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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED MAY 26, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM .............. TO .............
COMMISSION FILE NUMBER 1-1185
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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)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.10 par value New York Stock Exchange
Chicago Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by Reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of Common Stock held by non-affiliates of the
Registrant, based on the closing price of $55.125 per share as reported on the
New York Stock Exchange on August 1, 1996: $8,663.3 million.
Number of shares of Common Stock outstanding as of August 1, 1996:
157,157,501 (excluding 46,995,831 shares held in the treasury).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement dated August 22, 1996
are incorporated by reference into Part III, and portions of
Registrant's 1996 Annual Report to Stockholders
are incorporated by reference into Parts I, II and IV.
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PART I
ITEM 1. BUSINESS.
General Mills, Inc. was incorporated in Delaware in 1928. The Company is
engaged in the manufacture and marketing of consumer foods products. The terms
"General Mills," "Company" and "Registrant" mean General Mills, Inc. and its
subsidiaries unless the context indicates otherwise.
RECENT DEVELOPMENTS.
On August 13, 1996, the Company entered into an agreement to purchase the
branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc.,
including its CHEX and COOKIE CRISP brands, for a total price of $570 million,
payable in General Mills common stock and through the assumption of Ralcorp
debt. The acquisition is expected to close following approval by Ralcorp
shareholders and federal regulatory agencies. The transaction includes a
Cincinnati, Ohio manufacturing facility that employs 240 people, and trademark
and technology rights for the branded products in the Americas.
GENERAL BUSINESS.
The Company is a leading producer of packaged consumer foods and markets
its products primarily through its own sales organizations, supported by
advertising and other promotional activities. Such products are primarily
distributed directly to retail food chains, co-operatives, membership stores and
wholesalers. Certain food products, such as yogurt and some foodservice
products, are sold through distributors and brokers.
The packaged consumer foods market is highly competitive, with numerous
competitors of varying sizes. The principal methods of competition include
product quality, advertising, promotion and price. In most of its consumer
foods lines, described below, General Mills competes not only with other widely
advertised branded products, but also with generic products and private label
products, which are generally distributed at lower prices.
CEREALS. General Mills produces and sells a number of ready-to-eat
cereals, including such brands as: CHEERIOS, HONEY NUT CHEERIOS, APPLE CINNAMON
CHEERIOS, MULTI-GRAIN CHEERIOS, WHEATIES, LUCKY CHARMS, CORN TOTAL, WHEAT TOTAL,
TRIX, GOLDEN GRAHAMS, KIX, BERRY BERRY KIX, FIBER ONE, REESE'S PEANUT BUTTER
PUFFS, COCOA PUFFS, CRISPY WHEATIES 'N RAISINS, CINNAMON TOAST CRUNCH, CLUSTERS,
RAISIN NUT BRAN, TOTAL RAISIN BRAN, OATMEAL CRISP, TRIPLES and BASIC 4. In
fiscal 1996, the Company introduced FROSTED CHEERIOS, HONEY FROSTED WHEATIES and
TEAM USA CHEERIOS.
DESSERTS, FLOUR AND BAKING MIXES. General Mills makes and sells a line
of dessert mixes under the BETTY CROCKER trademark, including SUPERMOIST layer
cakes, CREAMY DELUXE and WHIPPED DELUXE ready-to-spread frostings, SUPREMe
brownie mixes, SUPREME dessert bars, muffin mixes, and SWEET REWARDS fat-free
and reduced-fat dessert mixes. The Company markets a variety of baking mixes
under the BISQUICK trademark, sells pouch mixes under the BETTY CROCKER and GOLD
MEDAL names, and produces family flour under the GOLD MEDAL brand, introduced in
1880, and regional brands such as LA PINA, ROBIN HOOD and RED BAND. The Company
also engages in grain merchandising, produces ingredient flour for internal
requirements and sells flour to bakery, foodservice and manufacturing markets.
DINNER AND SIDE DISH PRODUCTS. General Mills manufactures a line of
BETTY CROCKER dry packaged dinner mixes under the HAMBURGER HELPER, TUNA HELPER,
and SKILLET CHICKEN HELPER trademarks. Also under the BETTY CROCKER trademark,
the Company sells dry packaged specialty potatoes, POTATO BUDS instant mashed
potatoes, POTATO SHAKERS seasoning mixes, SUDDENLY SALAD and BAC*O'S salad
topping.
SNACK PRODUCTS AND BEVERAGES. General Mills markets POP SECRET microwave
popcorn; a line of grain snacks including new lowfat chewy and traditional
crunchy NATURE VALLEY granola bars and DUNKAROOS; a line of fruit snacks
including FRUIT ROLL-UPS, FRUIT BY THE FOOT, GUSHERS, FRUIT STRING THING, BUGS
BUNNY and TASMANIAN DEVIL; a line of fat-free snack bars under the name SWEET
REWARDS and a savory snack marketed under the name BUGLES. The Company also
produces and sells a line of
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single-serving fruit juice drinks marketed under the SQUEEZIT trademark and
SQUEEZIT 100, a 100% juice beverage.
YOGURT PRODUCTS. Yoplait USA manufactures and sells a line of yogurt,
including YOPLAIT ORIGINAL, YOPLAIT LIGHT, CUSTARD STYLE, FAT FREE FRUIT ON THE
BOTTOM, TRIX, a layered yogurt for children and YOPLAIT CRUNCHY LIGHT, a non-fat
yogurt with an overcap of crunchy toppings. Yoplait USA also markets frozen
yogurt and novelties under a licensing arrangement. The Colombo yogurt business
manufactures and sells a variety of refrigerated cup yogurt products under the
COLOMBO brand name.
FOODSERVICE. The Foodservice division markets General Mills branded
baking mixes, cereals, snacks, refrigerated and soft frozen yogurt and custom
products to the commercial and non-commercial sectors, including airlines,
schools, restaurants and food management companies.
INTERNATIONAL FOOD OPERATIONS. General Mills Canada, Inc. manufactures
and sells BIG G ready-to-eat cereals in Canada. It also markets BETTY CROCKER
dessert, baking and packaged dinner mixes and snacks in Canada, licenses food
products for manufacture in Europe and the Asia/Pacific region, and exports
flour and packaged products throughout the world.
Cereal Partners Worldwide (CPW), the Company's joint venture with Nestle,
S.A. through various entities, competes in more than 60 countries and republics,
including, its newest market, Argentina. The following products under the
umbrella NESTLE trademark were marketed in fiscal 1996: TRIO, CLUSTERS,
NESQUICK, MULTI-CHEERIOS, HONEY NUT CHEERIOS, GOLDEN GRAHAMS, CINI MINIS,
CHOCAPIC, TRIX, ESTRELITAS, GOLD, KIX, MILO, FIBRE 1, KANGUS, SPORTIES, FITNESS,
SHREDDED WHEAT, SHREDDIES, COUNTRY CORN FLAKES, APPLE PUFFS, HONEY STARS AND
KOKO KRUNCH. CPW also manufactures private label cereals for customers in the
United Kingdom. The Company has a 50% equity interest in CPW. See Note Four to
Consolidated Financial Statements appearing on page 24 of the Company's 1996
Annual Report to Stockholders, incorporated herein by reference.
Snack Ventures Europe (SVE), the Company's joint venture with PepsiCo,
Inc., manufactures and sells snack foods in Holland, France, Belgium, Spain,
Portugal, Greece, Italy, Estonia, Hungary, Russia and Slovakia. The Company has
a 40.5% equity interest in SVE. See Note Four to Consolidated Financial
Statements appearing on page 24 of the Company's 1996 Annual Report to
Stockholders, incorporated herein by reference.
International Dessert Partners L.L.C. (IDP), the Company's joint venture
with CPC International Inc., began selling baking and dessert mixes in Latin
America in fiscal 1996 under a joint venture agreement executed in December,
1994. The Company has a 50% equity interest in IDP. See Note Four to
Consolidated Financial Statements appearing on page 24 of the Company's 1996
Annual Report to Stockholders, incorporated herein by reference.
GENERAL
TRADEMARKS AND PATENTS. The Company's products are marketed and
businesses operated under trademarks and service marks owned by or licensed to
the Company. Trademarks and service marks are vital to the Company's business.
The most significant trademarks and service marks of the Company are contained
in the business segment discussions above.
The Company considers that, taken as a whole, the rights under its various
patents, which expire from time to time, are a valuable asset, but the Company
does not believe that its businesses are materially dependent upon any single
patent or group of related patents. Outside its joint venture activities, the
Company's activities under licenses or other franchises or concessions are not
material.
RAW MATERIALS AND SUPPLIES. The principal raw materials used by General
Mills are cereal grains, sugar, fruits, other agricultural products, vegetable
oils, and plastic and paper for packaging materials.
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Although General Mills has some long-term contracts, the majority of such raw
materials are purchased on the open market. Prices of most raw materials will
probably increase over the long term. Nonetheless, General Mills believes that
it will be able to obtain an adequate supply of needed ingredients and packaging
materials. Occasionally and where possible, General Mills makes advance
purchases of commodities significant to its business in order to ensure
continuity of operations. The Company's objective is to procure ingredients
meeting both the Company's quality standards and its production needs at the
lowest total costs to the Company. The Company's strategy is to buy these
ingredients at price levels that allow a targeted profit margin. Since
ingredients generally represent the largest variable cost in manufacturing the
Company's products, to the extent possible, the Company hedges the risk
associated with adverse price movements of grains and vegetable oils using
exchange-traded futures and options and forward cash contracts. These tools
enable the Company to manage the related commodity price risk over periods of
time that exceed the period of time in which the physical commodity is
available. Sugar is not hedged since there is no viable derivative market that
meets the Company's needs. Accordingly, the Company uses hedging to mitigate
the risks associated with adverse price movements and not to speculate in the
marketplace. See also Note Seven to Consolidated Financial Statements appearing
on page 26 of the Company's 1996 Annual Report to Stockholders, incorporated
herein by reference.
CAPITAL EXPENDITURES. During the three fiscal years ended May 26, 1996,
General Mills expended $498 million for capital expenditures, not including the
cost of acquired companies. The Company expects to spend approximately $170
million for such purposes in fiscal 1997.
RESEARCH AND DEVELOPMENT. The main research and development facilities
are located at the James Ford Bell Technical Center in Golden Valley (suburban
Minneapolis), Minnesota. With a staff of approximately 760, the Center is
responsible for most of the food research for the Company. Approximately one-
half of the staff hold degrees in various chemical, biological and engineering
sciences. Research and development expenditures (all Company-sponsored)
amounted to $60.1 million in fiscal 1996, $59.8 million in fiscal 1995 and $59.1
million in fiscal 1994. General Mills' research and development resources are
focused on new product development, product improvement, process design and
improvement, packaging and exploratory research in new business areas.
EMPLOYEES. At May 26, 1996, General Mills had approximately 9,800
employees.
ENVIRONMENTAL MATTERS. As of June 30, 1996, the Company has received
notices advising it that there have been releases or threatened releases of
hazardous substances or wastes at 10 sites, and alleging that the Company is
potentially responsible for cleaning up those sites and/or paying certain costs
in connection with those sites. These matters involve several different
procedural contexts, including litigation initiated by governmental authorities
and/or private parties, administrative proceedings commenced by regulatory
agencies, and demand letters issued by regulatory agencies and/or private
parties. The Company recognizes that its potential exposure with respect to any
of these sites may be joint and several, but has concluded that its probable
aggregate exposure is not material. This conclusion is based upon, among other
things, the Company's payments and/or accruals with respect to each site; the
number, ranking, and financial strength of other potentially responsible parties
identified at each of the sites; the status of the proceedings, including
various settlement agreements, consent decrees or court orders; allocations of
volumetric waste contributions and allocations of relative responsibility among
potentially responsible parties developed by regulatory agencies and by private
parties; remediation cost estimates prepared by governmental authorities or
private technical consultants; and the Company's historical experience in
negotiating and settling disputes with respect to similar sites.
Based on current facts and circumstances, General Mills believes that
neither the results of these proceedings nor its compliance in general with
environmental laws or regulations will have a material adverse effect upon the
capital expenditures, earnings or competitive position of the Company.
SEGMENT INFORMATION. Reporting financial information relating to industry
segments of General Mills was discontinued as of May 28, 1995 with the
distribution of the restaurant business. For a
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description of the distribution, see Note Two to Consolidated Financial
Statements appearing on page 24 of the Company's 1996 Annual Report to
Stockholders, incorporated herein by reference. Geographic financial
information is found in Note Eighteen to Consolidated Financial Statements
appearing on page 33 of the Company's 1996 Annual Report to Stockholders,
incorporated herein by reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, together with their ages and
business experience, are set forth below.
Dean Belbas, age 64, is Senior Vice President, Investor Relations. Mr.
Belbas joined General Mills in 1956, was elected Vice President in 1977 and was
elected Senior Vice President in 1995.
Y. Marc Belton, age 37, is Vice President; President, Snacks. Mr. Belton
joined the Company in 1983 and served in various food marketing management
positions. He was appointed a Vice President of the Company in 1991 and named
to his present position in 1994.
Edward K. Bixby, age 60, is Senior Vice President; President, Consumer
Foods Sales and Distribution. Mr. Bixby joined the Company in 1958 and served
as General Manager of several Consumer Foods divisions. Mr. Bixby was elected
Senior Vice President, General Manager, Grocery Products Sales Division in 1987,
named President, Consumer Foods Sales in 1989 and named to his present position
in 1994.
Randy G. Darcy, age 45, is Senior Vice President, Operations. Mr. Darcy
joined the Company in 1987 and was named Vice President, Director of
Manufacturing, Technology and Operations in 1989 and named to his present
position in 1994.
Stephen R. Demeritt, age 52, is Executive Vice President of General Mills
and Chief Executive Officer of CPW, S.A., a joint venture of General Mills and
Nestle, S.A. Mr. Demeritt joined the Company in 1969 and was named a Marketing
Director in the Big G Division in 1976, appointed a Vice President of the
Company in 1983, named President of General Mills Canada, Inc. in 1986, elected
Senior Vice President of General Mills in 1992, and named Chief Executive
Officer of CPW, S.A. in 1993. He was named to his present position in 1996.
Jon L. Finley, age 42, is Senior Vice President; President, Gold Medal, a
division that includes Gold Medal and other family flour, Bisquick baking mix
and Betty Crocker desserts and baking mixes. Mr. Finley joined the Company in
1983 and was named President, Yoplait USA in 1991, appointed a Vice President of
the Company in 1991, elected Senior Vice President in 1994, named Senior Vice
President, New Business in 1995 and named to his present position in 1996.
Leslie M. Frecon, age 43, is Senior Vice President, Corporate Finance. Ms.
Frecon joined the Company in 1981 as Manager of Acquisitions and was named
Director of Acquisitions in 1983, Controller of Foodservice in 1989 and
Controller of Sperry in 1991. She was named a Vice President of the Company in
1991 and was elected to her present position in 1993.
Charles W. Gaillard, age 55, was elected President of General Mills,
effective May 28, 1995, with responsibility for all domestic marketing
divisions. He was previously Vice Chairman of General Mills, Inc. with
responsibility for Big G, Consumer Food Sales and Yoplait. He earlier served as
Chief Executive Officer of Cereal Partners Worldwide, a joint venture of the
Company and Nestle, S.A. and as President of Big G. Mr. Gaillard joined General
Mills in 1966 and has served in various food marketing management positions. He
was elected a Senior Vice President in 1985 and Executive Vice President in
1989.
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Stephen J. Garthwaite, age 52, is Senior Vice President, Innovation and
Technology. Mr. Garthwaite joined the Company in 1982 as Vice President,
Director of Corporate Research and was named Vice President, Research and
Development for the Betty Crocker Division in 1986. He assumed the position of
Vice President, Research and Development for Consumer Foods in 1987, was elected
Senior Vice President, Research and Development in 1989, was named Senior Vice
President, Technology and Operations in 1990 and was named to his present
position in 1994.
Eric J. Larson, age 40, is Senior Vice President. Mr. Larson joined the
Company in this position in June 1996 from Morgan Stanley & Co. where he had
been a partner and senior analyst covering packaged food, agri-business,
foodservice, tobacco and selected beverage companies since 1992. He previously
worked as an analyst covering consumer products companies at First Boston
Corporation and Paine Webber. In late 1996 Mr. Larson will assume
responsibility for Investor Relations.
Siri S. Marshall, age 48, is Senior Vice President, General Counsel and
Secretary. Ms. Marshall joined the Company in this position in 1994 from Avon
Products, Inc. where she held the positions of Senior Vice President, General
Counsel and Secretary from 1992 to 1994 and Vice President-Legal and Government
Affairs and Secretary from 1990 to 1992.
David D. Murphy, age 44, is Senior Vice President; President, International
Foods. Mr. Murphy joined the Company in 1976, and served as the head of several
divisions including Minnetonka, Betty Crocker Products and Big G. He was
elected a Senior Vice President in 1991, named President of General Mills Canada
in 1993 and named to his present position in 1996.
Michael A. Peel, age 46, is Senior Vice President, Personnel. Mr. Peel
joined the Company in this position in 1991 from PepsiCo, Inc. where he was
Senior Vice President, Personnel, responsible for PepsiCo Worldwide Foods.
Kendall J. Powell, age 42, is Vice President; President, Yoplait USA. Mr.
Powell joined the Company in 1979 and was appointed a Vice President of General
Mills and named Marketing Director of Cereal Partners U.K. in 1990. He was
named to his present position in 1995.
Jeffrey J. Rotsch, age 46, is Senior Vice President; President, Big G. Mr.
Rotsch joined the Company in 1974 and was named Vice President, Director of
Marketing for the Betty Crocker Division in 1987, Vice President, General
Manager for Betty Crocker main meals and side dishes in 1989, elected Senior
Vice President in 1993 and named to his present position in 1994.
Roger W. Rumble, age 59, is Vice President; President, Foodservice. Mr.
Rumble joined the Company in 1959, and was named Vice President, Director of
Marketing, Foodservice in 1987, Vice President, Assistant General Manager,
Sperry Division in 1988, and named to his present position in 1989.
Stephen W. Sanger, age 50, is Chairman and Chief Executive Officer of
General Mills, Inc., a position to which he was elected May 28, 1995. Mr.
Sanger joined the Company in 1974 and served as the head of several business
units, including Yoplait USA and Big G. He was elected a Senior Vice President
in 1989, Executive Vice President in 1991, Vice Chairman in 1992 and President
in 1993.
Christina L. Steiner, age 43, is Vice President; President, Betty Crocker.
Ms. Steiner joined the Company in 1976 and was appointed a Vice President in
1987. She was appointed Vice President, New Business Development for Yoplait
USA in 1991, Vice President, General Manager of Betty Crocker Products' Main
Meals and Side Dishes in 1992, and named to her present position in 1994.
Austin P. Sullivan, Jr., age 56, is Senior Vice President, Corporate
Relations. Mr. Sullivan joined the Company in 1976, was named a Vice President
in 1978, named Director of Public Affairs in 1979 and
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assumed responsibility for Corporate Communications in 1993. He was named to
his present position in 1994.
Kenneth L. Thome, age 48, is Senior Vice President, Financial Operations.
Mr. Thome joined the Company in 1969 and was named Vice President, Controller
for Convenience and International Foods Group in 1985, Vice President,
Controller for International Foods in 1989, Vice President, Director of
Information Systems in 1991 and was elected to his present position in 1993.
Raymond G. Viault, age 52, is Vice Chairman of the Company, with overall
responsibility for all international operations and business development, as
well as for all financial activities of the Company. Mr. Viault joined the
Company in January 1996 from Philip Morris, where he had been based in Zurich,
Switzerland, serving since 1990 as President of Kraft Jacobs Suchard. Mr.
Viault had been with Kraft General Foods a total of 20 years, serving in a
variety of major marketing and general management positions.
CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company and its representatives may from time to time make written or
oral forward-looking statements with respect to long-term goals of the Company,
including statements contained in the Company's filings with the Securities and
Exchange Commission and in its reports to stockholders.
The words or phrases "will likely result," "are expected to," "will
continue," "is anticipated," "estimate," "project" or similar expressions
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. In
connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, the Company is hereby identifying important
factors that could affect the Company's financial performance and could cause
the Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements.
Among the factors which have affected and may continue to affect operating
results are the following: (i) significant price competition by the largest
branded cereal manufacturers, including competitive promotional spending levels;
and (ii) high ingredient prices compared to historical levels. The Company's
operating results may also be affected by other external factors such as: the
effect of economic conditions; the impact of competitive products and pricing;
product development; actions of competitors; changes in laws and regulations,
including changes in accounting standards; customer demand; effectiveness of
advertising and marketing spending or programs; consumer perception of health-
related issues; fluctuations in the cost and availability of supply-chain
resources; and foreign economic conditions, including currency rate
fluctuations.
The Company specifically declines to undertake any obligation to publicly
revise any forward-looking statements that have been made to reflect events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.
ITEM 2. PROPERTIES.
The Company's principal executive offices and main research laboratory are
Company-owned and located in the Minneapolis, Minnesota metropolitan area.
General Mills operates numerous manufacturing facilities and maintains many
sales and administrative offices and warehouses, mainly in the United States.
Other facilities are also operated in Canada.
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General Mills operates ten major consumer foods plants for the production
of cereal products, prepared mixes, convenience foods and other food products.
These facilities are located at Albuquerque, New Mexico; Buffalo, New York;
Cedar Rapids, Iowa; Chicago, Illinois area (3); Covington, Georgia; Lodi,
California; Toledo, Ohio; and Etobicoke, Canada. The Company owns seven flour
mills located at Avon, Iowa; Buffalo, New York; Great Falls, Montana; Johnson
City, Tennessee; Kansas City, Missouri; Vallejo, California; and Vernon,
California. The Company operates seven terminal grain elevators and has country
grain elevators in 28 locations, primarily in Idaho and Montana.
General Mills also has eight other food and beverage production facilities
with total floor space of approximately 555,000 square feet, including 231,000
square feet of leased space. General Mills also owns or leases warehouse space
aggregating approximately 6,840,000 square feet, of which approximately
4,298,000 square feet are leased. A number of sales and administrative offices
are maintained in the United States and Canada, totaling 1,761,000 square feet.
ITEM 3. LEGAL PROCEEDINGS.
In management's opinion, there were no claims or litigation pending at
May 26, 1996, the outcome of which could have a material adverse effect on the
consolidated financial position of General Mills, Inc. and its subsidiaries.
See the information contained under the section entitled "Environmental
Matters," supra, for a discussion of environmental matters in which the Company
is involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. -- Not
applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information relating to the market prices and dividends of the
Company's common stock contained in Note Nineteen to Consolidated Financial
Statements appearing on page 33 of Registrant's 1996 Annual Report to
Stockholders is incorporated herein by reference. As of August 1, 1996, the
number of record holders of common stock was 43,275. The Company's common stock
($.10 par value) is listed on the New York and Chicago Stock Exchanges.
ITEM 6. SELECTED FINANCIAL DATA.
The information for fiscal years 1992 through 1996 contained in the
Eleven-Year Financial Summary on page 34 of Registrant's 1996 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The information set forth in the section entitled "Management's Discussion
of Results of Operations and Financial Condition" on pages 16 through 18 of
Registrant's 1996 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information on pages 19 through 33 of Registrant's 1996 Annual Report
to Stockholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL
DISCLOSURE. --Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained in the sections entitled "Information Concerning
Nominees" and "Section 16(a) Beneficial Ownership Reporting Compliance"
contained in Registrant's definitive proxy materials dated August 22, 1996 is
incorporated herein by reference.
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ITEM 11. EXECUTIVE COMPENSATION.
The information contained on pages 20 through 23 of Registrant's definitive
proxy materials dated August 22, 1996 is incorporated herein by reference. The
information appearing under the heading "Report of Compensation Committee on
Executive Compensation" is not incorporated herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in the section entitled "Share Ownership of
Directors and Executive Officers" contained in Registrant's definitive proxy
materials dated August 22, 1996 is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. -- Not applicable.
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The Company's Annual Report on Form 10-K for the fiscal year ended May 26, 1996,
at the time of its filing with the Securities and Exchange Commission, shall
modify and supersede all prior documents filed pursuant to Sections 13, 14 and
15(d) of the 1934 Act for purposes of any offers or sales of any securities
after the date of such filing pursuant to any Registration Statement or
Prospectus filed pursuant to the Securities Act of 1933 which incorporates by
reference such Annual Report on Form 10-K.
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AUDITORS' REPORT
The Stockholders and the Board of Directors
General Mills, Inc.:
Under date of June 26, 1996, we reported on the consolidated balance sheets
of General Mills, Inc. and subsidiaries as of May 26, 1996 and May 28, 1995 and
the related consolidated statements of earnings and cash flows for each of the
fiscal years in the three-year period ended May 26, 1996, as contained in the
1996 annual report to stockholders. These consolidated financial statements and
our report thereon are incorporated by reference in the annual report on Form
10-K for the fiscal year ended May 26, 1996. In connection with our audits of
the aforementioned consolidated financial statements, we have also audited the
related financial statement schedule as listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
Our report covering the basic consolidated financial statements refers to
changes in the method of accounting for investments in debt and equity
securities in fiscal 1995 and postemployment benefits and income taxes in fiscal
1994.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 26, 1996
AUDITORS' CONSENT
The Board of Directors
General Mills, Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos. 2-49637, 33-56032 and 333-00745) on Form S-3 and Registration Statements
(Nos. 2-13460, 2-53523, 2-66320, 2-91987, 2-95574, 33-24504, 33-27628, 33-
32059, 33-36892, 33-36893, 33-50337 and 33-62729) on Form S-8 of General Mills,
Inc. of our reports dated June 26, 1996, relating to the consolidated balance
sheets of General Mills, Inc. and subsidiaries as of May 26, 1996 and May 28,
1995 and the related consolidated statements of earnings, cash flows and related
financial statement schedule for each of the fiscal years in the three-year
period ended May 26, 1996, which reports are included or incorporated by
reference in the May 26, 1996 annual report on Form 10-K of General Mills, Inc.
Our report covering the basic consolidated financial statements refers to
changes in the method of accounting for investments in debt and equity
securities in fiscal 1995 and postemployment benefits and income taxes in fiscal
1994.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 22, 1996
-9-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS:
Consolidated Statements of Earnings for the Fiscal Years Ended May 26,
1996, May 28, 1995 and May 29, 1994 (incorporated herein by reference
to page 20 of the Registrant's 1996 Annual Report to Stockholders).
Consolidated Balance Sheets at May 26, 1996 and May 28, 1995
(incorporated herein by reference to page 21 of the Registrant's 1996
Annual Report to Stockholders).
Consolidated Statements of Cash Flows for the Fiscal Years Ended May
26, 1996, May 28, 1995 and May 29, 1994 (incorporated herein by
reference to page 22 of the Registrant's 1996 Annual Report to
Stockholders).
Notes to Consolidated Financial Statements (incorporated herein by
reference to pages 23 through 33 of the Registrant's 1996 Annual
Report to Stockholders).
2. FINANCIAL STATEMENT SCHEDULES:
For the Fiscal Years Ended May 26, 1996, May 28, 1995 and May 29,
1994:
II - Valuation and Qualifying Accounts
3. EXHIBITS:
3.1 - Copy of Registrant's Restated Certificate of Incorporation,
as amended to date (incorporated herein by reference to
Exhibit 3.1 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 28, 1995).
3.2 - Copy of Registrant's By-Laws, as amended to date
(incorporated herein by reference to Exhibit 3 to
Registrant's Report on Form 8-K dated December 11, 1995).
4.1 - Copy of Indenture between Registrant and Continental
Illinois National Bank and Trust Company of Chicago, as
amended to date by Supplemental Indentures Nos. 1 through 8
(incorporated herein by reference to Exhibit 4 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992 and to Exhibit 4(b) to Registrant's
Current Report on Form 8-K filed January 8, 1993).
4.2 - Copy of Rights Agreement dated as of December 11, 1995
between Registrant and Norwest Bank Minnesota, N.A.
(incorporated herein by reference to Exhibit 1 to
Registrant's Report on Form 8-K dated December 11, 1995).
4.3 - Copy of Indenture between Registrant and First Trust of
Illinois, National Association dated February 1, 1996
(incorporated herein by reference to Exhibit 4.1 to
Registrant's Registration Statement on Form S-3 effective
February 23, 1996).
*10.1 - Copy of Stock Option and Long-Term Incentive Plan of 1988,
as amended to date (incorporated herein by reference to
Exhibit 10.1 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
*10.2 - Copy of Stock Option and Long-Term Incentive Plan of 1984,
as amended to date (incorporated herein by reference to
Exhibit 10.2 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
-10-
<PAGE>
10.3 - Distribution Agreement with Darden Restaurants, Inc. dated
May 12, 1995 (incorporated herein by reference to Exhibit 2
to Registrant's Report on Form 8-K dated May 28, 1995).
*10.4 - Copy of Executive Incentive Plan, as amended to date
(incorporated herein by reference to Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 28, 1995).
*10.5 - Copy of Management Continuity Agreement (incorporated herein
by reference to Exhibit 4 to Registrant's Report on Form 8-K
dated December 11, 1995).
