-----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, WxD5YoVO+9WT73jNFA4p+Pad4pR9GjtZvJos8mRdG7CbgOHcIaLDvJ4hIDKiV9yf fGXfTO6K9fGZX7AV/m4srQ== 0000040704-98-000044.txt : 19981009 0000040704-98-000044.hdr.sgml : 19981009 ACCESSION NUMBER: 0000040704-98-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980830 FILED AS OF DATE: 19981008 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: SEC FILE NUMBER: 001-01185 FILM NUMBER: 98722515 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 FORM 10-Q FOR QUARTER ENDED AUGUST 30, 1998 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 AUGUST 30, 1998 / / 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 September 23, 1998, General Mills had 152,937,831 shares of its $.10 par value common stock outstanding (excluding 51,215,501 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 August 30,August 24, 1998 1997 Sales $1,473.1 $1,416.5 Costs and Expenses: Cost of sales 583.7 581.7 Selling, general and administrative 634.1 588.7 Interest, net 29.8 31.2 Unusual items - (.4) Total Costs and Expenses 1,247.6 1,201.2 Earnings before Taxes and Earnings (Losses) of Joint Ventures 225.5 215.3 Income Taxes 83.1 81.5 Earnings (Losses) from Joint Ventures 2.6 .5 Net Earnings $ 145.0 $ 134.3 Earnings per Share $ .94 $ .84 Average Number of Common Shares 154.1 159.7 Earnings per Share - Assuming Dilution $ .92 $ .82 Average Number of Common Shares - Assuming Dilution 157.4 163.7 Dividends per Share $ .53 $ .53 See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (In Millions) (Unaudited) (Unaudited) ----------- ----------- August 30, August 24, May 31, 1998 1997 1998 ---- ---- ---- ASSETS Current Assets: Cash and cash equivalents $ 29.7 $ 18.2 $ 6.4 Receivables 458.4 419.3 395.1 Inventories: Valued primarily at FIFO 211.2 205.7 168.3 Valued at LIFO (FIFO value exceeds LIFO by $39.1, $48.5 and $39.1, respectively) 261.6 251.6 221.4 Prepaid expenses and other current assets 74.0 111.1 107.2 Deferred income taxes 135.4 106.7 136.9 Total Current Assets 1,170.3 1,112.6 1,035.3 Land, Buildings and Equipment, at Cost 2,539.7 2,605.9 2,489.0 Less accumulated depreciation (1,336.6) (1,330.8) (1,302.7) Net Land, Buildings and Equipment 1,203.1 1,275.1 1,186.3 Intangibles 625.4 649.2 630.4 Other Assets 1,026.1 925.6 1,009.4 Total Assets $4,024.9 $3,962.5 $3,861.4 LIABILITIES AND EQUITY Current Liabilities: Accounts payable $ 657.7 $ 662.8 $ 593.1 Current portion of long-term debt 146.9 171.4 153.2 Notes payable 424.1 189.9 264.1 Accrued taxes 197.9 169.3 148.5 Other current liabilities 254.1 232.3 284.8 Total Current Liabilities 1,680.7 1,425.7 1,443.7 Long-term Debt 1,612.2 1,497.0 1,640.4 Deferred Income Taxes 282.5 275.8 284.8 Deferred Income Taxes - Tax Leases 129.4 144.1 129.1 Other Liabilities 174.3 173.8 173.2 Total Liabilities 3,879.1 3,516.4 3,671.2 Stockholders' Equity: Cumulative preference stock, none issued - - - Common stock, 204.2 shares issued 620.5 585.8 619.6 Retained earnings 1,686.2 1,585.6 1,622.8 Less common stock in treasury, at cost, shares of 51.0, 45.6 and 49.4, respectively (2,048.0) (1,604.1) (1,935.7) Unearned compensation (73.1) (79.0) (75.4) Accumulated other comprehensive income (39.8) (42.2) (41.1) Total Stockholders' Equity 145.8 446.1 190.2 Total Liabilities and Equity $4,024.9 $3,962.5 $3,861.4 See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In Millions) Thirteen Weeks Ended August 30, August 24, 1998 1997 ---- ---- Cash Flows - Operating Activities: Net earnings $145.0 $134.3 Adjustments to reconcile earnings to cash flow: Depreciation and amortization 47.1 48.9 Deferred income taxes (3.9) 2.9 Change in current assets and liabilities (41.2) 20.4 Unusual items - (.4) Other, net (7.6) 9.7 Cash provided by continuing operations 139.4 215.8 Cash used by discontinued operations (.8) (1.1) Net Cash Provided by Operating Activities 138.6 214.7 Cash Flows - Investment Activities: Purchases of land, buildings and equipment (63.0) (40.1) Investments in businesses, intangibles and affiliates, net of investment returns and dividends (2.9) 15.4 Purchases of marketable investments (2.4) (2.2) Proceeds from sale of marketable investments 16.8 30.6 