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 24, 1996
/ / 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)
fs
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, 1996, General Mills had 156,081,168 shares
of its $.10 par value common stock outstanding (excluding
48,072,164 shares held in treasury).
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
November 24,November 26, November 24,November 26,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $1,560.1 $1,448.4 $2,875.7 $2,724.7
Costs and Expenses:
Cost of sales 659.4 596.1 1,195.2 1,121.7
Selling, general & administrative 587.5 549.9 1,098.2 1,008.7
Depreciation and amortization 43.0 46.7 85.9 93.4
Interest, net 24.5 25.8 47.3 52.8
Unusual items - - 48.4 -
Total Costs and Expenses 1,314.4 1,218.5 2,475.0 2,276.6
Earnings before Taxes and Earnings
(Losses) of Joint Ventures 245.7 229.9 400.7 448.1
Income Taxes 90.5 84.0 147.0 166.4
Earnings(Losses)from Joint Ventures 1.5 (.2) .7 .9
Net Earnings $ 156.7 $ 145.7 $ 254.4 $ 282.6
Earnings per Share $ 1.00 $ .92 $ 1.62 $ 1.78
Dividends per Share $ .50 $ .47 $ 1.00 $ .94
Average Number of Common Shares 156.5 158.8 157.2 158.6
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
<CAPTION>
(Unaudited) (Unaudited)
November 24, November 26, May 26,
1996 1995 1996
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 28.3 $ 44.0 $ 20.6
Receivables 428.4 381.4 337.8
Inventories:
Valued primarily at FIFO 154.2 230.2 186.3
Valued at LIFO (FIFO value exceeds LIFO by
$58.4, $56.0 and $55.7, respectively) 242.1 215.5 209.2
Prepaid expenses and other current assets 154.3 84.3 132.6
Deferred income taxes 101.2 125.4 108.6
Total Current Assets 1,108.5 1,080.8 995.1
Land, Buildings and Equipment, at Cost 2,474.7 2,607.5 2,508.0
Less accumulated depreciation (1,218.3) (1,205.7) (1,195.6)
Net Land, Buildings and Equipment 1,256.4 1,401.8 1,312.4
Other Assets 1,066.8 1,033.0 987.2
Total Assets $3,431.7 $3,515.6 $3,294.7
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 643.1 $ 538.7 $ 590.7
Current portion of long-term debt 107.5 64.9 75.4
Notes payable 421.6 299.3 141.6
Accrued taxes 141.7 130.2 124.3
Other current liabilities 232.4 338.0 259.9
Total Current Liabilities 1,546.3 1,371.1 1,191.9
Long-term Debt 1,078.8 1,246.4 1,220.9
Deferred Income Taxes 243.1 259.4 250.0
Deferred Income Taxes - Tax Leases 154.5 163.4 157.5
Other Liabilities 168.4 175.6 166.7
Total Liabilities 3,191.1 3,215.9 2,987.0
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 204.2 shares issued 389.6 381.6 384.3
Retained earnings 1,506.7 1,367.7 1,408.6
Less common stock in treasury, at cost,
shares of 48.3, 45.2 & 45.2, respectively (1,553.6) (1,349.9) (1,367.4)
Unearned compensation and other (52.8) (52.8) (61.2)
Cumulative foreign currency adjustment (49.3) (46.9) (56.6)
Total Stockholders' Equity 240.6 299.7 307.7
Total Liabilities and Equity $3,431.7 $3,515.6 $3,294.7
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
<CAPTION>
Twenty-Six Weeks Ended
November 24,November 26,
1996 1995
<S> <C> <C>
Cash Flows - Operating Activities:
Earnings from continuing operations $254.4 $282.6
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 85.9 93.4
Deferred income taxes (3.8) 34.9
Change in current assets and liabilities (67.6) (152.7)
Unusual expenses 48.4 -
Other, net (5.4) (3.4)
Cash provided by continuing operations 311.9 254.8
Cash used by discontinued operations (3.9) (11.2)
Net Cash Provided by Operating Activities 308.0 243.6
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (78.4) (57.5)
Investments in businesses, intangibles and
affiliates (23.6) (20.3)
Purchases of marketable investments (3.9) (3.6)
Proceeds from sale of marketable investments 21.3 7.0
Other, net (40.6) (6.7)
Net Cash Used by Investment Activities (125.2) (81.1)
Cash Flows - Financing Activities:
Increase in notes payable 277.7 109.7
Issuance of long-term debt 3.9 38.6
Payment of long-term debt (109.9) (146.1)
Common stock issued 23.4 22.1
Purchases of common stock for treasury (209.9) -
Dividends paid (157.5) (149.1)
Other, net (2.8) (6.7)
Net Cash Used by Financing Activities (175.1) (131.5)
Increase in Cash and Cash Equivalents $ 7.7 $31.0
<FN>
See accompanying notes to consolidated condensed financial statements.