*10.6 - Copy of Supplemental Retirement Plan, as amended to date
(incorporated herein by reference to Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 29, 1994).
*10.7 - Copy of Executive Survivor Income Plan, as amended to date.
*10.8 - Copy of Executive Health Plan, as amended to date.
*10.9 - Copy of Supplemental Savings Plan, as amended to date
(incorporated herein by reference to Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 29, 1994).
*10.10 - Copy of Compensation Plan for Non-Employee Directors, as
amended to date (incorporated herein by reference to Exhibit
10.10 to Registrant's Annual Report on Form 10-K for the
fiscal year ended May 31, 1992).
*10.11 - Copy of General Mills, Inc. 1995 Salary Replacement Stock
Option Plan.
*10.12 - Copy of Deferred Compensation Plan, as amended to date
(incorporated herein by reference to Exhibit 10.12 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 28, 1995).
*10.13 - Copy of Supplemental Benefits Trust Agreement dated
February 9, 1987, as amended and restated as of
September 26, 1988 (incorporated herein by reference to
Exhibit 10.13 to Registrant's Annual Report on Form 10-K
for the fiscal year ended May 29, 1994).
*10.14 - Copy of Supplemental Benefits Trust Agreement dated
September 26, 1988 (incorporated herein by reference to
Exhibit 10.14 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.15 - Copy of Agreements dated November 29, 1989 by and between
General Mills, Inc. and Nestle, S.A. (incorporated herein by
reference to Exhibit 10.15 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 28, 1995).
10.16 - Copy of Protocol and Addendum No. 1 to Protocol of Cereal
Partners Worldwide.
*10.17 - Copy of Stock Plan for Non-Employee Directors, as amended to
date (incorporated herein by reference to Exhibit 10.17 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 28, 1995).
*10.18 - Copy of 1990 Salary Replacement Stock Option Plan, as
amended to date. (incorporated herein by reference to
Exhibit 10.18 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.19 - Copy of Addendum No. 2 dated March 16, 1993 to Protocol of
Cereal Partners Worldwide (incorporated herein by reference
to Exhibit 10.19 to Registrant's Annual Report on Form 10-K
for the fiscal year ended May 30, 1993).
10.20 - Copy of Agreement dated July 31, 1992 by and between General
Mills, Inc. and PepsiCo, Inc. (incorporated herein by
reference to Exhibit 10.20 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 30, 1993).
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
-11-
<PAGE>
*10.21 - Copy of Stock Option and Long-Term Incentive Plan of 1993,
as amended to date (incorporated herein by reference to
Exhibit 10.21 to Registrant's Annual Report on Form 10-K for
the fiscal year ended May 29, 1994).
10.22 - Copy of Standstill Agreement with CPC International, Inc.
dated October 17, 1994 (incorporated herein by reference to
Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q
for the period ended February 26, 1995).
10.23 - Copy of Addendum No. 3 effective as of March 15, 1993 to
Protocol of Cereal Partners Worldwide (incorporated herein
by reference to Exhibit 10(b) to Registrant's Quarterly
Report on Form 10-Q for the period ended February 26, 1995).
11 - Statement of Determination of Common Shares and Common Share
Equivalents (contained on page 16 of this Report).
12 - Statement of Ratio of Earnings to Fixed Charges (contained
on page 17 of this Report).
13 - 1996 Annual Report to Stockholders (only those portions
expressly incorporated by reference herein shall be deemed
filed with the Commission).
21 - List of Subsidiaries of General Mills, Inc.
23 - Consent of KPMG Peat Marwick LLP (contained on page 9 of
this Report).
* Items that are management contracts or compensatory plans or arrangements
required to be filed as an exhibit pursuant to Item 14(c) of Form 10-K.
(b) REPORTS ON FORM 8-K. -- Not applicable.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: August 22, 1996
By: /s/ S. S. MARSHALL
-----------------------------------------
S. S. Marshall
SENIOR VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ R.M. BRESSLER Director August 7, 1996
- - ----------------------- --------------------
(Richard M. Bressler)
/s/ L. DE SIMONE Director August 8, 1996
- - ----------------------- --------------------
(Livio D. DeSimone)
/s/ W.T. ESREY Director August 9, 1996
- - ----------------------- --------------------
(William T. Esrey)
/s/ C. W. GAILLARD Director, August 8, 1996
- - ----------------------- President --------------------
(Charles W. Gaillard)
/s/ JUDITH R. HOPE Director August 8, 1996
- - ----------------------- --------------------
(Judith R. Hope)
/s/ KENNETH MACKE Director August 8, 1996
- - ----------------------- --------------------
(Kenneth A. Macke)
/s/ GEORGE PUTNAM Director August 9, 1996
- - ----------------------- --------------------
(George Putnam)
/s/ M.D. ROSE Director August 8, 1996
- - ----------------------- --------------------
(Michael D. Rose)
-13-
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ S. W. SANGER Chairman of the Board and August 8, 1996
- - ----------------------- Chief Executive Officer --------------------
(Stephen W. Sanger)
/s/ A. MICHAEL SPENCE Director August 8, 1996
- - ----------------------- --------------------
(A. Michael Spence)
/s/ D. A. TERRELL Director August 8, 1996
- - ----------------------- --------------------
(Dorothy A. Terrell)
/s/ RAYMOND G. VIAULT Director August 8, 1996
- - ----------------------- Vice Chairman --------------------
(Raymond G. Viault)
/s/ C. ANGUS WURTELE Director August 8, 1996
- - ----------------------- --------------------
(C. Angus Wurtele)
/s/ KENNETH L. THOME Senior Vice President, August 8, 1996
- - ----------------------- Financial Operations --------------------
(Kenneth L. Thome) (Principal Accounting Officer)
-14-
<PAGE>
GENERAL MILLS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- - ------------------------ -------- -------- -------- --------
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END OF
DESCRIPTION OF PERIOD EXPENSES RESERVES PERIOD
- - ----------- ----------- ---------- ---------- --------
Allowance for possible
losses on accounts
receivable:
Year ended May 26, 1996. . $4.1 $ .1 $ .4 (a) $4.1
(.3)(b)
---- ---- ---- ----
Total. . . . . . . . . $4.1 $ .1 $ .1 $4.1
---- ---- ---- ----
---- ---- ---- ----
Year ended May 28, 1995. . $3.6 $1.0 $ .8 (a) $4.1
(.3)(b)
---- ---- ---- ----
Total. . . . . . . . . $3.6 $1.0 $ .5 $4.1
---- ---- ---- ----
---- ---- ---- ----
Year ended May 29, 1994. . $3.5 $ .9 $1.0 (a) $3.6
(.2)(b)
---- ---- ---- ----
Total. . . . . . . . . . . $3.5 $ .9 $ .8 $3.6
---- ---- ---- ----
---- ---- ---- ----
- - ---------------------------
Notes:
(a) Bad debt write-offs.
(b) Other adjustments and reclassifications.
-15-
<PAGE>
EXHIBIT 11
GENERAL MILLS, INC.
STATEMENT OF DETERMINATION OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS
(IN MILLIONS)
Weighted average number of
common shares and common share
equivalents assumed outstanding
------------------------------------
For the Fiscal Years Ended
------------------------------------
May 26, May 28, May 29,
1996 1995 1994
------- ------- --------
Weighted average number of common shares
outstanding, excluding common stock
held in treasury (a) . . . . . . . . . 158.9 158.0 159.1
Common share equivalents resulting from
the assumed exercise of certain stock
options (b). . . . . . . . . . . . . . 3.1* 2.1* 2.4*
----- ----- -----
Total common shares and common share
equivalents. . . . . . . . . . . . . . 162.0 160.1 161.5
----- ----- -----
----- ----- -----
- - ---------------------------
Notes:
(a) Computed as the weighted average 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 of common shares outstanding
of 158.9 million, 158.0 million and 159.1 million for fiscal 1996, 1995 and
1994, respectively.
-16-
<PAGE>
EXHIBIT 12
GENERAL MILLS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
Fiscal Year Ended
-----------------------------------------------
May 26, May 28, May 29, May 30, May 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Ratio of Earnings to Fixed
Charges. . . . . . . . . . . 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 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.
-17-
<PAGE>
EXHIBIT INDEX
10.7 - Copy of Executive Survivor Income Plan, as amended to date.
10.8 - Copy of Executive Health Plan, as amended to date.
10.11 - Copy of General Mills, Inc. 1995 Salary Replacement Stock Option
Plan.
10.16 - Copy of Protocol and Addendum No. 1 to Protocol of Cereal
Partners Worldwide.
11 - Statement of Determination of Common Shares and Common Share
Equivalents (contained on page 16 of this Report).
12 - Statement of Ratio of Earnings to Fixed Charges (contained on
page 17 of this Report).
13 - 1996 Annual Report to Stockholders (only those portions
expressly incorporated by reference herein shall be deemed filed
with the Commission).
21 - List of Subsidiaries of General Mills, Inc.
23 - Consent of KPMG Peat Marwick (contained on page 9 of this
Report).
27 - Financial Data Schedule.
<PAGE>
EXHIBIT 10.7
EXECUTIVE SURVIVOR INCOME PLAN
OF
GENERAL MILLS, INC.
ARTICLE I - DEFINITIONS
1.01 "Administrator" shall mean the Vice President, Employee Relations of
the Company, or like successor.
1.02 "Company" shall mean General Mills, Inc. and its subsidiaries.
1.03 "Dependent" shall mean surviving unmarried children of the
Participant (including legally adopted and step-children) less than
age twenty-two (22) provided they (i) attend school full-time or
reside with Participant, and (ii) depended upon the Participant for
support and maintenance; and surviving unmarried children of the
Participant (including legally adopted and step-children) age
twenty-two (22) or older provided they (i) are totally disabled or
attending school full-time, and (ii) depended upon the Participant
for support and maintenance.
1.04 "Earnable Compensation" shall mean all compensation for services
paid to a Participant of the Plan including salary, bonuses,
commissions, Deferred Cash Awards as accrued under the Executive
Incentive and Estate Building Plan (excluding interest thereon) and
all other special payments made as compensation for services as
determined by the Administrator, excluding Stock Option and Long
Term Incentive Plan of 1980.
[1.04 Amended Effective 1/1/1982]
1.05 "Final Average Earnings" shall mean the average of Participant's
Earnable Compensation which is the larger of the two formulas in (a)
and (b) following:
(a) Determine the average of the five highest calendar years
of Earnable Compensation received by a Participant in the
Participant's last ten consecutive calendar years of
Company service immediately preceding death.
(b) Select the five highest calendar years of Earnable
Compensation (herein referred to as "selected years")
received by a Participant in the Participant's last ten
consecutive calendar years and (1) to the total of the
compensation received in the selected years add the full
months of Earnable Compensation which the Participant
received for all full calendar months of Company service
during the calendar year in which the Participant died,
and (2) deduct the Earnable Compensation which the
Participant received during the same month in the selected
year in which the Participant's Earnable Compensation was
the lowest. Divide the total compensation so determined by
five.
1.06 "Participant" shall mean any employee of the Company who is a
Participant of the Plan at the date of his or her death.
1.07 "Plan" shall mean the Executive Survivor Income Plan of General
Mills, Inc.
1.08 "Surviving Spouse" shall mean the then living spouse (excluding a
legally separated spouse) of the Participant, who at the time of the
Participant's death had been married to the Participant for a
minimum of one year.
<PAGE>
ARTICLE II - BENEFITS
2.01 SURVIVING SPOUSE'S BENEFIT
Upon the death of a Participant of the Plan, the Surviving Spouse
shall be entitled to receive a monthly benefit equal to one-twelfth
(1/12) of twenty-five percent (25%) of the Participant's Final
Average Earnings, provided that for Participants who were enrolled
in the Company's insured Survivor Income Plan immediately prior to
participation in this Plan, the Surviving Spouse's benefit shall not
be less than the benefit payable to the Surviving Spouse under the
Survivor Income Plan as of the last day the Participant was enrolled
in the Survivor Income Plan.
2.02 SURVIVING SPOUSE'S BENEFIT PAYMENT
Upon receipt of written proof of the death of the Participant
satisfactory to the Plan Administrator, the Surviving Spouse's
benefit shall become payable as of the first day of the calendar
payment shall be made as of the first day of the calendar month in
which the Surviving Spouse's death occurs. This benefit shall
continue to be payable in the event the Surviving Spouse remarries.
2.03 DEPENDENT'S BENEFIT
In the event there is no Surviving Spouse of the Participant or in
the event the Surviving Spouse thereafter dies and there are one or
more Dependents, a monthly benefit equal to one-twelfth (1/12) of
twelve and one-half percent (12 1/2%) of the Participant's Final
Average Earnings shall be paid to Participant's Dependents,
apportioned equally among such Dependents, so long as they qualify as
dependents as defined herein. For Participants who were enrolled in
the Company's insured Survivor Income Plan immediately prior to
participation in this Plan, the Dependent's benefit shall not be less
than the benefit payable to Dependents under the Survivor Income Plan
as of the last day the Participant was enrolled in the Survivor
Income Plan. Any adjustment in the benefit caused by the change in
the number of Dependents as determined by the Administrator shall
take effect immediately.
2.04 DEPENDENT'S BENEFIT PAYMENT
Upon receipt of written proof of the status of persons as Dependents
satisfactory to the Plan Administrator, and where such has not
previously been furnished written proof of the death of the
Participant, the Dependent's benefits shall become payable as of
thefirst day of the calendar month next following the death of the
Participant if there is no Surviving Spouse or as of the first day
of the calendar month next following the death of the Surviving
Spouse.
2.05 BENEFIT REDUCTION
Any benefit payable hereunder shall be reduced by amount payable
under all other Company-paid survivor income benefit plans,
including pension and profit-sharing retirement plans and
Company-paid individual life insurance policies. Any amounts payable
from Company-paid profit-sharing retirement plans shall be restated
to a monthly benefit basis. Amounts payable under Company-paid group
life insurance policies shall not reduce benefits payable hereunder.
2.06 PAYMENT TO TRUSTS
A Participant may, upon written notice to the Administrator, direct
that the benefits payable hereunder be paid to a trust, provided
that at the time of such designation, the Administrator shall be
furnished a copy of the trust instrument for review and approval.
The trust instrument must provide that the benefits payable
hereunder shall accrue to the Surviving Spouse or Dependents to the
same extent and manner as if the said benefits were paid in
accordance with this Plan. Payments of benefits to such trust shall
discharge the Company from all liability or obligation to the extent
of the amount so paid.
2.07 MINORITY OR INCOMPETENCY PAYMENT
<PAGE>
If any benefit is payable to a minor or to a person otherwise
incapable of giving a valid release for any payment due, and until a
claim is made by a duly appointed guardian or committee of such
person, payment may be made to such person or to any person or
institution appearing to the Administrator to have assumed the
custody and principal support of such person, and the liability of
the Company shall be discharged to the extent of the amount so paid.
ARTICLE III - ADMINISTRATION OF THE PLAN
3.01 ADMINISTRATOR
The Plan shall be supervised by the Administrator, who shall have
the authority to construe and interpret the Plan. The Management
Policy Committee of the Company shall have final authority in cases
where the Administrator, in his or her sole discretion, determines
that such Committee make a final decision. Interpretations and
decisions of the Administrator and the Management Policy Committee
shall be final and binding on all parties, including the Company and
the Participants.
3.02 DELEGATED DUTIES
The Administrator shall have authority to delegate to the Director
of Employee Benefits, or others, the duties and responsibilities of
maintaining records, issuing such rules and regulations as it deems
appropriate, and directing and making the payment of benefits
provided hereunder.
3.03 DESIGNATION AND TERMINATION OF PARTICIPANT STATUS
The Director of Executive Development and Compensation of the
Company shall designate by written instrument those employees chosen
to be Participants in the Plan. Participants shall be chosen from a
list of key employees recommended by management. Participants may be
added or deleted (upon management recommendation) by the Director of
Executive Development and Compensation of the Company at any time as
needed.
3.04 AMENDMENT AND TERMINATION OF PLAN
The Company may amend, modify or terminate the Plan and all benefits
hereunder at any time.
3.05 PAYMENTS
The Company shall pay all benefits arising under this Plan and all
costs, charges and expenses relating thereto.
3.06 NON-ASSIGNABILITY OF BENEFITS
Except to the extent required by law and other than as provided
herein, the benefits payable hereunder or the right to receive
future benefits under the Plan may not be anticipated, alienated,
sold, transferred, assign, pledged, encumbered, or subjected to any
charge or legal process, and if any attempt is made to do so, or a
person eligible for any benefits becomes bankrupt, the interest
under the Plan of the person affected may be terminated by the
Administrator, who, in his or her sole discretion, may cause the
same to be held or applied for the benefit of one or more of the
Dependents of such person or make any other disposition of such
benefits as he or she deems appropriate.
3.07 APPLICABLE LAW
All questions pertaining to the construction, validity and effect of
the Plan shall be determined in accordance with the laws of the
United States and the laws of the State of Minnesota.
3.08 EFFECTIVE DATE
This Plan shall become effective as of January 1, 1980.
<PAGE>
EXHIBIT 10.8
FOREWORD
This handbook is intended to serve as a summary of the benefits and practices
and is not a contract. If a discrepancy or conflict should arise between this
handbook and the official plan document or policy, the terms of the plan
document or policy will prevail.
General Mills, Inc. expressly reserves the right to amend, terminate or replace
the benefits, practices or policies at any time and at its sole discretion. This
handbook supersedes all previous handbooks.
IMPORTANT NOTICE: This Booklet is an important document and should be kept in a
safe place. This Booklet and the Certificate of Coverage made a part of this
Booklet forms your Group Insurance Certificate.
TABLE OF CONTENTS
FOREWORD 1
SCHEDULE OF BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Who is Covered? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Effective Date of These Benefts . . . . . . . . . . . . . . . . . . . . . .5
You Should Know. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Dental Expense Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . .5
Orthodontic Expense Coverage Supplement. . . . . . . . . . . . . . . . . . .6
Major Medical Expense Coverage . . . . . . . . . . . . . . . . . . . . . . .6
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Maximums; Cost of the Insurance; When You Have a Claim
ELIGIBIUTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Who is Eligible? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Effective Date of Coverage . . . . . . . . . . . . . . . . . . . . . . . . .9
When Coverage Could Bo Delayed . . . . . . . . . . . . . . . . . . . . . . .11
DENTAL EXPENSE COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Benefits; What is Covered?; Charges Not Covered
ORTHODONTIC EXPENSE COVERAGE SUPPLEMENT. . . . . . . . . . . . . . . . . . . .16
Benefits; What is Covered?; Charges Not Covered
MAJOR MEDICAL EXPENSE COVERAGE . . . . . . . . . . . . . . . . . . . . . . . .19
Benefits; What is Covered?; Charges Not Covered; Maximum
MODIFICATION - WHEN ANOTHER PERSON IS LIABLE FOR YOUR SICKNESS
OR INJURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
IF AN INDIVIDUAL IS COVERED BY MORE THAN ONE PLAN. . . . . . . . . . . . . . .27
HOW MEDICARE AFFECTS BENEFITS. . . . . . . . . . . . . . . . . . . . . . . . .31
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Assignment of Coverages to Others . . . . . . . . . . . . . . . . . . . . .33
Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
If You Need to Make a Claim. . . . . . . . . . . . . . . . . . . . . . . . .36
TERMINATION OF COVERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Events That Can End Your Insurance; End of Employment
<PAGE>
Continuation of Coverage . . . . . . . . . . . . . . . . . . . . . . . . . .37
Continued Coverage for an Incapacitated Child; When Health Care Insurance
May Be Continued (Including Rights Under COBRA)
EXTENSION OF HEALTH CARE PROTECTION DURING TOTAL DISABILITY . . . . . . . . .43
CONVERSION PRIVILEGE FOR HEALTH CARE INSURANCE . . . . . . . . . . . . . . . .44
SCHEDULE OF BENEFITS
Covered Classes: Employees of General Mills, Inc. (and its Affiliates) listed
below are eligible for this Plan:
(1) All Employees classified by General Mills, Inc. as Chairman of the Board,
Vice Chairman of the Board, President. Elected Corporate Vice Presidents
and Executive or Senior Vice Presidents who are Company Officers.
(2) All former employees who: (1) are retired from the Company: and (2) were
covered by this Plan on their last day of employment with the Company.
Program Date: January 1, 1996. This Booklet describes the benefits under the
Plan as of the Program Date.
You should know...
* The Coverages in this Booklet are available to you if you are included in
the Covered Classes. Only those Coverages for which you become insured will
apply to you. The rules for becoming insured are in the Effective Date of
Coverage section of this Booklet.
* There is a Delay of Effective Date section. The rules of that section may
delay the start of your insurance.
* The Delay of Effective Date section also applies to any change, unless
otherwise stated.
* The Coverages are described more fully on later pages of this Booklet. Be
sure to read these pages carefully. They show when benefits are or are not
payable under the Group Contract. They also outline when your insurance
ends and the conditions, limitations and exclusions that apply to the
Coverages. The benefits otherwise payable under the Group Contract for a
person's health care expenses may be reduced because of benefits from other
sources. See later pages for details.
* A Definitions section is included in this Booklet. Many of the terms used
in this Booklet, such as "Active Work Requirement", are defined in that
section.
* This Booklet and the Certificate of Coverage forms your Group Insurance
Certificate. The Coverages in this Booklet are insured under a Group
Contract issued by Prudential. All benefits are subject in every way to the
entire Group Contract which includes the Group Insurance Certificate. It
alone forms the agreement under which payment of insurance is made.
* The Group Contract referred to in this Booklet, or a copy of it, may be
reviewed by you during regular business hours either at General Mills, Inc.
or at Prudential's Group Operations office in Horsham, Pennsylvania.
* General Mills expects to continue the Group Program indefinitely. But
General Mills reserves the right to amend, terminate or replace the
benefits, practices or policies at anytime at its sole discretion. This
would change or end the terms of the Group Program in effect at that time
for active and retired Employees.
<PAGE>
DENTAL EXPENSE COVERAGE
* This Coverage pays benefits for many of the charges incurred for the
preventive and corrective dental care you and your Qualified Dependents
receive. Not all charges are eligible, some are eligible only to a limited
extent. Benefits are based on the Eligible Charges incurred in a Calendar
Year. There are Benefit Maximums. There is also an extension that may apply
after a person ceases to be covered.
If a proposed course of treatment is expected to involve charges of $300.00
or more, Pre-determination of Benefits is recommended. Pre-determination of
Benefits is explained in the Coverage pages.
ORTHODONTIC EXPENSE COVERAGE SUPPLEMENT
* This supplements your Dental Expense Coverage. It pays benefits for some of
the charges incurred for Orthodontic Procedures performed on you and your
Qualified Dependents. Benefits are based on the Eligible Charges incurred
in a Calendar Year. There are Benefit Maximums. Protection is not extended
after the date a person ceases to be a Covered Person for the benefits of
this Coverage Supplement.
MAJOR MEDICAL EXPENSE COVERAGE
* This Coverage pays benefits for many of the charges incurred for care and
treatment of you or your Qualified Dependent's Sicknesses and Injuries. Not
all charges are eligible and some are eligible only to a limited extent.
Benefits are based on the Eligible Charges incurred in a Calendar Year.
There are benefit maximums. There is also an extension that may apply after
a person ceases to be covered.
Some eligible charges under this coverage are subject to certain limits.
Benefit Maximums also apply. These limits and maximums may apply on a
calendar year or lifetime basis.
This coverage may be changed in the future. If it is, any used parts of
this coverage's maximums and limits will reduce any similar maximums and
limits that apply under the changed coverage.
This coverage may be replacing another Prudential Major Medical Expense
coverage previously issued to the Employer. If so, the maximums and limits
of this coverage will be reduced by any used parts of similar benefit
maximums and limits under the replaced coverage.
Another way to state this is that any benefit maximums and limits reduced
by benefits received are not restored for future charges by any changes -
whether to the coverage itself, or from another Major Medical Expense
coverage to this one, except as follows. Any automatic limited restoration
or restoration with evidence of insurability provisions under the coverage
will continue to apply.
OTHER INFORMATION
Contract Holder: GENERAL MILLS, INC.
Group Contract No.: GE-40100
Affiliates: Affiliates are employers who are the Contract Holder's subsidiaries
or affiliates and are reported to Prudential in writing by General Mills, Inc.
for inclusion under the Group Contract, provided that Prudential has approved
such request.
BENEFITS
All Eligible Charges are subject to the Benefit Maximum:
<PAGE>
The Amount Payable is 100% of the Eligible Charges.
BENEFIT MAXIMUM:
Lifetime Benefit Maximum for all Sicknesses and Injuries: $2,000,000 per each
Covered Person.
Cost of the Insurance: The insurance in this Booklet is Non-contributory
Insurance. The entire cost of the insurance is being paid by General Mills.
Prudential's Address:
The Prudential Insurance Company of America
Central Group Operations
P.O. Box 950
Horsham, Pennsylvania 19044-0950
WHEN YOU HAVE A CLAIM
No claim forms are required. Bills for medical and dental expenses can be sent
directly to The Prudential by the provider, or submitted by the claimant. All
bills or correspondence must be identified with "General Mills Executive Health
Plan, Prudential Group Policy GE-40 100."
Claim envelopes are available for your use by contacting the Employee Benefits
Department at General Mills.
ALTERNATE BENEFIT PAYMENT
Whenever a law or court order requires payment of health care expense benefits
under the Group Contract to be made to a person or facility other than you, the
payment will be made to that person or facility.
ELIGIBILITY
FOR EMPLOYEE INSURANCE
You are eligible for Employee Insurance while:*
* You are an Employee of General Mills; and
* You are in a Covered Class.
*If you are retired from General Mills while covered by this Plan, you will
continue to be eligible for Insurance as a retiree.
Your class is determined by General Mills. This will be done under its rules, on
dates it sets. General Mills must not discriminate among persons in like
situations. You cannot belong to more than one class for insurance on each
basis, Contributory or Non-contributory Insurance, under a Coverage. "Class"
means Covered Class, Benefit Class or anything related to work, such as position
or Earnings, which affects the insurance available.
FOR DEPENDENTS INSURANCE
Qualified Dependents:
These are the persons for whom you may obtain Dependents Insurance:
* Your spouse.
<PAGE>
* Your unmarried children less than 19 years old or age 25, if a full-time
student.
Your children include your legally adopted children and each of your
stepchildren, foster children and children of your Qualified Dependent children
who depend on you for support and maintenance.
In the case of health care expense Coverages, your children also include
children placed with you for adoption prior to legal adoption. A child placed
with you for adoption prior to legal adoption is considered your Qualified
Dependent from the date of placement for adoption, and is treated as though the
child was a newborn child born to you.
Exceptions:
* The age 19 limit does not apply to a child who:
(a) wholly depends on you for support and maintenance;
(b) is enrolled as a full-time student in a school; and
(c) is less than 25.
* Your spouse or child is not your Qualified Dependent while:
(a) on active duty in the armed forces of any country; or
(b) separately insured for health care expenses under the Group Contract
as an Employee.
A child will not be considered the Qualified Dependent of more than one
Employee. If this would otherwise be the case, the child will be considered the
Qualified Dependent of the Employee named in a written agreement of all such
Employees filed with General Mills. If there is no written agreement, the child
will be considered the Qualified Dependent of:
(a) the Employee who became insured under the Group Contract with respect
to the child, while the child was a Qualified Dependent of only that
Employee; and otherwise
(b) the Employee who has the longest continuous service with the Employer,
based on its records.
EFFECTIVE DATE OF COVERAGE
FOR EMPLOYEE INSURANCE
Your Employee Insurance under a Coverage will begin the first day on which:
* You are eligible for Employee Insurance; and
* You are in a Covered Class for that insurance; and
* Your insurance is not being delayed under the Delay of Effective Date
section below; and
* That Coverage is part of the Group Contract.
At anytime, the benefits for which you are insured are those for your class,
unless otherwise stated.
FOR DEPENDENTS INSURANCE
Your Dependents Insurance under a Coverage for a person will begin the first day
on which:
* The person is your Qualified Dependent; and
<PAGE>
* You are in a Covered Class for that insurance; and
* You are insured for the Employee Insurance, if any, under that Coverage;
and
* Your insurance for that Qualified Dependent is not being delayed under the
Delay of Effective Date section below; and
* Dependents Insurance under that Coverage is part of the Group Contract.
Special Dependents Insurance Rules for Newborn Children and Children Placed for
Adoption Prior to Legal Adoption: These rules apply only to Dependents Insurance
under a health care expense Coverage. They modify the above rules with respect
to a child: (a) born to you; or (b) born to your Qualified Dependent child; or
(c) placed with you for adoption prior to legal adoption. They modify the above
rules with respect to such child when you:
(1) are in a Covered Class for that insurance; and
(2) are insured for Employee Insurance under that Coverage; and
(3) are not insured for that child under the above rules.
You will become insured for that child from the moment of the child's birth, or
in the case of a child placed for adoption, from the date the child is placed
with you for adoption prior to legal adoption.
