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
NOVEMBER 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 December 20, 1994, General Mills had 157,808,001 shares of
its $.10 par value common stock outstanding (excluding
46,345,331 shares held in treasury).
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Sales $2,201.8 $2,182.2 $4,182.9 $4,272.0
Costs and Expenses:
Cost of sales 1,185.8 1,127.1 2,260.7 2,205.2
Selling, general and
administrative 666.9 729.5 1,223.4 1,370.0
Depreciation and amortization 79.0 72.5 159.8 143.9
Interest, net 31.5 23.4 59.3 50.1
Total Costs and Expenses 1,963.2 1,952.5 3,703.2 3,769.2
Earnings before Taxes 238.6 229.7 479.7 502.8
Income Taxes 89.4 89.0 179.7 196.5
Earnings from Operations 149.2 140.7 300.0 306.3
Cumulative Effect to May 31,
1993 of Accounting Changes - - - .2
Net Earnings $ 149.2 $ 140.7 $ 300.0 $ 306.5
Earnings per Share $ .95 $ .88 $ 1.90 $ 1.92
Dividends per Share $ .47 $ .47 $ .94 $ .94
Average Number of Common
Shares 157.7 159.1 157.9 159.5
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
November 27, November 28, May 29,
1994 1993 1994
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 41.1 $ 56.8 $ .2
Receivables 426.2 391.4 309.7
Inventories:
Valued primarily at FIFO 333.8 289.4 243.2
Valued at LIFO (FIFO value exceeds LIFO by
$55.7, $62.5 and $53.0, respectively) 315.5 264.2 245.1
Prepaid expenses and other current assets 106.6 98.2 110.6
Deferred income taxes 152.0 149.3 220.4
Total Current Assets 1,375.2 1,249.3 1,129.2
Land, Buildings and Equipment, at Cost 4,895.2 4,455.6 4,689.8
Less accumulated depreciation (1,727.7) (1,483.7) (1,597.2)
Net Land, Buildings and Equipment 3,167.5 2,971.9 3,092.6
Other Assets 1,092.3 774.8 976.5
Total Assets $5,635.0 $4,996.0 $5,198.3
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 617.8 $ 698.1 $ 650.4
Current portion of long-term debt 122.8 72.1 115.2
Notes payable 761.5 393.9 433.3
Accrued taxes 142.8 160.2 178.3
Other current liabilities 382.8 349.4 454.9
Total Current Liabilities 2,027.7 1,673.7 1,832.1
Long-term Debt 1,488.2 1,414.8 1,417.2
Deferred Income Taxes 335.8 243.1 297.4
Deferred Income Taxes - Tax Leases 184.9 193.9 189.8
Other Liabilities 194.5 183.9 188.6
Total Liabilities 4,231.1 3,709.4 3,925.1
Common Stock Subject to Put Options 25.1 16.3 122.0
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 204.2 shares issued 349.4 350.9 251.0
Retained earnings 2,610.2 2,442.3 2,457.9
Less common stock in treasury, at cost,
shares of 46.4, 45.1 and 45.7, respectively (1,381.7) (1,294.4) (1,334.4)
Unearned compensation and other (140.6) (163.8) (160.2)
Cumulative foreign currency adjustment (58.5) (64.7) (63.1)
Total Stockholders' Equity 1,378.8 1,270.3 1,151.2
Total Liabilities and Equity $5,635.0 $4,996.0 $5,198.3
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Twenty-Six Weeks Ended
November 27, November 28,
1994 1993
<S> <C> <C>
Cash Flows - Operating Activities:
Net Earnings $300.0 $306.5
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 159.8 143.9
Deferred income taxes 94.2 .1
Change in current assets and liabilities (411.9) (149.6)
Other, net 8.5 8.4
Cash provided by continuing operations 150.6 309.3
Cash used by discontinued operations (2.5) (2.7)
Net Cash Provided by Operating Activities 148.1 306.6
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (241.8) (273.4)
Investments in businesses, intangibles and
affiliates, net (27.4) (21.0)
Purchases of marketable investments (3.4) (46.1)
Proceeds from sale of marketable investments 2.7 24.5
Other, net (36.1) 5.3
Net Cash Used by Investment Activities (306.0) (310.7)
Cash Flows - Financing Activities:
Increase in notes payable 324.0 58.2
Issuance of long-term debt 130.5 202.4
Payment of long-term debt (50.0) (51.6)
Common stock issued 7.8 10.5
Purchases of common stock for treasury (57.7) (102.9)
Dividends paid (149.2) (150.1)
Other, net (6.6) (5.6)
Net Cash Provided (Used) by Financing Activities 198.8 (39.1)
Increase (Decrease) in Cash and Cash Equivalents $40.9 $(43.2)
See accompanying notes to consolidated condensed financial statements.
