-----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, LMdMd32V9u9/clnKOg19s99f+7s7NpMN0EXzGsQVW3VQgWgaFe/nViNufkmarfuP sg4PuWD2w3iG65RV69ggcg== 0000040704-97-000014.txt : 19970404 0000040704-97-000014.hdr.sgml : 19970404 ACCESSION NUMBER: 0000040704-97-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970223 FILED AS OF DATE: 19970403 SROS: CSX 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: 97574066 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, QUARTER ENDED 2/23/97 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 23, 1997 / / 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, 1997, General Mills had 161,178,868 shares of its $.10 par value common stock outstanding (excluding 42,974,464 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 Feb. 23, Feb. 25, Feb. 23, Feb. 25, 1997 1996 1997 1996 --------- --------- --------- ------- Sales $1,289.6 $1,309.2 $4,165.3 $4,033.9 Costs and Expenses: Cost of sales 548.3 533.1 1,743.5 1,654.8 Selling, general and administrative 470.0 515.8 1,568.2 1,524.5 Depreciation and amortization 45.1 45.0 131.0 138.4 Interest, net 25.2 25.1 72.5 77.9 Unusual expenses - - 48.4 - ------- ------- ------- ------- Total Costs and Expenses 1,088.6 1,119.0 3,563.6 3,395.6 ------- ------- ------- ------- Earnings before Taxes and Earnings (Losses) of Joint Ventures 201.0 190.2 601.7 638.3 Income Taxes 72.7 70.4 219.7 236.8 Earnings(Losses)from Joint Ventures (5.5) (3.5) (4.8) (2.6) -------- -------- -------- -------- Net Earnings $ 122.8 $ 116.3 $ 377.2 $ 398.9 ======= ======= ======= ======= Earnings per Share $ .78 $ .73 $ 2.40 $ 2.51 ======= ======= ======= ======= Dividends per Share $ .50 $ .47 $ 1.50 $ 1.41 ======= ======= ======= ======= Average Number of Common Shares 157.5 159.2 157.3 158.8 ======= ======= ======= ======= See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In Millions)
(Unaudited) (Unaudited) February 23, February 25, May 26, 1997 1996 1996 --------- --------- ------ ASSETS Current Assets: Cash and cash equivalents $ 31.0 $ 35.7 $ 20.6 Receivables 413.7 375.5 337.8 Inventories: Valued primarily at FIFO 184.6 214.5 186.3 Valued at LIFO (FIFO value exceeds LIFO by $59.6, $55.0 and $55.7, respectively) 228.4 205.7 209.2 Prepaid expenses and other current assets 141.6 90.4 132.6 Deferred income taxes 107.0 135.1 108.6 ------- ----- ----- Total Current Assets 1,106.3 1,056.9 995.1 ------- ----- ----- Land, Buildings and Equipment, at Cost 2,532.2 2,521.3 2,508.0 Less accumulated depreciation (1,251.6) (1,176.2) (1,195.6) ------- -------- -------- Net Land, Buildings and Equipment 1,280.6 1,345.1 1,312.4 Intangibles 657.6 114.4 110.3 Other Assets 943.3 919.8 876.9 ------- ------- -------- Total Assets $3,987.8 $3,436.2 $3,294.7 ======== ======== ======== LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 548.3 $ 505.4 $ 590.7 Current portion of long-term debt 158.5 66.9 75.4 Notes payable 442.0 216.0 141.6 Accrued taxes 151.0 149.9 124.3 Other current liabilities 260.1 312.9 259.9 -------- ------- -------- Total Current Liabilities 1,559.9 1,251.1 1,191.9 Long-term Debt 1,224.7 1,242.7 1,220.9 Deferred Income Taxes 240.0 261.2 250.0 Deferred Income Taxes - Tax Leases 147.1 160.4 157.5 Other Liabilities 167.1 169.1 166.7 -------- ------- -------- Total Liabilities 3,338.8 3,084.5 2,987.0 -------- ------- -------- Stockholders' Equity: Cumulative preference stock, none issued - - - Common stock, 204.2 shares issued 578.9 383.3 384.3 Retained earnings 1,552.2 1,410.4 1,408.6 Less common stock in treasury, at cost, shares of 42.4, 44.8 and 45.2, respectively (1,370.0) (1,338.7) (1,367.4) Unearned compensation and other (54.0) (52.9) (61.2) Cumulative foreign currency adjustment (58.1) (50.4) (56.6) -------- ------- -------- Total Stockholders' Equity 649.0 351.7 307.7 -------- ------- -------- Total Liabilities and Equity $3,987.8 $3,436.2 $3,294.7 ======== ======== ======== 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 23, February 25, 1997 1996 Cash Flows - Operating Activities: Earnings from continuing operations $ 377.2 $ 398.9 Adjustments to reconcile earnings to cash flow: Depreciation and amortization 131.0 138.4 Deferred income taxes (7.2) 26.0 Change in current assets and liabilities, net of effects from business acquired (148.6) (121.3) Unusual expenses 48.4 -- Other, net (10.4) (3.8) ------ ------ Cash provided by continuing operations 390.4 438.2 Cash used by discontinued operations (5.3) (14.5) ------ ------ Net Cash Provided by Operating Activities 385.1 423.7 ------ ------ Cash Flows - Investment Activities: Purchases of land, buildings and equipment (113.7) (89.4) Investments in businesses, intangibles and affiliates (28.3) (29.5) Purchases of marketable investments (5.9) (19.7) Proceeds from sale of marketable investments 36.9 21.8 Other, net (19.5) (2.3) ------ ------ Net Cash Used by Investment Activities (130.5) (119.1) ------ ------ Cash Flows - Financing Activities: Increase in notes payable 245.3 28.8 Issuance of long-term debt 46.8 40.4 Payment of long-term debt (119.5) (150.5) Common stock issued 47.4 34.9 Purchases of common stock for treasury (219.8) (1.7) Dividends paid (235.7) (223.8) Other, net (8.7) (10.0) ------ ------ Net Cash Used by Financing Activities (244.2) (281.9) ------ ------ Increase in Cash and Cash Equivalents $ 10.4 $ 22.7 ====== ====== 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 23, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending May 25, 1997. These statements should be read in conjunction with the financial statements and footnotes included in our annual report for the year ended May 26, 1996. The accounting policies used in preparing these financial statements are the same as those described in our annual report, except that the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," as of the beginning of fiscal 1997 (see note 3 below). Certain amounts in the prior year's financial statements have been reclassified to conform to the current year's presentation. (2) Acquisition On January 31, 1997, the Company acquired the branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc., including its Chex and Cookie Crisp brands. This acquisition includes a Cincinnati, Ohio, manufacturing facility that employs 240 people, and trademark and technology rights for the branded products in the Americas. The purchase price of $570 million (subject to a purchase price adjustment) involves a combination of about $355 million in General Mills common stock (approximately 5.4 million shares) and the assumption of about $215 million of Ralcorp debt and accrued interest. This acquisition has been accounted for under the purchase method of accounting. The purchase price has been preliminarily allocated based on estimated fair values at date of acquisition, pending final determination of certain acquired balances. The results of the acquired businesses have been included in the consolidated financial statements since the date of acquisition. (3) Unusual Items We adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" as of the beginning of fiscal 1997. The initial, non-cash charge recorded in the first quarter upon adoption of SFAS No. 121 was $48.4 million pre-tax, $29.2 million after-tax ($.18 per share). The charge represents a reduction in the carrying amounts of certain impaired assets to their estimated fair value, determined on the basis of estimated cash flows or net realizable value. The impaired assets include machinery and equipment related to inventory production at various plant locations. The impairments relate to assets not currently in use, assets significantly underutilized, and assets with limited planned future use. (4) Statements of Cash Flows During the first nine months, we paid $58.8 million for interest (net of amount capitalized) and $186.4 million for income taxes. In the third quarter, we issued common stock of $355 million and assumed debt and accrued interest of $215 million in the acquisition of the branded business of Ralcorp Holdings, Inc. (see Note 2). (5) Stockholders' Equity We purchased 3.9 million shares of our common stock in the open market for $219.2 million during the first nine months of fiscal 1997. We also issued put options, through private placements, for 2.2 million shares of our common stock for $3.5 million in premiums. As of February 23, 1997, put options for 1.5 million shares remain outstanding at exercise prices ranging from $64.00 to $66.71 per share with exercise dates from May 1997 to August 1997. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Operations generated $47.8 million less cash in the first nine months of fiscal 1997 than in the same prior-year period. The decrease in cash provided by operations as compared to last year was caused by a $27.3 million increase in the working capital change (principally, a decrease in accounts payable) and by a $20.5 million decrease in cash from operating results, after adjustment for non-cash charges. Fiscal 1997 capital expenditures are estimated to be approximately $160.0 million. During the first nine months, capital expenditures totaled $113.7 million. 