-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TzM3+5bc+5b4ywJxd3vzYWC6T2IJADGsaBOrCcg8QWn/EXSR498xEIMfW1z38Pdj Sk1LsIW2jTvRtpxT7IJ1uw== 0000040704-96-000012.txt : 19960409 0000040704-96-000012.hdr.sgml : 19960409 ACCESSION NUMBER: 0000040704-96-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960225 FILED AS OF DATE: 19960408 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL MILLS INC CENTRAL INDEX KEY: 0000040704 STANDARD INDUSTRIAL CLASSIFICATION: GRAIN MILL PRODUCTS [2040] IRS NUMBER: 410274440 STATE OF INCORPORATION: DE FISCAL YEAR END: 0525 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01185 FILM NUMBER: 96545092 BUSINESS ADDRESS: STREET 1: NUMBER ONE GENERAL MILLS BLVD CITY: MINNEAPOLIS STATE: MN ZIP: 55426 BUSINESS PHONE: 6125402311 MAIL ADDRESS: STREET 1: P O BOX 1113 CITY: MINNEAPOLIS STATE: MN ZIP: 55440 10-Q 1 THIRD QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 25, 1996 / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____ TO _____ Commission file number: 1-1185 GENERAL MILLS, INC. (Exact name of registrant as specified in its charter) Delaware 41-0274440 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Number One General Mills Boulevard Minneapolis, MN 55426 (Mail: P.O. Box 1113) (Mail: 55440) (Address of principal executive offices) (Zip Code) (612) 540-2311 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ As of March 19, 1996, General Mills had 159,401,368 shares of its $.10 par value common stock outstanding (excluding 44,751,964 shares held in treasury). Part I. FINANCIAL INFORMATION Item 1. Financial Statements GENERAL MILLS, INC. CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In Millions, Except per Share Data) Thirteen Weeks Ended Thirty-Nine Weeks Ended February 25, February 26, February 25, February 26, 1996 1995 1996 1995 Continuing Operations: Sales $1,309.2 $1,224.2 $4,033.9 $3,798.2 Costs and Expenses: Cost of sales 533.1 520.9 1,654.8 1,576.2 Selling, general and administrative 523.1 467.9 1,533.4 1,445.0 Depreciation and amortization 45.0 46.7 138.4 137.8 Interest, net 25.1 25.7 77.9 73.2 Unusual expenses - 139.6 - 139.6 Total Costs and Expenses 1,126.3 1,200.8 3,404.5 3,371.8 Earnings from Continuing Operations before Taxes 182.9 23.4 629.4 426.4 Income Taxes 66.6 3.2 230.5 153.4 Earnings from Continuing Operations 116.3 20.2 398.9 273.0 Discontinued Operations after Taxes - (14.8) - 32.4 Net Earnings $ 116.3 $ 5.4 $ 398.9 $ 305.4 Earnings per Share: Continuing operations $ .73 $ .13 $ 2.51 $ 1.73 Discontinued operations - (.10) - .20 Net Earnings per Share $ .73 $ .03 $ 2.51 $ 1.93 Dividends per Share $ .47 $ .47 $ 1.41 $ 1.41 Average Number of Common Shares 159.2 157.9 158.8 157.9 See accompanying notes to consolidated condensed financial statements. GENERAL MILLS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In Millions) (Unaudited) (Unaudited) February 25, February 26, May 28, 1996 1995 1995 ASSETS Current Assets: Cash and cash equivalents $ 35.7 $ 26.2 $ 13.0 Receivables 375.5 345.9 277.3 Inventories: Valued primarily at FIFO 214.5 181.1 134.7 Valued at LIFO (FIFO value exceeds LIFO by $55.0, $47.7 and $53.0, respectively) 205.7 278.7 237.3 Prepaid expenses and other current assets 90.4 94.9 80.8 Deferred income taxes 135.1 142.1 153.8 Total Current Assets 1,056.9 1,068.9 896.9 Land, Buildings and Equipment, at Cost 2,521.3 2,576.7 2,611.9 Less accumulated depreciation (1,176.2) (1,116.2) (1,155.3) Net Land, Buildings and Equipment 1,345.1 1,460.5 1,456.6 Net assets of Discontinued Operations - 1,637.5 - Other Assets 1,034.2 996.1 1,004.7 Total Assets $3,436.2 $5,163.0 $3,358.2 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 505.4 $ 427.0 $ 494.0 Current portion of long-term debt 66.9 125.3 93.7 Notes payable 216.0 728.9 112.9 Accrued taxes 149.9 47.2 108.8 Other current liabilities 312.9 403.2 411.5 Total Current Liabilities 1,251.1 1,731.6 1,220.9 Long-term Debt 1,242.7 1,482.9 1,400.9 Deferred Income Taxes 261.2 249.1 248.6 Deferred Income Taxes - Tax Leases 160.4 177.0 169.1 Other Liabilities 169.1 169.3 177.7 Total Liabilities 3,084.5 3,809.9 3,217.2 Common Stock Subject to Put Options - 20.0 - Stockholders' Equity: Cumulative preference stock, none issued - - - Common stock, 204.2 shares issued 383.3 357.6 379.5 Retained earnings 1,410.4 2,542.0 1,233.3 Less common stock in treasury, at cost, shares of 44.8, 46.1 and 46.3, respectively (1,338.7) (1,375.1) (1,372.1) Unearned compensation and other (52.9) (135.4) (57.9) Cumulative foreign currency adjustment (50.4) (56.0) (41.8) Total Stockholders' Equity 351.7 1,333.1 141.0 Total Liabilities and Equity $3,436.2 $5,163.0 $3,358.2 See accompanying notes to consolidated condensed financial statements. GENERAL MILLS, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Millions) Thirty-Nine Weeks Ended February 25, February 26, 1996 1995 Cash Flows - Operating Activities: Earnings