The insurance for the child will end as described in the Termination of Coverage
section, except that:
(1) It will not end, by reason of your failure to pay any required contribution
for that insurance, during the 31 day period starting with: (a) the child's
birth; or (b) in the case of a child placed for adoption, the date the
child is placed with you for adoption prior to legal adoption.
(2) Subject to (3) below:
(a) That insurance will not continue beyond the end of that 31 day period.
(b) No benefits will be paid for any service or supply furnished for the
child's health care after that period.
(3) Item (2) above will not apply if, at the end of that 31 day period, you
are insured for the child by complying, as to that child, with the rules
for becoming insured for Dependents Insurance. The Delay of Effective
Date section will not preclude continuing the insurance for the child
beyond that period.
Any exclusion of charges for pre-existing Sickness or Injury will not exclude
charges for services and supplies furnished to a child placed with you for
adoption prior to legal adoption.
Special Dependents Insurance Rules for Handicapped Dependents: These rules apply
only to Dependents Insurance under a health care expense Coverage. They modify
the requirements for becoming insured with respect to a Handicapped Dependent.
A "Handicapped Dependent" is a Qualified Dependent who is unable to carry on the
regular and customary activities of a person in good health and of the same age
and sex due to a bodily or mental disorder.
The same rules apply with respect to becoming insured for Dependents Insurance
under a Coverage for a Handicapped Dependent as for any other Qualified
Dependent, except as follows:
* The Delay of Effective Date section below will not operate to delay the
date your insurance with respect to your Handicapped Dependent takes
effect.
<PAGE>
Any exclusion of charges for pre-existing Sickness or Injury will not exclude
charges for services and supplies furnished to a Handicapped Dependent.
You must submit proof, when and as required by General Mills, that the Qualified
Dependent is a Handicapped Dependent.
Change in Family Status: It is important that you inform General Mills promptly
when you first acquire a Qualified Dependent. You should also inform General
Mills if your Dependents Insurance status changes from one to another of these
categories:
* No Qualified Dependents.
* Qualified Dependent spouse only.
* Qualified Dependent spouse and children.
* Qualified Dependent children only.
DELAY OF EFFECTIVE DATE
(This does not apply to Retired Employees who are in the Covered Classes.)
FOR EMPLOYEE INSURANCE
Your Employee Insurance under a Coverage will be delayed if you do not meet the
Active Work Requirement on the day your insurance would otherwise begin.
Instead, it will begin on the first day you meet the Active Work Requirement and
the other requirements for the insurance. The same delay rule will apply to any
change in your insurance that is subject to this section. If you do not meet the
Active Work Requirement on the day that change would take effect, it will take
effect on the first day you meet that requirement.
FOR DEPENDENTS INSURANCE
A Qualified Dependent may be confined for medical care or treatment, at home or
elsewhere. If a Qualified Dependent is so confined on the day that your
Dependents Insurance under a Coverage for that Qualified Dependent, or any
change in that insurance that is subject to this section, would take effect, it
will not then take effect. The insurance or change will take effect upon the
Qualified Dependent's final medical release from all such confinement. The other
requirements for the insurance or change must also be met.
Exception for Newborn Child and Child Adopted or Placed for Adoption: Under a
Coverage, this section does not apply to a child of yours at that child's birth
if the child is born to you and either:
(1) is your first Qualified Dependent; or
(2) becomes a Qualified Dependent while you are insured for Dependents
Insurance under that Coverage for any other Qualified Dependent.
Also, if a child is adopted or placed with you for adoption, this section does
not apply to such child on the date of such placement or adoption.
DENTAL EXPENSE COVERAGE
FOR YOU AND YOUR DEPENDENTS
This Coverage pays benefits for many of the charges incurred for the preventive
and corrective dental care you and your Qualified Dependents receive. Not all
charges are eligible; some are
<PAGE>
eligible only to a limited extent. Section C has an extension that may apply
under this Coverage after the date a person ceases to be a Covered Person.
A person may have benefits under this Coverage pre-determined.
"Pre-Determination of Benefits" is a system that allows a person and that
person's Dentist to know, in advance, what estimated benefits would be payable
under this Coverage for a proposed course of dental treatment.
Under Pre-Determination of Benefits, the Dentist can send Prudential a treatment
plan before any Dental Services are performed. That plan should: (a) list the
recommended Dental Services; and (b) show the charge for each Dental Service.
The plan will be reviewed by Prudential and returned to the Dentist showing
estimated benefits. Prudential may request supporting pre-operative x-rays or
other diagnostic records in connection with Pre-determination of Benefits.
In computing the estimated benefits, Prudential may consider alternate Dental
Services that are suitable for care of a specific condition. This will be done
only if those alternate services would produce a professionally acceptable
result, as determined by Prudential.
Pre-Determination of Benefits is recommended if a proposed course of treatment
is expected to involve charges of $300.00 or more.
Some of the terms used in this Coverage:
* Eligible Charges: These are the charges that may be used as the basis for a
claim. They are the charges for certain services, to the extent the charges
meet the terms of Section B.
* Dental Services: A service in the List of Dental Services.
* Dentist: A person who is either of these:
(a) a licensed dentist acting within the scope of the dental profession.
(b) any other Doctor furnishing dental services that the Doctor is
licensed to perform.
A. BENEFITS.
The benefits are described below.
Benefit Amount. Payable: The benefit amount payable is the applicable Covered
Percent of Eligible Charges incurred for a person's dental care. The Benefit
Maximum and the Covered Percents are shown in the Schedule of Benefits.
B. ELIGIBLE CHARGES.
A charge is an Eligible Charge if all of these conditions are met:
(1) It is made for a Dental Service furnished to you or your Qualified
Dependent.
(2) The Dental Service applies, or is furnished for treatment of the following:
(a) temporomandibular joint disorders; or
(b) craniomandibular disorder; or
(c) malocclusion involving joints or muscles; or
(d) birth defects known as cleft lip and cleft palate, including
orthodontic treatment and oral surgery involved in the management of these
defects. Such treatment must be provided before the person attains age 19.
(3) The person is a Covered Person when the charge is incurred. A charge is
considered
<PAGE>
incurred on the date the service is furnished.
(4) It is not described in Charges Not Covered below.
With respect to item (3) above, a charge is considered incurred as follows:
(1) For an appliance, or alteration of one: on the date the impression for it
is taken.
(2) For a crown, bridge or gold restoration: on the date the tooth is prepared
for it.
(3) For root canal therapy: on the date the pulp chamber is opened.
(4) For all other Dental Services: on the date the service is provided.
A charge, or part of a charge, for a Dental Service is not an Eligible Charge if
excluded. It is excluded to the extent it: (1) falls outside the Charge Limit
below for that service; or (2) is described in Charges Not Covered below.
CHARGE LIMIT: This applies if a benefit for a charge for a Dental Service would
be provided under both of the following:
(1) this Coverage; and
(2) any other program which is paid for in full or in part, directly or
indirectly, by General Mills. This includes both insured and uninsured
programs. When a program provides benefits in the form of services, the
cash value of each service rendered is considered both a charge incurred
and the benefit provided for that charge.
In that case, the charge for the Dental Service will be eligible only to the
extent needed to pay a benefit equal to the amount, if any, by which (a) exceeds
(b):
(a) The benefit that would be payable for that charge under this Coverage if
this limit did not apply.
(b) The total benefits for that charge under all other programs described
above.
CHARGES NOT COVERED:
(1) A charge for a service not reasonably necessary, or not customarily
performed, for the dental care of a specific condition of the Covered
Person.
(2) A charge for a service not furnished by a Dentist. This (2) does not apply
if the service: (a) is performed by a licensed dental hygienist under the
direction of a Dentist; or (b) is an x-ray ordered by a Dentist.
(3) A charge for a service:
(a) furnished by or for the federal or any state or local government,
unless payment of the charge is required; or
(b) to the extent that the service, or any benefit for the charge, is
provided by any law or governmental plan under which the person is or
could be covered. This (b) does not apply to a state plan under
Medicaid or to any law or plan when, by law, its benefits are excess
to those of any private insurance program or other non-governmental
program.
(4) A charge for a replacement or modification of a partial or full removable
denture, a removable bridge or fixed bridgework, or for adding teeth to any
of these, or for a replacement or modification of a crown or gold
restoration, within 5 years after that denture, bridge, bridgework, crown
or gold restoration was installed.
<PAGE>
(5) A charge for a partial or full removable denture, removable bridge, or
fixed bridgework if it includes replacement of one or more natural teeth
missing before the person became a Covered Person under this Coverage. This
(5) does not apply if the denture, bridge or bridgework also includes
replacement of a natural tooth that:
(a) is removed while the person is a Covered Person; and
(b) was not an abutment to a partial denture, removable bridge or fixed
bridge installed during the prior 5 years.
(6) A charge for any of the following services:
(a) An appliance, or modification of one, if an impression for it was made
before the person became a Covered Person.
(b) A crown, bridge or gold restoration, if a tooth was prepared for it
before the person became a Covered Person.
(c) Root canal therapy, if the pulp chamber for it was opened before the
person became a Covered Person.
(7) A charge in connection with a service furnished for cosmetic purposes.
Facings on crowns, or pontics, that are behind the second bicuspid will
always be considered cosmetic. This (8) does not apply if the service is
needed as a result of accidental injuries sustained while a person is a
Covered Person.
(8) A charge in connection with:
(a) an orthodontic service or procedure, other than one involved in the
management of cleft lip or cleft palate; or
(b) replacement of lost or stolen appliances; or
(c) appliances, restorations or procedures needed to alter vertical
dimensions or restore occlusion, or for the purpose of splinting or
correcting attrition or abrasion.
(9) A charge in connection with Injury or disease arising out of, or in the
course of, any work for wage or profit (whether or not with the Employer)
if such Injury or disease is covered by any workers' compensation law,
occupational disease law or similar law.
(10) A charge for a service to the extent that it is more than the usual
charge made by the provider for the service when there is no insurance.
(11) A charge for a service to the extent that it is above the reasonable
and customary charge in the area for dental care of a comparable
nature. A charge is above the reasonable and customary charge to the
extent that it is above the range of charges generally made in the area
for dental care of a comparable nature. The area and that range are as
determined by Prudential.
The benefits of this Coverage are payable to you. The Claim Rules apply to the
payment of the benefits.
ORTHODONTIC EXPENSE COVERAGE SUPPLEMENT
FOR YOU OR YOUR QUALIFIED DEPENDENTS
This supplements your Dental Expense Coverage. It pays benefits for some of the
charges incurred for Orthodontic Procedures performed on you or your Qualified
Dependents. Not all charges are
<PAGE>
eligible. The Eligible Charges under this Coverage Supplement are those
described below. Protection under this Coverage Supplement is not extended after
the date a person ceases to be a Covered Person for the benefits of this
Coverage Supplement.
Some of the terms used in this Coverage Supplement:
Orthodontic Procedure: Use of active appliances to move teeth, to correct:
(1) faulty position of teeth (malposition); or
(2) abnormal bite (malocclusion).
Orthodontic Treatment Plan: A Dentist's report, on a form approved by
Prudential, that:
(1) states the class of malocclusion or malposition; and
(2) recommends and describes needed treatment by Orthodontic Procedures; and
(3) estimates the duration of the treatment; and
(4) estimates the total charge for the treatment; and
(5) includes cephalometric x-rays, study models and any other supporting
evidence that Prudential may reasonably require.
Eligible Charges: These are the charges that may be used as the basis for a
claim. They are charges for certain services and supplies, to the extent the
charges meet the terms of Section B.
Covered Percent: A percentage of Eligible Charges used to determine the benefits
payable for certain charges. The Covered Percent is shown in the Schedule of
Benefits.
A. BENEFITS.
The benefits for the Eligible Charges incurred in connection with the
Orthodontic Procedures performed on a person and described in an Orthodontic
Treatment Plan are described below.
Benefit Amount Payable: The benefit amount payable is the Covered Percent of
those Eligible Charges. The Benefit Maximum and the Covered Percent are shown in
the Schedule of Benefits.
B. ELIGIBLE CHARGES.
A charge is an Eligible Charge if all of these conditions are met:
(1) It is made for a service or supply furnished a person in connection
with an Orthodontic Procedure and before the end of the estimated
duration shown in the Orthodontic Treatment Plan.
(2) An active appliance for that Orthodontic Procedure is inserted while the
person is a Covered Person for the benefits of this Coverage Supplement.
(3) The charge is incurred during a 3-month period described below. That period
must start while the person is a Covered Person for the benefits of this
Coverage Supplement.
(4) The Orthodontic Procedure is needed to correct one of these conditions:
(a) Vertical or horizontal overlap of upper teeth over lower teeth
(overbite or overjet).
(b) Faulty alignment (either frontwards or backwards) of the upper and
lower arches with each other.
<PAGE>
(c) Cross-bite.
(5) The service or supply is made part of an Orthodontic Treatment Plan that,
before the Orthodontic Procedure is performed, has been:
(a) sent to Prudential for review; and
(b) returned by Prudential to the Dentist showing estimated benefits.
A charge, or part of a charge, is not eligible if it is excluded. It is excluded
to the extent it is described in the Charges Not Covered below.
The total estimated Eligible Charges for an Orthodontic Treatment Plan, as
determined from that Plan, will be considered made and incurred in installments
over the estimated duration of the Orthodontic Treatment Plan shown in that
Plan, in these amounts and at these times:
(1) Amounts: The installments, except the first, will be equal. The first will
be twice each of the others.
(2) Times: The date the appliances are first inserted, at the end of the
3-month period starting with that date, and at the end of each of the
following 3-month periods.
If the actual Eligible Charges for the Orthodontic Treatment Plan are less than
or more than the estimated Eligible Charges, the last installment above will be:
(a) reduced by any excess of estimated over actual; or (b) increased by any
excess of actual over estimated.
Charges Not Covered:
(1) Any "Charges Not Covered" that are part of the Dental Expense Coverage.
This does not apply to items (6), (7) and (8) of that part.
(2) Any charges for an Orthodontic Procedure if an active appliance for that
Orthodontic Procedure has been installed before the first day on which the
person became a Covered Person for the benefits of this Coverage
Supplement.
(3) Any charges for an Orthodontic Procedure for which an active appliance has
been installed within the two years starting with the date the person
became a Covered Person for the benefits of this Coverage Supplement. This
applies only to a person who does not become such a Covered Person by the
31st day after the first day the person is eligible to become such a
Covered Person.
The benefits of this Coverage Supplement are payable to you. The Claim Rules
apply to the payment of the benefits.
MAJOR MEDICAL EXPENSE COVERAGE
FOR YOU AND YOUR DEPENDENTS
This Coverage pays benefits for many of the charges incurred for care and
treatment of you or your Qualified Dependent's Sicknesses and Injuries. Not all
charges are eligible; some are eligible only to a limited extent. Benefits are
based on the Eligible Charges incurred in a Calendar Year. A person's protection
under this Coverage may be extended after the date that person ceases to be a
Covered Person. See the Extension of Health Care Protection page. That page
applies to this Coverage.
Some of the terms used in this Coverage:
<PAGE>
* Eligible Charges: These are the charges that may be used as the basis for a
claim. They are the charges for certain services and supplies, to the
extent the charges meet the terms of Section B.
* Covered Percent: A percentage of Eligible Charges used to determine the
benefits payable for certain charges. The Covered Percent is shown in the
Schedule of Benefits.
A. BENEFITS.
The benefits are described below. All benefits are subject to the lifetime
benefit maximum of $2,000,000 per covered person for all sicknesses and
injuries.
B. ELIGIBLE CHARGES.
A charge is an Eligible Charge if all of these conditions are met:
(1) It is made for a service or supply furnished to you or your Qualified
Dependent.
(2) The service or supply is ordered by a Doctor.
(3) The person is a Covered Person when the charge is incurred.
(4) The service or supply is furnished:
(a) in connection with the diagnosis, cure, mitigation, treatment or
prevention of disease; or
(b) for the purpose of affecting any structure or function of the body.
A charge is considered incurred on the date of the service or purchase for which
the charge is made. A charge, or part of a charge, is not an Eligible Charge if
excluded. It is excluded if it is described in the Charges Not Covered below.
Charges Not Covered
(1) War: Charges for Sickness or Injury due to war or any act of war while the
person is a Covered Person. "War" means declared or undeclared war and
includes resistance to armed aggression.
(2) Work-connected Injury or Disease Charge: A charge in connection with (a) or
(b), to the extent covered by any other plan or program:
(a) Injury arising out of, or in the course of, any work for wage or
profit (whether or not with General Mills).
(b) Disease covered, with respect to such work, by any workers'
compensation law, occupational disease law or similar law.
(3) Government Plan Charge: A charge for a service or supply:
(a) furnished by or for the United States government or any other
government, unless payment of the charge is required by law; or
(b) to the extent that the service or supply, or any benefit for the
charge, is provided by any law or governmental plan under which the
patient is or could be covered. This (b) does not apply to a state
plan under Medicaid or to any law or plan when, by law, its benefits
are excess to those of any private insurance program or other
non-governmental program.
(4) Charges for Services or Supplies that are Not Needed or Not Appropriately
Provided: A charge for a service or supply is not covered to the extent
that it is not needed or not appropriately
<PAGE>
provided. Charges for services or supplies furnished in connection with a
service or supply that is not needed or not appropriately provided are also
not covered.
For the purpose of this exclusion a service or supply will be considered
both "needed and appropriately provided" if Prudential determines that it
meets each of these requirements:
(a) It is ordered by a Doctor for the diagnosis, cure, mitigation,
treatment or prevention of a Sickness or Injury.
(b) The prevailing opinion within the appropriate specialty of the United
States medical profession is that it is safe and effective for its
intended use, and that its omission would adversely affect the
person's medical condition.
(c) It is furnished by a provider with appropriate training, experience,
staff and facilities to furnish that particular service or supply.
Prudential will determine whether these requirements have been met based on:
* Published reports in authoritative medical literature;
* Regulations, reports, publications or evaluations issued by government
agencies such as the Agency for Health Care Policy and Research, the
National Institutes of Health, and the Food and Drug Administration (FDA);
* Listings in the following drug compendia: The American Medical Association
Drug Evaluations, The American Hospital Formulary Service Drug Information
and The United States Pharmacopeia Dispensing Information; and
* Other authoritative medical sources to the extent that Prudential
determines them to be necessary.
(5) Charge Above the Usual Charge: A charge for a service or supply to the
extent that it is above the usual charge made by the provider for the
service or supply when there is no insurance.
(6) Charge Above the Prevailing Charge: A charge for a service or supply to the
extent that it is above the prevailing charge in the area for a like
service or supply. A charge is above the prevailing charge to the extent
that it is above the usual charge of the provider to a person of
socio-economic status. The prevailing charge will be determined by
Prudential.
(7) Charges for Experimental or Investigational Services or Supplies: A charge
for a service or supply is not covered to the extent that it is
experimental or investigational. Charges for services or supplies furnished
in connection with a service or supply that is experimental or
investigational are also not covered.
For the purpose of this exclusion a service or supply will be considered
"experimental or investigational" if Prudential determines that one or more
of the following is true:
(a) The service or supply is under study or in a clinical trial to
evaluate its toxicity, safety or efficacy for a particular diagnosis
or set of indications. Clinical trials include but are not limited to
phase I, II and III clinical trials.
(b) The prevailing opinion within the appropriate specialty of the United
States medical profession is that the service or supply needs further
evaluation for the particular diagnosis or set of indications before
it is used outside clinical trials or other research settings.
Prudential will determine if this item (b) is true based on:
(i) Published reports in authoritative medical literature; and
<PAGE>
(ii) Regulations, reports, publications and evaluations issued by
government agencies such as the Agency for Health Care Policy
and Research, the National Institutes of Health, and the FDA.
(c) In the case of a drug, device or other supply that is subject to FDA
approval:
(i) It does not have FDA approval; or
(ii) It has FDA approval only under its Treatment Investigational
New Drug regulation or a similar regulation; or
(iii) It has FDA approval, but it is being used for an indication or
at a dosage that is not an accepted off-label use. Prudential
will determine if a use is an accepted off-label use based on
published reports in authoritative medical literature and
entries in the following drug compendia: The American Medical
Association Drug Evaluations, The American Hospital Formulary
Service Drug Information and The United States Pharmacopeia
Dispensing Information.
(d) The provider's institutional review board acknowledges that the use of
the service or supply is experimental or investigational and subject
to that board's approval.
(e) The provider's institutional review board requires that the patient,
parent or guardian give an informed consent stating that the service
or supply is experimental or investigational or part of a research
project or study; or federal law requires such a consent
(f) Research protocols indicate that the service or supply is experimental
or investigational. This item (f) applies for protocols used by the
patient's provider as well as for protocols used by other providers
studying substantially the same service or supply.
(8) Charges for Educational Services or Supplies: A charge for a service or
supply is not covered to the extent that it is determined by Prudential to
be educational. Charges for services or supplies furnished in connection
with a service or supply that is educational are also not covered.
"Educational" means:
(a) That the primary purpose of the service or supply is to provide the
person with any of the following: training in the activities of daily
living; instruction in scholastic skills such as reading and writing;
preparation for an occupation; or treatment for learning disabilities;
or
(b) That the service or supply is being provided to promote development
beyond any level of function previously demonstrated.
"Training in the activities of daily living" does not include training
directly related to treatment of a Sickness or Injury that resulted in a
loss of a previously demonstrated ability to perform those activities.
In the case of a Hospital stay, the length of the stay and Hospital
services and supplies are not covered to the extent that they are
determined to be allocable to the scholastic education or vocational
training of the patient.
(9) Blood Charge: A charge for blood or blood plasma which is replaced by or
for the patient.
(10) Cosmetic Surgery Charge: A charge in connection with Cosmetic Surgery.
"Cosmetic Surgery" means surgery performed mainly to change a person's
appearance. It includes surgery performed to treat a mental,
psychoneurotic or personality disorder through change in appearance.
But the following are not considered to be Cosmetic Surgery:
(a) Surgery to correct the result of an accidental injury sustained while
a person is a Covered Person.
(b) Surgery to treat a condition, including a birth defect, which impairs
the function of a body organ.
<PAGE>
(c) Surgery to reconstruct a breast after a mastectomy performed for the
treatment of a disease.
(11) Impregnation or Fertilization Charge: A charge for either of the
following that involves either a Covered Person or a surrogate as
a donor or recipient:
(a) Actual or attempted impregnation.
(b) Actual or attempted fertilization.
(12) Custodial Care: Charges for services in connection with Custodial Care.
(13) Payment Not Required: Charges which the Covered Person is not legally
required to pay.
(14) Charge made by the Employer or a Close Relative: A charge for a service
or supply furnished by:
(a) the Employer;
(b) a Close Relative. "Close Relative" means you, your spouse, and a
child, brother, sister or parent of you or your spouse.
(15) Charge under Employer's Other Programs: A charge to the extent it would
be covered under one of the following programs without regard to any
rules of the program for coordination of benefits:
(a) Any group insurance, other than this Major Medical Expense Coverage.
(b) Any other program of coverage for individuals in a group. This
includes insured and uninsured programs.
These programs are included in this part (15) if they:
(a) provide benefits for, or due to, medical or dental care or treatment;
and
(b) are paid for in full or in part, directly or indirectly, by the
Employer.
When a program provides benefits in the form of services, the cash
value of each service rendered is considered both a charge incurred
and the benefit provided for that charge.
(16) Transportation Charge: A charge for transportation. This will not apply
to local ambulance travel.
(17) Motor Vehicle Charge: A charge for the purchase of, or alteration of, a
motor vehicle.
(18) Charge for Capital Improvement of Property: A charge for the purchase,
installation, or construction of any: (a) device; or (b) equipment; or
(c) facility; determined by Prudential to be a capital improvement of
property.
(19) Cost of Insurance Coverage: A charge for the cost of insurance coverage.
"Insurance coverage" means any:
(a) group insurance; or
(b) individual insurance; or
(c) other program of coverage that provides benefits for, or due to,
medical or dental care or treatment. This includes:
(i) insured and uninsured programs.
<PAGE>
(ii) pre-payment programs.
C. MAXIMUM.
The lifetime benefit for you and your covered dependents is $2,000,000 per
covered person.
The benefits of this Coverage are payable to you. The Claim Rules apply to the
payment of the benefits.
MODIFICATION OF PROVISIONS CONCERNING TO WHOM BENEFITS ARE PAYABLE
This modification changes the parts of the Group Contract that state to whom
benefits under the health care expense Coverages of the Group Contract are
payable. It applies to benefits payable under those Coverages with respect to a
Qualified Dependent child for whom you are insured for Dependents Insurance
under those Coverages, but only when all the following conditions exist:
(1) You are the parent of the Qualified Dependent child.
(2) You and the other parent of such child are divorced or separated.
(3) By court decree, you have legal responsibility for the health care expenses
of such child, but you do not have custody of the child.
(4) The other parent of such child has custody of the child (called Custodial
Parent below).
If all the above conditions are met, the following will apply:
1. Upon request by the Custodial Parent, Prudential will pay any benefits
payable under a health care expense Coverage of the Group Contract for
charges for a service or supply furnished to such Qualified Dependent child
directly to the provider of such service or supply. But this is subject to
the following conditions:
(a) Any such request must be made in accordance with the Group Contract's
Claim Rules.
(b) No payment will be made to the provider of such service or supply if
any benefits have been paid to you for such service or supply before
Prudential receives the request from the Custodial Parent.
(c) Any such payment of benefits by Prudential will be made whether or not
you have made claim for such benefits.
2. When Prudential pays any benefits directly to the provider of a service or
supply in accordance with 1. above:
(a) Such benefits will be paid directly to the provider as if they had
been assigned by you to such provider.
(b) Solely with respect to payment of such benefits, this payment
provision will supersede:
(i) any assignment provisions of the Group Contract; and
(ii) any provision of the Group Contract that states benefits are
payable to you.
If an amount is so paid directly to the provider of a service or supply,
Prudential will not have
<PAGE>
to pay that part of the insurance again.
BENEFIT MODIFICATION FOR THIRD PARTY LIABILITY
This form modifies any Coverage of the Group Contract that:
(1) is a health care expense Coverage; or
(2) provides weekly or long term disability benefits.
A. This Modification applies when:
(1) a person, other than the person for whom a claim is made, is considered
responsible for a Sickness or Injury;
(2) payment for the Sickness or Injury has been made, or may be made in the
future, by or for that responsible person (as a settlement, judgment or in
any other way); and
(3) the total amount of benefits paid under one or more coverages to which this
Modification applies on account of that Sickness or Injury exceeds $5,000.
B. Once this Modification applies, Prudential may require the Covered
Person(s) involved (or, if incapable, that person's legal representative)
to agree in writing that, upon receiving the full amount of any payments
required from, and made by or for, the person responsible for the Sickness
or Injury (as a result of a settlement, judgment, etc.), the Covered
Person(s) or the legal representative will promptly pay back the benefits
paid under this Group Contract due to that Sickness or Injury, to the
extent of any such payments made by or for the responsible person.
The agreement referred to above is to apply whether or not: (a) liability
for the payments is admitted by the responsible person; and (b) such
payments are itemized. A reasonable share of fees and costs incurred to
obtain such payments may be deducted from amounts to be repaid to
Prudential.
C. Amounts due Prudential to repay benefits, agreed to as described above, may
be deducted from other benefits payable by Prudential after the payments by
or for the responsible person have been made.
When benefits have been provided in the form of services, the reasonable
cash value for each service rendered will be considered a benefit paid.
RULES FOR COORDINATION OF BENEFITS OF THE GROUP CONTRACT WITH OTHER BENEFITS
The purpose of a group health care program is to help you pay for covered
expenses, but not to result in total benefits greater than the covered expenses
incurred. Thus, the Group Contract's benefits that, without these rules, would
be payable for you or your Qualified Dependent's health care expenses may be
reduced so that the total benefits from this and all of the other Programs
(defined below) will not be more than the total Allowable Expenses (defined
below). That reduction will be made only if these rules so state. This
coordination with other Programs helps to control the cost of benefits for
everyone.
These rules for coordination apply to This Program, but only with respect to
expenses incurred on or after the date these rules take effect. "This Program"
and other terms used in these rules are defined in Section A. Section B
describes the effect of other health care benefits on those of the Group
Contract, subject to Sections C, D and E.
<PAGE>
A. DEFINITIONS.
(1) Program: Any of these which provide benefits or services for, or by reason
of, dental, vision, or medical care or treatment:
(a) Coverage under a governmental plan or required or provided by law.
This does not include a state plan under Medicaid or any law or plan
when, by law, its benefits are excess to those of any private
insurance program or other non-governmental program.
(b) Group insurance or other coverage for persons in a group, whether
insured or uninsured. This includes prepayment, group practice or
individual practice coverage. But this does not include school
accident-type coverage for grammar school, high school, and college
students.
(c) Medical, dental or vision care coverage under the "no fault" or
medical payments provisions of an automobile insurance contract.
For the purposes of these rules, each Program will be treated as one of
these three types of Program:
A Dental Program is one that mainly provides benefits or services for, or
because of, dental care or treatment.
A Vision Care Program is one that mainly provides benefits or services for,
or because of, vision care or treatment.
