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 27,
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 March 15, 1994, General Mills had 158,604,074 shares of its
$.10 par value common stock outstanding (excluding 45,549,258 shares
held in treasury).
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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. 27, Feb. 28, Feb. 27, Feb.28,
1994 1993 1994 1993
Sales $2,101.4 $2,010.7 $6,373.4 $6,127.2
Costs and Expenses:
Cost of sales 1,106.8 1,069.3 3,312.0 3,191.9
Selling, general and adminis. 663.7 616.9 2,033.7 1,961.4
Depreciation and amortization 75.8 67.6 219.7 197.0
Interest, net 22.2 19.8 72.3 53.4
Total Costs and Expenses 1,868.5 1,773.6 5,637.7 5,403.7
Earnings before Taxes 232.9 237.1 735.7 723.5
Income Taxes 87.9 96.2 284.4 284.9
Earnings from Operations 145.0 140.9 451.3 438.6
Cumulative Effect to May 31, 1993 of
Accounting Changes - - .2 -
Net Earnings $ 145.0 $ 140.9 $ 451.5 $ 438.6
Earnings per Share:
From operations $ .91 $ .86 $ 2.83 $ 2.68
Cumulative effect of accounting
changes - - - -
Net Earnings per Share $ .91 $ .86 $ 2.83 $ 2.68
Dividends per Share $ .47 $ .42 $ 1.41 $ 1.26
Average Number of Common Shares 159.0 163.6 159.3 163.7
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
February 27, February 28, May 30,
1994 1993 1993
ASSETS
Current Assets:
Cash and cash equivalents $ 22.8 $ 38.9 $ 100.0
Receivables 440.8 405.1 287.4
Inventories:
Valued primarily at FIFO 282.5 236.7 194.5
Valued at LIFO (FIFO value exceeds LIFO by
$61.3, $67.9 and $60.3, respectively) 283.9 249.3 244.5
Prepaid expenses and other current assets 102.2 89.5 108.2
Deferred income taxes 159.7 147.6 142.3
Total Current Assets 1,291.9 1,167.1 1,076.9
Land, Buildings and Equipment, at Cost 4,590.5 4,168.6 4,239.5
Less accumulated depreciation (1,542.3) (1,331.9) (1,379.9)
Net Land, Buildings and Equipment 3,048.2 2,836.7 2,859.6
Other Assets 871.0 752.9 714.3
Total Assets $5,211.1 $4,756.7 $4,650.8
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 636.0 $ 638.9 $ 617.0
Current portion of long-term debt 72.6 51.2 64.3
Notes payable 473.4 339.7 339.6
Accrued taxes 198.8 175.1 139.7
Other current liabilities 486.3 454.0 398.2
Total Current Liabilities 1,867.1 1,658.9 1,558.8
Long-term Debt 1,426.3 1,181.5 1,268.3
Deferred Income Taxes 276.9 231.5 262.0
Deferred Income Taxes - Tax Leases 191.8 197.0 195.6
Other Liabilities 183.7 178.3 147.6
Total Liabilities 3,945.8 3,447.2 3,432.3
Common Stock Subject to Put Options 98.9 - -
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 204.2 shares issued 273.9 357.1 358.7
Retained earnings 2,438.2 2,216.4 2,284.5
Less common stock in treasury, at cost,
shares of 45.4, 41.5 and 43.7,
respectively (1,319.5) (1,043.6) (1,196.4)
Unearned compensation and other (161.8) (167.6) (167.5)
Cumulative foreign currency adjustment (64.4) (52.8) (60.8)
Total Stockholders' Equity 1,166.4 1,309.5 1,218.5
Total Liabilities and Equity $5,211.1 $4,756.7 $4,650.8
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 27, February 28,
1994 1993
Cash Flows - Operating Activities:
Net Earnings $451.5 $438.6
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 219.7 197.0
Deferred income taxes 22.9 8.9
Change in current assets and liabilities,
net of effects from business acquired (180.1) (85.7)
Other, net 5.2 (8.1)
Cash provided by continuing operations 519.2 550.7
Cash used by discontinued operations (4.0) (2.0)
Net Cash Provided by Operating Activities 515.2 548.7
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (419.0) (493.5)
Investments in businesses, intangibles and
affiliates, net of dividends (119.3) (49.9)
Purchases of marketable investments (50.8) (24.4)
Proceeds from sale of marketable investments 32.1 12.1
Other, net 7.8 9.4
Net Cash Used by Investment Activities (549.2) (546.3)
Cash Flows - Financing Activities:
Increase in notes payable 138.7 208.0
Issuance of long-term debt 219.1 315.1
Payment of long-term debt (58.5) (36.7)
Common stock issued 14.5 27.9
Purchases of common stock for treasury (127.8) (265.8)
Dividends paid (224.8) (206.5)
Other, net (4.4) (6.0)
Net Cash Provided (Used) by Financing
Activities (43.2) 36.0
Increase (Decrease) in Cash and Cash Equivalents $(77.2) $38.4
See accompanying notes to consolidated condensed financial statements.