from continuing operations $398.9 $273.0 Adjustments to reconcile earnings to cash flow: Depreciation and amortization 138.4 137.8 Deferred income taxes 26.0 85.0 Change in current assets and liabilities (121.3) (449.2) Unusual expenses - 139.6 Other, net (3.8) (10.3) Cash provided by continuing operations 438.2 175.9 Cash provided (used) by discontinued operations (14.5) 173.8 Net Cash Provided by Operating Activities 423.7 349.7 Cash Flows - Investment Activities: Purchases of land, buildings and equipment (89.4) (104.1) Investments in businesses, intangibles and affiliates (29.5) (34.9) Purchases of marketable investments (19.7) (19.6) Proceeds from sale of marketable investments 21.8 16.4 Other, net (2.3) (17.7) Discontinued operations investment activities, net - (289.2) Net Cash Used by Investment Activities (119.1) (449.1) Cash Flows - Financing Activities: Increase in notes payable 28.8 288.3 Issuance of long-term debt 40.4 133.1 Payment of long-term debt (150.5) (51.0) Common stock issued 34.9 17.8 Purchases of common stock for treasury (1.7) (57.7) Dividends paid (223.8) (223.5) Other, net (10.0) (9.2) Net Cash Provided (Used) by Financing Activities (281.9) 97.8 Increase (Decrease) in Cash and Cash Equivalents $ 22.7 $(1.6) See accompanying notes to consolidated condensed financial statements. GENERAL MILLS, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) (1) Background These financial statements do not include certain information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the thirty-nine weeks ended February 25, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending May 26, 1996. These statements should be read in conjunction with the financial statements and footnotes included in our annual report for the year ended May 28, 1995. The accounting policies used in preparing these financial statements are the same as those described in our annual report. Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. (2) Discontinued Operations As of May 28, 1995, General Mills distributed the common stock of Darden Restaurants, Inc. (Darden) to General Mills' shareholders. This distribution reduced Stockholders' Equity by $1,218.7 million. Our former restaurant operations included in Darden are now presented as a part of Discontinued Operations for all periods presented. On May 18, 1995, we sold Gorton's, a leading marketer of frozen and canned seafood products, to Unilever United States, Inc. Gorton's is also included in Discontinued Operations for all periods presented. (3) Statements of Cash Flows During the first nine months, we paid $67.1 million for interest (net of amount capitalized) and $148.8 million for income taxes. (4) Long-term Debt In the third quarter of fiscal 1996, a new shelf registration statement filed with the Securities and Exchange Commission became effective for the issuance of up to $500 million in unsecured debt securities. The registration includes our continuing medium-term note program. (5) Unusual Items In the third quarter of fiscal 1995, we recorded restructuring charges related to shutting down and scaling back production systems at four food manufacturing locations. The charges primarily included asset write-offs, costs to dispose of assets and severance costs. These charges totalled $139.6 million pretax, and $82.8 million after tax ($.52 per share). Additional restructuring charges totaling $43.6 million pretax, $28.8 million after tax ($.19 per share) were recorded in the fourth quarter of fiscal 1995. It is expected that these restructuring activities will be substantially completed by the end of fiscal 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION During the fiscal year ended May 28, 1995 the company spun off its restaurant operations as a separate, free-standing company, Darden Restaurants, Inc., and sold the Gorton's frozen and canned seafood products business. The financial statements present the related assets and results as Discontinued Operations. The restaurant spinoff reduced Stockholders' Equity by $1,218.7 million at May 28, 1995. Continuing operations generated $262.3 million more cash through the first nine months of fiscal 1996 than in the same prior-year period. The increase in cash provided from continuing operations was mainly due to stronger operating results and a lower rate of increase in working capital. Our cash flow also reflected lower capital expenditures. Capital expenditures through nine months totaled $89.4 million, and for the full fiscal year are expected to reach approximately $125 million compared to $157 million in the prior year. If our operations perform as expected in the final quarter, we should generate significant cash from operations after capital investments for fiscal 1996, which is consistent with our longer-term cash flow expectations. For fiscal 1996 through 1998, we expect our capital investment needs (including