</TABLE>
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
twenty-six weeks ended November 27, 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 November 27, 1994 was $18.3
million. There was no impact on net earnings.
(3) Statements of Cash Flows
During the first six months of fiscal 1995, we paid $57.3 million for
interest (net of amount capitalized) and $109.6 million for income taxes.
(4) Long-term Debt
During the first six months of fiscal 1995, we issued $125.0 million of
debt under our medium-term note program with various maturities ranging
from 2 to 12 years and various interest rates from 6.4% to 8.0%.
(5) Stockholders' Equity and Put Options
During the first six months, 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.
(6) Investments in Affiliates
During the first six months, we made additional capital contributions and
advances of $25.6 million to Cereal Partners Worldwide.
(7) Subsequent Event
On December 14, 1994, we announced plans to separate into two independent
public corporations, one for Consumer Foods and one for Restaurants.
General Mills, Inc. will be the Consumer Foods company. Plans are to
spin off our Restaurant operations as a separate free-standing company to
our shareholders. It is planned that General Mills' shareholders will
receive one share in the Restaurant company for each share of General
Mills common stock owned as of the record date for the distribution. It
is expected that the two companies will become separate entities on
approximately June 1, 1995, subject to final approval of the General
Mills Board of Directors.
Beginning with our third-quarter financial statements, Restaurant
operations will be presented as Discontinued Operations. Following are
sales and operating profits for the twenty-six weeks ended on
November 27, 1994:
<TABLE>
Twenty-six weeks ended November 27, 1994
Consumer Corporate
(In Millions) Foods Restaurants Expense Consolidated
<S> <C> <C> <C> <C>
Sales $2,661.3 $1,521.6 $ - $4,182.9
Operating Profits 458.5 87.4 (66.2) 479.7
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Operations generated $158.5 million less cash in the first half of
fiscal 1995 than in the prior period. This decrease in cash provided
by operations as compared to last year was caused by a $262.3 million
increase in the working capital change (principally, increased rates of
cash absorption in inventory and payables), partially offset by a
$103.6 million increase in cash from operations, after adjustment for
non-cash charges.
Fiscal 1995 capital expenditures are estimated to be approximately $525
million, of which $350 million is attributable to Restaurants. During
the first half, capital expenditures totaled $241.8 million, of which
$178.4 million was expended by Restaurants. Our fixed-asset investment
has decreased from recent peak levels, which included adding cereal
production capacity.
Purchases of marketable investments made during fiscal 1994 to take
advantage of interest rate spreads declined to minor amounts in fiscal
1995.
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 half of fiscal 1995, $125.0 million of debt was issued under
our medium-term note program.
In the first half 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
Second quarter sales of $2,201.8 million grew 1 percent from the prior
year. Consumer Foods' sales of $1,468.4 million were down 3 percent
for the quarter, reflecting a 2 percent decline in total domestic
packaged foods unit volume and the lower average cereal prices.
Restaurants sales of $733.4 million grew 9 percent. First half sales
for Consumer Foods of $2,661.3 million declined 7 percent and
Restaurants' sales grew 7 percent to $1,521.6 million.
