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 28, 1994
/ / 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 16, 1994, General Mills had 157,720,486 shares of
its $.10 par value common stock outstanding (excluding 46,432,846
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 28, August 29,
1994 1993
Sales $1,981.1 $2,089.8
Costs and Expenses:
Cost of sales 1,074.9 1,078.1
Selling, general and administrative 556.5 640.5
Depreciation and amortization 80.8 71.4
Interest, net 27.8 26.7
Total Costs and Expenses 1,740.0 1,816.7
Earnings before Taxes 241.1 273.1
Income Taxes 90.3 107.5
Earnings from Operations 150.8 165.6
Cumulative Effect to May 31, 1993 of
Accounting Changes - .2
Net Earnings $ 150.8 $ 165.8
Earnings per Share $ .95 $ 1.04
Dividends per Share $ .47 $ .47
Average Number of Common Shares 158.1 159.9
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
August 28, August 29, May 29,
1994 1993 1994
ASSETS
Current Assets:
Cash and cash equivalents $ 4.5 $ 131.7 $ .2
Receivables 346.8 421.7 309.7
Inventories:
Valued primarily at FIFO 338.4 225.3 243.2
Valued at LIFO (FIFO value exceeds LIFO by
$54.4, $61.6 and $53.0, respectively) 351.4 275.5 245.1
Prepaid expenses and other current assets 107.2 96.5 110.6
Deferred income taxes 188.8 151.9 220.4
Total Current Assets 1,337.1 1,302.6 1,129.2
Land, Buildings and Equipment, at Cost 4,785.1 4,347.6 4,689.8
Less accumulated depreciation (1,661.9) (1,431.0) (1,597.2)
Net Land, Buildings and Equipment 3,123.2 2,916.6 3,092.6
Other Assets 1,065.9 720.0 976.5
Total Assets $5,526.2 $4,939.2 $5,198.3
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 653.0 $ 666.0 $ 650.4
Current portion of long-term debt 125.1 72.2 115.2
Notes payable 704.4 294.1 433.3
Accrued taxes 216.8 250.1 178.3
Other current liabilities 399.9 360.5 454.9
Total Current Liabilities 2,099.2 1,642.9 1,832.1
Long-term Debt 1,397.2 1,453.9 1,417.2
Deferred Income Taxes 320.8 240.3 297.4
Deferred Income Taxes - Tax Leases 189.9 198.2 189.8
Other Liabilities 190.7 174.9 188.6
Total Liabilities 4,197.8 3,710.2 3,925.1
Common Stock Subject to Put Options 58.2 - 122.0
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 204.2 shares issued 314.2 365.8 251.0
Retained earnings 2,534.9 2,375.7 2,457.9
Less common stock in treasury, at cost,
shares of 46.5, 45.0 and 45.7, respectively (1,383.5) (1,285.1) (1,334.4)
Unearned compensation and other (138.1) (165.3) (160.2)
Cumulative foreign currency adjustment (57.3) (62.1) (63.1)
Total Stockholders' Equity 1,270.2 1,229.0 1,151.2
Total Liabilities and Equity $5,526.2 $4,939.2 $5,198.3
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Thirteen Weeks Ended
August 28, August 29,
1994 1993
Cash Flows - Operating Activities:
Net earnings $150.8 $165.8
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 80.8 71.4
Deferred income taxes 40.7 (4.8)
Change in current assets and liabilities (249.3) (58.0)
Other, net 7.9 5.6
Cash provided by continuing operations 30.9 180.0
Cash used by discontinued operations (1.3) (1.2)
Net Cash Provided by Operating Activities 29.6 178.8
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (110.3) (139.7)
Investments in businesses, intangibles and
affiliates, net (6.4) (8.4)
Purchases of marketable investments (1.7) (1.8)
Proceeds from sale of marketable investments .5 6.9
Other, net (36.9) 6.6
Net Cash Used by Investment Activities (154.8) (136.4)
Cash Flows - Financing Activities:
Increase (decrease) in notes payable 265.6 (43.0)
Issuance of long-term debt 1.7 200.7
Payment of long-term debt (10.0) (8.4)
Common stock issued 5.6 8.0
Purchases of common stock for treasury (57.7) (92.0)
Dividends paid (74.6) (75.3)
Other, net (1.1) (.7)
Net Cash Provided (Used) by Financing Activities 129.5 (10.7)
Increase in Cash and Cash Equivalents $ 4.3 $31.7
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 thirteen weeks ended August 28, 1994 are not necessarily indicative
of the results that may be expected for the fiscal year ending May 28,
1995.
These statements should be read in conjunction with the financial
statements and footnotes included in our annual report for the year
ended May 29, 1994. The accounting policies used in preparing these
financial statements are the same as those described in our annual
report except for the change in accounting for marketable investments,
as noted below.
(2) Marketable Investments
We adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities,"
during the first quarter. The standard requires accounting for
investments at fair value instead of amortized cost for those securities
that are not intended to be held to maturity. All of of our marketable
investments are classified as available-for-sale and are now reported at
fair value with the unrealized gain or loss, net of taxes, recorded in
the "Unearned compensation and other" account, within Stockholders'
Equity. The net unrealized gain as of August 28, 1994 was $21.5
million. There was no impact on net earnings.
(3) Statements of Cash Flows
During the quarter, we paid $10.1 million for interest (net of amount
capitalized) and $7.2 million for income taxes.
(4) Stockholders' Equity and Put Options
During the quarter, we purchased 1.0 million shares of common stock for
$57.7 million, primarily from the exercise of put options, previously
sold in private placements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Operations generated $149.2 million less cash in the first quarter of
fiscal 1995 than in the prior period. The decrease in cash provided
by operations is due to a higher rate of increase in working capital,
primarily inventory. Inventory was affected by the oat situation
described below and build-up in both Consumer Foods and Restaurants
for anticipated second quarter needs.