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 issuance of $38.0 million and repurchases and debt payments of $117.2 million under this program. In the first nine months of fiscal 1997, we acquired 3.9 million shares of common stock for our treasury for $219.2 million. RESULTS OF OPERATIONS Third quarter sales of $1,289.6 million were down 1 percent from the prior year due to lower Big G cereal prices implemented in June 1996 and a 1 percent decline in domestic retail packaged food volume. The unit volume comparison reflects lower levels of marketing spending in this year's third quarter and the impact of two less shipping days in the period due to holiday timing. Nine months sales of $4,165.3 million grew 3 percent. Third quarter earnings from operations of $122.8 million ($.78 per share) were up 6 percent from $116.3 million ($.73 per share) reported last year. Results for the third quarter were reduced 2 cents per share as expected by the acquisition of the Ralcorp branded cereal and snacks businesses completed January 31, 1997. Cumulative earnings from operations of $406.4 million ($2.58 per share), before the non-cash charge associated with the adoption of SFAS No. 121 (see Note (3)) increased 2 percent from $398.9 million ($2.51 per share) last year. Adoption of SFAS No. 121 resulted in a first quarter non-cash, after-tax charge of $29.2 million, or 18 cents per share. Including this non-cash charge, nine months earnings were $377.2 million ($2.40 per share). The first half of this year was characterized by above-trendline 6 percent unit volume growth, but earnings were essentially flat because they included the majority of the impact from Big G's cereal price declines. Third-quarter results show just the reverse--domestic volume was down slightly but earnings were up, reflecting lower levels of marketing activity versus the prior year and the full implementation of expense reductions made in conjunction with the cereal price declines. The nine-month earnings results include approximately 18 cents of the expected 20 cents per share earnings impact in 1997 from Big G's cereal price decline, with about 2 cents falling in the third quarter. The nine-month unit volume and earnings results, excluding the effects of the cereal price declines, were in line with our expectations. Fourth-quarter marketing activity will include the launch of our corporate-wide promotion centered on the movie "The Lost World: Jurassic Park." We expect unit volume growth to resume in the fourth quarter. The strength of that volume increase will be the key factor determining our annual earnings gain. Through nine months, total domestic retail unit volume was up 4 percent, and market shares were even or up for virtually all of the company's major product lines. For the third quarter, Snacks led unit volume performance with an 8 percent gain, including good growth from fruit snacks and strong initial results for new Golden Grahams Treats snack bars. Yoplait and Colombo yogurt volume was up 9 percent in the quarter, driven by good performance from core Yoplait lines and the continued successful geographic expansion of Colombo distribution. Third-quarter volumes for desserts and Helper dinner mixes were down from particularly strong prior-year levels. Big G cereal unit volume was down 3 percent in the third quarter reflecting the shift of some volume into the second quarter, when cereal volume grew more than 10 percent, and lower promotional spending levels versus the prior year. The new French Toast Crunch and Betty Crocker Cinnamon Streusel and Dutch Apple cereals introduced in the second quarter continued to post good initial results. Together with Frosted Cheerios, introduced in September 1995, these new cereals contributed more than 3 share points in the quarter. Through nine months, Big G volume was up 4 percent, outpacing the ready-to-eat cereal category's 1 percent growth in all measured outlets. As a result, Big G share through nine months (excluding the acquired Ralcorp brands) was up nearly 1 point to 24 percent. Unit volume for the company's expanding international operations was up 8 percent for the third quarter and through nine months. Cereal Partners Worldwide (CPW), the company's joint venture with Nestle, led international volume performance with 18 percent gains in the quarter and nine months. CPW continues to record share gains in its major established markets while expanding to new market areas. Late in calendar 1996 CPW entered Brazil, and the venture is currently expanding to markets in central and eastern Europe. In Canada, cereal volume was up more than 17 percent in the third quarter, pacing a total unit volume increase of 15 percent. Volume for the Snack Ventures Europe (SVE) joint venture with PepsiCo was down in the quarter and through nine months versus prior-year results that included heavy promotional activity in key markets. The International Dessert Partners (IDP) joint venture with CPC International expanded operations beyond its four initial Latin American markets to Uruguay, Chile and Peru, and continued to record good distribution gains in its introductory year. International earnings for the quarter and nine months were below the prior year's, primarily due to year-one development spending for IDP, SVE's key market volume declines, and new market expansion by CPW. During the quarter, General Mills issued approximately 5.4 million common shares in conjunction with its acquisition of the Ralcorp branded cereal and snacks businesses. Following the close of that transaction, the company renewed its share repurchase activity, consistent with the previously stated long-term goal of reducing shares outstanding by 1 to 2 percent annually. Third quarter purchases totaled 150,000 shares, bringing the nine-month total to 3.9 million shares repurchased. Third-quarter average shares outstanding totaled 157.5 million shares, down 1.7 million shares from the same period a year earlier. Interest expense was $5.4 million lower for the first nine months, primarily reflecting lower debt levels and rates. Our reported tax rate for the first nine months was 36.5 percent. Excluding the effects of SFAS No. 121, our tax rate for the first nine months was 36.7 percent, compared to 37.1 percent in last year's comparable period. PART II. OTHER INFORMATION Item 5. Other Information. This report contains certain forward-looking statements which are based on management's current views and assumptions regarding future events and financial performance. These statements are qualified by reference to the section "Cautionary Statement Relevant to Forward-Looking Information" in Item 1 of our Annual Report on Form 10-K for the fiscal year ended May 26, 1996, which lists important factors that could cause actual results to differ materially from those discussed in this report. 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 January 28, 1997 the Company filed a report on Form 8-K updating the financial statements contained in the December 27, 1996 Proxy Statement-Prospectus concerning the acquisition of Ralcorp Holdings, Inc. and on February 13, 1997 the Company filed a report on Form 8-K describing the completion of the transaction and filing as exhibits certain documents relating to the acquisition and debt assumed by the Company in connection with the acquisition. 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 3, 1997 /s/ S. S. Marshall ------------- ---------------------------------- S. S. Marshall Senior Vice President, General Counsel Date April 3, 1997 /s/ K. L. Thome ------------- -------------------------------- K. L. Thome Senior Vice President, Financial Operations EX-11 2 EXHIBIT 11 TO 3RD QUARTER FORM 10-Q, 1997 Exhibit 11 GENERAL MILLS, INC. COMPUTATION OF EARNINGS PER SHARE (In Millions, Except per Share Data)
Thirty-Nine Weeks Ended February 23, February 25, 1997 1996 Net Earnings $377.2 $398.9 ====== ====== Computation of Shares: Weighted average number of shares outstanding, excluding shares held in treasury (a) 157.3 158.8 Net shares resulting from the assumed exercise of certain stock options (b) 4.2* 3.1* Total common shares and common share equivalents 161.5 161.9 ====== ===== Earnings per Share $ 2.40 $ 2.51 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 157.3 million and 158.8 million for the first nine months of fiscal 1997 and 1996, respectively.
EX-12 3 EXHIBIT 12 TO 3RD QUARTER FORM 10-Q, FISCAL 1997 Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES
Thirty-Nine Weeks Ended Fiscal Year Ended February 23, February 25, May 26, May 28, May 29, May 30, May 31, 1997 1996 1996 1995 1994 1993 1992 --------------------- ------------------------------- Ratio of Earnings to Fixed Charges 7.48 7.56 6.94 4.10 6.18 8.62 9.28
For purposes of computing the ratio of earnings to fixed charges, earnings represent pretax income from continuing operations, plus pretax earnings or losses of joint ventures 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 FDS --
5 This schedule contains summary financial information extracted from our Form 10-Q for the thirty-nine week period ended February 23, 1997, and is qualified in its entirety by reference to such financial statements. 9-MOS MAY-25-1997 MAY-27-1996 FEB-23-1997 31,000,000 0 413,700,000 0 413,000,000 1,106,300,000 2,532,200,000 (1,251,600,000) 3,987,800,000 1,559,900,000 1,224,700,000 0 0 578,900,000 70,100,000 3,987,800,000 4,165,300,000 4,165,300,000 1,743,500,000 1,743,500,000 131,000,000 0 72,500,000 601,700,000 219,700,000 377,200,000 0 0 0 377,200,000 2.40 2.40
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