A Medical Program is one that mainly provides benefits or services for, or
because of, medical care or treatment, and is not a Dental Program or a
Vision Care Program.
Separate Programs:
Each contract or other arrangement for coverage under (a), (b) or (c) is a
separate Program. But each part of a contract or other arrangement
for-coverage that is a Dental Program, a Vision Care Program, or a Medical
Program is a separate Program.
Also, rules for coordination of benefits may apply only to part of a Dental
Program, Vision Care Program, or Medical Program. If so, the part to which
the rules apply is a separate Program from the part to which the rules do
not apply.
(2) This Program: The part of the Group Contract that provides benefits for
health care expenses.
The term "This Program" applies separately to each part of the Group
Contract that is a Dental Program, a Vision Care Program, or a Medical
Program.
(3) Allowable Expense: For any health care expense insurance Coverages
described in the Booklet, the usual and prevailing charge for a needed
service or supply, when the charge, service or supply is covered at least
in part by one or more Medical Programs or Vision Care Programs covering
the person for whom claim is made. "Usual charge", "prevailing charge" and
"needed service or supply" have the same meanings as in the Major Medical
Expense Coverage.
For any dental expense insurance Coverage described in the Booklet, an
Allowable Expense is the usual and prevailing charge for a reasonably
necessary service or supply, when the charge, service or supply is covered
at least in part by one or more Dental Programs covering the person for
whom claim is made. "Usual charge" and "prevailing charge" have the same
meanings as described in the dental expense insurance Coverage.
When a Program provides benefits in the form of services, the reasonable
cash value for each service rendered will be considered both an Allowable
Expense and a benefit paid.
<PAGE>
If a person covered by This Program has expenses for a stay in a Hospital
private room, the term Allowable Expense does not include the difference
between the charge for the Hospital private room and the Eligible Charge
for a Hospital room under This Program, unless:
(a) the Hospital private room charges are a covered expense under one of
the Programs; or
(b) the person's stay in a Hospital private room is medically necessary in
terms of generally accepted medical practice.
(4) Claim Determination Period: A Calendar Year, but, for a person, this does
not include any part while the person has no coverage under This Program or
any part before the date these or similar rules take effect.
B. EFFECT ON BENEFITS.
(1) When this Section Applies: This Section B applies when the sum of the
benefits in (a) and (b) below for a person's Allowable Expenses in a Claim
Determination Period would be more than those Allowable Expenses. In that
case, the benefits of This Program will be reduced so that they and the
benefits in (b) do not total more than those Allowable Expenses.
(a) The benefits that would be payable for the Allowable Expenses under
This Program in the absence of this Section B.
(b) The benefits that would be payable for the Allowable Expenses under
all other Programs of the same type as This Program, in the absence of
rules with a purpose like that of these rules, whether or not claim is
made. But this (b) does not include the benefits of a Program if:
(i) It has rules coordinating its benefits with those of This
Program; and
(ii) Those rules have Claim Determination Period and Facility of
Payment items similar to those in these rules; and
(iii) Its rules and This Program's rules both require This Program to
determine benefits before it does.
(2) This Program's Rules for the Order in which Benefits are Determined: When a
person's health care is the basis for a claim:
(a) Non-dependent/Dependent: The benefits of a Program that covers the
person other than as a dependent are determined before those of a
Program that covers the person as a dependent.
(b) Dependent Child/Parents Not Separated or Divorced: Except as stated in
subparagraph B.(2)(c) below, when This Program and another Program
cover the same child as a dependent of different persons, called
"parents":
(i) the benefits of the Program of the parent whose birthday falls
earlier in a year are determined before those of the Program of
the parent whose birthday falls later in that year; but
(ii) if both parents have the same birthday, the benefits of the
Program which covered the parent longer are determined before
those of the Program which covered the other parent for a
shorter period of time.
However, if the other Program does not have this rule (b), and if, as
a result, the Programs do not agree on the order of benefits, the rule
in the other Program will determine the order of benefits.
<PAGE>
(c) Dependent Child/Separated or Divorced Parents: If two or more Programs
cover a person who is a dependent child of divorced or separated
parents, benefits for the child are determined in this order:
(i) first, the Program of the parent with custody of the child;
(ii) then, the Program of the spouse of the parent with custody of
the child; and
(iii) finally, the Program of the parent not having custody of the
child.
However, if the specific terms of a court decree state that one of the
parents is responsible for the health care expenses of the child, and
the entity obligated to pay or provide the benefits of the Program of
that parent has actual knowledge of those terms, the benefits of that
Program are determined first. This paragraph does not apply when any
benefits are actually paid or provided before the entity has that
actual knowledge.
(d) Active/Inactive Employee: The benefits of a Program which covers a
person as an employee who is neither laid off nor retired, or as that
employee's dependent, are determined before those of a Program which
covers that person as a laid off or retired employee or as that
employee's dependent. If the other Program does not have this rule,
and if, as a result, the Programs do not agree on the order of
benefits, this rule (d) is ignored.
(e) Longer/Shorter Length of Coverage: If none of the above rules
determine the order of benefits, the benefits of the Program which
covered a person longer are determined before those of the Program
which covered that person for the shorter time.
(3) Effect of Reduction in Benefits: When these rules reduce This Program's
benefits, each benefit is reduced in proportion. It is then charged against
any applicable benefit limit of This Program.
C. RIGHT TO RECEIVE AND RELEASE NEEDED INFORMATION.
Certain facts are needed to apply these coordination of benefits rules.
Prudential has the right to decide which facts it needs. It may get needed facts
from or give them to any other organization or person. Prudential need not tell,
or get the consent of, any person to do this. Each person claiming benefits
under This Program must give Prudential any facts it needs to pay the claim.
D. FACILITY OF PAYMENT.
A payment made under another Program may include an amount which should have
been paid under This Program. If it does, Prudential may pay that amount to the
organization which made that payment. That amount will then be treated as though
it were a benefit paid under This Program. Prudential will not have to pay that
amount again. The term "payment made" includes providing benefits in the form of
services, in which case the payment made shall be deemed to be the reasonable
cash value of any benefits provided in the form of services.
E. RIGHT OF RECOVERY.
If the amount of the payments made by Prudential is more than it should have
paid under This Program, it may recover the excess. It may get such recovery or
payment from one or more of:
(A) the persons it has paid or for whom it has paid;
(B) insurance companies; or
(C) other organizations.
The "amount of the payments made" includes the reasonable cash value of any
benefits provided in the form of services.
<PAGE>
PROVISIONS FOR REDUCTION OF BENEFITS BECAUSE OF MEDICARE
These Provisions apply to all health care expense Coverages under the Group
Contract (called Affected Coverages below). They change the Affected Coverages
to reduce their benefits because of those a person has or could have obtained
under Medicare. The changes are described below.
Some of the terms used in these Provisions:
Medicare: Title XVIII (Health Insurance for the Aged and Disabled) of the United
States Social Security Act, as amended from time to time.
Part A of Medicare: The program of Hospital Insurance Benefits for the Aged and
Disabled under Part A of Medicare.
Part B of Medicare: The voluntary program of Supplementary Medical Insurance
Benefits for the Aged and Disabled under Part B of Medicare.
Subject Person: A person who is or could be covered under Medicare.
Full Medicare Coverage: Coverage for all benefits provided under Part A and Part
B of Medicare. This includes benefits that would be provided under Medicare in
the absence of benefits payable under the group health plan of an employer other
than General Mills. But it does not include benefits provided under Part A of
Medicare in the case of a Subject Person who: (1) is not covered under that Part
A; and (2) could become covered under that part only by enrolling and paying the
required premium.
Changes made in the Group Contract:
(1) The following will apply when charges within the scope of the Affected
Coverages are made for services and supplies furnished a Subject Person, in
a Calendar Year and while the Subject Person has protection under those
Coverages. The total benefits payable for those charges under those
Coverages will be (a) minus (b):
(a) The total amount that would be payable for those charges under the
Affected Coverages in the absence of these Provisions.
(b) The total amount that is considered to be paid for those charges under
Medicare, as described in (2).
The above will be determined before the rules of the Group Contract for
coordination of benefits are applied.
(2) In determining amounts under (1):
(a) This applies when charges are not actually made because payment under
Medicare is based on the "reasonable cost" of services and supplies
rather than charges. Charges for those services and supplies will be
considered to have been made in the amount of the usual and prevailing
charges that would have been made for them in the absence of Medicare.
(b) The amount considered to be paid under Medicare with respect to
services and supplies is the amount of the charges made for those
services and supplies, to the extent that:
(i) those charges are usual and prevailing; and
<PAGE>
(ii) those services and supplies are within the scope of Full Medicare
Coverage. But that amount will not include coinsurance and other
amounts which are directly chargeable to the Subject Person under
Medicare or would be so chargeable if the Subject Person had Full
Medicare Coverage.
(3) Any provision of the Group Contract that excludes a charge for a service or
supply to the extent that the service or supply, or any benefit for the
charge, is provided by any law or governmental plan, will not apply to
Medicare.
(4) The rules of the Group Contract for coordination of benefits are changed as
follows:
(a) The term Program in those rules will not include any coverage under
Medicare.
(b) If a Subject Person incurs an expense for a service or supply during a
Claim Determination Period (defined in those rules), that both is an
Allowable Expense (defined in those rules) and is within the scope of
that person's Medicare coverage, the following will apply. The total
Allowable Expenses will be reduced by the amount equal to the benefits
that are considered to be paid under Medicare for that service or
supply. (See (2)(b) above.)
GENERAL INFORMATION
LIMITS ON ASSIGNMENTS
You may assign your insurance under a Coverage. Unless the Schedule of Benefits
states otherwise, the following rules apply to assignments: (1) Insurance under
any Coverage providing periodic benefits on account of disability may be
assigned only as a gift assignment; (2) Insurance under any other Coverage may
be assigned without restriction. Any rights, benefits or privileges that you
have as an Employee may be assigned. Prudential will not decide if an assignment
does what it is intended to do. Prudential will not be held to know that one has
been made unless it or a copy is filed with Prudential through General Mills.
DEFINITIONS
Active Work Requirement: A requirement that you be actively at work at General
Mills' place of business, or at any other place that General Mills' business
requires you to go.
Calendar Year: A year starting January 1.
Contributory Insurance, Non-contributory Insurance: Contributory Insurance is
insurance for which the Contract Holder has the right to require your
contributions. Non-contributory Insurance is insurance for which the Contract
Holder does not have the right to require your contributions. The Schedule of
Benefits shows whether insurance under a Coverage is Contributory Insurance or
Non-contributory Insurance.
Coverage: A part of the Booklet consisting of:
(1) A benefit page labeled as a Coverage in its title.
(2) Any page or pages that continue the same kind of benefits.
(3) A Schedule of Benefits entry and other benefit pages or forms that by their
terms apply to that kind of benefits.
Covered Person under a Coverage: An Employee or retired employee who is insured
for Employee Insurance under that Coverage; a Qualified Dependent for whom an
Employee is insured for Dependents Insurance, if any, under that Coverage.
<PAGE>
Custodial Care: This means that care that provides a level of routine
maintenance for the purpose of meeting personal needs. This is care that can be
provided by a lay person who does not have professional qualifications, skills
or training. Custodial Care includes, but is not limited to: help in walking and
getting into or out of bed; help in bathing, dressing, and eating; help in other
functions of daily living of a similar nature; administration of or help in
using or applying medications, creams and ointments; routine administration of
medical gasses after a regimen of therapy has been set up; routine care of a
patient, including functions such as changes of dressings, diapers and
protective sheets and periodic turning and positioning in bed; routine care and
maintenance in connection with casts, braces and other similar devices, or other
equipment and supplies used in treatment of a patient, such as colostomy and
ileostomy bags and indwelling catheters; routine tracheostomy care; general
supervision of exercise programs including carrying out of maintenance programs
of repetitive exercises that do not need the skills of a therapist and are not
skilled rehabilitation services.
Dependents Insurance: Insurance on the person of a dependent.
Doctor: A licensed practitioner of the healing arts acting within the scope of
the license.
Employee: A person employed by General Mills. The term also applies to that
person for any rights after insurance ends.
Employee Insurance: Insurance on the person of an Employee.
General Mills: Collectively, General Mills, Inc. and all of its Affiliates
included under the Group Contract.
Hospital: An institution that meets any of these five tests:
* It is accredited as a hospital under the Hospital Accreditation Program of
the Joint Commission on Accreditation of Healthcare Organizations.
* It is legally operated, has 24 hour a day supervision by a staff of
Doctors, has 24 hour a day nursing service by registered graduate nurses,
and complies with (1) or (2):
(1) It mainly provides general inpatient medical care and treatment of
sick and injured persons by the use of medical, diagnostic and major
surgical facilities. All such facilities are in it or under its
control.
(2) It mainly provides specialized inpatient medical care and treatment of
sick or injured persons by the use of medical and diagnostic
facilities (including X-ray and laboratory). All such facilities are
in it, under its control, or available to it under a written agreement
with a Hospital (as defined above) or with a specialized provider of
those facilities.
* It is an Intermediate Care Facility.
* It is an alcoholism or drug abuse treatment center that complies with (a),
(b), or (c):
(a) It is licensed as a hospital.
(b) It is a facility licensed, certified or approved to provide services
for the care and treatment of alcoholism or chug abuse by the
appropriate agency of the state in which it is located.
(c) It is accredited as an alcoholism or drug abuse treatment center by
the Joint Commission on Accreditation of Healthcare Organizations.
* It is licensed, certified or approved as a free-standing surgical facility
by the appropriate agency of the state in which it is located.
<PAGE>
But Hospital does not include a nursing home. Neither does it include an
institution, or part of one, which: (a) is used mainly as a place for
convalescence, rest, nursing care or for the aged; or (b) furnishes mainly
homelike or Custodial Care, or training in the routines of daily living; or (c)
is mainly a school.
Injury: Injury to the body of a Covered Person.
Intermediate Care Facility: An institution that provides care and treatment of
mental, psychoneurotic and personality disorders; alcoholism; or drug abuse
through one or more specialized programs and meets all of these three tests:
* It is staffed by registered graduate nurses and other mental health
professionals.
* It provides for the clinical supervision of such specialized programs by
Doctors who are licensed in the state in which it is located.
* Each specialized program provided by it must
(1) provide treatment for no less than three hours nor more than twelve
hours per day; and
(2) furnish a written, individual treatment plan which states specific
goals and objectives; and
(3) maintain, at a minimum, ongoing weekly progress notes which
demonstrate periodic review and direct patient evaluation by the
attending Doctor; and
(4) meet either of these two tests:
(a) It is accredited by the Joint Commission on Accreditation of
Healthcare Organizations (JCAHO) to provide the type of
specialized program described above; or
(b) It is licensed, accredited or approved by the appropriate
agency in the state in which it is located to provide the type
of specialized program described above.
Medicaid: Title XIX (Grants to States for Medical Assistance Programs) of the
United States Social Security Act, as amended from time to time.
Medicare: Title XVIII (Health Insurance for the Aged and Disabled) of the United
States Social Security Act, as amended from time to time.
Prudential: The Prudential Insurance Company of America.
Sickness: Any disorder of the body or mind of a Covered Person, but not an
Injury; pregnancy of a Covered Person, including abortion, miscarriage or
childbirth.
You: An Employee.
CLAIM RULES
These rules apply to payment of benefits under a Coverage when the Coverage
states that they do.
Proof of Loss: Prudential must be given written proof of the loss for which
claim is made under the Coverage. This proof must cover the occurrence,
character and extent of that loss. It must be furnished within 90 days after the
date of the loss, except that:
(1) If any Coverage provides for periodic payment of benefits at monthly or
shorter intervals, the proof of loss for each such period must be furnished
within 90 days after its end.
<PAGE>
(2) If payment under a Coverage is to be made for charges incurred during a
Calendar Year, the proof for that Calendar Year must be furnished within 90
days after its end.
A claim will not be considered valid unless the proof is furnished within these
time limits. However, it may not be reasonably possible to do so. In that case,
the claim will still be considered valid if the proof is furnished as soon as
reasonably possible.
When Benefits are Paid: Benefits are paid when Prudential receives written proof
of the loss. But, if a Coverage provides that benefits are payable at equal
intervals of a month or less, Prudential will not have to pay those benefits
more often.
A benefit unpaid at your death will be paid to your estate. But this does not
apply if the Coverage or the Limits on Assignments section on an earlier page
states otherwise.
Physical Exam: Prudential, at its own expense, has the right to examine the
person whose loss is the basis of claim. Prudential may do this when and as
often as is reasonable while the claim is pending.
Legal Action: No action at law or in equity shall be brought to recover on the
Group Contract until 60 days after the written proof described above is
furnished. No such action shall be brought more than three years after the end
of the time within which proof of loss is required.
INCONTESTABILITY OF INSURANCE TO WHICH THE CLAIM RULES APPLY
This limits Prudential's use of your statements in contesting an amount of that
insurance for which you are insured. These are statements made to persuade
Prudential to effect an amount of that insurance. They will be considered to be
made to the best of your knowledge and belief. These rules apply to each
statement:
(1) It will not be used in a contest to avoid or reduce that amount of
insurance unless:
(a) It is in a written application signed by you; and
(b) A copy of that application is or has been furnished to you.
(2) It will not be used in the contest after that amount of insurance has been
in force, before the contest, for at least two years during your lifetime.
TERMINATION OF COVERAGE
EMPLOYEE AND DEPENDENTS INSURANCE
Coverage for you and your Dependents will terminate at the end of the month in
which the first of these occurs:
* Your membership in the Covered Classes for the insurance ends because your
employment ends (see below) or for any other reason.
* The part of the Group Contract providing the insurance ends.
* The insurance is Dependents Insurance and your Employee Insurance under
that Coverage ends.
Your Dependents Insurance for a Qualified Dependent under a Coverage will end
when that person ceases to be a Qualified Dependent for that Coverage. (See
Continued Coverage for an Incapacitated Child below.)
End of Employment: For insurance purposes, your employment will end when you are
no longer an Employee actively at work for General Mills, unless the termination
is due to your retirement
<PAGE>
from General Mills. But, under the terms of the Group Contract, the Contract
Holder may consider you as still employed in the Covered Classes during certain
types of absences from full-time work. This is subject to any time limits or
other conditions stated in the Group Contract.
With regard to your health care expense insurance under the Group Contract, your
employment in the Covered Classes will not be considered to end while you are
absent from work due to leave for which insurance is required to be continued
under the Federal Family and Medical Leave Act of 1993 or a state law requiring
similar continuation, as reported to Prudential by the Employer.
If you stop active work for any reason, you should contact General Mills at once
to determine what arrangements, if any, have been made to continue any of your
insurance.
CONTINUATION OF COVERAGE
Continued Coverage for an Incapacitated Child: This applies only to the
Dependents Insurance you have for a child under a health care expense Coverage.
The insurance for the child will not end on the date the age limit in the
definition of Qualified Dependent is reached, if both of these are true
(1) The child is then mentally or physically incapable of earning a living. You
must submit proof of such incapacity to General Mills within 31 days of the
date your dependent would otherwise lose eligibility for coverage.
(2) The child depends on you for support and maintenance.
If these conditions are met, the age limit will not cause the child to stop
being a Qualified Dependent under that Coverage. This will apply as long as the
child remains so incapacitated and dependent on you for support and maintenance.
Continued Health Care Expense Insurance at Your or Your Dependents' Option
(including rights under COBRA): These provisions apply to the health care
expense Coverages of the Group Contract. They describe who has the right to
continue insurance under those Coverages and how it may be continued. The
provisions are concerned with continuation of your insurance beyond the date it
would otherwise have ended.
Right to Continue Insurance: A right under this part is subject to the rest of
these provisions:
You have the right to continue your Employee or Employee and Dependents
Insurance under the health care expense Coverages of the Group Contract if your
insurance under those Coverages would have ended: (1) because your employment
ended for a reason other than gross misconduct; or (2) because your work hours
were reduced; or (3) because you are no longer actively at work for General
Mills on account of your Total Disability.
Solely for the purpose of these provisions, "Total Disability" exists when, due
to Sickness or accidental Injury, both of these are true:
(1) You are not able to perform, for wage or profit, the material and
substantial duties of your occupation.
(2) After the first two years of Total Disability, you are not able to perform,
for wage or profit, the material and substantial duties of any job for
which you are, or may become, reasonably fitted by your education,
experience or training, including rehabilitative training.
Each of your Qualified Dependents has the right to continue insurance under the
health care expense Coverages of the Group Contract if your Dependents Insurance
for the Qualified Dependent under those Coverages would have ended:
(1) because your employment ended for a reason other than gross misconduct; or
<PAGE>
(2) because your work hours were reduced; or
(3) because you are no longer actively at work for General Mills on account of
your Total Disability; or
(4) at your death; or
(5) because you became entitled to Medicare benefits; or
(6) in the case of your spouse, when your spouse ceased to be a Qualified
Dependent as a result of divorce or legal separation; or
(7) in the case of your Qualified Dependent child, when your child ceased to be
a Qualified Dependent under the rules of the Group Contract.
Notice: This applies if your Dependents Insurance for a Qualified Dependent
would have ended due to an event shown in (6) or (7) above. If a person wants to
continue the insurance, written notice of the event must be given to General
Mills within 60 days after the event shown in (6) or (7) above.
Continuation: General Mills will give a written election notice of the right to
continue the insurance. Such notice will state the amount of the payments, if
any, required for the continued insurance and the manner in which any payments
must be made. If you are a surviving or former spouse whose insurance is
continued solely because of the requirements of a Minnesota law, General Mills
will, upon your request, provide written verification from The Prudential of the
cost of continuation insurance for the spouse and any dependents of the spouse.
If a person wants to continue the insurance, the election notice must be
completed and returned to General Mills within 60 days (90 days if the insurance
is being continued due to your death) of the later of: (1) the date the
insurance would otherwise have ended; or (2) the date the person receives the
notice informing him or her of the right to continue. But, in no event, may
election be made more than 120 days (150 days if the insurance is being
continued due to an event shown in (6) or (7) above) after the date the
insurance would otherwise have ended. The first payment for the continued
insurance must be made by the 45th day (9Oth day if the insurance is being
continued due to your death) after the date the election notice is completed. If
this is done, the insurance will be continued until the first of these occurs:
(1) The day 18 months from the earlier of the date: (a) your employment ends
for a reason other than (i) gross misconduct or (ii) your Total Disability
as defined above, or (b) your work hours are reduced. But, insurance may
continue for up to 11 additional months while a person is determined to be
disabled under Title II or XVI of the United States Social Security Act if:
(i) the disability was determined to exist on the date employment ended or
work hours were reduced; and
(ii) the person gives General Mills written notice of the disability within
60 days after the determination of disability is made and within the
18 months after the date employment ended or work hours were reduced.
General Mills must be notified if there is a final determination under the
United States Social Security Act that the person is no longer disabled. The
notice must be provided within 30 days after the final determination. The
insurance will end as of the first month that starts more than 30 days after the
determination.
(2) If the insurance is being continued due to your Total Disability, as
defined above, the day your Total Disability ends. But, if this (2) would
otherwise cause the insurance to end less than 18 months from the earlier
of the date your employment ends or your work hours are reduced, then the
insurance will not end due to this (2) until the end of that 18 month
period.
<PAGE>
(3) If the insurance is being continued due to your entitlement to Medicare
benefits, the later of (a) the day 36 months from the date the continued
insurance was elected and (b) the day 36 months from the date of your
entitlement to Medicare benefits.
(4) If the insurance is being continued due to your Qualified Dependent child
ceasing to be a Qualified Dependent under the rules of the Group Contract,
the later of (a) the day 36 months from the date the continued insurance
was elected and (b) the day 36 months from the date the child ceased to be
a Qualified Dependent.
(5) If the insurance is being continued due to your divorce or legal separation
from your spouse, the date your insurance under the Coverages ends. But, if
this (5) would otherwise cause the insurance to end before the day 36
months from the date of your divorce or legal separation, then the
insurance will not end due to this (5) until the end of that 36 month
period.
(6) If the person fails to make any payment required by General Mills for the
continued insurance, the end of the period for which the person has made
required payments.
(7) The day the person becomes covered (after the day the person made the
election for continuation coverage) under any other health plan for persons
in a group, on an insured or uninsured basis. This item (7) does not apply
if the insurance is being continued due to your Total Disability, as
defined above. Also, this item (7) by itself will not prevent coverage from
being continued until the end of any period for which preexisting
conditions are excluded or benefits for them are limited under the other
health plan.
(8) The part of the Group Contract providing the insurance ends.
While Employee Insurance is continued under this part, all other terms of the
Group Contract will apply, except that the For Employee Insurance part of the
Delay of Effective Date section will not apply.
While Dependents Insurance is continued under this part, all other terms of the
Group Contract will apply, except that benefits under the health care expense
Coverages will be paid to the person who elected the continuation right. If the
person who elected the continuation right is not living, the following will
apply:
(1) If you elected the continuation right, benefits will be paid to:
(a) your spouse, if living; or
(b) your spouse's estate, if your spouse is not living but survived your
Qualified Dependent children; or
(c) the person or institution appearing to Prudential to have assumed the
main support of your Qualified Dependent children, if neither (a) nor
(b) applies.
(2) If your spouse elected the continuation right, benefits will be paid to:
(a) your spouse's estate, if your spouse survived your Qualified Dependent
children; or
(b) the person or institution appearing to Prudential to have assumed the
main support of your Qualified Dependent children, if (a) does not
apply.
(3) If your Qualified Dependent child elected the continuation right, benefits
will be paid to your Qualified Dependent child's estate.
If an amount is so paid, Prudential will not have to pay that part of your
insurance again.
Continued Health Care Expense Insurance for Retirees in the Event of Bankruptcy:
These provisions apply to the health care expense Coverages of the Group
Contract. They apply only if coverage for retired Employees and their Dependents
is provided under those Coverages. The provisions are concerned with
continuation of your insurance beyond the date it would otherwise
<PAGE>
have ended because General Mills entered into a bankruptcy proceeding under
Title Xl, United States Code.
Right to Continue Insurance: A right under this part is subject to the rest of
these provisions:
For the purpose of these provisions, reference to your insurance ending includes
a substantial elimination of your insurance, provided that it occurs within one
year before or after the bankruptcy proceeding begins; and reference to a
Qualified Dependent includes a Surviving Spouse if your death occurs: (a) after
your retirement from employment with the Employer; and (b) before the date the
insurance under the Coverage would have ended because the Employer entered into
a Title Xl bankruptcy proceeding.
You have the right to continue your Employee or Employee and Dependents
Insurance under the health care expense Coverages of the Group Contract if these
two conditions are met:
(1) The insurance under the Coverage would have ended because the Employer
entered into a Title Xl bankruptcy proceeding.
(2) You retired from employment with the Employer on or before the date the
insurance under the Coverage ended.
Each of your Qualified Dependents (including a Surviving Spouse) has the right
to continue insurance under the health care expense Coverages of the Group
Contract if your Dependents Insurance for the Qualified Dependent under those
Coverages would have ended, provided: (a) the above conditions (1) and (2) are
met; and (b) such Qualified Dependent was covered for the insurance on the day
prior to the date it would have ended.
Continuation: General Mills will give a written election notice of the right to
continue the insurance. Such notice will state the amount of the payments, if
any, required for the continued insurance. If a person wants to continue the
insurance, the election notice must be completed and returned to General Mills
within 60 days of the later of: (1) the date the insurance would otherwise have
ended; or (2) the date of the notice informing the person of the right to
continue. But, in no event, may election be made more than 120 days after the
date the insurance would otherwise have ended. The first payment for the
continued insurance must be made by the 45th day after the date the election
notice is completed. If this is done, the insurance will be continued until the
first of these occurs:
(1) Your death. However, the insurance for your spouse and Qualified Dependent
children may be continued for up to 36 months from the date of your death
if written notice is given to General Mills within 60 days after your
death. See "Notice" (below) for details.
(2) In the case of a person who is a Surviving Spouse of a deceased retired
Employee when the coverage would have ended, the date the Surviving Spouse
dies.
(3) If the person fails to make any payment required by General Mills for the
continued insurance, the end of the period for which the person has made
required payments.
(4) The day the person becomes covered (after the day the person made the
election for continuation coverage) under any other health plan for persons
in a group, on an insured or uninsured basis. This item (4) by itself will
not prevent coverage from being continued until the end of any period for
which preexisting conditions are excluded or benefits for them are limited
under the other health plan.
(5) The part of the Group Contract providing the insurance ends.
Notice: This applies if you die while your Dependents Insurance for a Qualified
Dependent is being continued by reason of these provisions. If your Qualified
Dependents want to continue the insurance after your death, written notice of
the death must be given to General Mills within 60 days after the death.
<PAGE>
While Employee Insurance is continued under this part, all other terms of the
Group Contract will apply, except that the For Employee Insurance part of the
Delay of Effective Date section will not apply.
While Dependents Insurance is continued under this part, all other terms of the
Group Contract will apply, except that benefits under the health care expense
Coverages will be paid to the person who elected the continuation right. If the
person who elected the continuation right is not living, the following will
apply
(1) If you elected the continuation right, benefits will be paid to:
(a) your spouse, if living; or
(b) your spouse's estate, if your spouse is not living but survived your
Qualified Dependent children; or
(c) the person or institution appearing to Prudential to have assumed the
main support of your Qualified Dependent children, if neither (a) nor
(b) applies.
