General Mills has reached a partial settlement with a group of global insurance companies who participated in the reinsurance of a property policy covering a 1994 oats handling incident. The company will record this partial settlement, totaling approximately $55 million pre-tax net of associated costs ($34 million after tax or 12 cents per share), in the fourth quarter of fiscal 2001, which ended May 27, 2001. The settlement proceeds will be reported as an unusual item. General Mills remains on track to achieve double-digit growth in reported earnings per share for the 2001 fiscal year before including unusual items.
An arbitration proceeding currently is under way regarding the liability of the remaining reinsurers in this matter. General Mills previously received a separate insurance settlement related to this incident from another carrier. That settlement was included in fiscal 1998 results.
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The insurance settlements relate to a 1994 incident, when an independent licensed contractor to General Mills improperly substituted one pesticide for another in treating some of the company’s raw oat supplies. While the substitution presented no consumer health or safety issues, the substituted pesticide was not approved by the Environmental Protection Agency for use on oats. The contractor deliberately concealed the substitution from the company, and was convicted on criminal charges. The company recorded an after-tax charge to fiscal 1994 earnings.
Commenting on the agreement, General Mills Chairman and Chief Executive Officer Steve Sanger said, “We are pleased with this settlement as a partial recovery of the costs we incurred. It’s welcome news to the General Mills people who worked so hard in 1994 to help the company rebound from this event. We will continue to aggressively pursue our claims against the remaining reinsurers.”
General Mills expects the fourth-quarter settlement proceeds to be partially offset by unusual expense items such as one-time costs associated with the company’s pending acquisition of The Pillsbury Company. General Mills will report fourth-quarter and full-year results on June 27, 2001.
This press release contains forward-looking statements based on management’s current expectations and assumptions. In particular, projected fourth quarter and 2001 annual results are estimates. Such statements are subject to certain risks and uncertainties that could cause actual results to differ. General Mills undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.
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