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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996].
For the fiscal year ended May 31, 1998
/ / 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
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
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
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. [ X ]
Aggregate market value of Common Stock held by non-affiliates of the
Registrant, based on the closing price of $63.5625 per share as reported on the
New York Stock Exchange on July 30, 1998: $9,719.5 million.
Number of shares of Common Stock outstanding as of July 30, 1998:
152,912,269 (including 55,821 shares set aside for the exchange of shares of
Ralcorp Holdings, Inc. and excluding 50,814,822 shares held in the treasury).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement dated August 14, 1998 are
incorporated by reference into Part III, and portions of Registrant's
1998 Annual Report to Stockholders are incorporated by
reference into Parts I, II and IV.
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<PAGE>
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.
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, cooperatives, 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 sold at lower prices.
CEREALS. General Mills produces and sells a number of ready-to-eat cereals,
including such brands as: CHEERIOS, HONEY NUT CHEERIOS, FROSTED CHEERIOS, APPLE
CINNAMON CHEERIOS, MULTI-GRAIN CHEERIOS, TEAM CHEERIOS, WHEATIES, HONEY FROSTED
WHEATIES, CRISPY WHEATIES 'N RAISINS, LUCKY CHARMS, CORN TOTAL, WHEAT TOTAL,
TOTAL RAISIN BRAN, TRIX, GOLDEN GRAHAMS, WHEAT CHEX, CORN CHEX, RICE CHEX,
MULTI-BRAN CHEX, KIX, BERRY BERRY KIX, FIBER ONE, REESE'S PEANUT BUTTER PUFFS,
COCOA PUFFS, COOKIE CRISP, CINNAMON TOAST CRUNCH, FRENCH TOAST CRUNCH, CLUSTERS,
RAISIN NUT BRAN, OATMEAL CRISP, TRIPLES and BASIC 4.
DESSERTS, FLOUR AND BAKING MIXES. General Mills makes and sells a line of
dessert mixes under the BETTY CROCKER trademark, including SUPERMOIST layer
cakes, RICH & CREAMY and SOFT WHIPPED ready-to-spread frostings, SUPREME brownie
and dessert bar mixes, muffin mixes, STIR 'N BAKE mixes and SWEET REWARDS
fat-free and reduced-fat mixes. The Company markets variety baking mixes under
the BISQUICK trademark, sells pouch mixes under the BETTY CROCKER name, 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 flour for internal ingredient
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 and TUNA HELPER
trademarks. Also under the BETTY CROCKER trademark, the Company sells dry
packaged specialty potatoes, POTATO BUDS instant mashed potatoes, 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 NATURE VALLEY granola bars, DUNKAROOS
and GOLDEN GRAHAMS TREATS; a line of fruit snacks including FRUIT ROLL-UPS,
FRUIT BY THE FOOT, GUSHERS, FRUIT STRING THING, BUGS BUNNY and TRIX shapes; a
line of fat-free snack bars under the name SWEET REWARDS; a line of salty snack
products called CHEX snack mix and savory snacks marketed under the name BUGLES.
The Company also produces and sells a line of single-serving fruit juice drinks
marketed under the SQUEEZIT trademark and SQUEEZIT 100, a 100% juice beverage.
YOGURT PRODUCTS. Yoplait USA manufactures and sells yogurt products,
including YOPLAIT ORIGINAL, YOPLAIT LIGHT, CUSTARD STYLE and TRIX, a layered
yogurt for children and will be introducing GO-GURT, yogurt packaged in a
portable tube, in fiscal 1999. 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, dinner and side dish products, refrigerated and
soft-serve frozen yogurt and custom products to the commercial and
non-commercial sectors, including schools, colleges, hotels, restaurants and the
healthcare industry.
INTERNATIONAL FOODS OPERATIONS. The International Foods organization of the
Company exports packaged food products and snack pellets throughout the world
and licenses food products for manufacture in Europe and the Asia/Pacific
region. General Mills Canada, Inc. sells BIG G ready-to-eat cereals, BETTY
CROCKER side dishes, baking and packaged dinner mixes and fruit, grain and salty
snacks in Canada.
The Company is engaged in four international joint ventures. See Note Four
to Consolidated Financial Statements appearing on pages 25 and 26 of the
Company's 1998 Annual Report to Stockholders, incorporated herein by reference.
Cereal Partners Worldwide (CPW), the Company's joint venture with Nestle, S.A.,
through various entities, competes in more than 70 countries and republics,
including recent expansion into Central Europe. The following cereal products
were marketed under the umbrella Nestle trademark in fiscal 1998: 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, HONEY STARS, KOKO
KRUNCH, SNOW FLAKES, ZUCOSOS and APPLE MINIS. CPW also manufactures private
label cereals for customers in the United Kingdom. The Company has a 50% equity
interest in CPW.
