Microsoft Excel LibreOffice Calc

General Mills Inc. (GIS)

Analysis of Income Taxes

Difficulty: Advanced

Income Tax Expense (Benefit)

General Mills Inc., income tax expense (benefit), continuing operations

USD $ in thousands

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12 months ended May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Federal 441,200  368,500  489,800  392,700  526,700  493,400 
State and local 35,200  21,100  30,800  29,300  37,800  39,500 
Foreign 85,200  81,700  114,000  139,500  146,300  126,500 
Currently payable 561,600  471,300  634,600  561,500  710,800  659,400 
Federal (478,500) 201,300  123,000  70,300  159,100  68,800 
State and local 15,700  10,200  (6,900) (8,700) 21,300  19,200 
Foreign (41,500) (27,600) 4,500  (36,300) (7,900) (6,200)
Deferred (504,300) 183,900  120,600  25,300  172,500  81,800 
Income taxes 57,300  655,200  755,200  586,800  883,300  741,200 

Source: Based on data from General Mills Inc. Annual Reports

Item Description The company
Currently payable The component of income tax expense for the period representing amounts of income taxes paid or payable (or refundable) for the period for all income tax obligations as determined by applying the provisions of relevant enacted tax laws to relevant amounts of taxable income (loss) from continuing operations. General Mills Inc.'s currently payable declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level.
Deferred The component of income tax expense for the period representing the net change in the entity's deferred tax assets and liabilities pertaining to continuing operations. General Mills Inc.'s deferred increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Income taxes The sum of the current income tax expense (benefit) and the deferred income tax expense (benefit) pertaining to pretax income (loss) from continuing operations; income tax expense (benefit) may include interest and penalties on tax uncertainties based on the entity's accounting policy. General Mills Inc.'s income taxes declined from 2016 to 2017 and from 2017 to 2018.

Effective Income Tax Rate (EITR)

General Mills Inc., effective income tax rate (EITR) reconciliation

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
United States statutory income tax rate 29.40% 35.00% 35.00% 35.00% 35.00% 35.00%
State and local income taxes, net of federal tax benefits 1.70% 0.80% 0.70% 0.70% 1.40% 1.30%
Foreign rate differences -2.00% -3.50% -2.20% -3.10% -0.10% -0.60%
Provisional net tax benefit -24.50% –% –% –% –% –%
Repatriation of foreign earnings –% –% –% 4.50% –% –%
Non-deductible goodwill –% –% 2.60% –% –% –%
Stock based compensation -1.20% –% –% –% –% –%
Prior period tax adjustment 1.90% –% –% –% –% –%
Deferred taxes for Medicare subsidies –% –% –% –% –% -1.30%
GMC subsidiary restructure –% –% –% –% –% -2.50%
Domestic manufacturing deduction -1.90% -2.80% -2.00% -2.90% -2.30% -2.10%
Other, net -0.70% -0.70% -2.70% -0.90% -0.70% -0.60%
Effective income tax rate 2.70% 28.80% 31.40% 33.30% 33.30% 29.20%

Source: Based on data from General Mills Inc. Annual Reports

Item Description The company
Effective income tax rate A ratio calculated by dividing the reported amount of income tax expense attributable to continuing operations for the period by GAAP-basis pretax income from continuing operations. General Mills Inc.'s effective income tax rate declined from 2016 to 2017 and from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

General Mills Inc., components of deferred tax assets and liabilities

USD $ in thousands

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Accrued liabilities 47,200  70,000  89,900  98,000  106,000  154,600 
Compensation and employee benefits 210,200  419,200  491,500  536,200  546,000  619,200 
Unrealized hedges – – – 800  – 6,900 
Pension 57,100  196,300  322,000  169,000  – 112,500 
Tax credit carryforwards 7,400  18,400  4,500  5,600  78,900  78,000 
Stock, partnership, and miscellaneous investments 147,900  276,400  353,600  384,100  427,900  461,100 
Capital losses 12,900  29,800  14,500  6,100  13,000  13,600 
Net operating losses 161,200  109,500  97,900  89,300  71,400  65,100 
Other 52,900  85,600  84,100  74,500  117,700  138,800 
Gross deferred tax assets 696,800  1,205,200  1,458,000  1,363,600  1,360,900  1,649,800 
Valuation allowance (176,000) (231,800) (227,000) (215,400) (221,600) (232,800)
Net deferred tax assets 520,800  973,400  1,231,000  1,148,200  1,139,300  1,417,000 
Brands (1,498,700) (1,310,100) (1,311,700) (1,346,300) (1,373,400) (1,380,400)
Fixed assets (329,500) (484,500) (476,300) (446,500) (499,400) (537,400)
Pension – – – – (2,000) –
Intangible assets (255,100) (238,600) (221,800) (208,400) (204,200) (168,300)
Tax lease transactions (26,000) (45,800) (48,000) (50,800) (53,100) (55,100)
Inventories (38,800) (60,000) (53,000) (59,700) (60,600) (52,000)
Stock, partnership, and miscellaneous investments (317,100) (479,400) (476,000) (472,500) (470,700) (456,700)
Unrealized hedges (28,500) (45,400) (22,600) – (22,800) –
Other (30,900) (29,000) (21,200) (14,200) (45,000) (28,200)
Gross deferred tax liabilities (2,524,600) (2,692,800) (2,630,600) (2,598,400) (2,731,200) (2,678,100)
Net deferred tax asset (liability) (2,003,800) (1,719,400) (1,399,600) (1,450,200) (1,591,900) (1,261,100)