development spending for our international joint ventures) to average significantly less per year than in the previous five-year period. Subject to meeting earnings-increase expectations, cash flow from operations after capital investments should grow and would be available to support growth initiatives including new business development, stock repurchases and dividend increases. Our short-term outside financing is obtained through private placement of commercial paper and bank notes. Our level of notes payable fluctuates based on cash flow needs. Our long-term outside financing is obtained primarily through our medium-term note program. First nine months' activity included new debt of $35.0 million and principal payments of $141.3 million under this program. In February 1996, we filed a new shelf registration statement with the Securities and Exchange Commission permitting the issuance of up to $500 million in unsecured debt securities, which will be available for the issuance of medium-term notes under our continuing program and for other long-term debt offerings. The nine months' cash flow has permitted us to reduce total debt (including Deferred Income Taxes-Tax Leases) by $90.6 million (long-term debt, exclusive of current portion, was reduced by $158.2 million). During the same period Total Stockholders' Equity has increased by $210.7 million. RESULTS OF OPERATIONS Third quarter sales of $1,309.2 million grew 7 percent from the prior year. Year-to-date sales of $4,033.9 million grew 6 percent. Third quarter earnings from operations of $116.3 million ($.73 per share) were up 13 percent from $103.0 million ($.65 per share) before restructuring charges of $82.8 million ($.52 per share), reported last year. Last year's third-quarter restructuring charges primarily related to elimination of the company's least-efficient consumer foods manufacturing capacity. Including those charges, 1995 earnings per share for continuing operations were 13 cents in the third quarter and $1.73 through nine months. Cumulative earnings of $398.9 million ($2.51 per share) were up 12 percent from $355.8 million ($2.25 per share) before restructuring charges, reported last year. The prior-year comparisons exclude results for Gorton's and the restaurant operations. The record results through nine months keep General Mills on pace toward its fiscal 1996 goal. The third-quarter results were driven by strong performance across our domestic businesses, including broad-based unit volume growth, strong profit gains by Big G cereals, Betty Crocker mixes and Gold Medal, and profit recovery in snacks. Year to date, the good progress reflects this domestic business momentum, as well as solid productivity improvement and accelerating international performance. Third-quarter results for U.S. operations reflected unit volume gains for every major business unit. Total domestic retail unit volume was up 7 percent from the prior year period, when volume was affected by the company's transition to new, efficient promotion strategies that have increased overall efficiency but resulted in one-time trade inventory reductions when they were implemented. This year's third-quarter volume strength included an 11 percent gain for Betty Crocker products driven by Helper dinner mixes, and a 10 percent volume gain for snacks fueled by innovative new offerings such as Pop Secret Jumbo Pop microwave popcorn and Sweet Rewards fat-free snack bars. Gold Medal products' volume grew 9 percent on the strength of dessert and baking mix performance. Big G cereals posted a 5 percent volume gain, and Yoplait-Colombo yogurt volume grew 3 percent. Big G's 5 percent volume gain for the period outpaced a strengthening ready- to-eat cereal market. Category volume in all measured outlets grew nearly 2 percent in the quarter, the strongest rate of growth in 18 months. Big G's performance was driven by well-supported product innovation efforts. These include new Frosted Cheerios, which achieved a 1.5 percent pound market share for the period; product improvements on several established brands; and the recent repositioning and relaunch of two cereals (Honey Frosted Wheaties and Crispy Wheaties `n Raisins) as extensions of the Wheaties brand franchise. Big G's pound share of the U.S. grocery cereal market was 24.3 percent in the third quarter, up 1.2 points from the same period a year earlier. Nine-month share was up 1.5 points to 23.4 percent. Through nine months, total domestic retail volume was up 6 percent, led by gains of 10 percent for Big G cereals and 6 percent for Betty Crocker. Market shares were even or up for most major product lines with the exception of fruit and grain snacks, where further product innovation is needed to fully restore share levels. Results for international operations were on target through nine months, including planned heavy development spending in the third quarter to