SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
NOVEMBER 26, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____ TO _____
Commission file number: 1-1185
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware 41-0274440
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Number One General Mills Boulevard
Minneapolis, MN 55426
(Mail: P.O. Box 1113) (Mail: 55440)
(Address of principal executive offices) (Zip Code)
(612) 540-2311
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of December 15, 1995, General Mills had 159,105,977 shares of
its $.10 par value common stock outstanding (excluding
45,047,355 shares held in treasury).
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
November 26, November 27, November 26, November 27,
1995 1994 1995 1994
Continuing Operations:
Sales $1,448.4 $1,417.3 $2,724.7 $2,574.0
Costs and Expenses:
Cost of sales 596.1 595.1 1,121.7 1,055.3
Selling, general and
administrative 551.7 537.5 1,010.3 977.1
Depreciation and
amortization 46.7 44.2 93.4 91.1
Interest, net 25.8 25.4 52.8 47.5
Total Costs
and Expenses 1,220.3 1,202.2 2,278.2 2,171.0
Earnings from Continuing Operations
before Taxes 228.1 215.1 446.5 403.0
Income Taxes 82.4 80.3 163.9 150.2
Earnings from Continuing
Operations 145.7 134.8 282.6 252.8
Discontinued Operations
after Taxes - 14.4 - 47.2
Net Earnings $ 145.7 $ 149.2 $ 282.6 $ 300.0
Earnings per Share:
Continuing operations $ .92 $ .85 $ 1.78 $ 1.60
Discontinued operations - .10 - .30
Net Earnings per Share $ .92 $ .95 $ 1.78 $ 1.90
Dividends per Share $ .47 $ .47 $ .94 $ .94
Average Number of
Common Shares 158.8 157.7 158.6 157.9
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
November 26, November 27, May 28,
1995 1994 1995
ASSETS
Current Assets:
Cash and cash equivalents $ 44.0 $ 52.5 $ 13.0
Receivables 381.4 387.0 277.3
Inventories:
Valued primarily at FIFO 230.2 163.7 134.7
Valued at LIFO (FIFO value exceeds LIFO by
$56.0, $45.4 and $53.0, respectively) 215.5 305.6 237.3
Prepaid expenses and other current assets 84.3 80.3 80.8
Deferred income taxes 125.4 134.3 153.8
Total Current Assets 1,080.8 1,123.4 896.9
Land, Buildings and Equipment, at Cost 2,607.5 2,547.3 2,611.9
Less accumulated depreciation (1,205.7) (1,082.3)(1,155.3)
Net Land, Buildings and Equipment 1,401.8 1,465.0 1,456.6
Net Assets of Discontinued Operations - 1,695.7 -
Other Assets 1,033.0 977.4 1,004.7
Total Assets $3,515.6 $5,261.5 $3,358.2
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 538.7 $ 506.3 $ 494.0
Current portion of long-term debt 64.9 122.8 93.7
Notes payable 299.3 761.5 112.9
Accrued taxes 130.2 112.7 108.8
Other current liabilities 338.0 265.1 411.5
Total Current Liabilities 1,371.1 1,768.4 1,220.9
Long-term Debt 1,246.4 1,484.4 1,400.9
Deferred Income Taxes 259.4 244.1 248.6
Deferred Income Taxes - Tax Leases 163.4 184.9 169.1
Other Liabilities 175.6 175.8 177.7
Total Liabilities 3,215.9 3,857.6 3,217.2
Common Stock Subject to Put Options - 25.1 -
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 204.2 shares issued 381.6 349.4 379.5
Retained earnings 1,367.7 2,610.2 1,233.3
Less common stock in treasury, at cost,
shares of 45.2, 46.4 and 46.3,
respectively (1,349.9) (1,381.7)(1,372.1)
Unearned compensation and other (52.8) (140.6) (57.9)
Cumulative foreign currency adjustment (46.9) (58.5) (41.8)
Total Stockholders' Equity 299.7 1,378.8 141.0
Total Liabilities and Equity $3,515.6 $5,261.5 $3,358.2
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Twenty-Six Weeks Ended
November 26, November 27,
1995 1994
Cash Flows - Operating Activities:
Earnings from continuing operations $282.6 $252.8
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 93.4 91.1
Deferred income taxes 34.9 85.7
Change in current assets and liabilities (152.7) (358.0)
Other, net (3.4) .4
Cash provided by continuing operations 254.8 72.0
Cash provided (used) by discontinued operations (11.2) 59.9
Net Cash Provided by Operating Activities 243.6 131.9
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (57.5) (61.9)
Investments in businesses, intangibles
and affiliates (20.3) (26.9)
Purchases of marketable investments (3.6) (3.4)
