Outlook

Sanger said that 2005 marked the end of a transitional period for General Mills that followed the $10 billion acquisition of Pillsbury in fiscal 2002. Earnings results during that transition period included significant restructuring charges and costs related to the merger, which General Mills separately identified in its earnings guidance and reported results. EPS results for the company also reflected the fact that General Mills suspended open-market share repurchase activity in recent years to focus on debt reduction.

        Beginning in fiscal 2006, General Mills will no longer forecast identified expenses separately in its earnings guidance. The company intends to renew share repurchase activity in 2006, and expects share repurchases to be a source of EPS growth in 2006 and beyond.

        “We think General Mills is well-positioned to deliver low single-digit growth in net sales, mid single-digit growth in operating profits, and high single-digit growth in earnings per share,” Sanger said. “Over the next three to five years, our goal is to deliver good growth while improving our return on capital by an average of 50 basis points a year. We believe this financial performance, together with dividend yield, should result in consistent, double-digit returns to General Mills shareholders.”

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        For fiscal 2006, the company said it is targeting low single-digit growth in net sales, and mid single-digit growth in operating profits driven by margin recovery in the U.S. Retail segment. Guidance for diluted EPS is a decline of 8 to 10 percent from $3.08 in 2005, which included the large net gain from dispositions. 2005 diluted EPS excluding that net gain, the impact of EITF 04-8, and approximately 8 cents contributed by divested businesses would have totaled $2.67. From this adjusted base, the company said it expects diluted EPS growth of 7 to 8 percent in 2006.