</FN>
</TABLE>
<PAGE>
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 24, 1996 are not necessarily indicative
of the results that may be expected for the fiscal year ending May 25,
1997.
These statements should be read in conjunction with the financial
statements and footnotes included in our annual report for the year ended
May 26, 1996. The accounting policies used in preparing these financial
statements are the same as those described in our annual report, except
that the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," as of the beginning of fiscal 1997
(see note 3 below).
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current year's presentation.
(2) Acquisition
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 on
January 31, 1997 following approval by Ralcorp shareholders. The
transaction includes a Cincinnati, Ohio, manufacturing facility that
employs 240 people, and trademark and technology rights for the branded
products in the Americas.
(3) Unusual Items
We adopted 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" as of the beginning of fiscal 1997. The
initial, non-cash charge recorded in the first quarter upon adoption of
SFAS No. 121 was $48.4 million pre-tax, $29.2 million after-tax ($.18 per
share). The charge represents a reduction in the carrying amounts of
certain impaired assets to their estimated fair value, determined on the
basis of estimated cash flows or net realizable value. The impaired
assets include machinery and equipment related to inventory production at
various plant locations. The impairments relate to assets not currently
in use, assets significantly underutilized, and assets with limited
planned future use.
(4) Statements of Cash Flows
During the first six months, we paid $47.1 million for interest (net of
amount capitalized) and $125.3 million for income taxes.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Operations generated $57.1 million more cash in the first half of
fiscal 1997 than in the same prior-year period. The increase in cash
provided by operations as compared to last year was caused by a $85.1
million decrease in the working capital change (principally, a reduced
rate of increase in inventories) partially offset by a $28.0 million
decrease in cash from operations, after adjustment for non-cash charges.
Fiscal 1997 capital expenditures are estimated to be approximately
$170.0 million. During the first six months, capital expenditures
totaled $78.4 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 repurchases and
debt payments of $108.7 million under this program.
In the first half of fiscal 1997, we acquired 3.8 million shares
of common stock for our treasury for $209.9 million.
RESULTS OF OPERATIONS
Second quarter sales of $1,560.1 million grew 8 percent from the prior
year. First half sales of $2,875.7 million grew 6 percent. Second
quarter earnings from operations of $156.7 million ($1.00 per share) were
up 8 percent from $145.7 million ($.92 per share) reported last year.
Cumulative earnings from operations of $283.6 million ($1.80 per share),
before the non-cash charge associated with the adoption of SFAS No. 121
(see Note (3)) increased slightly from $282.6 million ($1.78 per share)
last year. Adoption of SFAS No. 121 resulted in a first quarter non-cash,
after-tax charge of $29.2 million, or 18 cents per share. Including this
non-cash charge, first half earnings were $254.4 million ($1.62 per
share).
This record second-quarter performance represents strong renewal of our
earnings growth momentum following the first-quarter interruption caused
by Big G's cereal price declines. Our earnings gain was driven by
broad-based unit volume growth, with total domestic volume up 9 percent
on gains by every major business unit, and international volume growth
led by a 19 percent increase for our Cereal Partners Worldwide (CPW)
joint venture with Nestle. In total, the company's worldwide cereal
operations accounted for more than half of the second-quarter earnings
increase.
