The results revealed in a US Securities and Exchange Commission (SEC) filing by the Minneapolis food giant represent a dramatic turn of events from fiscal 2002. In that year the company’s pension plans were overfunded by $571 million, according to a Dow Jones report.
Like many corporate pension plans that have been hit with the underfunding stick in recent months, General Mills points to weak stock market conditions in recent years as a contributing factor in this fiscal year’s performance. Also chipping in were actions taken by the company to modify its pension-plan assumptions by reducing the company’s discount rate and lowering its expected rate of return on pension plan assets to 9.6% from 10.4%.
Additionally, General Mills posted that the company’s other retirement benefit plans were underfunded by $612 million as of May 25, widened from $378 million a year earlier. To help correct this recent dip, the company said it plans to contribute less than $10 million toward the pension plans in the current fiscal year and contribute about $20 million for each of the next three years toward its other retirement plans
The company estimates its net pension and postretirement expense will be about $12 million in the current fiscal year, compared with income of $48 million in fiscal 2003. These numbers are in line with earlier predictions made to analysts in June, when the company forecast net pension and postretirement expense would be just more than $10 million in 2004.