Proceeds from sale of marketable investments 7.0 2.7
Other, net (6.7) (21.5)
Discontinued operations investments
activities, net - (195.0)
Net Cash Used by Investment Activities (81.1) (306.0)
Cash Flows - Financing Activities:
Increase in notes payable 109.7 324.0
Issuance of long-term debt 38.6 130.5
Payment of long-term debt (146.1) (50.0)
Common stock issued 22.1 7.8
Purchases of common stock for treasury - (57.7)
Dividends paid (149.1) (149.2)
Other, net (6.7) (6.6)
Net Cash Provided (Used) by Financing
Activities (131.5) 198.8
Increase in Cash and Cash Equivalents $31.0 $24.7
See accompanying notes to consolidated condensed financial statements.
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
These financial statements do not include certain information and
footnotes required by generally accepted accounting principles for
complete financial statements. However, in the opinion of management,
all adjustments considered necessary for a fair presentation have been
included and are of a normal recurring nature. Operating results for the
twenty-six weeks ended November 26, 1995 are not necessarily indicative
of the results that may be expected for the fiscal year ending May 26,
1996.
These statements should be read in conjunction with the financial
statements and footnotes included in our annual report for the year ended
May 28, 1995. The accounting policies used in preparing these financial
statements are the same as those described in our annual report.
Certain amounts in the prior year financial statements have been
reclassified to conform to the current year presentation.
(2) Discontinued Operations
As of May 28, 1995, General Mills distributed the common stock of
Darden Restaurants, Inc. (Darden) to General Mills' shareholders. This
distribution reduced Stockholders' Equity by $1,218.7 million. Our
former restaurant operations included in Darden are now presented as a
part of Discontinued Operations for all periods presented.
On May 18, 1995, we sold Gorton's, a leading marketer of frozen and canned
seafood products, to Unilever United States, Inc. Gorton's is also included
in Discontinued Operations for all periods presented.
(3) Statements of Cash Flows
During the first six months, we paid $59.9 million for interest (net of
amount capitalized) and $99.5 million for income taxes.
(4) Updated Rights Plan
Subsequent to the end of the quarter, the Board of Directors adopted a
new Preferred Share Purchase Rights Plan to replace the existing rights
plan which expires in March 1996. The existing plan is described in Note
11 to the consolidated financial statements for the year ended May 28,
1995. The new Rights are similar in purpose and effect to the existing
Rights and entitle each outstanding share of common stock on and after
January 10, 1996 to one right. The new Rights will expire on February 1,
2006.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the fiscal year ended May 28, 1995 the company spun off its
restaurant operations as a separate, free-standing company, Darden
Restaurants, Inc., and sold the Gorton's frozen and canned seafood
products business. The financial statements for the second quarter of
fiscal 1995 have been restated to present assets and results of these
operations as Discontinued Operations. The restaurant spinoff reduced
Stockholders' Equity by $1,218.7 million at May 28, 1995.
Continuing operations generated $182.8 million more cash in the first
half of fiscal 1996 than in the same prior-year period. The increase
in cash provided by continuing operations is due mainly to a lower rate
of increase in working capital.
Fiscal 1996 capital expenditures are estimated to be approximately
$150 million. During the first six months, capital expenditures
totaled $57.5 million.
Our short-term outside financing is obtained through private
placement of commercial paper and bank notes. Our level of notes
payable fluctuates based on cash flow needs.
Our long-term outside financing is obtained primarily through our
medium-term note program. First half activity included new debt
of $35.0 million and principal payments of $141.3 million under
this program.