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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 27, 1994
are not necessarily indicative of the results that may be expected
for the fiscal year ending May 29, 1994.
These statements should be read in conjunction with the financial
statements and footnotes included in our annual report for the year
ended May 30, 1993. The accounting policies used in preparing these
financial statements are the same as those described in our annual
report.
(2) Statements of Cash Flows
During the first nine months of fiscal 1994, we paid $57.6 million
for interest (net of amount capitalized) and $209.9 million for
income taxes.
(3) Accounting Changes
In fiscal 1994, we adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." The
cumulative effect as of May 31, 1993 of changing to the liability
method of accounting for deferred income taxes was an increase in net
earnings of $17.5 million ($.11 per share).
We also adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect as of May 31, 1993
of changing to the accrual basis for severance and disability costs
was a decrease in net earnings of $17.3 million ($.11 per share).
(4) Investments in Affiliates
During the first nine months of fiscal 1994 we made additional
capital contributions and advances of $37.7 million to Cereal
Partners Worldwide.
(5) Long-term Debt
During the first nine months of fiscal 1994, we issued $165.0 million
of debt under our medium-term note program with various maturities
ranging from 5 to 40 years and various effective interest rates from
3.3% to 7.3%.
(6) Stockholders' Equity and Put Options
In February 1994, the Board of Directors approved an increase in the
number of common stock shares authorized to be repurchased for our
treasury to 60.0 million. We purchased 2.2 million shares of our
common stock in the open market for $131.2 million during the first
nine months of fiscal 1994.
We also issued put options, through private placements, for 2.0
million shares of our common stock for $5.2 million in premiums. As
of February 27, 1994, put options for 1.7 million shares remain
outstanding at strike prices ranging from $55.00 to $60.25 per share
with exercise dates from March 1994 to October 1994.
(7) Acquisition
We purchased the Colombo yogurt business for approximately $75.0
million from a U.S. subsidiary of Bongrain S.A. effective December
19, 1993. Colombo is a leading producer of soft frozen yogurt, as
well as premium hard pack frozen yogurt, and has a strong
refrigerated cup business in the northeast. The transaction will not
have any material effect on our current year earnings.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Operations generated $33.5 million less cash through nine months of
fiscal 1994 than in the prior period. This decrease is primarily due
to a buildup in inventories to meet expected promotional needs and
increased nonmilling grain volume.
Fiscal 1994 capital expenditures are estimated to be approximately
$600 million. During the first nine months, capital expenditures
totaled $419.0 million. Our fixed-asset investment has decreased
from recent peak levels, which included adding cereal production
capacity.
Purchases and sales of marketable investments were made to take
advantage of interest rate spreads.
The increase in other assets results primarily from the acquisition
of the Colombo yogurt business and capital contributions to Cereal
Partners Worldwide (CPW).
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.
In the first nine months of fiscal 1994, $165.0 million of debt was
issued under our medium-term note program. An additional $50.0
million of our notes payable was reclassified to long-term under our
revolving credit agreement.
RESULTS OF OPERATIONS
Third quarter sales of $2,101.4 million grew 5 percent from the
prior year. Consumer Foods' sales of $1,346.5 million were 4
percent higher than last year and sales for Restaurants of $754.9
million grew 6 percent. Year-to-date sales for Consumer Foods of
$4,201.7 million grew 2 percent and Restaurants' sales grew 8
percent to $2,171.7 million.
Third quarter earnings from operations of $145.0 million ($.91 per
share) and cumulative earnings of $451.3 million ($2.83 per share)
were both up 3 percent from $140.9 million ($.86 per share) and
$438.6 million ($2.68 per share) reported for the same periods last
year. Cumulative results for fiscal 1993 included restructuring
charges of 6 cents per share, 5 cents of which occurred in the third
quarter, representing restructuring charges for Snack Ventures
Europe.
These results were below the company's expectations for two major
reasons. First, continued promotional escalation in the ready-to-
eat cereal market had an adverse effect on margins and profits,
although Big G's share of market is holding well. Second,
uncommonly severe winter weather in much of the country through
January and the first half of February, along with the California
earthquake, had a short-term--but very meaningful--impact on
third-quarter restaurant results. These factors combined to
restrain nine-month operating profit growth to 2 percent,
including a 1 percent decline in the third quarter, and will be
the major causes of below-trend growth for fiscal 1994 as a
whole.
Third-quarter Consumer Foods operating profits declined 2
percent. Total domestic retail packaged food unit volume grew 2
percent, restrained by weak shipment levels in January.
Unit volume for Big G cereals was up 1 percent in the quarter,
with February shipments up 10 percent. Growth was led by five
established adult cereals recently improved to include 25 percent
more fruit and nut pieces, and new products. For the quarter,
Big G's tonnage at retail increased 6 percent, outpacing the
market's 5 percent growth. The company's third-quarter dollar
market share totaled 29.7 percent, up .4 percentage points versus
the prior year's quarter.