Other, net .9 (24.2) Net Cash Used by Investment Activities (50.6) (20.5) Cash Flows - Financing Activities: Change in notes payable 161.8 (9.2) Issuance of long-term debt 2.4 2.1 Payment of long-term debt (31.8) (.2) Common stock issued 10.4 18.6 Purchases of common stock for treasury (125.6) (119.2) Dividends paid (82.0) (84.7) Other, net .1 3.8 Net Cash Used by Financing Activities (64.7) (188.8) Increase in Cash and Cash Equivalents $ 23.3 $ 5.4 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 thirteen weeks ended August 30, 1998 are not necessarily indicative of the results that may be expected for the fiscal year ending May 30, 1999. These statements should be read in conjunction with the financial statements and footnotes included in our annual report for the year ended May 31, 1998. 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) Unusual Items In the first quarter of fiscal 1998 we recorded several unusual items resulting in a net after-tax charge of $.1 million. We received an insurance settlement from one of our carriers related to costs incurred in fiscal 1995 and 1996 (charged against fiscal 1994) from the improper use of a pesticide by an independent contractor in treating some of the company's oat supplies. Snack Ventures Europe (SVE), our joint venture with PepsiCo, Inc., recorded restructuring charges for productivity initiatives primarily related to production consolidation. We also recorded charges associated with restructuring our sales regions and our trade and promotion organization. (3) Statements of Cash Flows During the quarter, we made interest payments of $15.9 million (net of amount capitalized) and paid $34.9 million in income taxes. (4) Comprehensive Income We adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," effective June 1, 1998. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components, including all changes in equity during a period except those resulting from investments by owners or distributions to owners. The following table summarizes total comprehensive income for the periods presented (in millions): Thirteen Weeks Ended Aug. 30, Aug. 24, 1998 1997 Net Earnings $145.0 $134.3 Other comprehensive income (loss): Unrealized gain on securities 2.7 2.3 Foreign currency translation adjustments (1.4) (7.6) ----------- ----- ----- 1.3 (5.3) Total comprehensive income $146.3 $129.0 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION Operations generated $76.4 million less cash in the first quarter of fiscal 1999 than in the same prior-year period. The decrease in cash provided by operations as compared to last year was caused by a $61.6 million increase in the working capital change (primarily due to receivables) and by a $14.8 million decrease in cash from operations, after adjustment for non-cash items. Fiscal 1999 capital expenditures are estimated to be approximately $200 million. During the first three months, capital expenditures totaled $63.0 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. Activity through three months under this program consisted of debt payments of $30.0 million. In the first quarter of fiscal 1999, we acquired 1.9 million shares of common stock for our treasury for $125.6 million. RESULTS OF OPERATIONS Sales in the first quarter grew 4 percent to $1,473.1 million. First quarter net earnings of $145.0 million ($.94 per share), increased by 8 percent from $134.3 million ($.84 per share). Basic earnings per share of $.94 for the first quarter of fiscal 1999 were up 12 percent from $.84 earned in the same period last year. Diluted earnings per share also rose 12 percent to $.92. We recorded several unusual items in the first quarter last year that added a net $.4 million to pre-tax income and had no material after-tax impact. These items included charges related to productivity initiatives by the company's Snack Ventures Europe joint venture with PepsiCo and several other small restructuring actions, which were offset by receipt of a settlement from one of the company's insurance carriers for costs previously incurred from an independent contractor's improper treatment of some oat supplies. First-quarter results met our expectations