Re
Slide 17: Nine Months Fiscal 2014 Cash Flow Highlights
Nine Months Fiscal 2014 Cash Flow Highlights Operating Cash Flow ($ in Millions) • YTD Operating Cash Flow $2,146 Below LY Driven By Change in $1,724 Current Assets & Liabilities • Expect Strong Operating Cash Flow Growth in Q4 YTD F13 YTD F14 6582-17
Slide 18: Cash Returns to Shareholders
Cash Returns to Shareholders Share Repurchases Dividends ($ in Millions) • 29MM Shares Repurchased F14 YTD $1,403 • 8% Dividend Increase Effective May 1, 2014 $745 • F14 Dividends per Share +17% vs. LY $652 $729 YTD F13 YTD F14 6582-18
Slide 19: Fiscal 2014 Outlook
Fiscal 2014 Outlook 4th Quarter Expectations • Input Cost Inflation Below Year-ago • Underlying Tax Rate*, Diluted Shares Outstanding Lower than LY • Strong DD Growth in Adjusted Diluted EPS* Annual Expectations • Adjusted Diluted EPS* of $2.87 - $2.90 * Non-GAAP Measure. 6582-19
Slide 20: U.S. Baking Products Update
U.S. Baking Products Update Ann Simonds Senior Vice President; President, Baking Products Division 6582-20
Slide 21: General Mills U.S. Baking Products Business
General Mills U.S. Baking Products Business Annual Retail Sales = $2.5 Billion Flour 7% Baking Mixes Refrigerated 37% Baked Goods 56% Largest Branded Baking Business in the U.S. Source: Nielsen XAOC, Latest 52 Weeks 6582-21
Slide 22: Consumers Like Baked Goods
Consumers Like Baked Goods Dessert Mixes Refrigerated Dough 73% 67% 11.8 10.4 Household Buy Rate Household Buy Rate Penetration Penetration Source: Nielsen, Fiscal Year ended 5.25.13 6582-22
Slide 23: Baking is On Trend with Key Consumer Groups
Baking is On Trend with Key Consumer Groups Millennials Boomers Like to Bake and Want Smaller Experiment Serving Sizes Hispanics Bread Completes the Meal 6582-23
Slide 24: A Strong Winter Quarter
A Strong Winter Quarter Fiscal 2014 Q3 Retail Sales Growth Baking Products Division +4% Dessert Mixes -2% Refrigerated Baked Goods +6% Flour +15% Source: Nielsen XAOC 6582-24
Slide 25: Refrigerated Dough Performance
Refrigerated Dough Performance (Retail Sales Growth, FYTD) FYTD Dollar Share = 70%, +0.1 pts Sweet Rolls Grands Biscuits +2% +3% Source: Nielsen XAOC through 2.22.14 6582-25
Slide 26: Bringing Innovation to Baking
Bringing Innovation to Baking Affordable Premium Product Seasonal News 6582-26
Slide 27: Consumers Appreciate Gluten Free Products
Consumers Appreciate Gluten Free Products “I have tried more gluten free products than I care to discuss… Your new line of cakes and brownies ‘Bravo’ and thank you so much. They taste as good as I remember the regular mixes.” 2010 2011 “I just wanted to say thank you for having your gluten free baki
Slide 28: We’re A Leading U.S. Food Advertiser
We’re A Leading U.S. Food Advertiser General Mills Rank: U.S. Food Sales #4 Measured Media #2 General Mills U.S. Retail Media and Advertising Expense 5-yr CAGR +8% F08 F13 Sources: Dollar Sales – Nielsen, Latest 52 weeks ended 1.18.14 Measured Media – Kantar, Latest 12 Months Available 6582-28
Slide 29: Our Changing Mix in U.S. Media Spending
Our Changing Mix in U.S. Media Spending Fiscal 2008 Fiscal 2013 Other Other 4% 12% Digital Digital 17% 8% TV TV 80% 79% Dollars Spent: 100 148 (Index: 2008 = 100) 6582-29