RESULTS OF OPERATIONS
Second quarter sales of $1,448.4 million grew 2 percent from the prior
year. First half sales of $2,724.7 million grew 6 percent. Second
quarter earnings from operations of $145.7 million ($.92 per share) were
up 8 percent from $134.8 million ($.85 per share) reported last year.
Cumulative earnings of $282.6 million ($1.78 per share) were up 12
percent from $252.8 million ($1.60 per share) reported for last year's
first half. The prior-year comparisons exclude results for Gorton's and
the restaurant operations.
Record results for the first half met company expectations, with
cumulative domestic retail unit volume growth of 6 percent, continued
strong productivity increases and improving profitability from
international operations. As anticipated, the company's rate of growth
in the second quarter was slower than the 15 percent earnings-per-share
increase achieved in the first quarter, reflecting volume fluctuations in
the prior year due to the oats-related business disruption and changes in
promotion timing.
Second-quarter overall domestic volume was up slightly as promotional
changes primarily affected snack products where volume declined 21
percent, offsetting a large first quarter gain. Volume for the company's
remaining domestic businesses grew 4 percent, led by a 6 percent volume
gain by Big G cereals. Total unit volume, including strong gains by
international joint ventures that are not consolidated in the company's
sales results, grew 3 percent in the second quarter and 8 percent for the
first half. Consumer retail sales were even or up for most major product
lines, excluding domestic snacks.
Big G cereals led General Mills' performance, both in the half and the
latest quarter. Through six months, cereal volume was up 12 percent and
profit growth was even stronger. The second quarter's 6 percent volume
gain was led by new Frosted Cheerios, which began shipping Sept. 11 and
achieved a 1.6 percent pound market share for the period. Other
contributors to the second quarter volume gain included improved versions
of Apple Cinnamon Cheerios and Lucky Charms, and growing business in non-
traditional retail outlets. Big G's second-quarter pound share of the
U.S. grocery cereal market was 23.5 percent, up a full percentage point
from the same period a year earlier.
Snack foods' 21 percent volume decline in the second quarter followed a
10 percent gain in the first quarter. The decline reflected shifts in
promotional strategies and timing toward first-quarter back-to-school
merchandising, and strong levels of competitive new-product and
merchandising activity in the grain snack segment. Volume growth in the
company's other domestic retail businesses was led by Yoplait and Colombo
yogurt, Helper dinner mixes, and new Whipped Deluxe frosting and fat-free
Sweet Rewards cake mixes. Additionally, the company's Foodservice
operations achieved a 13 percent volume gain in the first half.
General Mills' Canadian food operations reported a 14 percent increase in
first-half unit volume, including a 13 percent gain in the second
quarter. Cereal Partners Worldwide (CPW), the company's strategic
alliance with Nestle, posted volume growth of 19 percent in the quarter
and 22 percent through six months, with share gains in most markets.
Snack Ventures Europe, the company's joint venture with PepsiCo Foods
International, reported volume gains of 16 percent for both the second
quarter and first half. Each of these joint ventures and the company's
fully-owned international operations contributed to first-half earnings
growth.
Net interest expense for the first six months increased by $5.3 million
compared to last year, primarily due to higher interest rates.
The effective tax rate for the first six months of fiscal 1996 of 36.7%
was less than the 37.3% rate for the first six months of fiscal 1995 due
primarily to the effects of state taxes.
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on September 18,
1995.
(b) All directors nominated were elected at the Annual Meeting.
(c) For the election of directors, the results were as follows:
Richard M. Bressler For 134,678,727
Withheld 682,432
Livio D. DeSimone For 135,342,058
Withheld 19,101
William T. Esrey For 135,324,654
Withheld 36,505
Charles W. Gaillard For 135,314,580
Withheld 46,579
Judith R. Hope For 135,243,799
Withheld 117,360
Kenneth A. Macke For 135,310,121
Withheld 51,038
George Putnam For 135,300,397
Withheld 60,762
Michael D. Rose For 135,305,288
Withheld 55,871
Stephen W. Sanger For 135,341,378
Withheld 19,781
A. Michael Spence For 135,279,549
Withheld 81,610
Dorothy A. Terrell For 135,205,934
Withheld 155,225
C. Angus Wurtele For 135,332,246
Withheld 28,913
On the ratification of the appointment of KPMG Peat Marwick LLP as
auditors for fiscal 1996 the results were as follows:
For: 135,401,311
Withheld: 334,521
Abstain: 277,775
On the proposal to adopt the General Mills, Inc. 1995 Salary
Replacement Stock Option Plan, the results were as follows:
For: 122,890,196
Against: 11,702,115
Abstain: 1,421,296
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 Statement re Computation of Earnings per Share.