(2) If your spouse (including a Surviving Spouse) elected the continuation
right, benefits will be paid to:
(a) your spouse's estate, if your spouse survived your Qualified Dependent
children; or
(b) the person or institution appearing to Prudential to have assumed the
main support of your Qualified Dependent children, if (a) does not
apply.
(3) If your Qualified Dependent child elected the continuation right, benefits
will be paid to your Qualified Dependent child's estate.
If an amount is so paid, Prudential will not have to pay that part of your
insurance again.
EXTENSION OF HEALTH CARE PROTECTION
This page applies to a health care expense Coverage when that Coverage states
that it does.
A person's protection under the Coverage may be extended after the date that
person ceases to be a Covered Person under that Coverage. It will be extended
if, on that date, the person is totally disabled from a Sickness or Injury and
is under a Doctor's care. The extension is only for that and any related
Sickness or Injury. It will be for the time the person remains so disabled from
any such Sickness or Injury and under such care, but not beyond one month.
A Coverage will apply during an extension as if the person were still a Covered
Person. There are two exceptions. Restorations will not be allowed under the
Overall Maximum section of the Major Medical Expense Coverage. And a Coverage
will apply only to the extent that other coverage for its Eligible Charges is
not provided for the person through the Employer.
CONVERSION PRIVILEGE UNDER HEALTH CARE EXPENSE INSURANCE
This Conversion Privilege applies only to health care expense insurance under
the Group Contract (called group health care insurance below).
<PAGE>
It describes when and how you, or your spouse or child, may get an individual
health care expense insurance contract (called the Converted Contract below)
when your group health care insurance, or that of your spouse or child, ends.
Right to Convert
A right under this section is subject to the rest of this Conversion Privilege.
You have the right to get a Converted Contract if your group health care
insurance ends for any reason other than:
(a) your failure to pay, when due, any contribution required for an insurance
of the Group Contract; or
(b) the end of your employment if you then have the right to elect to continue
your group health care insurance.
Your spouse or each of your children has the right to get a Converted Contract
if your Dependents Insurance for your spouse or child under the group health
care insurance ends for one of these reasons:
(a) Your death.
(b) Your spouse ceases to be a Qualified Dependent, due to divorce or annulment
of your marriage.
(c) Your spouse or child ceases to be a Qualified Dependent for any other
reason, and you do not have the right to get a Converted Contract at that
time.
A child does not have the right to get a Converted Contract while your spouse
has that right.
Application and First Premium Payment
The person who has the right to get the Converted Contract must apply for it,
and pay the first premium, to Prudential within 31 days after the group health
care insurance for that person ends except as follows:
(a) If insurance for your spouse ends because of divorce or annulment of your
marriage, the spouse must apply for the Converted Contract and pay the
first premium to Prudential within thirty days after the spouse receives
notice that insurance is ending; or
(b) If your insurance ends because the Group Contract ends, you must apply for
the Converted Contract and pay the first premium to Prudential within
thirty days after you receive notice that insurance is ending.
Effective Date
The Converted Contract will take effect on the day after the group health care
insurance ends.
Converted Contract
The Converted Contract's form and premiums, and the persons covered by it, will
be as stated below.
Form: Any form of Converted Contract that Prudential then makes available. The
benefits will comply with any state laws or regulations that may apply. Some of
the group health care coverages may not be available under the Converted
Contract. The levels of benefits under the Converted Contract may be lower than
those of the group health care insurance.
If the person who has the right to get the Converted Contract is a resident of
Minnesota, the following will apply:
<PAGE>
(a) The person may select a Converted Contract that provides at least the
minimum benefits of either a number three, a number two, or a number one
qualified plan, as provided by Section 62E.06, subdivisions 1 to 3, of the
Minnesota Insurance Laws.
(b) Under any such selected Converted Contract, Pregnancy will be treated the
same as any other Sickness.
Premiums: For the Converted Contract, these will be based on Prudential's rates
for:
(1) the age and class of risk (but not health) of each person covered under it;
and
(2) the type and amount of insurance it provides; and
(3) its premium period. This is the usual one for the Converted Contract. But
premiums will not be due less often than quarterly unless the insured
agrees.
Persons Covered: Subject to the exceptions below, these are:
(1) If the Converted Contract is issued to you, you and your Qualified
Dependents whose group health care insurance ended when yours did.
(2) If your spouse has the right to get a Converted Contract and it is issued
to your spouse, your spouse and any of your Qualified Dependent children
whose group health care insurance ended at the same time.
(3) If your child has the right to get a Converted Contract and it is issued to
your child, only that child.
These are the exceptions to the above rules:
(a) Prudential may issue a separate Converted Contract to any person.
(b) Prudential does not have to issue a Converted Contract covering these
persons:
(i) A person to whom one or more of the items below applies, when the
benefits of the Converted Contract, together with the similar benefits
provided or available from the sources shown in those items, would
result in overinsurance under Prudential's standards.
(A) The person is a resident of Minnesota and is covered by another
qualified plan as defined in Section 62E.02, subdivision 4 of
the Minnesota Insurance Laws.
(B) The person is not a resident of Minnesota and is eligible for
coverage (whether or not covered) under any insured or
uninsured arrangement for coverage for persons in a group.
<PAGE>
EXHIBIT 10.11
GENERAL MILLS, INC.
1995 SALARY REPLACEMENT STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of the General Mills, Inc. 1995 Salary Replacement
Stock Option Plan (the "Plan") is to give management employees of
General Mills, Inc. (the "Company") and its subsidiaries the
opportunity to receive stock option grants in lieu of salary increases
and certain other compensation and benefits thereby encouraging focus
on the growth and profitability of the Company and its Common Stock.
Restricted stock is not permitted to be issued under the terms of this
Plan.
2. EFFECTIVE DATE OF PLAN
This Plan shall become effective as of September 18, 1995,
subject to the approval of the stockholders of the Company at the
Annual Meeting on September 18, 1995.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee shall be made up of non-management
members of the Board of Directors (the "Board") appointed in
accordance with the Company's Certificate of Incorporation. The
Committee shall have authority to adopt rules and regulations for
carrying out the purpose of the Plan, select the employees to whom
grants will be made ("Optionees"), the number of shares to be optioned
and interpret, construe and implement the provisions of the Plan;
provided that if at any time Rule 16b-3 or any successor rule ("Rule
16b-3") under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), so permits without adversely affecting the ability of the
Plan to comply with the conditions for exemption from Section 16 of
the 1934 Act (or any successor provisions) provided by Rule 16b-3, the
Committee may delegate the administration of the Plan in whole or in
part, on such terms and conditions, and to such person or persons as
it may determine in its discretion. Decisions of the Committee (or
its delegate as permitted herein) shall be final, conclusive and
binding upon all parties, including the Company, stockholders and
Optionees.
4. COMMON STOCK SUBJECT TO THE PLAN
The shares of "Common Stock" of the Company ($.10 par value) to
be issued upon the exercise of a non-qualified option to purchase
Common Stock granted hereunder (an "Option") may be made available
from the
<PAGE>
authorized but unissued Common Stock, shares of Common Stock held in
the treasury, or Common Stock purchased on the open market or
otherwise.
Approval of the Plan by the stockholders of the Company shall
constitute authorization to use such shares for the Plan, subject to
the discretion of the Board or as such discretion may be delegated to
the Committee.
Subject to the provisions of the next succeeding paragraph, the
maximum aggregate number of shares authorized under the Plan for which
Options may be granted under the Plan shall be 7,000,000 shares. If
an Option granted under the Plan is terminated without having been
exercised in full, the unpurchased or forfeited shares or rights to
receive shares shall become available for grant to other employees.
The number of shares of Common Stock subject to Options granted under
this Plan to any Optionee shall not exceed 5% of the total number of
shares of Common Stock which may be issued under this Plan.
In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, Common Stock,
securities of a subsidiary of the Company, other securities or other
property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other
similar corporate transaction or event affects the Common Stock such
that an adjustment is determined by the Committee to be appropriate to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee may,
in its sole discretion and in such manner as it may deem equitable,
adjust any or all of (i) the number of shares of Common Stock subject
to the Plan, subject to Section 15, (ii) the number of shares of
Common Stock subject to outstanding Options, and (iii) the grant or
exercise price with respect to any Option and, if deemed appropriate,
make provision for a cash payment to the holder of an outstanding
Option; PROVIDED, that the number of shares of Common Stock subject to
any Option denominated in Common Stock shall always be a whole number.
5. ELIGIBLE PERSONS
Only persons who are officers or management employees of the
Company or a subsidiary shall be eligible to receive grants under the
Plan. No grant shall be made to any member of the Committee or any
other non-employee director.
6. PURCHASE PRICE OF STOCK OPTIONS
The purchase price for each share of Common Stock issuable under
an Option shall not be less than 100 percent of the Fair Market Value
of the Shares of Common Stock of the Company subject to such option on
the
<PAGE>
date of grant. "Fair Market Value" as used in the Plan shall equal
the mean of the high and low price of the Common Stock on the New York
Stock Exchange on the applicable date.
7. OPTION TERM
The term of each Option grant as determined by the Committee
shall not exceed ten (10) years and one (1) month from the date of
that grant and shall expire as of the last day of the designated term,
unless terminated earlier under the provisions of the Plan.
8. OPTION TYPE
Option grants will be non-qualified stock options governed by
Section 83 of the Internal Revenue Code of 1986, as amended (the
"Code") or any successor provision.
9. NON-TRANSFERABILITY OF OPTIONS
No Option granted under this Plan shall be transferable by the
Optionee otherwise than by the Optionee's last will and testament or
by the applicable laws of descent and distribution and an Option may
be exercised during the Optionee's lifetime only by the Optionee or
his or her guardian or legal representative. An Optionee shall
forfeit any Option assigned or transferred, voluntarily or
involuntarily, other than as permitted under this Section.
10. EXERCISE OF OPTIONS
Except as provided in Sections 12, 13 and 14, each Option shall
be vested and may be exercised in accordance with such terms and
conditions as may be determined by the Committee for grants to
officers or executives and by the Chief Executive Officer of the
Company for grants to other management participants.
Subject to the provision of this Section 10, each Option may be
exercised in whole or, from time to time, in part with respect to the
number of then exercisable shares in any sequence desired by the
Optionee without regard to the date of grant of stock options under
other plans of the Company.
An Optionee exercising an Option shall give notice to the Company
of such exercise and of the number of shares elected to be purchased
prior to 4:30 P.M. CST/CDT on the day of exercise, which must be a
business day at the executive offices of the Company. At the time of
purchase, the Optionee shall tender the full purchase price of the
shares purchased. Until such payment has been made and either a
certificate or certificates for the shares purchased has been issued
in the Optionee's name or the ownership
<PAGE>
of such shares by the Optionee has been entered by the Company's
transfer agent on the master stockholder records of the Company, the
Optionee shall possess no stockholder rights with respect to any such
shares. Payment of such purchase price shall be made to the Company,
subject to any applicable rule or regulation adopted by the Committee:
(i) in cash (including check, draft, money order or wire
transfer made payable to the order of the Company);
(ii) through the delivery of shares of Common Stock owned by the
Optionee; or
(iii) by a combination of (i) and (ii) above.
For determining the payment, Common Stock delivered pursuant to
(ii) or (iii) shall have a value equal to the Fair Market Value of the
Common Stock on the date of exercise.
11. WITHHOLDING TAXES ON OPTION EXERCISE
Each Optionee shall deliver to the Company cash in an amount
equal to all federal, state and local withholding taxes required to be
collected by the Company in respect of the exercise of an Option, and
until such payment is made, the Company may, in its discretion, retain
all or a portion of the shares to be issued.
Notwithstanding the foregoing, to the extent permitted by law and
pursuant to such rules as the Committee may adopt, an Optionee may
authorize the Company to satisfy any such withholding requirement by
directing the Company to withhold from any shares to be issued such
number of shares as shall be sufficient to satisfy the withholding
obligation.
12. EXERCISE OF OPTIONS IN EVENT OF CERTAIN CHANGES OF CONTROL
Each outstanding Option shall become immediately and fully
exercisable for a period of one (1) year following the date of the
following occurrences, each constituting a "Change of Control":
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act), (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of
voting securities of the Company where such acquisition
causes such Person to own 20% or more of the combined voting
power of the then outstanding voting securities of the
Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not be deemed to result in a
Change of Control: (i) any acquisition directly from the
<PAGE>
Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) below; and
provided, further, that if any Person's beneficial ownership
of the Outstanding Voting Securities reaches or exceeds 20%
as a result of a transaction described in clause (i) or (ii)
above, and such Person subsequently acquires beneficial
ownership of additional voting securities of the Company,
such subsequent acquisition shall be treated as an
acquisition that causes such Person to own 20% or more of
the Outstanding Voting Securities; or
(b) Individuals who, as of the date hereof, constitute the Board
of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent
to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a
vote of at least of a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the
Company ("Business Combination") or, if consummation of such
Business Combination is subject, at the time of such
approval by stockholders, to the consent of any government
or governmental agency, the obtaining of such consent
(either explicitly or implicitly by consummation);
excluding, however, such a Business Combination pursuant to
which (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation that as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
<PAGE>
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Voting Securities,
(ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least
a majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
After such one (1) year period the normal option exercise
provisions of the Plan shall govern. In the event an Optionee is
terminated as an employee of the Company or a Subsidiary within two
(2) years of any of the events specified in (a), (b), (c) or (d), all
outstanding Options at that date of termination shall become
immediately exercisable for a period of six (6) months, subject to the
provisions of Section 7.
13. TERMINATION OF EMPLOYMENT OF AN OPTIONEE
(a) NORMAL TERMINATION
If the Optionee's employment by the Company or a subsidiary
terminates for any reason other than as specified in subsections (b),
(c) or (d) below, the Options shall terminate three (3) months after
such termination. If the employment by the Company or a subsidiary of
an Optionee is terminated for the convenience of the Company, as
determined by the Committee, the Committee, in its sole discretion,
may vest such Optionee in all or any portion of the outstanding Option
(which shall become exercisable) effective as of the date of such
termination and if, at the time of such termination, the sum of the
Optionee's age and service with the Company equals or exceeds 70, the
Committee, in its sole discretion, may permit such Option to remain
exercisable until the expiration of the Option in accordance with its
original term.
(b) DEATH
If the termination of employment is due to the Optionee's death,
the Options may be exercised as provided in Section 14.
<PAGE>
(c) RETIREMENT
If the termination of employment is due to the Optionee's
retirement, the Optionee thereafter may exercise an Option within the
period remaining under the original term of the Option.
(d) DISCONTINUATION OF A COMPLETE LINE OF BUSINESS
If the termination of employment is due to the cessation,
transfer, or spin-off of a complete line of business of the Company,
the Committee, in its sole discretion, may determine that all
outstanding Options granted to the Optionee prior to such termination
shall immediately become exercisable for a period of up to five (5)
years after the date of such termination, subject to the provisions of
Section 7.
14. DEATH OF OPTIONEE
If an Optionee should die while employed by the Company or a
subsidiary, any Option previously granted to the Optionee under this
Plan may be exercised by the person designated in such Optionee's last
will and testament or, in the absence of such designation, by the
Optionee's estate, to the full extent that such Option could have been
exercised by such Optionee immediately prior to the Optionee's death,
subject to the original term of the Option. Further, with respect to
outstanding Options which, as of the date of death, are not yet
exercisable, any such Option shall vest and become exercisable in a
pro rata amount, based on the number of full months of employment
completed during the full vesting period of the Option from the date
of grant to the date of death.
15. AMENDMENTS TO THE PLAN
The Committee and the Board of Directors may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that
no amendment shall be made without stockholder approval if such
stockholder approval is necessary to comply with any tax or regulatory
requirement, including for these purposes any approval requirement
that is a prerequisite for exemptive relief from Section 16(b) of the
1934 Act. Notwithstanding anything to the contrary contained herein,
any amendment, suspension or termination made in accordance with this
Section 15 that would adversely affect an Optionee's rights under an
Option granted under the Plan may not be made without such Optionee's
consent.
The Committee shall have authority to cause the Company to take
any action related to the Plan which may be required to comply with
the provisions of the Securities Act of 1933, as amended, the 1934
Act, and the rules and regulations prescribed by the Securities and
Exchange Commission. Any such action shall be at the expense of the
Company.
<PAGE>
16. FOREIGN JURISDICTIONS
The Committee may adopt, amend, and terminate such arrangements,
not inconsistent with the intent of the Plan, as it may deem necessary
or desirable to make available tax or other benefits of laws of any
foreign jurisdiction, to key employees of the Company who are subject
to such laws and who are eligible to receive Option grants under the
Plan.
17. DURATION OF THE PLAN
Grants may be made under the Plan until September 30, 2000.
18. NOTICE
All notices and communications to the Company shall be in
writing, effective as of actual receipt by the Company, and shall be
sent to:
General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, Minnesota 55426
Attention: Corporate Compensation
If by Telex: 170360 Gen Mills
If by Facsimile: (612) 540-4925
19. SECTION 16 OFFICERS
With respect to persons subject to Section 16 of the 1934 Act,
transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.
Effective as of September 18, 1995
<PAGE>
EXHIBIT 10.16
PROTOCOL OF CEREAL PARTNERS WORLDWIDE
FIRST. General Mills and Nestle have identified a common area of interest in
developing together the business of breakfast cereals outside of North America
and Japan, starting in Europe.
SECOND. General Mills is a diversified consumer foods and restaurant business
that has developed a strong, successful breakfast cereal business in North
America. It recently captured the number one position with Cheerios brand.
THIRD. Nestle, a diversified food business, has operations in over 60
countries, and amongst its portfolio of branded leading food products has been
traditionally selling in most countries outside North America and the U.K.,
infant weaning cereals where it enjoys leadership. Nestle has recently entered
the breakfast cereal market in Europe and some selected countries overseas.
FOURTH. Both companies recognize the following:
(a) Potential growth opportunities above average in many countries outside
North America and particularly in Europe.
(b) Both companies, apart from non-significant exceptions, do not compete
directly in the food business on a geographical basis.
(c) General Mills' long-standing successful breakfast cereal technological
and marketing know-how with strong product brands in North America
which can be globalised.
(d) Nestle's long-standing and successful worldwide manufacturing and
marketing organisation, selling top quality food products under the
strong Nestle endorsement name; also its recent entry into breakfast
cereals.
(e) Strong and dedicated R&D activities of both companies in the areas of
food and nutrition.
FIFTH. General Mills has been offered the possibility on a strictly
confidential basis by RHM to make a private bid for the cereals business, part
of which was recently acquired in the U.K. from RJR Nabisco. General Mills will
endeavor to obtain permission from RHM to share with Nestle available data and
other information pertaining to the possible acquisition.
Both companies will decide within an estimated 3 to 4 weeks period to make or
not a bid if they agree on an acceptable price range, in which case the purchase
will be done and the RHM cereal
<PAGE>
business would be integrated in the joint venture "Cereals Partners Europe."
However, it is agreed that if the acquisition from RHM does not materialize,
this should not in any circumstances impinge on the agreement concerning the
contemplated joint venture.
THEREFORE, in order to successfully exploit their complementary natures, the
companies intend to enter into a general agreement covering the following:
1. Establishment of a worldwide cereal joint venture ("JV") covering all
countries in the world with the exception of the USA, Puerto Rico, U.S.
territories, Canada and Japan.
(a) As a first step, the JV will enter Europe (EEC and EFTA countries
including possible ventures in countries of Eastern Europe currently
outside these territories).
(b) As subsequent steps, the JV will enter other countries or territories
sequentially as feasible.
(c) The partners will discuss an approach for Japan.
(d) The exact form of cooperation between General Mills and Nestle in the
following countries where Nestle has already a breakfast cereals
business commitment will be further agreed upon between the two
parties: Malaysia, India, Chile, Zimbabwe and Tunisia.
2. Purposes of the joint venture:
(a) To become a significant player in the fast growing worldwide breakfast
cereal business, and
(b) To exploit the strength and complementary nature of both partners to
successfully build a viable, sizeable business against strong
competitors.
3. Nature of agreement:
(a) A 50/50 JV by combining the respective knowledge and know-how related
to the business to facilitate the efficient manufacturing, marketing
and selling of breakfast cereals.
(b) The JV shall be organised as mutually agreed based upon business
considerations and other matters including legal and tax.
(c) The JV shall be physically separated from the main flow of both
partners, with a management fully responsible and accountable for its
operations and reporting to a board as defined below.
<PAGE>
(d) The defined field of the business is the following:
Breakfast cereals, defined as all family, child and adult ready-to-eat
and hot cereals excluding infant weaning cereals defined as dry or wet
cereal-based products intended for infants and children not more than
3 years of age normally prepared as paps diluted in liquids. Excluded
unless agreed upon at a later date are grain-based products presented
in the form of snack bars and the like.
(e) The parties shall share equally in the initial and on-going investment
required by the JV.
(f) All acquisitions in the defined product range and territory
originating from one of the partners shall be offered to the other
partner to be part of the JV or shared equally by both parties. If the
partner being offered does not want or is unable to accept for reasons
other than price, then that party will exclude itself from entering
the breakfast cereal market in that country.
4. Nature of Board of Directors:
General Mills and Nestle agree to establish a supervisory Board in order to
coordinate business activities, set the policies and authorize strategies,
plans and budgets proposed by the CEO and resolve possible conflicts.
The Board shall consist of an even number of members not to exceed six.
General Mills and Nestle shall each be entitled to elect one half of the
members. In the event a member resigns or becomes unable to serve, the
parties agree that before taking any further action, a new member will be
elected within 90 days by the party whose member has resigned. Neither the
CEO nor any JV employee shall be a Board member.
Each party will appoint a Co-Chairman of the Board. The Co-Chairmen will
alternate in chairing the Board meetings. Minutes shall be kept for all
Board meetings and be approved by the Board.
The meetings of the Board shall be held at such times and such places as
may from time to time be decided by the Board; however, it should meet
initially at least three times a year.
Each member may be accompanied at Board meetings by any special advisor
deemed necessary.
<PAGE>
All possible conflicts should be solved in earnest and good faith for the
exclusive benefit of the JV. However, in case of a necessary arbitration,
the Board will submit the matter to the CEO's of both companies. A detailed
arbitration procedure will be established by both companies in common
agreement.
The Board will elect the Key Executives of the JV and determine their
conditions of employment.
The Board will also review and approve:
(a) Establishment of overall strategic objectives.
(b) Long-term plans of the JV.
(c) Capital, finance and operating budgets.
(d) Research and Development budget plans to be farmed out to the parties.
(e) Acquisitions and divestments.
(f) Application of trademarks - brands - their utilization by the JV.
(g) Bonuses and long-term incentive programmes.
(h) Yearly results and proposed use of cash and profits.
5. Nature of Management:
It will be a responsibility of the JV management to define business
objectives, strategies, long and short term plans and budgets to be
approved by the Board. The execution of such plans within certain
boundaries set by the Board will be the sole responsibility of the JV
management.
To initially form the JV, the Board will select a CEO with the proper
qualifications to manage the European business and who may be proposed by
either JV partner. The partner who did not propose the selected CEO
candidate will propose the CFO candidate to be selected. General Mills will
propose to the Board marketing and technical management candidates fully
qualified in the cereal business. Nestle will propose to the Board sales,
distribution and manufacturing candidates who are fully qualified. It is
contemplated that the marketing staff will include people from each
partner.
EUROPEAN OPERATIONS
In order to begin JV operations starting in Europe, General Mills will
provide its long-standing breakfast cereal technological and marketing know-how
and strong product brand names to the JV at no cost. Likewise Nestle will
provide its strong Nestle endorsement
<PAGE>
name, its breakfast cereal brand names and its marketing and technological
know-how to the JV at no cost.
Initially, the European operations of the JV will comprise the present
Nestle manufacturing operations for breakfast cereals as well as such facilities
as may be acquired by the JV from RHM. In principle, initially the JV will
preferably use Nestle's selling and physical distribution organization within
Europe unless other alternatives are more suitable. For this purpose the JV will
enter into an agreement with Nestle to purchase the physical distribution
service at cost. The selling service will be purchased at cost plus an
appropriate sales incentive.
Existing Nestle breakfast cereals' European fixed assets shall be
transferred to the JV at true asset value. If agreement on true asset value
cannot be reached by the parties, Peat Marwick Main & Co. will evaluate the
assets independently and both parties will accept their valuation. If other
related Nestle fixed assets needed for the JV cannot be physically separated for
JV ownership, the JV will enter into an arm's length agreement with Nestle on a
fiscally acceptable cost basis.
Products supplied by either party to the JV will be invoiced at a fiscally
acceptable cost plus basis.
BRANDS
It is the intention to use Nestle as the endorsement for all products.
General Mills' and Nestle's strong product brand names will be used and agreed
upon according to what is in the best interest of the JV. Visual properties of
both company brands would be harmonised while respecting individual logos, etc.
In view of the exclusive arrangement of Nestle with EuroDisney, the JV would
use such licensed characters as appropriate within the agreement signed by
Nestle and Disney.
EXPORTS
Exports made to other than European countries will be the subject of future
agreements between the parties.
ACCOUNTING MATTERS
The JV will establish accounting systems and procedures to meet its and the
partners' needs.
The JV will reimburse the partners for services other than those mentioned
in the second paragraph of the European Operations section on page 4 hereof,
provided to the JV on a fiscally acceptable cost basis; e.g., legal, accounting,
product development, technical resources, market research, etc.
The partners recognize the need for flexibility to minimize taxes and
fiscally required payments of each party shall be balanced.
PRESS RELEASE
<PAGE>
Both parties will conform to the wording and schedule of agreed-to press
releases.
DURATION
1. This agreement is intended to be perpetual.
2. Neither partner may sell or assign its interest to a third party.
FURTHER AGREEMENTS - To be executed with this Protocol
1. The Confidentiality Agreement covering exchange of technical information
between General Mills and Nestle necessary to agree upon and form the JV
(Annex "A").
2. Agreement by Nestle covering non-disclosure of RHM information ("Annex
B").
3. Agreements by Nestle and General Mills not to engage in any activity
which is directly or indirectly an attempt to take-over the other party
(Annex "C").
FORMAL JOINT VENTURE AGREEMENT
This Agreement is to be executed on or before January 15, 1990.
AGREEMENTS SUBSIDIARY TO THE JOINT VENTURE AGREEMENT
1. Agreements providing for the transfer of technology (patents and
know-how) relating to breakfast cereals from the partners to the JV.
Such agreements will provide that neither the JV nor Nestle may use
breakfast cereal technology in the USA, its territories, Canada or
Japan.
2. Agreements by both partners on the use of trademarks covering "Nestle"
as an endorsement and the use of product brands presently used by Nestle
on breakfast cereals and reciprocally General Mills' trademarks defined
as product brands used by the latter in North America and elsewhere.
3. R&D general agreements between both partners whereby future know how of
the partners relating to breakfast cereals will be shared in common for
all subsequent R&D projects.
Executed this 21 day of November, 1989.
NESTLE S.A. GENERAL MILLS, INC.
By /s/ Camillo Pagano By /s/ H. B. Atwater, Jr.
-------------------------- -----------------------------
Chairman and Chief Executive
Officer
<PAGE>
ANNEX C
OUTLINE OF MUTUAL "STANDSTILL" AGREEMENTS
Each party will agree not to acquire or offer to acquire the stock or assets
of the other party, nor engage in a proxy contest to gain control of the other
party, whether alone or in concert with others.
These agreements will extend for the longer of: ten years from the date of
the agreements; or ten years from the date the JV is dissolved or the structure
of the JV is materially changed.
<PAGE>
ADDENDUM NO. 1 TO THE
PROTOCOL OF CEREAL PARTNERS WORLDWIDE
THIS ADDENDUM NO. 1 is to the Protocol of Cereal Partners Worldwide between
General Mills, Inc. and Nestle S.A. (the "Partners"), executed on the 21st day
of November, 1989. Upon execution hereof this Addendum shall become an integral
part of the Protocol, and the parties hereto agree that the Protocol, this
Addendum, and any subsequent addendums hereto shall constitute the Formal Joint
Venture Agreement contemplated to be executed by the parties on or before
January 15, 1990.
FORMATION OF MANAGEMENT COMPANY
The Partners agree that a management company shall be legally formed under
the laws of Switzerland with a physical location in the Canton of Vaud. The name
of this Swiss company may possibly be "CEREAL PARTNERS WORLDWIDE" or "CPW" or
the translation in French of "CEREAL PARTNERS WORLDWIDE" ("CPW"). CPW is to be
incorporated on or before June 1, 1990.
CEREAL BUSINESSES IN GERMANY, FRANCE, SPAIN AND PORTUGAL
It is agreed that the present Nestle cereal businesses in Germany, France,
Spain and Portugal are to be transferred to the responsibility of the JV on June
1, 1990 under the various "Subsidiary Agreements" referred to hereafter in this
Addendum. Notwithstanding that the legal structure of the JV in France, Spain
and Portugal is being studied at this time, CPW will have full operational
authority and responsibility for the above cereal businesses beginning June 1,
1990.
