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MINNEAPOLIS--(BUSINESS WIRE)--Sept. 17, 2001--General Mills (NYSE:GIS - news) today reported record results for its
fiscal 2002 first quarter. Sales for the 13 weeks ended Aug. 26, 2001, grew 6 percent to $1.77 billion, fueled by 5 percent growth in the company's worldwide unit volume. Net diluted earnings per share (EPS) grew to 64 cents, up 16 percent from 55 cents reported a year earlier. The 64-cent total included a 3-cent net gain from unusual items, and a 1-cent charge representing the cumulative
effect of adopting new accounting standard SFAS No. 133 for derivatives and hedging activities. Excluding those items, first-quarter EPS totaled 62 cents.
General Mills also adopted accounting standard SFAS No. 142 in the quarter, eliminating the amortization of goodwill. Prior-year first quarter earnings before unusual items would have been $164.8 million after tax, or 57 cents per diluted share, if goodwill amortization had not been expensed in that period. On this comparable basis, General Mills' 2002 first quarter earnings after tax grew 10 percent to $181.8 million, and diluted EPS grew 9 percent (62 cents this year compared to 57 cents a year earlier).
General Mills Chairman and Chief Executive Officer Steve Sanger said the results represented a solid start to the new fiscal year. ``This performance met our expectations and puts our current businesses on track to deliver another year of double-digit earnings per share growth in 2002. In addition, we continue to look forward to completing our acquisition of Diageo's worldwide Pillsbury operations. We remain in active discussions with the Federal Trade Commission on the transaction and expect the FTC's review will be completed in October.''
Domestic unit volume for the first quarter grew 4 percent. This growth was led by the company's convenience foods business (snacks and yogurt), which posted an 8 percent volume increase. Yogurt volume grew at a double-digit rate, with strong performance from core 6-ounce cup product lines and from Expresse and Go-GURT portable yogurt. Snacks volume grew 5 percent, led by strong performance from Nature Valley granola bars, Pop Secret microwave popcorn and fruit snacks. Combined volume for Betty Crocker
meals, side dishes and baking products grew 4 percent. Meals and side dish volume grew 5 percent, with double-digit growth for Lloyd's refrigerated entrees and the Bowl Appetit! line of microwaveable lunch entrees. Betty Crocker Baking Products saw a 4 percent volume increase for the quarter, spurred on by good performance from pouch dessert mixes and family flour. Foodservice
volume increased 2 percent above prior year volume, which grew 14 percent.
Unit volume for Big G cereals was down slightly in the first quarter, following a 6 percent unit volume increase in the fourth quarter of 2001. That strong finish reflected
expanding distribution for several new products, including Harmony and Wheaties Energy Crunch cereals. First-quarter retail volume for Big G cereals in all ACNielsen-measured outlets grew 5 percent, reflecting good initial consumer response to these new products plus continued good performance by key established cereal brands. U.S. ready-to-eat cereal category volume grew 2 percent in the quarter, and Big G's share of the market's retail dollar sales grew by half a percentage point to approximately 32 percent. New Chex Morning Mix, which blends cereal, fruit and nut pieces in convenient single-serving pouches, was introduced in 40 percent of the U.S. in July and is currently expanding to the remainder of the country. In October, Big G plans to begin shipping new Frosted Mini Chex cereal to markets comprising about 40 percent of the U.S.
Unit volume for General Mills' international operations grew 11 percent in the first quarter. Snack Ventures Europe (SVE), the company's joint venture with PepsiCo,
posted an 8 percent volume gain. This increase was driven by growth in core Western European markets, particularly Spain. Cereal Partners Worldwide (CPW), the company's joint venture with Nestle, achieved a 10 percent unit volume increase in the first quarter. Unit volume in the United Kingdom grew 7 percent despite strong competition. Strong performance in Latin America also contributed to CPW's volume growth. Overall, CPW holds a 21 percent combined share of the worldwide markets where it competes. Earnings after tax for General Mills' international joint ventures exceeded $9 million in the quarter, up sharply from $3 million a year earlier.
Unit volume for the company's wholly owned international businesses grew at a double-digit rate in the first quarter. Canada posted a volume increase of 15 percent
driven by double-digit growth in cereal volume. Newer businesses in China and the United Kingdom also contributed to the international volume gain.
General Mills' net earnings for the first quarter include an unusual gain of approximately $9.3 million after tax, or 3 cents per share. This gain primarily reflects net
insurance proceeds, totaling 6 cents per share, from ongoing settlement agreements related to a 1994 oats mishandling incident. We expect to record additional insurance proceeds later in 2002. The first-quarter insurance gain was partially offset by three items: remaining costs for exiting the Squeezit child beverage business, Pillsbury transaction costs, and costs related to flash flood damage sustained this summer at the company's manufacturing facility in Cincinnati, Ohio. Together, these unusual expenses totaled 3 cents per share.
Net interest expense of $48.9 million in the first quarter was lower than the previous year's, due to lower interest rates. Book stockholders' equity declined from fiscal
2001 year end, reflecting the impact of adopting the new derivatives accounting principle. However, the market value of General Mills stockholders' equity grew to $12.8
billion as of quarter end, based on the Aug. 24, 2001 closing price of $44.85 per share and 284.6 million basic shares outstanding. During the quarter, the company
repurchased 1.7 million shares of common stock at an average price of approximately $31 dollars per share, including the effect of put and call options. Average diluted shares outstanding for the quarter totaled 294.8 million, up slightly from an average 290.5 million in last year's first quarter as higher market prices for General Mills stock increase the number of diluted shares.
Looking ahead, Sanger said, ``We expect to build on this good start to fiscal 2002 with more new product introductions and innovative marketing in the coming quarters. In the second quarter, we expect our current businesses to achieve low single-digit volume growth and high single-digit growth in earnings per share from 72 cents last year adjusted for goodwill, and we expect to complete the FTC review process on our Pillsbury transaction. We continue to believe this acquisition will enhance General Mills' already strong future growth prospects.''