Source: Based on data from General Mills Inc. Annual Reports

Item Description The company
Gross deferred tax assets The sum of the tax effects as of the balance sheet date of the amounts of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws (before the valuation allowance, if any, to reduce such sum amount to net realizable value). Includes any tax benefit realized in deferred tax assets for significant impacts of tax planning strategies. General Mills Inc.'s gross deferred tax assets declined from 2016 to 2017 and from 2017 to 2018.
Net deferred tax assets The aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; net of deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. General Mills Inc.'s net deferred tax assets declined from 2016 to 2017 and from 2017 to 2018.
Net deferred tax asset (liability) For entities that net deferred tax assets and tax liabilities, represents the unclassified net amount of deferred tax assets and liabilities as of the balance sheet date, which result from applying the applicable enacted tax rate to net temporary differences and carryforwards pertaining to assets or liabilities. A temporary difference is a difference between the tax basis of an asset or liability and its carrying amount in the financial statements prepared in accordance with generally accepted accounting principles that will reverse in ensuing periods. General Mills Inc.'s net deferred tax asset (liability) declined from 2016 to 2017 and from 2017 to 2018.

Deferred Tax Assets and Liabilities, Classification

General Mills Inc., deferred tax assets and liabilities, classification

USD $ in thousands

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Current deferred tax assets – – – 100,100  74,100  128,000 
Noncurrent deferred tax liabilities 2,003,800  1,719,400  1,399,600  1,550,300  1,666,000  1,389,100 

Source: Based on data from General Mills Inc. Annual Reports

Item Description The company
Current deferred tax assets The current portion of the aggregate tax effects as of the balance sheet date of all future tax deductions arising from temporary differences between tax basis and generally accepted accounting principles basis recognition of assets, liabilities, revenues and expenses, which can only be deducted for tax purposes when permitted under enacted tax laws; after deducting the allocated valuation allowance, if any, to reduce such amount to net realizable value. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. An unrecognized tax benefit that is directly related to a position taken in a tax year that results in a net operating loss carryforward should be presented as a reduction of the related deferred tax asset.
Noncurrent deferred tax liabilities Represents the noncurrent portion of deferred tax liabilities, which result from applying the applicable tax rate to net taxable temporary differences pertaining to each jurisdiction to which the entity is obligated to pay income tax. A noncurrent taxable temporary difference is a difference between the tax basis and the carrying amount of a noncurrent asset or liability in the financial statements prepared in accordance with generally accepted accounting principles. In a classified statement of financial position, an enterprise shall separate deferred tax liabilities and assets into a current amount and a noncurrent amount. Deferred tax liabilities and assets shall be classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred tax liability or asset that is not related to an asset or liability for financial reporting, including deferred tax assets related to carryforwards, shall be classified according to the expected reversal date of the temporary difference. General Mills Inc.'s noncurrent deferred tax liabilities increased from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Deferred Taxes