SUBSIDIARY AGREEMENTS FOR GERMANY, FRANCE, SPAIN AND PORTUGAL
To most efficiently begin the JV operations in Germany, France, Spain and
Portugal on June 1, 1990, it is anticipated that some or all of the following
agreements in some form will be necessary:
1. Co-pack Agreements
2. Distribution Agreements
3. Technology and Trademark License Agreements
4. Management Agreements
The preceding agreements, all to be effective June 1, 1990, shall be between
Nestle S.A. or General Mills, Inc. and the affiliated companies or entities of
the JV, e.g., CPW and whatever legal entities are formed for the cereal
businesses of Germany, France, Spain and Portugal, and subsidiary companies of
Nestle S.A. or General Mills, Inc. located in these countries.
<PAGE>
Notwithstanding that the JV will become operational on June 1, 1990 under
the preceding agreements, General Mills, Inc. also agrees that upon written
notice from Nestle S.A., the existing Nestle S.A. breakfast cereals' European
fixed assets shall be transferred to the JV in accordance with the provisions of
the third paragraph of EUROPEAN OPERATIONS of the Protocol.
ARBITRATION
Any "material dispute" which may arise between Nestle S.A. and General
Mills, Inc. concerning any aspect of the JV, the Protocol, or any matter related
thereto, including, but not limited to the interpretation, the implementation,
or the termination of the JV, shall be submitted for mediation and resolution to
the respective chief executive officer of General Mills, Inc. and Nestle S.A. A
"material dispute" shall mean any disagreement or impasse or failure to take any
action by Nestle S.A. or General Mills, Inc., or any of the companies or
entities associated with the JV, which will have a substantial negative
consequence in the operation of the JV. If such a "material dispute" is not
resolved within 60 days after submission to the chief executive officers of
General Mills, Inc. and Nestle S.A., the dispute, including a decision as to
whether or not the dispute is material, shall be resolved by arbitration
pursuant to the Rules of Conciliation and Arbitration of the International
Chamber of Commerce, which arbitration shall take place in the City of London.
Notwithstanding such rules, it is agreed that the arbitrators shall be three in
number, one of whom shall be chosen by Nestle S.A., the second by General Mills,
Inc., and the third shall be chosen by the two arbitrators designated by Nestle
S.A. and General Mills, Inc. The arbitration proceedings shall be conducted in
the English language, but documents shall be submitted in the language of the
original with translations thereof being provided to the arbitrators. Judgment
by the International Chamber of Commerce shall be final and not subject to any
appeal, and the award thereof, if necessary, may be entered into any court of
competent jurisdiction of any country.
TERMINATION
The JV envisioned and delineated by the Protocol shall continue until
December 31, 2040, unless terminated by the mutual written consent of General
Mills, Inc. and Nestle S.A. prior thereto, or by the provisions under
LIQUIDATION. Notwithstanding the date of December 31, 2040, the JV shall be
automatically extended for additional consecutive 10-year periods, subject that
either Nestle S.A. or General Mills, Inc., by written notice to the other at
least three years prior to December 31, 2040, or any renewal date, gives notice
that the JV shall not be continued or renewed.
MATERIAL BREACH
<PAGE>
In addition to the JV terminating pursuant to the provisions of TERMINATION,
the JV may also terminate upon a "material breach" by Nestle S.A. or General
Mills, Inc., or any affiliated company or entity carrying out any aspect of the
JV which is not cured. A "material breach" shall be defined in the same manner
as a "material dispute," and if there is disagreement as to whether or not a
"material breach" has occurred, this matter shall be resolved or arbitrated in
accordance with the provisions of ARBITRATION. In the event that any entity or
party to the JV wishes to assert that a material breach has occurred, written
notice thereof shall be given to the chief executive officer of either Nestle
S.A. or General Mills, Inc., and the notified party shall be given a period of
60 days in which to cure or rectify such material breach. If it is impossible to
rectify or cure such material breach within the said 60 day period, it shall
nevertheless be deemed to have been rectified or cured if the notified party
provides a financial bond or other financial guaranty which will assure that the
costs of curing or rectifying the "material breach" will be met.
MATERIAL CHANGE OF CIRCUMSTANCES
A "material change of circumstances" shall be deemed to be an event or
events which, absent termination of the JV, will cause a material inequity to
occur to Nestle S.A. or General Mills, Inc., or any affiliated entity or company
thereof, not including a JV entity (the "affected party"). A material change of
circumstances would be one which was not contemplated by the parties hereto to
occur as of the date hereof and which will have the consequence of materially
changing the manner in which the JV is to be conducted or in the
characteristics, including the corporate structure, of either Nestle S.A. or
General Mills, Inc. If a material change of circumstances has occurred, Nestle
S.A. or General Mills, Inc. as the "affected party," that is the party not
incurring the material change of circumstances, shall have the right to purchase
the other party's interest in the JV at an equitable price subject that all
other relationships between the parties (e.g., licenses) also are resolved on an
equitable basis. In the event that Nestle S.A. and General Mills, Inc. are not
in agreement that an event has occurred which constitutes a "material change of
circumstances," or there is not agreement as to the price at which one party may
purchase the other party's interest in the JV or the settlement of other rights,
such disagreement shall be subject to ARBITRATION as herein provided.
LIQUIDATION
In the event that the JV is to be terminated under any of the provisions of
the Protocol, Nestle S.A. and General Mills, Inc. will negotiate in the utmost
good faith a termination of the companies and entities comprising the JV under
the following principles:
1. If the businesses of the JV, or any part thereof, are to be
discontinued, the assets thereof shall be applied first to the payment
of the associated liabilities, then
<PAGE>
to the expenses of such liquidation, and any net remainder shall be
distributed equally to Nestle S.A. or General Mills, Inc., or the
assigns thereof.
2. Intellectual property transferred or licensed to the company or entity
which is to be liquidated shall be reassigned or transferred to the
entity which was the transferor of the intellectual property.
3. Intellectual property that has been developed solely by any company or
entity of the JV, or is the sole and exclusive property of such entity
or company under contract, shall be distributed to Nestle S.A. and
General Mills, Inc. (or the assigns thereof) in shares that are as equal
as practical under the circumstances, taking into account the fair value
of such intellectual property. It is agreed that if either Nestle S.A.
or General Mills, Inc. pursuant to this provision receives the exclusive
title or right to such intellectual property, such party will grant to
the other party of the JV an irrevocable, royalty-free license without
limitation as to term, with full rights to sublicense to any company or
entity which is directly or indirectly owned or controlled by Nestle
S.A. or General Mills, Inc.
4. In the event that the parties are unable to agree upon the manner in
which any of the preceding principles of termination are to be effected
or resolved, the matter shall be submitted for resolution pursuant to
ARBITRATION as herein provided.
EXECUTED THIS 9th day of February, 1990.
NESTLE S.A.
By /s/ Ramon Masip
---------------------------------
Its Executive Vice President
--------------------------------
GENERAL MILLS, INC.
By /s/ Mark H. Willes
--------------------------------
Its President
--------------------------------
<PAGE>
EXHIBIT 11
GENERAL MILLS, INC.
STATEMENT OF DETERMINATION OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS
(IN MILLIONS)
<TABLE>
<CAPTION>
Weighted average number of
common shares and common share
equivalents assumed outstanding
--------------------------------------------
For the Fiscal Years Ended
--------------------------------------------
May 26, 1996 May 28, 1995 May 29, 1994
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average number of common shares outstanding,
excluding common stock held in treasury (a). . . . 158.9 158.0 159.1
Common share equivalents resulting from the assumed
exercise of certain stock options (b). . . . . . . 3.1* 2.1* 2.4*
----- ----- -----
Total common shares and common share equivalents. . . 162.0 160.1 161.5
----- ----- -----
----- ----- -----
</TABLE>
- - ----------------------------------
Notes:
(a) Computed as the weighted average 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 of common shares outstanding
of 158.9 million, 158.0 million and 159.1 million for fiscal 1996, 1995 and
1994, respectively.
<PAGE>
EXHIBIT 12
GENERAL MILLS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------
May 26, May 28, May 29, May 30, May 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges. .. . . . . 6.94 4.10 6.18 8.62 9.28
</TABLE>
For purposes of computing the ratio of earnings to fixed charges, earnings
represent pretax income from continuing operations, plus 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.
<PAGE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
General Mills' overriding financial objective is to deliver performance that
ranks us within the top decile of American public companies measured by the
combination of earnings per share growth and return on capital. Key strategic
and operating actions taken in 1995 sharpened the company's focus on its best
growth and return opportunities in consumer foods. Performance in 1996 reflected
this strengthened focus, as General Mills achieved broad-based growth and record
financial results.
The company expects to record continued earnings growth in 1997, driven by the
good momentum visible in our domestic non-cereal businesses and international
operations. However, the rate of growth will be moderated by recent pricing
actions in the U.S. ready-to-eat cereal market. During the spring and summer of
1996, the industry's major participants announced various actions to reduce
prices and promotional spending. Actions taken by Big G will reduce its fiscal
1997 sales by about 4 percent, or $100 million. We expect planned reductions in
marketing spending and continued productivity increases to offset about one-half
of this 1997 impact. We further expect continued cereal unit-volume growth to
offset a portion of the remainder. Nonetheless, this short-term impact will
likely cause Big G's earnings in 1997 to be relatively unchanged from the prior
year, and cause General Mills' overall earnings per share growth to fall below
our long-term goal of 12 percent. The company believes prospects for meeting its
long-term goals of superior growth and returns beyond 1997 remain excellent.
RESULTS OF OPERATIONS IN 1996 VS. 1995
For the year ended May 26, 1996, earnings totaled $476.4 million, or $3.00 per
share. This represented a 28 percent increase from the $371.3 million, or $2.35
per share, earned by continuing operations before restructuring charges in the
preceding year. Consumer Foods restructuring charges in 1995 totaled $111.6
million, or 71 cents per share, and related primarily to elimination of the
company's least-efficient manufacturing capacity and realignment of the sales
organization. Including these charges, 1995 earnings for continuing operations
totaled $259.7 million, or $1.64 per share. Reported sales for fiscal 1996
increased 8 percent to $5.42 billion.
General Mills' strong performance in 1996 reflected unit volume increases
across the company's domestic food businesses, continued productivity gains and
accelerating international performance. In the United States, unit volume grew
7 percent to an all-time high, more than recovering volume lost in 1995 during
the oats-related business disruption in cereals and the company's transition to
new, efficient promotion strategies.
Big G cereals led the company's performance. Unit volume rose nearly 10
percent, exceeding results of two years ago to set an all-time record. Volume
for established cereals rose nearly 6 percent, driven by focused product
improvement efforts on brands including Lucky Charms and Cocoa Puffs. Big G also
recorded strong new product volume with Frosted Cheerios, extensions of the
Wheaties brand franchise, and the limited-edition Team USA Cheerios offered as
part of the company's sponsorship of the 1996 U.S. Olympic Team.
Betty Crocker desserts posted 5 percent volume growth driven by innovative new
products such as Whipped Deluxe ready-to-spread frostings and a broad line of
Sweet Rewards reduced fat and fat-free dessert mixes. Volume for Helper dinner
mixes grew 16 percent on the success of new varieties, innovative advertising
and effective merchandising. The company's snack business renewed its earnings
momentum in 1996 and recorded a 2 percent unit volume gain, with volume up 11
percent for the final six months of the year. This performance reflected strong
product innovation efforts, including Sweet Rewards fat-free snack bars, Pop
Secret Jumbo Pop microwave popcorn and new fruit snacks. Gold Medal flour,
Yoplait and Colombo yogurts and Foodservice operations also achieved good volume
gains.
International operations generated 13 percent unit volume growth in 1996
and earnings grew more than 50 percent to account for 10 cents, or 3 percent, of
total earnings per share. In Canada, food operations posted a 10 percent unit
volume gain and good market share progress. Cereal Partners Worldwide, the
company's joint venture with Nestle, achieved 21 percent volume growth with
share gains in nearly every major market. Snack Ventures Europe, our joint
venture with PepsiCo, also posted good volume growth driven by product line
additions in established markets and expansion to initial markets in eastern
Europe. Our International Dessert Partners joint venture with CPC International
launched its first products in four Latin American markets late in fiscal 1996.
Net interest expense was $101.4 million and $101.2 million in fiscal 1996
and 1995, respectively. The 1995 amount was $22.4 million higher than 1994 net
interest expense of $78.8 million, primarily due to increased working capital,
higher interest rates and previous borrowings associated with the company's
share repurchase program.
The effective income tax rate in 1996, 1995 and 1994 was 36.8%, 36.5% and
38.5%, respectively. The rate was lower in 1996 and 1995 due to a number of
factors, including a lower impact from state income taxes.
It is management's view that changes in the rate of inflation have not had
a significant effect on profitability from continuing operations over the three
most recent years. Management attempts to minimize the effects of inflation
through appropriate planning and operating practices.
<PAGE>
Adoption of SFAS No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed of" is required in fiscal 1997.
We will calculate its impact at that time. Adoption of the disclosure
requirements of SFAS No. 123, "Accounting for Stock-based Compensation," is also
required in fiscal 1997. This will have no impact on our financial condition or
results of operations.
1995 COMPARED WITH 1994
1995 earnings for continuing operations of $371.3 million before restructuring
charges, or $2.35 per share, were down 13 percent from $427.1 million, or $2.69
per share earned before unusual items in 1994. The profit decline in 1995
reflected the oats-related disruption experienced by Big G cereals during the
first quarter, as well as lower shipments of domestic snack products and the
one-time impact of strategic trade-promotion changes. Sales of $5.03 billion in
fiscal 1995 were 6 percent lower than 1994. Foodservice, yogurt, family and
bakery flour operations, and dinner mixes each recorded volume gains, but total
domestic unit volume was down 4 percent in 1995. International results included
volume gains of 12 percent in Canada, 21 percent by CPW, and 15 percent for SVE.
Fiscal 1994 results included an unusual after-tax charge of $87.1 million,
or 55 cents per share, to cover estimated costs associated with the improper use
of a pesticide by an independent contractor in treating some of the company's
oat supplies. Including restructuring and unusual charges in both years,
earnings for continuing operations were $259.7 million, or $1.64 per share, in
1995, and $340.0 million, or $2.14 per share, in 1994.
FINANCIAL CONDITION
It is management's view that the most important measures of financial strength
are the ratios of cash flow to debt and fixed charge coverage. The cash flow to
debt ratio measures the amount of cash that the company generates each year as a
percentage of its total debt. The fixed charge coverage ratio measures the
number of times each year that the company earns enough to cover its fixed
charges. Our targets are 40 to 45 percent cash flow to debt, and fixed charge
coverage of at least 6 times. Fiscal 1996 performance, with 49 percent cash flow
to debt and 6.9 times fixed charge coverage, exceeded those targets and
represented a strengthening of the company's financial position from the point
when restaurant operations were spun off at the end of fiscal 1995. General
Mills' balance sheet reflects the impact of that spin-off, which reduced
stockholders' equity in 1995 by approximately $1.2 billion. Strong cash flow
from operations enabled the company to increase shareholders' equity by $167
million and reduce total long-term debt by nearly $200 million during 1996.
The composition of the company's capital structure is shown in the
accompanying table:
CAPITAL STRUCTURE
In Millions MAY 26, 1996 May 28, 1995
- - --------------------------------------------------------------------------------
Notes payable $ 141.6 $ 112.9
Current portion of long-term debt 75.4 93.7
Long-term debt 1,220.9 1,400.9
Deferred income taxes - tax leases 157.5 169.1
- - --------------------------------------------------------------------------------
Total debt 1,595.4 1,776.6
Debt adjustments:
Leases - debt equivalent 159.4 165.0
Marketable investments, at cost (171.8) (169.2)
- - --------------------------------------------------------------------------------
Adjusted debt 1,583.0 1,772.4
Stockholders' equity 307.7 141.0
- - --------------------------------------------------------------------------------
Total capital $1,890.7 $1,913.4
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The company intends to manage its businesses and financial ratios so as to
maintain a strong "A" bond rating, which allows access to financing at
reasonable costs. Currently, General Mills' publicly issued long-term debt
carries "A2" (Moody's Investors Services, Inc.) and "A+" (Standard & Poor's
Corporation) ratings. Our commercial paper has ratings of "P-1" (Moody's) and
"A-1" (Standard & Poor's) in the United States and "R-1 (middle)" in Canada from
Dominion Bond Rating Service.
We selectively use derivatives to hedge financial risks, primarily interest
rate volatility and foreign currency fluctuations. The derivatives are generally
treated as hedges for accounting purposes. We manage our debt structure through
both issuance of fixed and floating-rate debt, and the use of derivatives. The
debt equivalent of our leases and deferred income taxes related to tax leases
are both fixed-rate obligations. The accompanying table, when reviewed in
conjunction with the capital structure table, shows the composition of our debt
structure including the impact of derivatives.
DEBT STRUCTURE
Dollars in Millions MAY 26, 1996 May 28, 1995
- - -------------------------------------------------------------------------
<PAGE>
Floating-rate debt $ 280.3 18% $ 347.9 20%
Fixed-rate debt 985.8 62 1,090.4 61
Leases - debt equivalent 159.4 10 165.0 9
Deferred income taxes -
tax leases 157.5 10 169.1 10
- - ------------------------------------------------------------------------
Total debt $1,583.0 100% $1,772.4 100%
- - -------------------------------------------------------------------------
Commercial paper is a continuing source of short-term financing. Bank credit
lines are maintained to ensure availability of short-term funds on an as-needed
basis. As of May 26, 1996, we had fee-paid credit lines of $350 million.
Our shelf registration statements permit issuance of up to $562.1 million net
proceeds in unsecured debt securities. The shelf registration authorizes a
medium-term note program that provides additional flexibility in accessing the
debt markets.
Sources and uses of cash in the past three fiscal years are shown in the
accompanying table:
CASH SOURCES (USES)
IN MILLIONS 1996 1995 1994
- - ------------------------------------------------------------------------
From continuing operations $ 676.4 $ 457.4 $ 561.3
From discontinued operations (16.6) 210.1 259.3
Fixed assets and other
investments, net-continuing (173.9) (231.6) (395.8)
Change in marketable securities .9 27.4 (50.1)
Proceeds from disposition of
businesses -- 188.3 --
Investment activities,
net-discontinued operations -- (357.5) (336.3)
Increase (decrease) in
outstanding debt-net (164.8) (312.6) 287.7
Financing activities-discontinued
operations -- 347.9 --
Common stock issued 38.0 24.3 13.3
Treasury stock purchases (35.6) (57.7) (145.7)
Dividends paid (303.6) (297.2) (299.4)
Other (13.2) (13.6) (4.2)
- - -------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents $ 7.6 $ (14.8) $(109.9)
- - -------------------------------------------------------------------------
Continuing operations generated $219.0 million more cash in 1996 than in 1995
primarily due to higher earnings and a decreased impact from the change in
working capital. Capital investment for fixed assets and joint venture
development totaled $174 million in 1996, compared to $208 million in 1995. For
fiscal 1997 through 1999, we expect our capital investment needs (including
development spending for our international joint ventures) to average about $225
million annually. If we meet our earnings growth expectations, cash flow from
operations after capital investments should increase and would be available to
support growth initiatives including new business development, dividend
increases and stock repurchases. During the first two months of 1997, we
repurchased 1.9 million shares for $103.4 million.
Proceeds from disposition of businesses of $188.3 million in 1995 include the
sale of Gorton's and certain Latin American operations. Prior to the spin-off at
the end of fiscal 1995, the restaurant operations initiated their own borrowings
and the funds were used to reduce General Mills' notes payable.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and the Board of Directors of
General Mills, Inc.:
We have audited the accompanying consolidated balance sheets of General Mills,
Inc. and subsidiaries as of May 26, 1996 and May 28, 1995, and the related
consolidated statements of earnings and cash flows for each of the fiscal years
in the three-year period ended May 26, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of General
Mills, Inc. and subsidiaries as of May 26, 1996 and May 28, 1995, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended May 26, 1996 in conformity with generally accepted
accounting principles.
As discussed in notes five, fourteen and sixteen, respectively, to the
consolidated financial statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statement No. 115, Accounting for Certain
Investments in Debt and Equity Securities, in fiscal 1995, and Statements No.
112, Employers' Accounting for Postemployment Benefits, and No. 109, Accounting
for Income Taxes, in fiscal 1994.
Minneapolis, Minnesota
June 26, 1996
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal Year Ended
-------------------------------
MAY 26, May 28, May 29,
In Millions, Except per Share Data 1996 1995 1994
- - --------------------------------------------------------------------------------
Continuing Operations:
Sales $5,416.0 $5,026.7 $5,327.2
Costs and Expenses:
Cost of sales 2,241.0 2,123.0 2,012.5
Selling, general and administrative 2,128.3 2,008.3 2,350.5
Depreciation and amortization 186.7 191.4 173.8
Interest, net 101.4 101.2 78.8
Unusual items - 183.2 146.9
- - --------------------------------------------------------------------------------
Total Costs and Expenses 4,657.4 4,607.1 4,762.5
- - --------------------------------------------------------------------------------
Earnings from Continuing Operations before Taxes
and Earnings (Losses) of Joint Ventures 758.6 419.6 564.7
Income Taxes 279.4 153.3 217.4
Earnings (Losses) from Joint Ventures (2.8) (6.6) (7.3)
- - --------------------------------------------------------------------------------
Earnings from Continuing Operations 476.4 259.7 340.0
Discontinued Operations after Taxes - 107.7 133.4
Cumulative Effect to May 31, 1993
of Continuing Operations Accounting Changes - - (3.5)
- - --------------------------------------------------------------------------------
Net Earnings $476.4 $367.4 $469.9
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Earnings per Share:
Continuing operations $3.00 $1.64 $2.14
Discontinued operations - .69 .83
Cumulative effect of accounting changes - - (.02)
- - --------------------------------------------------------------------------------
Net Earnings per Share $3.00 $2.33 $2.95
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Average Number of Common Shares 158.9 158.0 159.1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
MAY 26, May 28,
In Millions 1996 1995
- - --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $20.6 $13.0
Receivables, less allowance for doubtful
accounts of $4.1 in both 1996 and 1995 337.8 277.3
Inventories 395.5 372.0
Prepaid expenses and other current assets 132.6 80.8
Deferred income taxes 108.6 153.8
- - --------------------------------------------------------------------------------
Total Current Assets 995.1 896.9
Land, Buildings and Equipment, at cost 1,312.4 1,456.6
Other Assets 987.2 1,004.7
- - --------------------------------------------------------------------------------
Total Assets $3,294.7 $3,358.2
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $590.7 $494.0
Current portion of long-term debt 75.4 93.7
Notes payable 141.6 112.9
Accrued taxes 124.3 108.8
Accrued payroll 124.7 118.2
Other current liabilities 135.2 293.3
- - --------------------------------------------------------------------------------
Total Current Liabilities 1,191.9 1,220.9
Long-term Debt 1,220.9 1,400.9
Deferred Income Taxes 250.0 248.6
Deferred Income Taxes -- Tax Leases 157.5 169.1
Other Liabilities 166.7 177.7
- - --------------------------------------------------------------------------------
Total Liabilities 2,987.0 3,217.2
- - --------------------------------------------------------------------------------
Stockholders' Equity:
Cumulative preference stock, none issued - -
Common stock, 204.2 shares issued 384.3 379.5
Retained earnings 1,408.6 1,233.3
Less common stock in treasury, at cost,
shares of 45.2 in 1996 and 46.3 in 1995 (1,367.4) (1,372.1)
Unearned compensation and other (61.2) (57.9)
Cumulative foreign currency adjustment (56.6) (41.8)
- - --------------------------------------------------------------------------------
Total Stockholders' Equity 307.7 141.0
- - --------------------------------------------------------------------------------
Total Liabilities and Equity $3,294.7 $3,358.2
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------
MAY 26, May 28, May 29,
In Millions 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows - Operating Activities:
Earnings from continuing operations $476.4 $259.7 $336.5
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 186.7 191.4 173.8
Deferred income taxes 42.4 59.0 (34.0)
Change in current assets and liabilities, net of effects
from business acquired (25.9) (227.8) (79.1)
Unusual expenses - 183.2 146.9
Other, net (3.2) (8.1) 17.2
- - ---------------------------------------------------------------------------------------------------------
Cash provided by continuing operations 676.4 457.4 561.3
Cash provided (used) by discontinued operations (16.6) 210.1 259.3
- - ---------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 659.8 667.5 820.6
- - ---------------------------------------------------------------------------------------------------------
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (128.8) (156.5) (212.5)
Investments in businesses, intangibles and affiliates,
net of dividends (40.0) (48.8) (140.7)
Purchases of marketable securities (21.6) (21.7) (83.8)
Proceeds from sale of marketable securities 22.5 49.1 33.7
Proceeds from disposal of land, buildings and equipment 6.2 1.2 3.3
Proceeds from disposition of businesses - 188.3 -
Other, net (11.3) (27.5) (45.9)
Discontinued operations investment activities, net - (357.5) (336.3)
- - ---------------------------------------------------------------------------------------------------------
Net Cash Used by Investment Activities (173.0) (373.4) (782.2)
- - ---------------------------------------------------------------------------------------------------------
Cash Flows - Financing Activities:
Increase (decrease) in notes payable (42.4) (330.4) 93.2
Issuance of long-term debt 42.3 135.0 273.6
Payment of long-term debt (164.7) (117.2) (79.1)
Common stock issued 38.0 24.3 13.3
Purchases of common stock for treasury (35.6) (57.7) (145.7)
Dividends paid (303.6) (297.2) (299.4)
Other, net (13.2) (13.6) (4.2)
Discontinued operations financing activities - 347.9 -
- - ---------------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (479.2) (308.9) (148.3)
- - ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 7.6 (14.8) (109.9)
Cash and Cash Equivalents - Beginning of Year 13.0 27.8 137.7
- - ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year $20.6 $13.0 $27.8
- - ---------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------
Cash Flow from Changes in Current Assets and Liabilities:
Receivables $(59.5) $(11.9) $(11.5)
Inventories (23.7) (52.7) (76.1)
Prepaid expenses and other current assets (6.3) (11.9) (22.2)
Accounts payable 93.2 (18.1) (5.7)
Other current liabilities (29.6) (133.2) 36.4
- - ---------------------------------------------------------------------------------------------------------
Change in Current Assets and Liabilities $(25.9) $(227.8) $(79.1)
- - ---------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTE ONE: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior-year amounts have been reclassified to conform to the 1996
presentation.
A. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the following domestic and foreign
operations: parent company and 100% owned subsidiaries, and General Mills'
investment in and share of net earnings or losses of 20-50% owned companies.
Our fiscal year ends on the last Sunday in May. Years 1996, 1995 and 1994
each consisted of 52 weeks.
B. LAND, BUILDINGS, EQUIPMENT AND DEPRECIATION
Buildings and equipment are depreciated over estimated useful lives ranging from
three to 50 years, primarily using the straight-line method. Accelerated
depreciation methods are generally used for income tax purposes.
When an item is sold or retired, the accounts are relieved of its cost and
related accumulated depreciation; the resulting gains and losses, if any, are
recognized.
C. INVENTORIES
Inventories are valued at the lower of cost or market. Certain domestic
inventories are valued using the LIFO method, while other inventories are
generally valued using the FIFO method.
D. INTANGIBLE ASSETS
Goodwill represents the difference between purchase prices of acquired companies
and the related fair values of net assets acquired and accounted for by the
purchase method of accounting. Goodwill is amortized on a straight-line basis
over 40 years or less.
Intangible assets include an amount that offsets a minimum liability
recorded for a pension plan with assets less than accumulated benefits as
required by Financial Accounting Standard No. 87.
The costs of patents, copyrights and other intangible assets are amortized
evenly over their estimated useful lives.
The Audit Committee of the Board of Directors annually reviews goodwill and
other intangibles. At its meeting on April 22, 1996, the Board of Directors
affirmed that the remaining amounts of these assets have continuing value.
E. RESEARCH AND DEVELOPMENT
All expenditures for research and development are charged against earnings in
the year incurred. The charges for 1996, 1995 and 1994 were $60.1 million,
$59.8 million and $59.1 million, respectively.
F. EARNINGS PER SHARE
Earnings per share has been determined by dividing the appropriate earnings by
the weighted average number of common shares outstanding during the year.
Common share equivalents were not material.
G. FOREIGN CURRENCY TRANSLATION
For most foreign operations, local currencies are considered the functional
currency. Assets and liabilities are translated using the exchange rates in
effect at the balance sheet date. Results of operations are translated using
the average exchange rates prevailing throughout the period. Translation
effects are accumulated in the foreign currency adjustment in stockholders'
equity.
<PAGE>
H. STATEMENTS OF CASH FLOWS
For purposes of the statement of cash flows, we consider all investments
purchased with a maturity of three months or less to be cash equivalents.
I. SEGMENT INFORMATION
We operate exclusively in the consumer foods industry. On May 28, 1995 we spun
off our restaurants segment. See note two.