These first-half results include approximately 16 cents of the expected
20 cents-per-share earnings impact in 1997 from Big G's cereal price
declines, with about 4 cents per share falling in the second quarter. We
expect that the impact on future quarters will be less as further
reductions in promotional spending behind established brands take effect.
Big G cereals recorded volume gains of more than 10 percent in the second
quarter and 7 percent through six months. Second-quarter volume for
established cereals was up 7 percent, driven by strong performance from
brands featured in the annual fall Salute to Savings corporate
merchandising event and by the success of a sample-size merchandising
program focused on generating consumer trial for recently improved
brands. Three new Big G products-Betty Crocker Cinnamon Streusel and
Dutch Apple cereals, and French Toast Crunch cereal-entered distribution
during the second quarter with strong introductory marketing support and
posted good initial performance. These three new cereals together with
Frosted Cheerios, introduced in September 1995, accounted for nearly 2.5
points of Big G's 25 percent second-quarter pound market share.
Ready-to-eat cereal category volume in all measured outlets grew nearly 1
percent during the second quarter and 1.5 percent through the first half,
reflecting the category's transition to new pricing and price promotion
levels. Big G's strong unit volume momentum drove its first-half pound
market share up 1.5 points to 24.3 percent.
Volume and market share performance also was strong across the company's
other domestic businesses. Helper dinner mix volume was up 9 percent for
the quarter and 12 percent through six months, reflecting continued
effective merchandising and good performance from three new, lower-sodium
varieties introduced in June 1996. Snacks unit volume grew 12 percent in
the quarter and 3 percent through the first half, led by strong initial
performance from new Golden Grahams Treats snack bars launched in
October. Yoplait-Colombo yogurt volume increased 12 percent in the
quarter and market share was up 2 points on strong performance from core
Yoplait lines and continuing expansion of Colombo distribution in the
North Central United States. Volume for Betty Crocker desserts, family
flour and baking mixes grew 3 percent in the quarter. In addition, the
company's foodservice operations recorded a 7 percent volume increase.
Earnings from the company's expanding international operations were up 18
percent in the second quarter led by CPW. Through six months, CPW unit
volume was up 17 percent with share gains recorded in most major
markets. In Canada, cereal volume grew 13 percent in the second quarter
and 11 percent in the first half on strong new product performance,
driving cereal market share for the year-to-date up nearly 2 points to 16
percent. Volume for the Snack Ventures Europe joint venture with PepsiCo
was down slightly in the first half against prior-year results that
included heavy promotional activity in key markets. The International
Dessert Partners (IDP) joint venture with CPC International continues to
experience good consumer trial and distribution gains in its four initial
Latin American markets. Through six months, international earnings were
below the prior year's, primarily due to year-one development spending to
launch IDP.
During the first half, General Mills repurchased 3.8 million shares,
including 1.6 million in the second quarter at an average price of
$57.21. This activity is consistent with the previously stated long-term
goal of reducing average shares outstanding by 1 to 2 percent annually.
As a result, second quarter average shares outstanding totaled 156.5
million, down 2.3 million from the same period a year earlier.
Interest expense was $5.5 million lower for the first half, primarily
reflecting lower debt levels and rates. Our reported tax rate for the
first six months was 36.7 percent. Excluding the effects of SFAS No.
121, our tax rate for the first six months was 37.0 percent, compared to
37.1 percent in last year's comparable period.
<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meeting of Stockholders was held on September 30,
1996.