Exhibit 12 Statement re Ratio of Earnings to Fixed Charges.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the second
quarter of fiscal 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL MILLS, INC.
(Registrant)
Date January 8, 1996 /s/ S. S. Marshall
S. S. Marshall
Senior Vice President,
General Counsel and Secretary
Date January 8, 1996 /s/ K. L. Thome
K. L. Thome
Senior Vice President,
Financial Operations
Exhibit 11
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Twenty-Six Weeks Ended
November 26, November 27,
1995 1994
Net Earnings $282.6 $300.0
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 158.6 157.9
Net shares resulting from the assumed exercise of
certain stock options (b) 3.0* 1.9*
Shares potentially issuable under compensation plans -* .1*
Total common shares and common share equivalents 161.6 159.9
Earnings per Share $1.78 $1.90
Notes to Exhibit 11:
(a)Computed as the weighted average of net shares outstanding on stock-
exchange trading days.
(b)Common share equivalents are computed by the "treasury stock" method.
This method first determines the number of shares issuable under stock
options that had an option price below the average market price for the
period, and then deducts the number of shares that could have been
repurchased with the proceeds of options exercised.
* Common share equivalents are not material. As a result, earnings per
share have been computed using the weighted average number of shares
outstanding of 158.6 million and 157.9 million for the first six months
of fiscal 1996 and 1995, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Twenty-Six Weeks Ended Fiscal Year Ended
November 26, November 27, May 28, May 29, May 30, May 31, May 26,
1995 1994 1995 1994 1993 1992 1991
Ratio of
Earnings to
Fixed Charges 7.87 7.52 4.10 6.18 8.62 9.28 8.06
For purposes of computing the ratio of earnings to fixed charges, earnings
represent pretax income from continuing operations plus fixed charges (net
of capitalized interest). Fixed charges represent interest (whether
expensed or capitalized) and one-third (the proportion deemed
representative of the interest factor) of rents of continuing operations.
Exhibit 11
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Twenty-Six Weeks Ended
November 26, November 27,
1995 1994
Net Earnings $282.6 $300.0
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 158.6 157.9
Net shares resulting from the assumed exercise of
certain stock options (b) 3.0* 1.9*
Shares potentially issuable under compensation plans -* .1*
Total common shares and common share equivalents 161.6 159.9
Earnings per Share $1.78 $1.90
Notes to Exhibit 11:
(a)Computed as the weighted average of net shares outstanding on stock-
exchange trading days.
(b)Common share equivalents are computed by the "treasury stock" method.
This method first determines the number of shares issuable under stock
options that had an option price below the average market price for the
period, and then deducts the number of shares that could have been
repurchased with the proceeds of options exercised.
* Common share equivalents are not material. As a result, earnings per
share have been computed using the weighted average number of shares
outstanding of 158.6 million and 157.9 million for the first six months
of fiscal 1996 and 1995, respectively.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Twenty-Six Weeks Ended Fiscal Year Ended
November 26, November 27, May 28, May 29, May 30, May 31, May 26,
1995 1994 1995 1994 1993 1992 1991
Ratio of
Earnings to
Fixed Charges 7.87 7.52 4.10 6.18 8.62 9.28 8.06
For purposes of computing the ratio of earnings to fixed charges, earnings
represent pretax income from continuing operations plus fixed charges (net
of capitalized interest). Fixed charges represent interest (whether
expensed or capitalized) and one-third (the proportion deemed
representative of the interest factor) of rents of continuing operations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from our
Form 10-Q for the twenty-six week period ended November 26, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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