J. ADVERTISING COSTS
Advertising expense (including production and communication costs) for fiscal
1996, 1995 and 1994 was $319.7, $323.7 and $292.1 million, respectively.
Prepaid advertising costs (including syndication properties) of $24.2 and $33.1
million were reported as assets at May 26, 1996 and May 28, 1995, respectively.
We expense the production costs of advertising the first time the advertising
takes place.
K. STOCK-BASED COMPENSATION
We use the "intrinsic value-based method" for measuring the cost of compensation
paid in company stock. This method defines our cost as the excess of the
stock's market value at the time of the grant over the amount that the employee
is required to pay. Our policy for stock options is to set the employee's
payment at market value, as of the date of the grant.
L. NEW ACCOUNTING RULES
In March 1995, the Financial Accounting Standards Board (FASB) issued 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." This new
standard requires that long-lived assets be reviewed for impairment whenever the
carrying amount of those assets may not be recoverable. The recoverability is
based on the estimated future cash flows resulting from the use of the asset.
Adoption of SFAS No. 121 is required in our fiscal 1997. We will calculate its
impact at that time.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-based
Compensation." This new standard allows either a fair-value based method or an
intrinsic value-based method of accounting for stock-based compensation plans.
Adoption of the disclosure requirements of SFAS No. 123 is required in our
fiscal 1997. We will adopt the disclosure provisions of SFAS No. 123 and retain
the intrinsic value-based method described above. Therefore, there will be no
impact on our financial condition or results of operations from the adoption of
SFAS No. 123.
NOTE TWO: DISCONTINUED OPERATIONS
As of May 28, 1995, General Mills distributed to shareholders the common stock
of Darden Restaurants, Inc. (Darden). General Mills' shareholders received one
share of Darden for each share of General Mills common stock owned as of the
close of business on May 15, 1995. This distribution reduced Stockholders'
Equity by $1,218.7 million. Our former restaurant operations included in Darden
are presented as a part of Discontinued Operations for all periods presented.
On May 18, 1995, we sold our Gorton's frozen and canned seafood business to
Unilever United States, Inc. Gorton's is also included in Discontinued
Operations for all periods presented.
The results of the discontinued operations in fiscal 1995 and 1994 are
summarized as follows:
Fiscal Year
-------------------------
In Millions 1995 1994
- - -------------------------------------------------------------------------------
Total net sales $3,366.9 $3,189.7
- - --------------------------------------------------------------------------------
Pretax earnings $80.0 $205.2
Income taxes 17.9 75.5
- - --------------------------------------------------------------------------------
Net earnings - operations 62.1 129.7
Accounting changes - 3.7
Spin-off costs and other (7.7) -
Gorton's sale and Red Lobster Japan joint venture
termination 53.3 -
- - --------------------------------------------------------------------------------
Discontinued operations, net $107.7 $133.4
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
NOTE THREE: UNUSUAL ITEMS
In 1995, we recorded restructuring charges of $183.2 million pretax, $111.6
million after tax ($.71 per share) primarily related to shutting down and
scaling back production systems at four food manufacturing locations and
realignment of the sales organization. The charges included approximately $139
million in non-cash charges primarily related to asset write-offs and
approximately $44 million of cash charges, primarily related to disposal of
assets and severance costs. These restructuring activities were substantially
completed in fiscal 1996 and there has been no adjustment to the original
reserve. There is a remaining reserve of $27.3 million.
In 1994, we recorded a charge of $146.9 million pretax, $87.1 million after
tax ($.55 per share) to cover estimated costs associated with the actions of an
independent licensed contractor who used an unapproved pesticide in treating
some of our oat supplies, a portion of which was used in production. While the
substitution presented no consumer health or safety issues, the pesticide had
not been registered for use on oats and thus its application represented an FDA
regulatory violation. The charge included estimated costs associated with the
disposition of finished oat products and oats inventory and other related
expenses, as well as the settlement costs of several consumer class action
lawsuits. Most of these costs were incurred in fiscal 1995 and 1996 and the
original reserve has not required adjustment. We are in litigation against our
insurers to recover costs associated with this matter.
NOTE FOUR: INVESTMENTS IN JOINT VENTURES
We are involved in three joint ventures. We have a 50% equity interest in
Cereal Partners Worldwide (CPW), our joint venture with Nestle, S.A., which
manufactures and markets breakfast cereals outside North America. We have a
40.5% equity interest in Snack Ventures Europe (SVE), our joint venture with
PepsiCo, Inc., which manufactures and markets snack foods in continental Europe.
We have a 50% equity interest in International Dessert Partners (IDP), our joint
venture with CPC International Inc., which manufactures and markets baking mixes
and desserts in Latin America.
The joint ventures are reflected in the financial statements on an equity
accounting basis. We record our share of the earnings or (losses) of these
joint ventures. (The table that follows in this footnote reflects the joint
ventures on a 100% basis.) We also receive royalty income from these joint
ventures, incur various expenses (primarily research and development), and
record the tax impact of certain of the joint venture operations that are
structured as partnerships. Including all these factors, the effect on our net
income related to the joint ventures was a charge of $2.8 million, $6.6 million
and $7.3 million in fiscal 1996, 1995 and 1994, respectively.
Our cumulative investment in these joint ventures (including our share of
earnings and losses) was $229.8 million, $228.8 million and $180.1 million at
the end of fiscal years 1996, 1995 and 1994, respectively. We made aggregate
investments in the joint ventures of $45.3 million, $51.6 million and $53.0
million in fiscal years 1996, 1995 and 1994, respectively. We received
aggregate dividends from the joint ventures of $8.2 million and $7.3 million in
fiscal years 1996 and 1995, respectively. No dividends were received in fiscal
year 1994.
<PAGE>
Summary combined financial information for the joint ventures on a 100%
basis follows. Since we record our share of CPW and IDP results on a two-month
lag, their information is included in the combined information as of and for the
twelve months ended March 31, whereas the SVE information included in the
combined information is consistent with our May year end.
COMBINED FINANCIAL INFORMATION - JOINT VENTURES - 100% BASIS
Fiscal Year Ended
-------------------------------------
MAY 26, May 28, May 29,
In Millions 1996 1995 1994
- - ---------------------------------------------------------------------------
Sales $1,599.5 $1,326.3 $1,085.8
Gross Profit 838.1 686.2 578.0
Earnings (losses) before Taxes 12.1 .6 (12.1)
Earnings (losses) after Taxes (13.1) (18.9) (28.4)
MAY 26, May 28,
In Millions 1996 1995
- - ------------------------------------------------------------
Current Assets $379.4 $352.4
Non-current Assets 648.1 608.8
Current Liabilities 469.8 437.5
Non-current Liabilities 87.2 103.5
Our proportionate share of the sales of the joint ventures was $705.7
million, $584.0 million and $476.4 million for fiscal years 1996, 1995 and 1994,
respectively.
NOTE FIVE: BALANCE SHEET INFORMATION
The components of certain balance sheet accounts are as follows:
MAY 26, May 28,
In Millions 1996 1995
- - --------------------------------------------------------------------------------
Land, Buildings and Equipment:
Land $17.8 $18.5
Buildings 516.2 524.9
Equipment 1,865.4 1,877.5
Construction in progress 108.6 191.0
- - --------------------------------------------------------------------------------
Total land, buildings and equipment 2,508.0 2,611.9
Less accumulated depreciation (1,195.6) (1,155.3)
- - --------------------------------------------------------------------------------
Net land, buildings and equipment $1,312.4 $1,456.6
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Other Assets:
Prepaid pension $362.3 $320.7
Marketable securities, at market 167.9 214.7
Investments in and advances to affiliates 217.4 214.7
Intangible assets 110.3 119.9
Miscellaneous 129.3 134.7
- - --------------------------------------------------------------------------------
Total other assets $987.2 $1,004.7
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
We adopted SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," as of May 30, 1994. Adoption of this standard had no impact
on our Consolidated Statement of Earnings, and the Consolidated Balance Sheet
was not materially affected. Beginning in fiscal 1995, available-for-sale
securities, including their associated derivatives, are reflected at fair market
value in the Consolidated
<PAGE>
Balance Sheet. The aggregate unrealized gains and losses on available-for-sale
securities, net of tax effects, are accumulated in the "Unearned compensation
and other" account within Stockholders' Equity.
As of May 26, 1996, a comparison of cost and market values of our
marketable securities (all of which are debt securities) was as follows:
MARKET GROSS GROSS
IN MILLIONS COST VALUE GAIN LOSS
- - -------------------------------------------------------------------------------
In "Other Current Assets" $44.2 $44.4 $.2 $-
In "Other Assets" 127.6 167.9 40.3 -
- - -------------------------------------------------------------------------------
Total marketable securities $171.8 $212.3 $40.5 $-
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Realized gains from sales of marketable securities were $3.8 million and
$.7 million in fiscal 1996 and 1995, respectively. In addition, realized losses
from purchases of our related debt (see note nine) were $2.3 million and $1.6
million in fiscal 1996 and 1995, respectively.
NOTE FIVE: BALANCE SHEET INFORMATION (continued)
Scheduled maturities of our marketable securities are as follows:
In Millions Cost Market Value
- - --------------------------------------------------------------------------------
Under one year (current) $44.2 $44.4
From 1 to 3 years 37.3 37.3
From 4 to 7 years 23.6 23.9
Over 7 years 66.7 106.7
- - --------------------------------------------------------------------------------
Totals $171.8 $212.3
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NOTE SIX: INVENTORIES
The components of inventories are as follows:
MAY 26, May 28,
In Millions 1996 1995
- - --------------------------------------------------------------------------------
Raw materials, work in process and supplies $ 77.6 $ 77.1
Finished goods 255.1 282.2
Grain 118.5
65.7
Reserve for LIFO valuation method (55.7) (53.0)
- - --------------------------------------------------------------------------------
Total inventories $395.5 $372.0
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
At May 26, 1996 and May 28, 1995, respectively, inventories of $209.2
million and $237.3 million were valued at LIFO.
NOTE SEVEN: FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Most of our financial instruments are recorded on the balance sheet. A few
(known as "derivatives") are off-balance-sheet items. Derivatives are financial
instruments whose value is derived from one or more underlying financial
instruments. Examples of such underlying instruments are currencies, equities,
commodities and interest rates. The carrying amount and fair value of our
financial instruments at the balance-sheet dates are as follows:
<PAGE>
MAY 26, 1996 May 28, 1995
--------------------------------------------
CARRYING FAIR Carrying Fair
In Millions AMOUNT VALUE Amount Value
- - ----------------------------------------------------------------------------
ASSETS AND LIABILITIES
- - ----------------------
Assets:
Cash and cash equivalents $ 20.6 $ 20.6 $ 13.0 $ 13.0
Receivables 337.8 337.8 277.3 277.3
Marketable securities 215.1 215.1 216.3 216.3
Liabilities:
Accounts payable 590.7 590.7 494.0 494.0
Debt 1,437.9 1,515.7 1,607.5 1,689.6
DERIVATIVES RELATING TO:
- - ------------------------
Marketable securities (2.8) (2.8) (1.6) (1.6)
Debt - 3.1 - 1.3
The fair values were estimated using current market quotes and interest
rates. Gains or losses from derivatives offset and neutralize the corresponding
losses or gains from the asset or liability being hedged. We ensure that these
derivative instruments correlate with the asset or liability being hedged, and
we do not issue or hold derivatives for trading or speculative purposes.
We use derivative instruments to reduce financial risk in three areas:
interest rates, foreign currency and commodities. The notional amounts of
derivatives do not represent actual amounts exchanged by the parties and, thus,
are not a measure of the exposure of the Company through its use of derivatives.
Interest rate swap and foreign exchange agreements are made with a diversified
group of highly rated financial institutions, whereas commodities agreements are
entered into through various regulated exchanges. We have credit exposure
associated with these agreements to the extent that the instruments have a
positive fair value, but we do not anticipate any losses. The Company does not
have a significant concentration of risk with any single party or group of
parties in any of its financial instruments.
(1) INTEREST RATE RISK MANAGEMENT - We use interest rate swaps to hedge
and/or lower financing costs, to adjust our floating- and fixed-rate debt
positions, and to lock in a positive interest rate spread between certain assets
and liabilities. An interest rate swap used in conjunction with a debt
financing may allow the Company to create fixed or floating-rate financing at a
lower cost than with a stand-alone financing. Generally, under interest rate
swaps, the Company agrees with a counterparty to exchange the difference between
fixed-rate and floating-rate interest amounts calculated by reference to an
agreed notional principal amount.
The following table indicates the types of swaps used to hedge various
assets and liabilities and their weighted average interest rates. Average
variable rates are based on rates as of the end of the reporting period. The
swap contracts mature from fiscal 1997 to fiscal 2008.
MAY 26, 1996 May 28, 1995
-------------------------------------
$ in Millions ASSET LIABILITY Asset Liability
- - ------------------------------------------------------------------------------
Receive fixed swaps - notional amount $ - $90.0 $ - $90.0
Average receive rate - 7.1% - 6.8%
Average pay rate - 5.1% - 5.8%
Pay fixed swaps - notional amount $63.0 $21.3 $74.8 $21.3
Average receive rate 5.7% 5.4% 6.4% 6.1%
Average pay rate 8.9% 6.2% 8.3% 6.2%
The interest rate differential on interest rate swaps used to hedge
existing assets and liabilities is recognized as an adjustment of interest
expense or income over the term of the agreement.
<PAGE>
The Company uses interest rate options and cap agreements primarily to
reduce the impact of interest rate changes on its floating-rate debt, as well as
to hedge the value of call options contained in long-term debt issued by the
Company in earlier periods. In return for an upfront payment, an interest rate
swap option grants the purchaser the right to receive (pay) the fixed rate
interest amount in an interest rate swap. In return for an upfront payment, a
cap agreement entitles the purchaser to receive the amount, if any, by which an
agreed upon floating rate index exceeds the cap interest rate. The following
table summarizes our option and cap agreements, which mature in fiscal 1997.
MAY 26, 1996 May 28, 1995
------------------------------------------
NOTIONAL AVERAGE Notional Average
$ in Millions AMOUNT RATE Amount Rate
- - --------------------------------------------------------------------------------
Caps purchased - receive floating $ 200.0 7.0% $200.0 7.0%
The premiums paid/received for interest rate options and cap agreements are
included in other assets/liabilities and are amortized to interest expense over
the terms of the agreements. Amounts receivable or payable under the cap
agreements are recognized as yield adjustments over the life of the related
debt.
(2) FOREIGN-CURRENCY EXPOSURE - We selectively hedge the potential effect
of foreign currency fluctuations related to operating activities and net
investments in foreign operations by entering into foreign exchange contracts
with highly rated financial institutions. Realized and unrealized gains and
losses on hedges of firm commitments are included in the cost basis of the asset
being hedged and are recognized as the asset is expensed through cost of goods
sold or depreciation. Realized and unrealized gains and losses on contracts
that hedge other operating activities are recognized currently in net earnings.
Realized and unrealized gains and losses on contracts that hedge net investments
are recognized in the foreign currency adjustment in Stockholders' Equity.
The components of our net foreign investment exposure by geographic region
are as follows:
MAY 26, May 28,
In Millions 1996 1995
- - ---------------------------------------------------------------------------
Europe $156.7 $165.3
North/South America 35.3 32.3
Asia 1.9 1.9
- - ---------------------------------------------------------------------------
Total exposure 193.9 199.5
After-tax hedges - (7.0)
- - ---------------------------------------------------------------------------
Net exposure $193.9 $192.5
- - ---------------------------------------------------------------------------
- - ---------------------------------------------------------------------------
At May 26, 1996, we had forward contracts maturing in fiscal 1997 to sell
$57.3 million of foreign currencies. The fair value of these contracts is based
on third-party quotes and was immaterial at May 26, 1996.
(3) COMMODITIES - The Company uses an integrated set of financial
instruments in its purchasing cycle, including purchase orders, noncancelable
contracts, futures contracts, and futures options. Except as described below,
these instruments are all used to purchase ingredients for the Company's
internal needs, and to manage purchase prices and inventory values as practical.
All futures contracts and futures options are exchange-based instruments with
ready liquidity and determinable market values. Unrealized gains and losses are
recorded monthly and deferred until the physical ingredients flow through cost
of goods sold. The net gain and losses deferred and expensed are immaterial.
At May 26, 1996 and May 28, 1995, the aggregate fair value of our ingredient
derivatives position was $66.9 million and $53.8 million, respectively.
<PAGE>
The Company also has a grain-merchandising operation, which uses cash
contracts, futures contracts, and futures options. All futures contracts and
futures options are exchange-based instruments with ready liquidity and market
values. Neither results of operations nor the year-end positions from
grain-merchandising operations was material to the Company's overall results.
NOTE EIGHT: NOTES PAYABLE
The components of notes payable and their respective weighted average
interest rates at the end of the period are as follows:
<TABLE>
<CAPTION>
MAY 26, 1996 May 28, 1995
----------------------------------------------------
Weighted Weighted
Average Average
Notes Interest Notes Interest
$ in Millions Payable Rate Payable Rate
- - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. commercial paper $ 15.0 5.2% $ 78.3 6.1%
Canadian commercial paper 19.9 4.8 22.8 7.7
Financial institutions 281.7 5.4 261.8 6.4
Amounts reclassified to long-term debt (175.0) - (250.0) -
- - --------------------------------------------------------------------------------------------------------------
Total notes payable $141.6 $112.9
- - --------------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------------
</TABLE>
To ensure availability of funds, we maintain bank credit lines sufficient
to cover our outstanding short-term borrowings. As of May 26, 1996, we had
$350.0 million fee-paid lines and $64.6 million uncommitted, no-fee lines
available in the U.S. and Canada. In addition, other foreign subsidiaries had
no-fee lines of $122.7 million of which $55.3 million are unused.
We have a revolving credit agreement expiring in December 2000 that
provides for the fee-paid credit lines. This agreement provides us with the
ability to refinance short-term borrowings on a long-term basis, and therefore
we have reclassified a portion of our notes payable to long-term debt.
NOTE NINE: LONG-TERM DEBT
MAY 26, May 28,
In Millions 1996 1995
- - -------------------------------------------------------------------------------
Medium-term notes, 5.2% to 9.1%,
due 1996 to 2033 $978.1 $1,094.4
Zero coupon notes, yield 11.1%, $284.0
due August 15, 2013 44.5 43.1
8.2% ESOP loan guaranty,
due through June 30, 2007 70.4 74.5
Zero coupon notes, yield 11.7%, $64.4
due August 15, 2004 25.3 22.6
Notes payable, reclassified 175.0 250.0
Other 3.0 10.0
- - --------------------------------------------------------------------------------
1,296.3 1,494.6
Less amounts due within one year (75.4) (93.7)
- - --------------------------------------------------------------------------------
Total long-term debt $1,220.9 $1,400.9
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
At May 26, 1996 our debt shelf registrations permit the issuance of up to $562.1
million net proceeds in unsecured debt securities to reduce short-term debt and
for other general corporate purposes, and include a medium-term note program
that allows us to issue debt quickly for various amounts and at various rates
and maturities.
<PAGE>
In 1996, we issued $35.0 million of debt under our medium-term note program
with maturities from five to 12 years and interest rates from 5.2% to 7.2%. In
1995, $125.0 million of debt was issued under this program with maturities from
two to 12 years and interest rates from 6.4% to 8.0%.
The Company has guaranteed the debt of the Employee Stock Ownership Plan;
therefore, the loan is reflected on our consolidated balance sheets as long-term
debt with a related offset in stockholders' equity, "Unearned compensation and
other."
The sinking fund and principal payments due on long-term debt are (in
millions) $75.4, $150.6, $84.7, $90.0 and $62.3 in fiscal years ending 1997,
1998, 1999, 2000 and 2001, respectively. The notes payable that are
reclassified under our revolving credit agreement are not included in these
principal payments.
Our marketable securities (see note five) include zero coupon U.S. Treasury
securities. These investments are intended to provide the funds for the payment
of principal and interest for the zero coupon notes due August 15, 2004 and
2013.
NOTE TEN: STOCK OPTIONS
The following table contains information on stock options:
Average Option
Shares Price per Share
- - --------------------------------------------------------------------------------
Granted
1996 4,127,602 $52.55
1995 4,063,100 55.11
1994 4,868,098 63.22
- - --------------------------------------------------------------------------------
Exercised
1996 1,778,823 $25.87
1995 725,437 32.31
1994 562,714 31.08
- - --------------------------------------------------------------------------------
Expired
1996 730,343 $49.40
1995 574,714 59.33
1994 459,800 62.56
- - --------------------------------------------------------------------------------
Outstanding at year end
1996 23,593,232 $44.46
1995 21,974,796 41.60
1994 18,009,478 49.52
- - --------------------------------------------------------------------------------
Exercisable at year end
1996 11,315,131$ 7.70
1995 12,576,580 33.37
1994 10,278,466 38.73
- - --------------------------------------------------------------------------------
A total of 13,693,716 shares (including 7,000,000 shares for salary
replacement options and 219,817 shares for restricted stock) are available for
grants of options or restricted stock to employees under our 1993 and 1995 stock
plans through October 1, 1998 and September 30, 2000, respectively. An
additional 1,430,400 shares are available for grants under the plans on a
one-for-one basis as common stock is repurchased by the Company. Options may be
granted at a price not less than 100 percent of fair market value on the date
the option is granted. Options now outstanding include some granted under the
1984, 1988, and 1990 option plans, under which no further rights may be granted.
All options expire within 10 years plus one month after the date of grant. The
plans provide for full vesting of options in the event there is a change of
control.
The 1993 plan permits awards of restricted stock to key employees subject
to a restricted period and a purchase price, if any, to be paid by the employee
as determined by the Compensation Committee of the
<PAGE>
Board of Directors. The 1988 plan also permitted such awards. Most of the
restricted stock awards require the employee to deposit personally owned shares
(on a one-for-one basis) with the Company during the restricted period. In
1996, grants from the 1993 plan of 101,907 shares of restricted stock were made,
and on May 26, 1996, there were 224,100 of such shares outstanding.
The 1988 plan permitted the granting of performance units corresponding to
stock options granted. The value of performance units was determined by return
on equity and growth in earnings per share measured against preset goals over
three-year performance periods. For seven years after a performance period,
holders may elect to receive the value of performance units (with interest) as
an alternative to exercising corresponding stock options. On May 26, 1996,
there were 2,345,156 outstanding options with corresponding performance unit
accounts.
As of May 26, 1996, there were 25,758 shares of restricted stock
outstanding under a separate 1990 stock plan for non-employee directors.
A new plan to be presented to stockholders for approval at the 1996 annual
meeting will annually grant each non-employee director an option to purchase
2,500 shares at fair market value on the date of grant. Options expire 10 years
after the date of grant. The plan also includes an annual restricted stock
grant to non-employee directors, who each may choose to receive either 500
shares of stock restricted for one year, or 500 restricted stock units
convertible to common stock after his or her term of service on the board is
completed. There will be 250,000 shares available for grants of options and
restricted stock to non-employee directors until September 30, 2001 under this
new plan.
The number and exercise price of options outstanding when the Restaurant
operations were spun off were adjusted to compensate for the market value of the
Darden shares distributed to our stockholders. This adjustment increased the
number of General Mills options outstanding at May 28, 1995 by 1,202,369 shares
and decreased the exercise price of the option shares outstanding by
approximately 17.7 percent. Other than these adjustments to the 1995
outstanding and exercisable options, no other data in the table above has been
restated.
NOTE ELEVEN: STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
$.10 Par Value Common Stock
(One Billion Shares Authorized)
---------------------------------- Cumulative
In Millions, Except Issued Treasury Unearned Foreign
-------------- ----------------- Retained Compensation Currency
per Share Data Shares Amount Shares Amount Earnings and Other Adjustment Total
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at May 30, 1993 204.2 $358.7 (43.7) $(1,196.4) $2,284.5 $(167.5) $(60.8) $1,218.5
Net earnings 469.9 469.9
Cash dividends declared ($1.88
per share), net of income
taxes of $2.9 (296.5) (296.5)
Stock option, profit sharing and
ESOP plans - 8.0 .4 7.5 15.5
Shares purchased on open market (2.4) (145.7) (145.7)
Put option premium - 6.3 - .2 6.5
Transfer of put options - (122.0) (122.0)
Unearned compensation related to
restricted stock awards (3.9) (3.9)
Earned compensation 9.6 9.6
Minimum pension liability adjustment 1.6 1.6
Translation adjustments, net of
income taxes of $4.2 (2.3) (2.3)
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at May 29, 1994 204.2 251.0 (45.7) (1,334.4) 2,457.9 (160.2) (63.1) 1,151.2
Unrealized gain, net of income taxes
of $14.0, on available-for-sale
securities at May 30, 1994 22.0 22.0
Net earnings 367.4 367.4
Cash dividends declared ($1.88
per share), net of income
taxes of $3.1 (294.1) (294.1)
Stock option, profit sharing and
ESOP plans - 10.0 .4 17.2 27.2
Shares purchased via puts, or on open
market (1.0) (57.7) (57.7)
Put option premium/settlements, net - (3.5) - 2.8 (.7)
Transfer of put options - 122.0 122.0
Unearned compensation related to
restricted stock awards (5.6) (5.6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
$.10 Par Value Common Stock
(One Billion Shares Authorized)
---------------------------------- Cumulative
In Millions, Except Issued Treasury Unearned Foreign
-------------- ----------------- Retained Compensation Currency
per Share Data Shares Amount Shares Amount Earnings and Other Adjustment Total
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earned compensation 11.0 11.0
Change in unrealized gain, net of
income taxes of $3.7, on
available-for-sale securities 5.8 5.8
Amount charged to gain on sale of
foreign operations 3.6 3.6
Translation adjustments, net of
income tax benefit of $.2 7.6 7.6
Transfer of equity components to
Darden prior to spin-off 69.1 10.1 79.2
Distribution of equity to stockholders
from spin-off of Restaurant operations (1,297.9) (1,297.9)
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at May 28, 1995 204.2 379.5 (46.3) (1,372.1) 1,233.3 (57.9) (41.8) 141.0
Net earnings 476.4 476.4
Cash dividends declared ($1.91
per share), net of income
taxes of $2.5 (301.1) (301.1)
Stock option, profit sharing and
ESOP plans - 4.6 1.7 40.3 44.9
Shares purchased on open market (.6) (35.6) (35.6)
Put option premium - .2 .2
Unearned compensation related to
restricted stock awards (6.5) (6.5)
Earned compensation 7.1 7.1
Change in unrealized gain, net of
income taxes of $2.0, on
available-for-sale securities (3.1) (3.1)
Minimum pension liability adjustment (.8) (.8)
Translation adjustments, net of
income tax benefit of $.2 (14.8) (14.8)
- - ---------------------------------------------------------------------------------------------------------------------------------
Balance at May 26, 1996 204.2 $384.3 (45.2) $(1,367.4) $ 1,408.6 $(61.2) $(56.6) $307.7
- - ---------------------------------------------------------------------------------------------------------------------------------
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Cumulative preference stock of 5.0 million shares, without par value, is
authorized but unissued.
We have a shareholder rights plan that entitles each outstanding share of
common stock to one right. Each right entitles the holder to purchase one
one-hundredth of a share of cumulative preference stock (or, in certain
circumstances, common stock or other securities), exercisable upon the
occurrence of certain events. The rights are not transferable apart from the
common stock until a person or group has acquired 20 percent or more, or makes a
tender offer for 20 percent or more, of the common stock. If the Company is
then acquired in a merger or other business combination transaction, each right
will entitle the holder (other than the acquiror) to receive, upon exercise,
common stock of either the Company or the acquiring company having a market
value equal to two times the exercise price of the right. The initial exercise
price is $240 per right. The rights are redeemable by the Board at anytime
prior to the acquisition of 20 percent or more of the outstanding common stock.
The rights expire on February 1, 2006. At May 26, 1996, there were 159.0
million rights issued and outstanding.
The Board of Directors has authorized the repurchase, from time to time, of
common stock for our treasury, provided that the number of shares held in
treasury shall not exceed 60.0 million.
Through private transactions in fiscal 1996 and 1994, we issued put options
that entitled the holder to sell shares of our common stock to us, at a
specified price, if the holder exercised the option. In 1996, we issued put
options for .2 million shares for $.2 million in premiums. There were no put
options outstanding at May 26, 1996.
NOTE TWELVE: INTEREST EXPENSE
The components of net interest expense are as follows:
Fiscal Year
--------------------------
In Millions 1996 1995 1994
- - --------------------------------------------------------------------------------
Interest expense $117.2 $150.0 $121.7
Capitalized interest (.6) (5.2) (6.1)
<PAGE>
Interest income (15.2) (19.4) (16.4)
- - --------------------------------------------------------------------------------
Total interest expense, net 101.4 125.4 99.2
Net interest allocated to discontinued operations - (24.2) (20.4)
- - --------------------------------------------------------------------------------
Interest expense, net $101.4 $101.2 $ 78.8
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
During 1996, 1995 and 1994, we paid interest (net of amount capitalized) of
$103.8 million, $135.2 million and $99.0 million, respectively. The interest
allocated to discontinued operations is net of capitalized interest credits of
$4.3 million and $4.1 million in 1995 and 1994, respectively.