General Mills Inc., adjustments to financial data

USD $ in thousands

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Adjustment to Current Assets
Current assets (as reported) 4,123,700  4,061,400  3,937,200  3,785,700  4,393,500  4,298,900 
Less: Current deferred tax assets, net – – – 100,100  74,100  128,000 
Current assets (adjusted) 4,123,700  4,061,400  3,937,200  3,685,600  4,319,400  4,170,900 
Adjustment to Total Assets
Total assets (as reported) 30,624,000  21,812,600  21,712,300  21,964,500  23,145,700  22,658,000 
Less: Current deferred tax assets, net – – – 100,100  74,100  128,000 
Total assets (adjusted) 30,624,000  21,812,600  21,712,300  21,864,400  23,071,600  22,530,000 
Adjustment to Total Liabilities
Total liabilities (as reported) 23,355,400  16,216,200  15,559,600  15,792,900  15,156,200  14,562,000 
Less: Noncurrent deferred tax liabilities, net 2,003,800  1,719,400  1,399,600  1,550,300  1,666,000  1,389,100 
Total liabilities (adjusted) 21,351,600  14,496,800  14,160,000  14,242,600  13,490,200  13,172,900 
Adjustment to Stockholders' Equity
Stockholders' equity (as reported) 6,141,100  4,327,900  4,930,200  4,996,700  6,534,800  6,672,200 
Less: Net deferred tax assets (liabilities) (2,003,800) (1,719,400) (1,399,600) (1,450,200) (1,591,900) (1,261,100)
Stockholders' equity (adjusted) 8,144,900  6,047,300  6,329,800  6,446,900  8,126,700  7,933,300 
Adjustment to Net Earnings Attributable To General Mills
Net earnings attributable to General Mills (as reported) 2,131,000  1,657,500  1,697,400  1,221,300  1,824,400  1,855,200 
Add: Deferred income tax expense (benefit) (504,300) 183,900  120,600  25,300  172,500  81,800 
Net earnings attributable to General Mills (adjusted) 1,626,700  1,841,400  1,818,000  1,246,600  1,996,900  1,937,000 

Adjusted Ratios: Removal of Deferred Taxes (Summary)

General Mills Inc., adjusted ratios

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
Current Ratio
Reported current ratio 0.56 0.76 0.79 0.77 0.81 0.81
Adjusted current ratio 0.56 0.76 0.79 0.75 0.80 0.79
Net Profit Margin
Reported net profit margin 13.54% 10.61% 10.25% 6.93% 10.19% 10.44%
Adjusted net profit margin 10.33% 11.79% 10.98% 7.07% 11.15% 10.90%
Total Asset Turnover
Reported total asset turnover 0.51 0.72 0.76 0.80 0.77 0.78
Adjusted total asset turnover 0.51 0.72 0.76 0.81 0.78 0.79
Financial Leverage
Reported financial leverage 4.99 5.04 4.40 4.40 3.54 3.40
Adjusted financial leverage 3.76 3.61 3.43 3.39 2.84 2.84
Return on Equity (ROE)
Reported ROE 34.70% 38.30% 34.43% 24.44% 27.92% 27.80%
Adjusted ROE 19.97% 30.45% 28.72% 19.34% 24.57% 24.42%
Return on Assets (ROA)
Reported ROA 6.96% 7.60% 7.82% 5.56% 7.88% 8.19%
Adjusted ROA 5.31% 8.44% 8.37% 5.70% 8.66% 8.60%
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. General Mills Inc.'s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. General Mills Inc.'s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Mills Inc.'s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 General Mills Inc.'s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. General Mills Inc.'s adjusted ROE improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Mills Inc.'s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Current Ratio

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Current assets (USD $ in thousands) 4,123,700  4,061,400  3,937,200  3,785,700  4,393,500  4,298,900 
Current liabilities (USD $ in thousands) 7,341,900  5,330,800  5,014,700  4,890,100  5,423,500  5,293,900 
Current ratio1 0.56 0.76 0.79 0.77 0.81 0.81
Adjusted for Deferred Taxes
Adjusted current assets (USD $ in thousands) 4,123,700  4,061,400  3,937,200  3,685,600  4,319,400  4,170,900 
Adjusted current ratio2 0.56 0.76 0.79 0.75 0.80 0.79

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= 4,123,700 ÷ 7,341,900 = 0.56

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= 4,123,700 ÷ 7,341,900 = 0.56

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. General Mills Inc.'s adjusted current ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Net Profit Margin

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Net earnings attributable to General Mills (USD $ in thousands) 2,131,000  1,657,500  1,697,400  1,221,300  1,824,400  1,855,200 
Net sales (USD $ in thousands) 15,740,400  15,619,800  16,563,100  17,630,300  17,909,600  17,774,100 
Net profit margin1 13.54% 10.61% 10.25% 6.93% 10.19% 10.44%
Adjusted for Deferred Taxes
Adjusted net earnings attributable to General Mills (USD $ in thousands) 1,626,700  1,841,400  1,818,000  1,246,600  1,996,900  1,937,000 
Adjusted net profit margin2 10.33% 11.79% 10.98% 7.07% 11.15% 10.90%