Slide 30: The Baking Division’s Unique Marketing Mix
The Baking Division’s Unique Marketing Mix (% of Baking Division Media Spending) Digital 9% Digital 35% Fiscal 2008 Fiscal 2013 6582-30
Slide 31: Betty Crocker Goes Digital
Betty Crocker Goes Digital 69 Million Visitors per Year Source: Comscore Feb 2013 – Jan 2014 6582-31
Slide 32: Pillsbury.com
Pillsbury.com Easy Meals 6582-32
Slide 33: Pillsbury Bake-Off
Pillsbury Bake-Off • Largest Amateur Baking Contest in the U.S. • Consumers Voted to Choose Finalist in 2013 • Great Marketing Platform with Retailers 6582-33
Slide 34: Baking Products Summary
Baking Products Summary • Baking is On-trend with Growing U.S. Consumer Groups • Betty Crocker and Pillsbury are Leading Brands – Supported with Unique Marketing Initiatives • Continue to Bring News to These Categories to Drive Growth Year Round 6582-34
Slide 35: Operating Highlights
Operating Highlights Ken Powell Chairman of the Board; Chief Executive Officer 6582-35 35
Slide 36: U.S. Yogurt F14 Q3 Dynamics
U.S. Yogurt F14 Q3 Dynamics • Category Sales Growth Slowed • Yoplait Q3 New Product Launches – 16 SKUs • Increased Trade Merchandising Support – New Products – Competitive Price Points on Greek Yogurt • Yoplait Greek Blended Taste Superiority • In-store Sampling – 45% ACV • Incremental Spot TV Adver
Slide 37: Yoplait Greek Performance
Yoplait Greek Performance Dollar Share of Greek Segment 10.6% 10.0% 9.7% 9.2% 9.4% 9.2% 9.2% 8.5% 8.8% 7.7% Jun-Dec Week 1 Week 2 Week 3 Week 4 Week 1 1 Week 2 2 Week 3 3 Week 4 4 Week 1 2013 March 2014 January 2014 February 2014 Source: Nielsen XAOC 6582-37
Slide 38: Original Style Yoplait
Original Style Yoplait Retail $ Sales Growth +9.9 +8.6 +7.2 +6.9 +5.0 +3.3 +3.2 Wk 1 Wk 2 Wk 3 Wk 4 11 Wk 22 Wk 33 Wk 44 Wk Wk5 1 March -0.6 January 2014 February 2014 -3.9 Source: Nielsen XAOC 6582-38
Slide 39: General Mills Cereal Performance
General Mills Cereal Performance 9 Mos F14 YTD • Net Sales +2% • Dollar Share 31.3% +0.3 pts Source: Nielsen XAOC through 2.22.14 6582-39
Slide 40: Grain Snacks – Continued Strong Performance
Grain Snacks – Continued Strong Performance New in January 9 Mos F14 YTD • Retail Sales +10% • Dollar Share +4 pts. 3 Varieties 2 Varieties Source: Nielsen XAOC through 2.22.14 6582-40
Slide 41: Totino’s Frozen Pizza and Hot Snacks
Totino’s Frozen Pizza and Hot Snacks (9 Mos F14 YTD Retail Sales Growth) +5% +6% Source: Nielsen XAOC through 2.22.14 6582-41
Slide 42: Convenient Meals
Convenient Meals Old El Paso Progresso Mexican Aisle Ready-to-serve $ Share 9 Mos F14 YTD • Retail Sales +4% 39.4 39.6 • Dollar Share +0.5 pts. Freezer Case YTD YTD F13 F14 Projected Year-one Retail Sales $50 Million Source: Nielsen XAOC through 2.22.14 6582-42
Slide 43: Natural and Organic Foods
Natural and Organic Foods (9 Mos F14 Retail Sales Growth) Cereal Snacks +1% +23% Source: Nielsen XAOC through 2.22.14 Plus spins through 2.23.14 6582-43
Slide 44: Convenience Stores & Foodservice Key Product Platforms
Convenience Stores & Foodservice Key Product Platforms (9 Mos F14 YTD Net Sales Growth) Snacks Yogurt +4% +10% Frozen Breakfast +23% 6582-44
Slide 45: International Segment 9 Month F14 Financial Summary