Second quarter earnings from operations of $149.2 million ($.95 per
share) were up 6 percent from $140.7 million ($.88 per share) reported
last year. Cumulative earnings of $300.0 million ($1.90 per share)
were down 2 percent from $306.5 million ($1.92 per share) reported for
last years first half due to the temporary interruption in cereal
shipments experienced in the first quarter. Excluding Big G cereals,
first-half net earnings were 5 percent above the prior year.
Second-quarter Consumer Foods operating profits increased 8 percent, led
by the improved profitability of Big G cereals. Reflecting strategic
actions taken by Big G in the second half of last year, weighted-average
cereal prices were 5 percent lower and unit volume was nearly even with
last year's second quarter, but planned reductions in inefficient
promotional spending and increasing productivity resulted in good profit
improvement. Big G made steady progress throughout the quarter in
rebuilding its share of the $9.2 billion U.S. ready-to-eat cereal market.
For November, Big G's dollar market share was 26.8 percent, up from 24
percent in the first quarter. Second-quarter unit volume for the
Cheerios brands was up 4 percent. Quarterly market shares for major
categories excluding popcorn and grain snacks equaled or exceeded their
52-week levels. CPW, the company's worldwide cereal joint venture with
Nestle, recorded a 21 percent volume gain for the quarter.
While total Restaurant operating profits were down 3 percent for the
quarter, combined profits from Red Lobster and The Olive Garden were up
more than 11 percent. Expenses related to the rapid rollout of China
Coast accounted for the profit decline. Red Lobster's same-store sales
increased 1 percent for the quarter due in part to the popular
LOBSTERFEST promotion, and outpaced the casual dining industry. Same-
store sales for The Olive Garden were up nearly 1 percent, following
declines earlier in the year. The improving trend reflects the early
success of efforts to enhance the dining experience and strengthen
marketing. New unit openings included three new Red Lobsters, seven The
Olive Garden restaurants and ten China Coast units, for a total of 1,189
units in operation in North America. In addition, The Olive Garden
expanded its Cafe test concept, opening 2 new units in Texas and 1 in New
York City that is part of the company's new restaurant in Times Square.
Interest expense increased by $8 million in the quarter, primarily due to
increased working capital, higher interest rates, and previous borrowings
associated with the company's share repurchase program. Average shares
outstanding totaled 157.7 million in this year's second quarter, down
from 159.1 million for the same period a year ago.
During the first quarter, the company adopted SFAS #115 ("Accounting for
Certain Investments in Debt and Equity Securities") with no impact on net
earnings.
As described in note 7 of Notes to Consolidated Condensed Financial
Statements, the company has announced plans to separate into two
independent public corporations, one for Consumer Foods and one for
Restaurants. Plans are to spin off our Restaurant operations as a
separate free-standing company to shareholders on or about June 1, 1995.
The attached financial statements present the Restaurant operations on a
fully-consolidated basis as part of continuing operations. Starting with
the third-quarter's financial statements, the Restaurant operations will
be presented as Discontinued Operations. For the twenty-six weeks ended
November 27, 1994, the Restaurant operations accounted for approximately
36% of the Company's consolidated sales, and about 16% of operating
profits before corporate expense.
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on September 19,
1994.
(b) All directors nominated were elected at the Annual Meeting.