support new market expansion by the company's international strategic alliances. Continued strong international volume gains boosted General Mills' worldwide unit volume growth to 8 percent for both the third quarter and nine months. General Mills' Canadian food operations reported volume gains of 5 percent in the quarter and 11 percent through nine months. Cereal Partners Worldwide (CPW), the company's cereal joint venture with Nestle, achieved a 23-percent volume increase in the quarter and 22-percent growth through nine months, with share gains in nearly every major market. Unit volume for the Snack Ventures Europe joint venture with PepsiCo Foods International grew 10 percent in the third quarter and 14 percent through nine months, including expansion into Eastern European markets. Late in the quarter, the International Dessert Partners joint venture with CPC International began introducing its initial line of dessert mix products in northern Mexico. Expansion to additional Latin American markets is planned later in the calendar year. Net interest expense for the first nine months increased by $4.7 million compared to last year, primarily due to higher interest rates. The effective tax rate for the first nine months of fiscal 1996 of 36.6% was more than the 36.0% rate for the first nine months of fiscal 1995. Last year's rate was lower because of the incremental tax benefit on the $139.6 million (pretax) restructuring charge recorded in last year's third quarter results. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 11 Statement re Computation of Earnings per Share. Exhibit 12 Statement re Ratio of Earnings to Fixed Charges. Exhibit 27 Financial Data Schedule. (b) Reports on Form 8-K On December 19, 1995, the Company filed a report on Form 8-K dated December 11, 1995 which included exhibits containing (i) the Rights Agreement, dated as of December 11, 1995, between General Mills, Inc. and Norwest Bank Minnesota, N.A., as Rights Agent; (ii) the Company's By-Laws as amended by the Board of Directors on December 11, 1995; and (iii) a new form of Management Continuity Agreement approved by the Board of Directors on December 11, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENERAL MILLS, INC. (Registrant) Date April 5, 1996 /s/ S. S. Marshall S. S. Marshall Senior Vice President, General Counsel and Secretary Date April 5, 1996 /s/ K. L. Thome K. L. Thome Senior Vice President, Financial Operations EX-11 2 EXHIBIT 11 TO 10-Q Exhibit 11 GENERAL MILLS, INC. COMPUTATION OF EARNINGS PER SHARE (In Millions, Except per Share Data) Thirty-Nine Weeks Ended February 25, February 26, 1996 1995 Net Earnings $398.9 $305.4 Computation of Shares: Weighted average number of shares outstanding, excluding shares held in treasury (a) 158.8 157.9 Net shares resulting from the assumed exercise of certain stock options (b) 3.1* 2.0* Total common shares and common share equivalents 161.9 159.9 Earnings per Share $2.51 $1.93 Notes to Exhibit 11: (a) Computed as the weighted average of net shares outstanding on stock-exchange trading days. (b) Common share equivalents are computed by the "treasury stock" method. This method first determines the number of shares issuable under stock options that had an option price below the average market price for the period, and then deducts the number of shares that could have been repurchased with the proceeds of options exercised. * Common share equivalents are not material. As a result, earnings per share have been computed using the weighted average number of shares outstanding of 158.8 million and 157.9 million for the first nine months of fiscal 1996 and 1995, respectively. EX-12 3 EXHIBIT 12 TO 10-Q Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES Thirty-Nine Weeks Ended Fiscal Year Ended February 25, February 26, May 28, May 29, May 30, May 31, May 26, 1996 1995 1995 1994 1993 1992 1991 Ratio of Earnings to Fixed Charges 7.56 5.50 4.10 6.18 8.62 9.28 8.06 For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from continuing operations plus fixed charges (net of capitalized interest). Fixed charges represent interest (whether expensed or capitalized) and one-third (the proportion deemed representative of the interest factor) of rents of continuing operations. EX-27 4 ART. 5 FDS FOR 3RD QTR.
5 This schedule contains summary financial information extracted from our Form 10-Q for the thirty-nine week period ended February 25, 1996 and is qualified in its entirety by reference to such financial statements. 9-MOS MAY-28-1995 FEB-25-1996 35,700,000 0 375,500,000 0 420,200,000 1,056,900,000 2,521,300,000 (1,176,200,000) 3,436,200,000 1,251,100,000 1,242,700,000 383,300,000 0 0 (31,600,000) 3,436,200,000 4,033,900,000 4,033,900,000 1,654,800,000 1,654,800,000 138,400,000 0 77,900,000 629,400,000 230,500,000 398,900,000 0 0 0 398,900,000 2.51 2.51
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