General Mills International Segment 9 Month F14 Financial Summary ($ in Millions) 9 Mos F14 YTD % Change % Change $ As Reported Constant Currency* Net Sales $4,047 +8% +11%** Segment Operating Profit $389 +8% +HSD *Non-GAAP Measure. **Non-GAAP Measure. See Appendix for Reconciliation. 6582-45
Slide 46: International Highlights
International Highlights Europe China Canada Latin America 6582-46
Slide 47: International Highlights – Cereal Partners Worldwide
International Highlights – Cereal Partners Worldwide Strong Growth on Core Brands New in January 6582-47
Slide 48: General Mills Summary
General Mills Summary • A Tough Third Quarter • Clear Drivers of Strong Earnings Growth in Q4 • Full-year Adjusted Diluted EPS Target is $2.87 - $2.90 • Robust Cash Return to Shareholders through Buybacks and 17% Dividend Increase 6582-48
Slide 49: Reconciliation of Adjusted Segment Operating Profit
Reconciliation of Adjusted Segment Operating Profit (Fiscal Years, $ in Millions) Q3 Nine Months 2014 2013 2012 2014 2013 U.S. Retail $517 $577 $512 $1,810 $1,876 Adjusted International 111 110 96 389 375 Convenience Stores & Foodservice 62 75 66 222 239 Adjusted Segment Operating Profit $690 $763 $
Slide 50: Reconciliation of Adjusted International Segment Operating Profit
Reconciliation of Adjusted International Segment Operating Profit (Fiscal Years, $ in Millions) Q3 Nine Months 2014 2013 2012 2014 2013 International Segment Operating Profit $111 $96 $96 $389 $361 Venezuela Currency Devaluation* -- 14 -- -- 14 Adjusted International Segment Operating Profit $111 $1
Slide 51: Reconciliation of Adjusted Diluted EPS
Reconciliation of Adjusted Diluted EPS (Fiscal Years) Q3 Nine Months 2014 2013 2014 2013 Diluted EPS $0.64 $0.60 $2.18 $2.24 Mark-to-market Effects (.02) .02 (.04) (.01) Restructuring -- .01 .01 .02 Tax Item -- -- -- (.10) Acquisition Integration Costs -- .01 -- .01 Venezuela Currency Devaluation* -
Slide 52: Reconciliation of Q3 Constant-currency Net Sales Growth
Reconciliation of Q3 Constant-currency Net Sales Growth (Fiscal Years) Q3 2014 % Change in Net % Change in Sales Net Sales Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Europe 3% 1 pt 2% Canada -6 -8 2 Asia/Pacific 14 0 14 Latin America -1 -18 17 Total International 2
Slide 53: Reconciliation of Nine Months Constant-currency Net Sales Growth
Reconciliation of Nine Months Constant-currency Net Sales Growth (Fiscal Years) Nine Months 2014 % Change in Net % Change in Sales Net Sales Impact of Foreign on a Constant- as Reported Currency Exchange currency Basis Europe 1% 2 pts -1% Canada 2 -6 8 Asia/Pacific 11 1 10 Latin America 30 -20 50 To
Slide 54: Reconciliation of Gross Margin
Reconciliation of Gross Margin (Fiscal Years, $ in Millions) Q3 2014 Q3 2013 % of % of $ Net Sales $ Net Sales Net Sales $4,377 $4,431 Gross Margin as Reported 1,513 34.6% 1,523 34.4% Mark-to-market Effects (23) 25 Gross Margin Excluding Mark-to-market Effects $1,490 34.1% $1,548 34.9% 6582-54
Slide 55: Reconciliation of Effective Income Tax Rate
Reconciliation of Effective Income Tax Rate (Fiscal Years, $ in Millions) Q3 2014 Q3 2013 Pre-tax Income Pre-tax Income Earnings* Taxes Earnings* Taxes As Reported $595 $201 $566 $174 Mark-to-market effects (23) (8) 25 9 Restructuring Costs -- -- 5 -- Integration Costs -- -- 3 1 Venezuela Currency D