2018 Calculations

1 Net profit margin = 100 × Net earnings attributable to General Mills ÷ Net sales
= 100 × 2,131,000 ÷ 15,740,400 = 13.54%

2 Adjusted net profit margin = 100 × Adjusted net earnings attributable to General Mills ÷ Net sales
= 100 × 1,626,700 ÷ 15,740,400 = 10.33%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. General Mills Inc.'s adjusted net profit margin improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Total Asset Turnover

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Net sales (USD $ in thousands) 15,740,400  15,619,800  16,563,100  17,630,300  17,909,600  17,774,100 
Total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,964,500  23,145,700  22,658,000 
Total asset turnover1 0.51 0.72 0.76 0.80 0.77 0.78
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,864,400  23,071,600  22,530,000 
Adjusted total asset turnover2 0.51 0.72 0.76 0.81 0.78 0.79

2018 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 15,740,400 ÷ 30,624,000 = 0.51

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 15,740,400 ÷ 30,624,000 = 0.51

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. General Mills Inc.'s adjusted total asset turnover deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,964,500  23,145,700  22,658,000 
Stockholders' equity (USD $ in thousands) 6,141,100  4,327,900  4,930,200  4,996,700  6,534,800  6,672,200 
Financial leverage1 4.99 5.04 4.40 4.40 3.54 3.40
Adjusted for Deferred Taxes
Adjusted total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,864,400  23,071,600  22,530,000 
Adjusted stockholders' equity (USD $ in thousands) 8,144,900  6,047,300  6,329,800  6,446,900  8,126,700  7,933,300 
Adjusted financial leverage2 3.76 3.61 3.43 3.39 2.84 2.84

2018 Calculations

1 Financial leverage = Total assets ÷ Stockholders' equity
= 30,624,000 ÷ 6,141,100 = 4.99

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders' equity
= 30,624,000 ÷ 8,144,900 = 3.76

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 General Mills Inc.'s adjusted financial leverage increased from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Net earnings attributable to General Mills (USD $ in thousands) 2,131,000  1,657,500  1,697,400  1,221,300  1,824,400  1,855,200 
Stockholders' equity (USD $ in thousands) 6,141,100  4,327,900  4,930,200  4,996,700  6,534,800  6,672,200 
ROE1 34.70% 38.30% 34.43% 24.44% 27.92% 27.80%
Adjusted for Deferred Taxes
Adjusted net earnings attributable to General Mills (USD $ in thousands) 1,626,700  1,841,400  1,818,000  1,246,600  1,996,900  1,937,000 
Adjusted stockholders' equity (USD $ in thousands) 8,144,900  6,047,300  6,329,800  6,446,900  8,126,700  7,933,300 
Adjusted ROE2 19.97% 30.45% 28.72% 19.34% 24.57% 24.42%

2018 Calculations

1 ROE = 100 × Net earnings attributable to General Mills ÷ Stockholders' equity
= 100 × 2,131,000 ÷ 6,141,100 = 34.70%

2 Adjusted ROE = 100 × Adjusted net earnings attributable to General Mills ÷ Adjusted stockholders' equity
= 100 × 1,626,700 ÷ 8,144,900 = 19.97%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. General Mills Inc.'s adjusted ROE improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Return on Assets (ROA)

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May 27, 2018 May 28, 2017 May 29, 2016 May 31, 2015 May 25, 2014 May 26, 2013
As Reported
Net earnings attributable to General Mills (USD $ in thousands) 2,131,000  1,657,500  1,697,400  1,221,300  1,824,400  1,855,200 
Total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,964,500  23,145,700  22,658,000 
ROA1 6.96% 7.60% 7.82% 5.56% 7.88% 8.19%
Adjusted for Deferred Taxes
Adjusted net earnings attributable to General Mills (USD $ in thousands) 1,626,700  1,841,400  1,818,000  1,246,600  1,996,900  1,937,000 
Adjusted total assets (USD $ in thousands) 30,624,000  21,812,600  21,712,300  21,864,400  23,071,600  22,530,000 
Adjusted ROA2 5.31% 8.44% 8.37% 5.70% 8.66% 8.60%

2018 Calculations

1 ROA = 100 × Net earnings attributable to General Mills ÷ Total assets
= 100 × 2,131,000 ÷ 30,624,000 = 6.96%

2 Adjusted ROA = 100 × Adjusted net earnings attributable to General Mills ÷ Adjusted total assets
= 100 × 1,626,700 ÷ 30,624,000 = 5.31%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. General Mills Inc.'s adjusted ROA improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.