Fiscal 1995 capital expenditures are estimated to be approximately
$525 million. During the first three months, capital expenditures
totaled $110.3 million. Our fixed asset investment has decreased
from recent peak levels, which included adding cereal production
capacity.
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. During September,
the company replaced $125 million of notes payable with long-term
debt.
In the first quarter of fiscal 1995, $57.7 million was paid for
common stock for our treasury, primarily from the exercise of put
options that were previously sold in private placements.
RESULTS OF OPERATIONS
Sales of $1,981.1 million in the first quarter declined 5 percent
from the prior year, due primarily to the temporary disruption in
cereal operations this past summer. Cereal operations have now been
restored to normal. Consumer Foods' reported sales of $1,192.9
million, a decrease of 11 percent. Restaurant sales of $788.2
million grew 6 percent. First quarter earnings per share from
operations decreased by 9 percent to $.95 compared to $1.04 last
year.
In mid-June, the company suspended shipments of its oat-
containing products when it learned that an independent
contractor had improperly treated some of the company's raw oat
supplies. Full production of these products from newly-secured
raw materials and resumption of normal customer service did not
commence until the latter half of July. As a result, first
quarter cereal unit volume declined 21 percent from the prior
year. While all costs associated with disposition of oat product
inventories and related items were reflected in fiscal 1994
results, the impact of the shipment interruptions is reflected in
first-quarter fiscal 1995 working capital levels, earnings and
sales results. With trade inventories back at appropriate levels,
normal marketing support was restored for September and for the
balance of the year.
In the first quarter, Consumer Foods reported a decline in
operating profits of 12 percent. Total domestic retail packaged
foods unit volume declined 12 percent, due to the oat cereal
problem and lower shipments of Betty Crocker
snack foods related to promotional timing. Volume of Betty
Crocker Products excluding snacks grew 8 percent, with excellent
gains from new main meal products and Creamy Chilled Desserts.
Yogurt and Gorton's frozen seafoods showed volume gains of 28
percent and 15 percent, respectively, on the strength of new
products and the addition of the Colombo yogurt line. Due to
significant retail out-of-stocks during nearly half of the quarter,
Big G's dollar share of the $9 billion U.S. ready-to-eat cereal
market declined 5 points to 24 percent. Share of market for most
of the company's other major product lines remained strong.
CPW, the company's worldwide cereal joint venture with Nestle,
recorded a volume gain of 21 percent for the quarter. All of the
company's food businesses not affected by the cereal problem
reported operating profit gains for the quarter.
Restaurant operating profits were virtually flat versus the prior
year, as profit gains by Red Lobster North America were offset by
lower earnings at The Olive Garden and higher development
expenses at the expanding China Coast concept. Red Lobster's
total sales rose 4 percent with same store sales holding even
with excellent prior-year performance, outpacing the casual
dining industry segment. Sales for The Olive Garden rose 5
percent but same store sales declined 6 percent, continuing a
trend that started early in calendar 1994. Actions taken during
the quarter to improve the dining experience and strengthen
marketing met with some success. These actions included a new
seasonal menu emphasizing fresh new ingredients, flavors and
recipes, and initial network advertising supporting a distinctive
and attractively priced dinner combination. The promotional
effort resulted in significantly improved customer traffic and
cut the same store sales decline in August to only 2 percent.
Further moves to refresh The Olive Garden are under way including
actions to update the signature Hospitaliano! service and
interior decor. China Coast opened 8 units during the quarter
for a current total of 33 units.
During the quarter, the company adopted SFAS #115 ("Accounting
for Certain Investments in Debt and Equity Securities") with no
impact on net earnings.
PART II. OTHER INFORMATION
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.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
first quarter of fiscal 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 October 7, 1994 /s/ C. L. Whitehill
C. L. Whitehill
Senior Vice President,
General Counsel and Secretary
Date October 7, 1994 /s/ K. L. Thome
K. L. Thome
Senior Vice President,
Financial Operations
Exhibit 11
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Thirteen Weeks Ended
August 28, August 29,
1994 1993
Net Earnings $150.8 $165.8
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 158.1 159.9
Net shares resulting from the assumed exercise of
certain stock options (b) 1.8* 2.7*
Shares potentially issuable under compensation plans .1* -*
Total common shares and common share equivalents 160.0 162.6
Earnings per Share $ .95 $ 1.04
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 158.1 million and 159.9 million for the first
quarter of fiscal 1995 and 1994, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Thirteen Weeks Ended Fiscal Year Ended
August 28, August 29 May 29, May 30, May 31, May 26, May 27,
1994 1993 1994 1993 1992 1991 1990
Ratio of Earnings
to Fixed Charges 7.04 7.94 6.16 7.79 8.58 7.82 7.66
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.
Exhibit 11
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Thirteen Weeks Ended
August 28, August 29,
1994 1993
Net Earnings $150.8 $165.8
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 158.1 159.9
Net shares resulting from the assumed exercise of
certain stock options (b) 1.8* 2.7*
Shares potentially issuable under compensation plans .1* -*
Total common shares and common share equivalents 160.0 162.6
Earnings per Share $ .95 $ 1.04
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 158.1 million and 159.9 million for the first
quarter of fiscal 1995 and 1994, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Thirteen Weeks Ended Fiscal Year Ended
August 28, August 29 May 29, May 30, May 31, May 26, May 27,
1994 1993 1994 1993 1992 1991 1990
Ratio of Earnings
to Fixed Charges 7.04 7.94 6.16 7.79 8.58 7.82 7.66
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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from our Form 10-Q for the quarterly period ended August 28, 1994,
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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