and represented a good start to the year. Unit volume was up for each of our U.S. retail food divisions in the quarter. International unit volume grew 5 percent, with earnings from our joint ventures contributing to profit growth. In addition, we continued to record good productivity gains companywide. Our domestic unit volume grew 4 percent in the first quarter, with Big G cereal volume up 1 percent and combined volume for all other U.S. businesses up 6 percent. Unit volume for our convenience food businesses (yogurt and snack foods) was up 9 percent. This included gains of 17 percent for fruit snacks and 11 percent for Pop Secret microwave popcorn, driven by strong new flavor varieties and effective back-to-school merchandising programs. Chex Mix snack volume was up 30 percent. Yogurt volume grew more than 13 percent in the first quarter, led by Yoplait Original Style, Custard Style and Trix multipack product lines. Volume for Betty Crocker baking products, dinner and side dish mixes rose nearly 5 percent. Foodservice volume was down 1 percent in the first quarter. Big G cereals' 1 percent volume increase included good performance from established brands, led by Cheerios, Honey Nut Cheerios and the line of Total fortified cereals. Cinnamon Grahams cereal, introduced nationwide in August 1997, and new Honey Nut Chex, which began entering distribution in about 20 percent of the U.S. in August 1998, also contributed to volume growth. For the cereal category, pound volume in all measured outlets declined 1 percent from the prior year, when first-quarter category volume grew 2 percent. Big G retail movement in the quarter was also below year-ago levels, reflecting differences in new product activity and merchandising timing. Big G's pound market share for the period was 24.5 percent and dollar share was 30.3 percent. Combined unit volume for our international operations grew 5 percent in the first quarter. Cereal Partners Worldwide (CPW), our joint venture with Nestle, led international performance and achieved a 9 percent volume gain. The volume growth was broadly based, including good increases recorded in western European markets, Poland, and Latin America. Volume for the International Dessert Partners (IDP) joint venture with Bestfoods in Latin America was lower in the quarter. Snack Ventures Europe (SVE), our joint venture with PepsiCo, posted a 12 percent volume increase with good performance in core Western European markets. In Canada, unit volume declined slightly and profits were adversely affected by the impact of foreign currency translation. However, Canadian cereal unit volume was up 1 percent and market shares were strong. During the quarter, we repurchased 1.9 million shares of common stock at an average price of approximately $66 per share. This activity is consistent with our ongoing share repurchase program, which has a goal of reducing the number of shares outstanding by an average of 1 to 2 percent annually. Average shares outstanding (basic) for the quarter totaled 154.1 million. This was down significantly from the previous year's first-quarter average of 159.7 million shares, which reflected the issuance of 5.4 million shares in conjunction with our February 1997 acquisition of the Ralcorp branded cereal and snack businesses. Cumulative open-market share repurchases since that time have exceeded the number of shares issued in that transaction. Interest expense in the first quarter totaled $29.8 million, down slightly from last year's $31.2 million due to favorable rates. Our tax rate (excluding unusual items) for the quarter was 36.9 percent compared to 37.7 percent in last year's quarter. The rate decrease was due primarily to a reduced state effective rate. Our reported tax rates for first quarter fiscal 1999 and 1998 were 36.9 percent and 37.9 percent, respectively. YEAR 2000 The year 2000 issue is the result of computer programs written using two digits (rather than four) to define years. Computers or other equipment with date-sensitive software may recognize "00" as 1900 rather than 2000. This could result in system failures or miscalculations. If we, or our significant customers, suppliers