Snack Ventures Europe (SVE), the Company's joint venture with PepsiCo,
Inc., manufactures and sells snack foods in Holland, France, Belgium, Spain,
Portugal, Greece, Estonia, Hungary, Russia and Slovakia. The Company has a 40.5%
equity interest in SVE.
International Dessert Partners L.L.C. (IDP), the Company's joint venture
with Bestfoods, sells baking and dessert mixes in Brazil, Mexico, Colombia,
Argentina, Chile, Peru, Venezuela and Uruguay and recently introduced a line of
rice pudding dessert mixes in the southern cone of Latin America. IDP
manufactures baking and ready-to-serve frosting mixes in Uruguay. The Company
has a 50% equity interest in IDP.
Tong Want, the Company's joint venture with Want Want Holdings, Ltd., was
formed to manufacture and sell savory snacks in the People's Republic of China.
Operations are expected to commence in 1999. The Company has a 50% equity
interest in Tong Want.
GENERAL INFORMATION
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 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. 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 items significant to
its business in order to ensure continuity of operations. The Company's
objective is to procure materials meeting both the Company's quality standards
and its production needs at the lowest total cost to the Company. The Company's
strategy is to buy these materials at price levels that allow a targeted profit
margin. Since commodities 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 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. 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 pages 27 and 28 of the Company's 1998 Annual Report to
Stockholders, incorporated herein by reference and the "Market Risk Management"
subsection of the section entitled "Management's Discussion and Analysis"
appearing on pages 17 and 18 of the Company's 1998 Annual Report to
Stockholders, incorporated herein by reference.
CAPITAL EXPENDITURES. During the three fiscal years ended May 31, 1998,
General Mills expended $475 million for capital expenditures, not including the
cost of acquired companies. The Company expects to spend approximately $215
million for such purposes in fiscal 1999.
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 850, 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 $66.3 million in fiscal 1998, $61.4 million in
fiscal 1997 and $60.1 million in fiscal 1996. 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 31, 1998, General Mills had approximately 10,200
employees.
ENVIRONMENTAL MATTERS. As of June 30, 1998, the Company has received
notices advising it that there have been releases or threatened releases of
hazardous substances or wastes at 12 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. Geographic financial information is
found in Note Nineteen to Consolidated Financial Statements appearing on page 33
of the Company's 1998 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.
Y. Marc Belton, age 39, is Vice President; President, New Ventures. 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,
named President, Snacks in 1994 and named to his present position in 1997.
Peter J. Capell, age 41, is Vice President; President, Snacks. Mr. Capell
joined the Company in 1985 and served in various marketing and general
management positions. He was appointed a Vice President of the Company in 1996,
named Marketing Director, Cheerios Business Unit in 1996 and named to his
present position in 1997.
Randy G. Darcy, age 47, is Senior Vice President, Operations. Mr. Darcy
joined the Company in 1987, was named Vice President, Director of Manufacturing,
Technology and Operations in 1989 and was named to his present position in 1994.
Stephen R. Demeritt, age 54, is Executive Vice President of General Mills
and Chief Executive Officer of Cereal Partners Worldwide. Mr. Demeritt joined
the Company in 1969, 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 44, is Senior Vice President, Global Convenience Foods,
which includes Yoplait-Colombo, refrigerated bakery snacks and domestic and
international snack foods. 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 Senior Vice President, Gold Medal in 1996. He was
named to his present position in 1998.
Ian R. Friendly, age 37, is Vice President; President, Yoplait-Colombo. Mr.
Friendly joined the Company in 1983 and served in various food marketing
management positions. He was appointed a Vice President of the Company in 1990
with responsibility for the New Enterprise Business Unit of Big G and was
subsequently appointed to lead the Child Cereals Business Unit of Big G in 1993
and the Asia/Pacific and Latin America Business Development of CPW, S.A. in
1994. He was named to his present position in 1998.
Charles W. Gaillard, age 57, has been President of General Mills since
1995. Mr. Gaillard joined General Mills in 1966 and advanced through various
food marketing management positions, becoming Executive Vice President in 1989
and Vice Chairman in 1993. From 1989 to 1993 he was Chief Executive Officer of
Cereal Partners Worldwide.
Eric J. Larson, age 42, is Senior Vice President, Investor Relations. 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 PaineWebber.
Siri S. Marshall, age 50, is Senior Vice President and General Counsel. 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.
Michael A. Peel, age 48, is Senior Vice President, Human Resources. 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 44, is Senior Vice President; President, Big G. 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
President, Yoplait USA in 1995 and elected to his present position in 1998.