(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 136,058,767
Withheld 76,891
Livio D. DeSimone For 136,098,631
Withheld 37,027
William T. Esrey For 136,094,703
Withheld 40,955
Charles W. Gaillard For 136,104,184
Withheld 31,474
Judith R. Hope For 135,969,553
Withheld 166,105
Kenneth A. Macke For 136,063,487
Withheld 72,171
Michael D. Rose For 136,033,669
Withheld 101,989
Stephen W. Sanger For 136,115,174
Withheld 20,484
A. Michael Spence For 136,078,796
Withheld 56,862
Dorothy A. Terrell For 136,033,877
Withheld 101,781
Raymond G. Viault For 136,100,041
Withheld 35,617
C. Angus Wurtele For 136,107,674
Withheld 27,984
On the ratification of the appointment of KPMG Peat Marwick LLP
as auditors for fiscal 1997 the results were as follows:
For: 136,263,967
Against: 315,477
Abstain: 302,909
On the proposal to adopt the Stock Option and Long-Term Incentive
Plan of 1993, as amended, the results were as follows:
For: 130,651,004
Against: 4,744,749
Abstain: 1,486,600
On the proposal to adopt the General Mills, Inc. Executive
Incentive Plan as amended, the results were as follows:
For: 131,312,787
Against: 3,931,684
Abstain: 1,637,882
On the proposal to adopt the General Mills, Inc. 1996
Compensation Plan for Non-Employee Directors, the results were as
follows:
For: 110,650,055
Against: 24,508,804
Abstain: 1,723,494
The stockholders' proposal requesting that the directors take
action to adopt cumulative voting was rejected:
For: 34,507,341
Against: 78,665,757
Abstain: 10,198,121
Broker Non-Vote: 13,511,134
<PAGE>
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.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
second quarter of fiscal 1997.
<PAGE>
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 6, 1997 /s/ S. S. Marshall
S. S. Marshall
Senior Vice President,
General Counsel
Date January 6, 1997 /s/ K. L. Thome
K. L. Thome
Senior Vice President,
Financial Operations
Exhibit 11
<TABLE>
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
<CAPTION>
Twenty-Six Weeks Ended
November 24, November 26,
1996 1995
<S> <C> <C>
Net Earnings $254.4 $282.6
Computation of Shares:
Weighted average number of shares outstanding,
excluding shares held in treasury (a) 157.2 158.6
Net shares resulting from the assumed exercise of
certain stock options (b) 3.1* 3.0*
Total common shares and common share equivalents 160.3 161.6
Earnings per Share $1.62 $1.78
<FN>
Notes to Exhibit 11:
(a) Computed as the weighted average of net shares outstanding
on stock-exchange trading days.
(b) Common share equivalents are computed by the "treasury
stock" method. This method first determines the number of
shares issuable under stock options that had an option
price below the average market price for the period, and
then deducts the number of shares that could have been
repurchased with the proceeds of options exercised.
* Common share equivalents are not material. As a result,
earnings per share have been computed using the weighted
average number of shares outstanding of 157.2 million and
158.6 million for the first six months of fiscal 1997 and
1996, respectively.
</FN>
</TABLE>
Exhibit 12
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Twenty-Six Weeks Ended Fiscal Year Ended
November 24,November 26, May 26, May 28, May 29, May 30, May 31,
1996 1995 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings
to Fixed Charges 7.68 7.87 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 pretax 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.
<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 24, 1996, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-25-1997
<PERIOD-START> MAY-27-1996
<PERIOD-END> NOV-24-1996
<CASH> 28,300,000
<SECURITIES> 0
<RECEIVABLES> 428,400,000
<ALLOWANCES> 0
<INVENTORY> 396,300,000
<CURRENT-ASSETS> 1,108,500,000
<PP&E> 2,474,700,000
<DEPRECIATION> (1,218,300,000)
<TOTAL-ASSETS> 3,431,700,000
<CURRENT-LIABILITIES> 1,546,300,000
<BONDS> 1,078,800,000
0
0
<COMMON> 389,600,000
<OTHER-SE> (149,000,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,431,700,000
<SALES> 2,875,700,000
<TOTAL-REVENUES> 2,875,700,000
<CGS> 1,195,200,000
<TOTAL-COSTS> 1,195,200,000
<OTHER-EXPENSES> 85,900,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,300,000
<INCOME-PRETAX> 400,700,000
<INCOME-TAX> 147,000,000
<INCOME-CONTINUING> 254,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254,400,000
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
</TABLE>