or other third parties fail to correct year 2000 issues, our ability to operate our businesses could be affected. We have assessed the impact of year 2000 issues on the processing of date-related information for all of our information systems infrastructure and non-technical assets (e.g., plant production equipment). All systems and assets have been inventoried and classified as to their compliance with year 2000 data processing. Any systems found year 2000 deficient will be modified, upgraded or replaced. Project plans anticipate all existing, critical information systems infrastructure to be year 2000 compliant by early in calendar 1999 and all plant production equipment to be year 2000 compliant by the middle of calendar 1999. Contingency plans will be in place by the middle of calendar 1999 to address any failures resulting from relationships with significant customers, suppliers or other third parties. However these plans do not guarantee that circumstances beyond our control will not adversely impact our operations. Based on assessments and testing to date, we do not expect the financial impact of addressing internal system year 2000 issues to be material to our financial position, results of operations or cash flows. 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 31, 1998, 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 of Computation of Earnings per Share. Exhibit 12 Statement of Ratio of Earnings to Fixed Charges. Exhibit 27 Financial Data Schedule. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the first quarter of fiscal 1999. 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 October 8, 1998 /s/ S. S. Marshall S. S. Marshall Senior Vice President, General Counsel Date October 8, 1998 /s/ K. L. Thome K. L. Thome Senior Vice President, Financial Operations EX-11 2 EXHIBIT 11 TO 1ST QUARTER FORM 10-Q, FISCAL 1999 Exhibit 11 GENERAL MILLS, INC. COMPUTATION OF EARNINGS PER SHARE (In Millions, Except per Share Data) Thirteen Weeks Ended August 30, August 24, 1998 1997 Net Earnings $145.0 $134.3 Average Number of Common Shares - Basic EPS (a) 154.1 159.7 Incremental Share Effect from: -Stock options (b) 3.2 3.9 -Restricted stock, stock rights and puts .1 .1 Average Number of Common Shares - Diluted EPS 157.4 163.7 Earnings per Share - Basic $ .94 $ .84 Earnings per Share - Assuming Dilution $ .92 $ .82 Notes to Exhibit 11: (a) Computed as the weighted average of net shares outstanding on stock-exchange trading days. (b) Common share equivalents from stock options 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. EX-12 3 EXHIBIT 12 TO 1ST QUARTER FORM 10-Q, FISCAL 1999 Exhibit 12 RATIO OF EARNINGS TO FIXED CHARGES
Thirteen Weeks Ended Fiscal Year Ended August 30, August 24, May 31, May 25, May 26, May 28, May 29, 1998 1997 1998 1997 1996 1995 1994 Ratio of Earnings to Fixed Charges 7.29 6.70 5.63 6.54 6.94 4.10 6.18 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, 1ST QUARTER 10-Q, FISCAL 1999
5 This schedule contains summary financial information extracted from our Form 10-Q for the thirteen week period ended Augu7st 30, 1998, and is qualified in its entirety by reference to such financial statements. 3-MOS MAY-30-1999 JUN-01-1998 AUG-30-1998 29,700,000 0 458,400,000 0 472,800,000 1,170,300,000 2,539,700,000 (1,336,600,000) 4,024,900,000 1,680,700,000 1,612,200,000 0 0 620,500,000 (474,700,000) 4,024,900,000 1,473,100,000 1,473,100,000 583,700,000 583,700,000 0 0 29,800,000 225,500,000 83,100,000 145,000,000 0 0 0 145,000,000 .94 .92
EX-27 5 RESTATED FDS FOR QUARTER ENDED AUGUST 24, 1997
5 This schedule contains summary financial information extracted from our Form 1o-Q for the thirteen week period ended August 24, 1997, and is qualified in its entirety by reference to such financial statements. 3-MOS MAY-31-1998 MAY-26-1997 AUG-24-1997 18,200,000 0 419,300,000 0 457,300,000 1,112,600,000 2,605,900,000 (1,330,800,000) 3,962,500,000 1,425,700,000 1,497,000,000 0 0 585,800,000 (139,700,000) 3,962,500,000 1,416,500,000 1,416,500,000 581,700,000 581,700,000 0 0 31,200,000 215,300,000 81,500,000 134,300,000 0 0 0 134,300,000 .84 .82
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