Yoplait yogurt volume increased 21 percent, led by the new Trix
and Crunch `n Yogurt lines, and Gold Medal flour and baking mixes
achieved a 17 percent volume gain. Betty Crocker Products unit
volume was 4 percent lower than in last year's third quarter,
when volume rose 24 percent on the strength of major new
introductions. CPW, the company's worldwide cereal joint venture
with Nestle, S.A., continued to achieve share gains in virtually
every market, and began expansion to Austria, Belgium,
Switzerland, Greece and Chile. Snack Ventures Europe posted an
operating profit increase for the quarter despite continued weak
economic conditions in most of its markets.
Through nine months, Consumer Foods operating profits grew 2
percent, with Betty Crocker Products, Yoplait and international
food activities making excellent profit gains. Cumulative
domestic retail packaged food unit volume increased 2 percent.
Fourth-quarter volume growth is expected to strengthen for both
Big G and Betty Crocker Products, driven by accelerated new
product activity.
For Restaurants, six weeks of major snow and ice storms across
the eastern half of the U.S. and Canada and the earthquake in
California combined to restrain third-quarter sales growth to 6
percent and hold operating profits flat. In contrast, first-half
Restaurant sales and operating profits increased 9 percent and 10
percent, respectively. Third-quarter difficulties were most
pronounced in January, when combined sales for Red Lobster and
The Olive Garden's North American operations were flat, as each
concept saw average unit sales fall 8 to 9 percent behind the
prior year. January's operating profit results were adversely
affected by an estimated $10 million.
Third-quarter sales for Red Lobster's North American operations
grew 2 percent. Average unit sales in the U.S. were 2 percent
lower for the quarter, but are slightly above last year's through
nine months. Sales for The Olive Garden's North American
operations increased 12 percent in the quarter. Average units
sales in the U.S. were down nearly 6 percent in the quarter, and
are down 3 percent for the year-to-date. During the quarter, Red
Lobster opened 13 new restaurants and The Olive Garden added 16
units, for a combined total of 1,115 units in North America. The
new China Coast concept opened seven new restaurants during the
quarter, including its first units in Michigan, Ohio, and the
Houston market area, for a total of 16 units in operation.
Through nine months, Restaurants operating profits increased 6
percent, led by Red Lobster. Fourth-quarter plans include two
advertised promotional events now underway--Lobster and 18 Shrimp
at Red Lobster and Lasagna Lovers' Festival at The Olive Garden--
as well as continued aggressive unit expansion, with plans for 28
new units, including 9 China Coast restaurants.
Interest expense grew $2.4 million in the third quarter and $18.9
million through nine months, primarily due to increased
borrowings associated with the company's ongoing share repurchase
program. Over the past 12 months, the company has repurchased
4.5 million shares. As a result, average shares outstanding
totaled 159.0 million in the third quarter, down 3 percent from
the prior-year's level.
The effect of the increase in the federal tax rate was partially
offset by utilization of foreign tax credits.
On April 4, 1994, the company announced that it is reducing spending
on inefficient cereal couponing and price promotion by more than
$175 million annually. Couponing and price promotional activity
will continue, but at a reduced level and frequency. In order to
deliver consumer value more directly and efficiently, the company is
concurrently reducing prices on its largest cereal brands by an
average of 11 percent. The products affected represent about 40
percent of Big G's cereal volume. The price reductions, scheduled to
take effect May 2, are expected to cost the company between five to ten
cents per share in the fourth quarter, mainly reflecting compensation to
grocery accounts for lowering shelf prices of current inventory that was
bought before these price reductions. Once implemented, the price
changes are not expected to have a material effect on the company's
cereal market share but are designed to curtail inefficient spending
and have a positive impact on profits in fiscal 1995.
<PAGE>
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.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K
during the third quarter of fiscal 1994.
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, 1994 /s/ C. L. Whitehill
C. L. Whitehill
Senior Vice President,
General Counsel and Secretary
Date April 5, 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)
Thirty-Nine Weeks Ended
February 27, February 28,
1994 1993
Net Earnings $451.5 $438.6
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 159.3 163.7
Shares resulting from the assumed exercise of
certain stock options (b) 2.5* 3.4*
Total common shares and common share equivalents 161.8 167.1
Earnings per Share $2.83 $2.68
Notes to Exhibit 11:
(a) Beginning balance of common stock is adjusted for changes in
amount outstanding, weighted by the elapsed portion of the
period during which the shares were outstanding.
(b) Common share equivalents are computed by the "treasury
stock" method. Share amounts represent the dilutive effect
of outstanding stock options which have an option price
below the average market price of our stock for the period
concerned.
* Common share equivalents are not material. As a result,
earnings per share have been computed using the weighted
average number of shares outstanding of 159.3 million and
163.7 million for the nine months of fiscal 1994 and 1993,
respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Thirty-Nine Weeks Ended Fiscal Year Ended
February 27, February 28, May 30, May 31, May 26, May 27, May 28,
1994 1993 1993 1992 1991 1990 1989
Ratio of
Earnings to
Fixed Charges 7.66 8.82 7.79 8.58 7.82 7.66 7.73
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.