NOTE THIRTEEN: RETIREMENT PLANS
We have defined-benefit plans covering most employees. Benefits for salaried
employees are based on length of service and final average compensation. The
hourly plans include various monthly amounts for each year of credited service.
Our funding policy is consistent with the funding requirements of federal law
and regulations. Our principal plan covering salaried employees has a provision
that any excess pension assets would be vested in plan participants if the plan
is terminated within five years of a change in control. Plan assets consist
principally of listed equity securities, corporate obligations and U.S.
government securities.
Components of net pension income are as follows:
Fiscal Year
------------------------
Expense (Income) in Millions 1996 1995 1994
- - --------------------------------------------------------------------------------
Service cost--benefits earned $14.1 $ 13.5 $ 14.6
Interest cost on projected benefit obligation 56.7 55.1 52.9
Actual return on plan assets (162.3) (106.9) (47.8)
Net amortization and deferral 61.4 8.3 (43.9)
- - --------------------------------------------------------------------------------
Net pension income $(30.1) $(30.0) $(24.2)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
benefit obligations were 8.1% and 4.5% in 1996, and 8.0% and 4.5% in 1995,
respectively. The expected long-term rate of return on assets was 10.4%.
The funded status of the plans and the amount recognized on the
consolidated balance sheets (as determined as of May 31, 1996 and 1995) are as
follows:
<TABLE>
<CAPTION>
MAY 26, 1996 May 28, 1995
-------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
In Millions Benefits Assets Benefits Assets
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $649.5 $17.7 $623.7 $ 16.5
Nonvested benefits 41.3 .8 41.4 1.3
- - ------------------------------------------------------------------------------------------------
Accumulated benefit obligations 690.8 18.5 665.1 17.8
- - ------------------------------------------------------------------------------------------------
Projected benefit obligation 730.3 19.5 709.2 19.0
Plan assets at fair value 1,067.7 - 942.8 1.1
- - ------------------------------------------------------------------------------------------------
Plan assets in excess of
(less than) the projected
benefit obligation 337.4 (19.5) 233.6 (17.9)
Unrecognized prior service cost 31.9 2.3 30.0 2.9
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MAY 26, 1996 May 28, 1995
-------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
In Millions Benefits Assets Benefits Assets
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unrecognized net loss (gain) 88.8 2.3 166.2 (13.3)
Recognition of minimum liability - (7.9) - 7.1
Unrecognized transition (asset)
liability (95.8) 4.3 (109.4) 5.3
- - ------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $362.3 $(18.5) $320.4 $(15.9)
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
</TABLE>
We have defined-contribution plans covering salaried and non-union
employees with net assets of $689.0 million at May 26, 1996 and $614.6 million
at May 28, 1995. Our main defined contribution plan is a 401(k) savings plan
which is open to substantially all employees. The plan includes investment
funds and an Employee Stock Ownership Plan (ESOP). The ESOP's only assets are
Company common stock and temporary cash balances. Expense recognized for all
defined-contribution plans in fiscal 1996, 1995 and 1994 was $6.9 million, $5.4
million and $4.7 million, respectively. The ESOP's share of this expense was
$6.6 million, $5.0 million and $4.3 million, respectively. The ESOP's expense
is calculated by the "shares allocated" method.
The ESOP uses Company common stock to convey benefits to employees and,
through increased stock ownership, to align employee interests with those of
shareholders. The Company matches a percentage of employee contributions with a
base match plus a variable year-end match that depends on annual results.
Employees receive the Company match in the form of common stock.
The ESOP originally purchased Company common stock with funds borrowed from
third parties (and guaranteed by the Company), plus $10.0 million borrowed from
the Company at a variable interest rate. The ESOP shares are included in net
shares outstanding for the purposes of calculating earnings per share. The
ESOP's third-party debt is described in the long-term debt footnote. At May 26,
1996, the ESOP's debt to the Company had a balance of $6.8 million with an
interest rate of 5.6% and sinking fund payments due to June 2015.
The Company treats dividends paid to the ESOP the same as other dividends.
Dividends received on leveraged shares (i.e., all shares originally purchased
with the debt proceeds) are used for debt service, while dividends received on
unleveraged shares are passed through to participants.
The Company's cash contribution to the ESOP is calculated so as to pay off
enough debt to release sufficient shares to make the Company match. The ESOP
uses the Company's cash contributions to the plan, plus the dividends received
on the ESOP's leveraged shares, to make principal and interest payments on the
ESOP's debt. As loan payments are made, shares become unencumbered by debt and
become committed to be allocated. The ESOP allocates shares to individual
employee accounts on the basis of the match of employee payroll savings
(contributions), plus reinvested dividends received on previously allocated
shares. In 1996, 1995 and 1994, the ESOP incurred interest expense of $6.3
million, $6.6 million and $6.8 million, respectively. The ESOP used dividends
of $9.1 million, $6.2 million and $6.0 million, along with Company contributions
of $6.7 million, $4.8 million and $4.7 million to make interest and principal
payments in the respective years.
The number of shares of Company common stock within the ESOP are summarized
as follows:
MAY 26, May 28,
Number of shares 1996 1995
- - ----------------------------------------------------------------------
Unreleased shares 2,415,000 2,690,000
Committed to be allocated 10,000 66,000
Allocated to participants 2,129,000 1,966,000
- - ----------------------------------------------------------------------
Total shares 4,554,000 4,722,000
- - -----------------------------------------------------------------------
- - -----------------------------------------------------------------------
As of May 28, 1995, the ESOP received Darden shares from the spin-off
distribution described in note two. The Darden shares were immediately
exchanged for Company shares, based on their relative market values immediately
preceding the distribution date.
<PAGE>
NOTE FOURTEEN: OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS
We sponsor several plans that provide health care benefits to the majority of
our retirees. The salaried plan is contributory with retiree contributions
based on years of service.
We fund plans for certain employees and retirees on an annual basis. In
1996, 1995 and 1994 we contributed $14.0 million, $13.7 million and $38.3
million, respectively. Plan assets consist principally of listed equity
securities and U.S. government securities.
Components of the postretirement health care expense are as follows:
Fiscal Year
-------------------------
Expense (Income) in Millions 1996 1995 1994
- - --------------------------------------------------------------------------------
Service cost--benefits earned $4.9 $ 4.5 $ 5.0
Interest cost on accumulated benefit obligation 14.2 14.3 13.4
Actual return on plan assets (18.7) (15.1) (1.5)
Net amortization and deferral 6.9 5.0 (4.6)
- - --------------------------------------------------------------------------------
Net postretirement expense $7.3 $ 8.7 $ 12.3
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The funded status of the plans and the amount recognized on our
consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
MAY 26, 1996 May 28, 1995
-------------------------------------------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
In Millions Benefits Assets Benefits Assets
- - ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligations:
Retirees $38.5 $55.7 $ 36.2 $ 47.2
Fully eligible active employees 13.1 5.1 14.6 8.5
Other active employees 38.3 38.5 35.8 50.6
- - ------------------------------------------------------------------------------------------------
Accumulated benefit obligations 89.9 99.3 86.6 106.3
Plan assets at fair value 121.9 13.2 104.6 7.5
- - ------------------------------------------------------------------------------------------------
Plan assets in excess of (less than)
accumulated benefit obligations 32.0 (86.1) 18.0 (98.8)
Unrecognized prior service credits (.1) (13.7) (.1) (17.3)
Unrecognized net loss 14.3 23.8 27.1 33.8
- - ------------------------------------------------------------------------------------------------
Prepaid (accrued) postretirement
benefits $46.2 $(76.0) $45.0 $(82.3)
- - ------------------------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------------------------
</TABLE>
The discount rates used in determining the actuarial present value of the
benefit obligations were 8.1% and 8.0% in 1996 and 1995, respectively. The
expected long-term rate of return on assets was 10%.
The assumed health care cost trend-rate increase in the per capita charges
for benefits ranged from 5.9% to 9.2% for 1997 depending on the medical service
category. The rates gradually decrease to 4.4% to 5.7% for 2007 and remain at
that level thereafter. If the health care cost trend rate increased by one
percentage point in each future year, the aggregate of the service and interest
cost components of postretirement expense would increase for 1996 by $3.2
million and the accumulated benefit obligation as of May 26, 1996 would increase
by $28.6 million.
In 1994, we 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 $14.7
million ($.09 per share).
<PAGE>
NOTE FIFTEEN: PROFIT-SHARING PLANS
The Executive Incentive Plan provides incentives to key individuals who have the
greatest potential to contribute to current earnings and successful future
operations. These awards are approved by the Board of Directors upon
recommendation of the Compensation Committee and depend on profit performance in
relation to pre-established goals. The Plan is administered by the Compensation
Committee, which consists solely of outside directors. Profit-sharing expense
was $7.0 million, $.9 million and $1.5 million in 1996, 1995 and 1994,
respectively.
NOTE SIXTEEN: INCOME TAXES
We adopted SFAS No. 109, "Accounting for Income Taxes" as of May 31, 1993. The
adoption of SFAS No. 109 changed our method of accounting for income taxes from
the deferred method to the asset and liability method. Deferred income taxes
reflect the differences between assets and liabilities recognized for financial
reporting purposes and amounts recognized for tax purposes measured using the
current enacted tax rates. The cumulative effect of adoption was an increase in
net earnings of $11.2 million ($.07 per share).
The components of earnings from continuing operations before income taxes
and the income taxes thereon are as follows:
Fiscal Year
-------------------------------
In Millions 1996 1995 1994
- - --------------------------------------------------------------------------------
Earnings (loss) before income taxes:
U.S. $744.0 $412.1 $549.0
Foreign 14.6 7.5 15.7
- - --------------------------------------------------------------------------------
Total earnings before income taxes $758.6 $419.6 $564.7
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Income taxes:
Current:
Federal $206.5 $ 91.6 $192.0
State and local 28.5 1.3 46.8
Foreign 2.0 1.4 12.6
- - --------------------------------------------------------------------------------
Total current 237.0 94.3 251.4
- - --------------------------------------------------------------------------------
Deferred:
Federal 33.7 50.6 (17.5)
State and local 7.1 11.1 (4.3)
Foreign 1.6 (2.7) (12.2)
- - --------------------------------------------------------------------------------
Total deferred 42.4 59.0 (34.0)
- - --------------------------------------------------------------------------------
Total income taxes $279.4 $153.3 $217.4
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
During 1996 and 1995, net income tax benefits/(expense) of $25.0 million
and $(8.0) million, respectively, were allocated to stockholders' equity. These
benefits/expenses were attributable to the exercise of employee stock options,
dividends paid on unallocated ESOP shares, translation adjustments and
unrealized gain on marketable securities.
During 1996, 1995 and 1994, we paid income taxes of $194.0 million, $104.1
million and $202.2 million, respectively.
In prior years we purchased certain income-tax items from other companies
through tax lease transactions. Total current income taxes charged to earnings
reflect the amounts attributable to operations and have not been materially
affected by these tax leases. Actual current taxes payable relating to 1996,
1995 and 1994 operations were increased by approximately $15 million, $12
million and $10 million, respectively, due to the current effect of tax leases.
These tax payments do not affect taxes
<PAGE>
for statement of earnings purposes since they repay tax benefits realized in
prior years. The repayment liability is classified as "Deferred Income Taxes -
Tax Leases."
The following table reconciles the U.S. statutory income tax rate with the
effective income tax rate:
Fiscal Year
------------------------
1996 1995 1994
- - ------------------------------------------------------------------------
U.S. statutory rate 35.0% 35.0% 35.0%
State and local income taxes, net of
federal tax benefits 3.0 3.6 5.0
Other, net (1.2) (2.1) (1.5)
- - ------------------------------------------------------------------------
Effective income tax rate 36.8% 36.5% 38.5%
- - ------------------------------------------------------------------------
- - ------------------------------------------------------------------------
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
MAY 26, May 28,
In Millions 1996 1995
- - ------------------------------------------------------------------------
Accrued liabilities $ 84.6 $ 80.6
Unusual charge for oats matter 3.1 9.5
Unusual charge for restructuring 9.4 42.5
Compensation and employee benefits 53.3 55.2
Disposition liabilities 15.4 29.1
Foreign tax loss carryforward 12.4 19.4
Other 9.0 11.2
- - ------------------------------------------------------------------------
Gross deferred tax assets 187.2 247.5
- - ------------------------------------------------------------------------
Depreciation 130.5 139.4
Prepaid pension asset 138.1 125.1
Intangible assets 11.3 12.8
Other 37.5 53.8
- - ------------------------------------------------------------------------
Gross deferred tax liabilities 317.4 331.1
- - ------------------------------------------------------------------------
Valuation allowance 11.2 11.2
- - ------------------------------------------------------------------------
Net deferred tax liability $141.4 $94.8
- - ------------------------------------------------------------------------
- - ------------------------------------------------------------------------
As of May 26, 1996, we have foreign operating loss carryovers for tax
purposes of $34.6 million, which will expire as follows if not offset against
future taxable income: $11.0 million in 1998, $.1 million in 1999, $8.0 million
in 2000, $15.2 million in 2001 and $.3 million in 2002.
We have not recognized a deferred tax liability for unremitted earnings of
$91.1 million for our foreign operations because we do not expect those earnings
to become taxable to us in the foreseeable future. A determination of the
potential liability is not practicable. If a portion were to be remitted, we
believe income tax credits would substantially offset any resulting tax
liability.
NOTE SEVENTEEN: LEASES AND OTHER COMMITMENTS
An analysis of rent expense by property leased follows:
Fiscal Year
------------------------
In Millions 1996 1995 1994
- - ------------------------------------------------------------------------
Warehouse space $14.9 $14.0 $13.3
Equipment 7.3 8.7 8.1
Other 3.3 3.7 3.6
- - ------------------------------------------------------------------------
Total rent expense $25.5 $26.4 $25.0
- - ------------------------------------------------------------------------
- - ------------------------------------------------------------------------
<PAGE>
Some leases require payment of property taxes, insurance and maintenance
costs in addition to the rent payments. Contingent and escalation rent in
excess of minimum rent payments and sublease income netted in rent expense were
insignificant.
Noncancelable future lease commitments are (in millions) $15.7 in 1997,
$8.4 in 1998, $6.2 in 1999, $4.2 in 2000, $2.2 in 2001 and $2.0 after 2001, with
a cumulative total of $38.7.
We are contingently liable under guaranties and comfort letters for $94.7
million. The guaranties and comfort letters are principally issued to support
borrowing arrangements, primarily for our joint ventures. General Mills remains
the primary guarantor on a number of Darden leases and certain other
obligations; however Darden has indemnified General Mills against any loss.
NOTE EIGHTEEN: GEOGRAPHIC INFORMATION
Unallocated
Corporate Consolidated
In Millions U.S.A. Foreign Items (a) Total
- - -----------------------------------------------------------------------------
Sales
1996 $ 5,204.5 $211.5 $ - $5,416.0
1995 4,840.7 186.0 - 5,026.7
1994 5,156.8 170.4 - 5,327.2
- - -----------------------------------------------------------------------------
Operating Profits
1996 862.7 24.0 (128.1) 758.6
1995 504.0(b) 14.9(b) (99.3) 419.6
1994 642.7(c) 19.4 (97.4) 564.7
- - -----------------------------------------------------------------------------
Identifiable Assets
1996 2,509.1 293.2 492.4 3,294.7
1995 2,531.9 300.6 525.7 3,358.2
1994 2,502.3 245.7 2,056.0(d) 4,804.0
- - -----------------------------------------------------------------------------
(a) Corporate expenses reported here include net interest expense and general
corporate expenses.
(b) U.S.A. and Foreign operating profits are net of charges of $179.1 million
and $4.1 million, respectively, for the unusual items described in note
three.
(c) U.S.A. operating profits include a charge of $146.9 million for the unusual
item described in note three.
(d) For 1994, Unallocated Corporate Items include the net assets of
discontinued operations. See note two.
The foreign sales above were made primarily by our Canadian subsidiary. Our
proportionate share of our joint ventures' sales (not shown above) was $705.7
million, $584.0 million and $476.4 million for fiscal years 1996, 1995, and
1994, respectively. The foreign operating profits above exclude our share of
the results from our joint ventures.
<PAGE>
NOTE NINETEEN: QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1996 and 1995 follows:
<TABLE>
<CAPTION>
First Second Third
Quarter Quarter Quarter
In Millions, Except per Share -------------------------------------------------------------------------
and Market Price Amounts 1996 1995 1996 1995 1996 1995
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,276.3 $1,156.7 $1,448.4 $1,417.3 $1,309.2 $1,224.2
Gross profit (a) 750.7 696.5 852.3 822.2 776.1 703.3
Earnings (loss) from continuing operations 136.9 118.0 145.7 134.8 116.3 20.2(b)
Earnings (loss) per share from continuing
operations .86 .75 .92 .85 .73 .13
Discontinued operations - 32.8 - 14.4 - (14.8)
Net earnings 136.9 150.8 145.7 149.2 116.3 5.4
Net earnings per share .86 .95 .92 .95 .73 .03
Dividends per share .47 .47 .47 .47 .47 .47
Market price of common stock: (c)
High 54 3/8 56 1/4 58 1/8 58 3/8 60 1/2 61 5/8
Low 50 49 3/8 50 7/8 52 7/8 52 5/8 53 1/4
- - ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Fourth Total
Quarter Year
In Millions, Except per Share -----------------------------------------------
and Market Price Amounts 1996 1995 1996 1995
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,382.1 $1,228.5 $5,416.0 $5,026.7
Gross profit (a) 795.9 681.7 3,175.0 2,903.7
Earnings (loss) from continuing operations 77.5 (13.3)(b) 476.4 259.7
Earnings (loss) per share from continuing
operations .49 (.09) 3.00 1.64
Discontinued operations - 75.3 - 107.7
Net earnings 77.5 62.0 476.4 367.4
Net earnings per share .49 .40 3.00 2.33
Dividends per share .50 .47 1.91 1.88
Market price of common stock: (c)
High 60 63 3/4 60 1/2 63 3/4
Low 53 1/2 58 50 49 3/8
- - -------------------------------------------------------------------------------------------------
</TABLE>
(a) Before charges for depreciation.
(b) Includes after-tax losses of $82.8 million ($.52 per share) in the third
quarter and $28.8 million ($.19 per share) in the fourth quarter related to
restructuring.
(c) Prices shown for 1995 are before the spin-off described in note two. The
closing prices on May 26, 1995 of the two common stocks on a when-issued
basis were $49 7/8 for General Mills and $10 7/8 for Darden Restaurants.
<PAGE>
ELEVEN YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
May 26, May 28, May 29, May 30, May 31,
In Millions, Except per Share Data 1996 1995 1994 1993 1992
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Results
Net earnings per share $ 3.00 $ 2.33 $ 2.95 $ 3.10 $ 2.99
Continuing operations earnings per share 3.00 1.64 2.14 2.52 2.39
Return on average equity 212.3% 52.0% 37.7% 39.1% 39.9%
Dividends per share 1.91 1.88 1.88 1.68 1.48
Sales 5,416 5,027 5,327 5,138 4,964
Costs and expenses:
Cost of sales 2,241 2,123 2,012 2,003 1,967
Selling, general and administrative 2,128 2,008 2,351 2,191 2,126
Depreciation and amortization 187 192 174 153 143
Interest, net 101 101 79 56 45
Unusual expenses (income) - 183 147 36 (12)
Total costs and expenses 4,657 4,607 4,763 4,439 4,269
Earnings from continuing operations before
taxes and earnings (losses) of joint ventures 759 420 564 699 695
Income taxes 280 153 217 276 283
Earnings (losses) of joint ventures (3) (7) (7) (12) (16)
Earnings from continuing operations 476 260 340 411 396
Discontinued operations after taxes - 107 134 95 100
Accounting changes - - (4) - -
Net earnings 476 367 470 506 496
Earnings from continuing operations as a percent
of sales 8.8% 5.2% 6.4% 8.0% 8.0%
Weighted average number of common shares 159 158 159 163 166
Taxes (income, payroll, property, etc.) per share 2.11 1.30 1.68 1.98 2.08
- - ------------------------------------------------------------------------------------------------------------------------
Financial Position
Total assets 3,295 3,358 4,804 4,310 3,997
Land, buildings and equipment, net 1,312 1,457 1,503 1,463 1,398
Working capital at year end (197) (324) (630) (386) (238)
Long-term debt, excluding current portion 1,221 1,401 1,413 1,264 916
Stockholders' equity 308 141 1,151 1,219 1,371
Stockholders' equity per share 1.94 .89 7.26 7.59 8.28
- - ------------------------------------------------------------------------------------------------------------------------
Other Statistics
Total dividends 304 297 299 275 245
Gross capital expenditures 129 157 213 317 396
Research and development 60 60 59 56 55
Advertising media expenditures 320 324 292 283 309
Wages, salaries and employee benefits 541 538 558 556 598
Number of employees (actual) 9,790 9,882 10,616 10,577 12,195
Accumulated LIFO reserve 56 53 43 47 50
Common stock price range (a):
High 60 1/2 63 3/4 68 3/4 74 1/8 75 7/8
Low 50 49 3/8 49 7/8 62 54 1/4
Close 58 1/4 60 5/8 54 1/2 65 1/4 63 1/2
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Prices shown prior to 1996 are before the spin-off of the Company's
restaurant business on May 26, 1995. The closing prices on May 26, 1995 of
the two common stocks on a when-issued basis were $49 7/8 for General Mills
and $10 7/8 for Darden Restaurants.
Note: All amounts presented in this summary have been restated to a continuing
operations basis only.
<PAGE>
EXHIBIT 21
GENERAL MILLS, INC. SUBSIDIARIES
Percentage
Country or of Voting
State in Which Securities
Each Subsidiary Owned
Was Organized (Note 1)
------------- -----------
COLOMBO DAIRY FOODS LTD. Ontario 100
COLOMBO, INC. Delaware 100
COLOMBO YOGURT SHOP, QUINCY MARKET, INC. Delaware 100
C.P.A. CEREAL PARTNERS HANDELSGESELLSCHAFT
m.b.H. (Note 10) Austria 50
C.P.D. CEREAL PARTNERS DEUTSCHLAND
VERWALTUNGSGESSELSCHAFT m.b.H (Note 2) Germany 50
CPW MEXICO S.A. de C.V. Mexico 50
CPW S.A. (Note 13) Switzerland 50
CPW-CI LIMITED Cayman Islands 50
FYL CORP. California 100
GENERAL MILLS CONTINENTAL, INC. (Note 11) Delaware 100
CEREAL PARTNERS L.L.C. Delaware 50
GENERAL MILLS DIRECT MARKETING, INC. Delaware 100
GENERAL MILLS EUROPE LIMITED England 100
C.P. HELLAS EEIG Greece 50
GENERAL MILLS FINANCE, INC. Delaware 100
GENERAL MILLS FRANCE S.A. France 100
GMSNACKS, SCA (Note 3) France 43.29
Snack Ventures Europe, SCA (Note 4) Belgium 40.49
Biscuiterie Nantaise-BN, S.A. France 100
S.A. de Bebidas Carbonicas (SABECA) Spain 100
Matutano, S.A. Portugal 100
Smiths Food Group B.V. The Netherlands 100
SVE Italia S.r.L. Italy 100
Tasty Foods S.A. Greece 100
GENERAL MILLS HOLDING B.V. (Note 5) The Netherlands 100
CEREAL PARTNERS FRANCE B.V. (Note 6) The Netherlands 100
GENERAL MILLS ESPANA B.V. (Note 7) The Netherlands 100
GENERAL MILLS HOLLAND B.V. The Netherlands 100
GENERAL MILLS MAARSSEN B.V. The Netherlands 100
GENERAL MILLS OPERATIONS, INC. (Note 14) Delaware 100
<PAGE>
GENERAL MILLS PRODUCTS CORP. Delaware 100
GENERAL MILLS INTERNATIONAL LIMITED (Note 11) Delaware 100
Bimaler S.A. Uruguay 100
Cereal Partners L.L.C. Delaware 50
SVE (Hungary) Trading and Manufacturing
Limited Hungary 100
INMOBILIARIA SELENE, S.A. DE C.V. Mexico 100
TORONTO MACARONI & IMPORTED FOODS LIMITED Ontario 100
General Mills Canada, Inc. (Note 8) Canada 100
GENERAL MILLS SALES, INC. Delaware 100
INTERNATIONAL DESSERT PARTNERS L.L.C. Delaware 50
GOLD MEDAL INSURANCE CO. (Note 9) Minnesota 100
GRANDES MOLINOS DE VENEZUELA, S.A Venezuela 12.61
MILLS MEDIA, INC. Minnesota 100
NESTLE ASEAN PHILIPPINES, INC. (Note 12) The Philippines 30
POPCORN DISTRIBUTORS, INC. Delaware 100
TORUN-PACIFIC SP. Z O.O. Poland 50
YOPLAIT USA, INC. Delaware 100
<PAGE>
NOTES TO LIST OF SUBSIDIARIES:
1. Except where noted, the percentage of ownership refers to the total
ownership by the indicated parent corporation.
2. General Mills, Inc. also owns a 50% ownership interest in a partnership
organized under the laws of Germany.
3. General Mills Holland B.V. owns a 29.34% interest in GMSNACKS, SCA, General
Mills Holding B.V. owns a 26.25% interest in GMSNACKS, SCA, and General
Mills Products Corp. owns a 1.12% interest in GMSNACKS, SCA.
4. General Mills Holding B.V. owns a .01% interest in Snack Ventures Europe,
SCA.
5. General Mills Holding B.V. and General Mills, Inc. together own a 100%
interest in a Belgian partnership, General Mills Belgium, SNC, which also
has a 50% interest in a partnership organized under the laws of Portugal.
6. Cereal Partners France B.V., General Mills, Inc. and General Mills France
S.A. own a 100% interest in a French partnership, GMEAF SNC, which owns a
50% interest in a partnership organized under the laws of France.
7. General Mills Espana B.V. owns a 50% interest in a partnership organized
under the laws of Spain.
8. General Mills Canada, Inc. and General Mills Products Corp. together own a
100% interest in a Canadian partnership, General Mills North America
Affiliates, which owns a 50% interest in a partnership organized under the
laws of the United Kingdom.
9. Eighty-one percent of the voting securities are owned by General Mills,
Inc. and 19% of the voting securities are owned by General Mills Canada,
Inc.
10. General Mills, Inc. also owns a 50% ownership interest in a partnership
organized under the laws of Austria.
11. General Mills Continental, Inc. and General Mills International Limited
together own a 100% interest in a Chilean partnership, General Mills
Continental, Inc. y Compania, which owns a 50% interest in Cereales C.P.W.
Chile Limitada, a corporation organized under the laws of Chile; as well as
a 100% interest in a Mexican variable capital general partnership known as
General Mills International y Compania S. en N.C. de C.V.
12. The 30% ownership interest of General Mills, inc. is held in trust by
Nestle, S.A.
<PAGE>
13. General Mills, Inc. also owns a 50% ownership interest in a partnership
organized under the laws of Switzerland.
14. General Mills Operations, Inc. also owns a 50% ownership interest in a
partnership organized under the laws of the state of Montana.
<PAGE>
EXHIBIT 23
AUDITORS' CONSENT
The Board of Directors
General Mills, Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos. 2-49637, 33-56032 and 333-00745) on Form S-3 and Registration Statements
(Nos. 2-13460, 2-53523, 2-66320, 2-91987, 2-95574, 33-24504, 33-27628, 33-
32059, 33-36892, 33-36893, 33-50337 and 33-62729) on Form S-8 of General Mills,
Inc. of our reports dated June 26, 1996, relating to the consolidated balance
sheets of General Mills, Inc. and subsidiaries as of May 26, 1996 and May 28,
1995 and the related consolidated statements of earnings, cash flows and related
financial statement schedule for each of the fiscal years in the three-year
period ended May 26, 1996, which reports are included or incorporated by
reference in the May 26, 1996 annual report on Form 10-K of General Mills, Inc.
Our report covering the basic consolidated financial statements refers to
changes in the method of accounting for investments in debt and equity
securities in fiscal 1995 and postemployment benefits and income taxes in fiscal
1994.
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 22, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR FORM
10-K FOR THE FISCAL YEAR ENDED MAY 26, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-START> MAY-29-1995
<PERIOD-END> MAY-26-1996
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 342
<ALLOWANCES> (4)
<INVENTORY> 396
<CURRENT-ASSETS> 995
<PP&E> 2,508
<DEPRECIATION> (1,196)
<TOTAL-ASSETS> 3,295
<CURRENT-LIABILITIES> 1,192
<BONDS> 1,221
0
0
<COMMON> 384
<OTHER-SE> (77)
<TOTAL-LIABILITY-AND-EQUITY> 3,295
<SALES> 5,416
<TOTAL-REVENUES> 5,416
<CGS> 2,241
<TOTAL-COSTS> 2,241
<OTHER-EXPENSES> 187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 759
<INCOME-TAX> 279
<INCOME-CONTINUING> 476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 476
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 3.00
</TABLE>