(c) For the election of directors, the results were as follows:
H. Brewster Atwater For 132,238,599
Withheld 1,055,444
Richard M. Bressler For 132,369,809
Withheld 924,234
Livio D. DeSimone For 132,414,710
Withheld 879,333
William T. Esrey For 132,367,221
Withheld 926,822
Charles W. Gaillard For 132,397,273
Withheld 896,770
Judith R. Hope For 132,364,274
Withheld 929,769
Joe R. Lee For 132,372,869
Withheld 921,174
Kenneth A. Macke For 132,393,441
Withheld 900,602
George Putnam For 132,381,999
Withheld 912,044
Michael D. Rose For 132,395,473
Withheld 898,570
Stephen W. Sanger For 132,387,441
Withheld 906,602
A. Michael Spence For 132,359,966
Withheld 934,077
Dorothy A. Terrell For 132,260,479
Withheld 1,033,564
Mark H. Willes For 132,344,350
Withheld 949,693
C. Angus Wurtele For 132,415,490
Withheld 878,553
On the ratification of the appointment of KPMG Peat Marwick LLP as
auditors for fiscal 1995 the results were as follows:
For: 132,349,295
Against: 391,095
Abstain: 553,653
On the proposal to adopt a Restated Certificate of Incorporation of
General Mills, Inc., the results were as follows:
For: 120,499,314
Against: 1,310,694
Abstain: 909,451
Broker Non-Vote: 10,574,584
The stockholders' proposal requesting that the directors take
action to adopt cumulative voting was rejected:
For: 23,842,590
Against: 94,303,192
Abstain: 1,792,708
Broker Non-Vote: 13,355,553
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 second
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 January 9, 1995 /s/ S. S. Marshall
S. S. Marshall
Senior Vice President,
General Counsel and Secretary
Date January 9, 1995 /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)
Twenty-Six Weeks Ended
November 27, November 28,
1994 1993
Net Earnings $300.0 $306.5
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 157.9 159.5
Net shares resulting from the assumed exercise of
certain stock options (b) 1.9* 2.6*
Shares potentially issuable under compensation plans .1* -*
Total common shares and common share equivalents 159.9 162.1
Earnings per Share $1.90 $1.92
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 157.9 million and 159.5 million for the first six months
of fiscal 1995 and 1994, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Twenty-Six Weeks Ended Fiscal Year Ended
November 27,November 28, May 29,May 30,May 31,May 26,May 27,
1994 1993 1994 1993 1992 1991 1990
Ratio of Earnings
to Fixed Charges 6.72 7.57 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)
Twenty-Six Weeks Ended
November 27, November 28,
1994 1993
Net Earnings $300.0 $306.5
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 157.9 159.5
Net shares resulting from the assumed exercise of
certain stock options (b) 1.9* 2.6*
Shares potentially issuable under compensation plans .1* -*
Total common shares and common share equivalents 159.9 162.1
Earnings per Share $1.90 $1.92
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 157.9 million and 159.5 million for the first six months
of fiscal 1995 and 1994, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Twenty-Six Weeks Ended Fiscal Year Ended
November 27,November 28, May 29,May 30,May 31,May 26,May 27,
1994 1993 1994 1993 1992 1991 1990
Ratio of Earnings
to Fixed Charges 6.72 7.57 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 November 27, 1994, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> QTR-2
<FISCAL-YEAR-END> MAY-28-1995
<PERIOD-END> NOV-27-1994
<CASH> 41,100,000
<SECURITIES> 0
<RECEIVABLES> 426,200,000
<ALLOWANCES> 0
<INVENTORY> 649,300,000
<CURRENT-ASSETS> 1,375,200,000
<PP&E> 4,895,200,000
<DEPRECIATION> (1,727,700,000)
<TOTAL-ASSETS> 5,635,000,000
<CURRENT-LIABILITIES> 2,027,700,000
<BONDS> 1,488,200,000
<COMMON> 349,400,000
0
0
<OTHER-SE> 1,029,400,000
<TOTAL-LIABILITY-AND-EQUITY> 5,635,000,000
<SALES> 4,182,900,000
<TOTAL-REVENUES> 4,182,900,000
<CGS> 2,260,700,000
<TOTAL-COSTS> 2,260,700,000
<OTHER-EXPENSES> 159,800,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,300,000
<INCOME-PRETAX> 479,700,000
<INCOME-TAX> 179,700,000
<INCOME-CONTINUING> 300,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,000,000
<EPS-PRIMARY> 1.9
<EPS-DILUTED> 1.9
</TABLE>