Jeffrey J. Rotsch, age 48, is Senior Vice President, Sales. Mr. Rotsch
joined the Company in 1974 and served as the head of several divisions,
including Betty Crocker and Big G. He was elected Senior Vice President in 1993
and named to his present position in 1998.
Stephen W. Sanger, age 52, has been Chairman and Chief Executive Officer of
General Mills, Inc. since 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, an Executive Vice President in 1991,
Vice Chairman in 1992 and President in 1993.
Christina L. Shea, age 45, is Senior Vice President; President, Betty
Crocker. Ms. Shea 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 President of Betty Crocker in 1994. She was
named to her present position in 1998.
Robert L. Stretmater, age 54, is Vice President; President, Foodservice.
Mr. Stretmater joined the Company in 1967 and was appointed a Vice President in
1987. He was appointed Vice President, Director of Marketing for the Gold Medal
Division in 1989, Vice President, Director of Marketing for Foodservice in 1996
and named to his present position in 1997.
Danny L. Strickland, age 49, is Senior Vice President, Innovation,
Technology and Quality. Mr. Strickland joined the Company in this position in
1997 from Johnson & Johnson where he held the position of Executive Vice
President, Worldwide Absorbent Products and Material Research from 1993 to 1997.
Prior to joining Johnson & Johnson he spent five years at Kraft General Foods as
Vice President of Technology.
Austin P. Sullivan, Jr., age 58, 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 assumed responsibility for
Corporate Communications in 1993. He was named to his present position in 1994.
Kenneth L. Thome, age 50, 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 54, is Vice Chairman of the Company, with overall
responsibility for international operations, global convenience foods, business
development and financial activities. 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.
AVAILABLE INFORMATION
General Mills is a reporting company under the Securities Exchange Act of
1934, as amended, and files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The public may read
and copy any Company filings at the Commission's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the Commission at
1-800-SEC-0330. Because the Company makes filings to the Commission
electronically, you may access this information at the Commission's Internet
site (http://www.sec.gov). This site contains reports, proxies and information
statements and other information regarding issuers that file electronically with
the Commission. You can also learn more about General Mills at our web site
(http://www.genmills.com).
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 annual or 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 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.
Our future results could be affected by a variety of factors such as
competitive dynamics in the U.S. ready-to-eat cereal market, including pricing
and promotional spending levels by premium branded manufacturers and by
lower-priced bagged cereal and private label competitors. Results could also be
affected by other external factors such as: economic conditions; the impact of
competitive products and pricing; product development; actions of competitors
other than as described above; 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 operated in Canada.
General Mills operates nine 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 (2); Cincinnati, Ohio; Covington,
Georgia; Lodi, California; and Toledo, Ohio. 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 29 locations, primarily in Idaho and Montana.
General Mills also has eight other food and beverage production facilities
with total floor space of approximately 493,000 square feet, including 64,000
square feet of leased space. General Mills also owns or leases warehouse space
aggregating approximately 8,330,000 square feet, of which approximately
5,573,000 square feet are leased. A number of sales and administrative offices
are maintained in the United States and Canada, totaling 1,800,000 square feet.
ITEM 3. LEGAL PROCEEDINGS.
In management's opinion, there were no claims or litigation pending at May
31, 1998, the outcome of which could have a material adverse effect on the
consolidated financial position or results of operations of the Company. 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 Twenty to Consolidated Financial
Statements appearing on page 34 of Registrant's 1998 Annual Report to
Stockholders is incorporated herein by reference. As of July 30, 1998, the
number of record holders of common stock was 41,903. 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 1994 through 1998 contained in the
Eleven-Year Financial Summary on page 35 of Registrant's 1998 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
and Analysis" on pages 15 through 18 of Registrant's 1998 Annual Report to
Stockholders is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information set forth in the "Market Risk Management" subsection of the
section entitled "Management's Discussion and Analysis" on pages 17 and 18 of
Registrant's 1998 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information on pages 19 through 34 of Registrant's 1998 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 14, 1998 is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information contained on pages 20 through 23 of Registrant's definitive
proxy materials dated August 14, 1998 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 14, 1998 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 31, 1998,
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.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and the Board of Directors
General Mills, Inc.:
Under date of June 30, 1998, we reported on the consolidated balance sheets
of General Mills, Inc. and subsidiaries as of May 31, 1998 and May 25, 1997 and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended May 31, 1998,
as contained in the 1998 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 31, 1998. 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 in fiscal 1997 for impairment of long-lived
assets and for long-lived assets to be disposed of.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 30, 1998
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
General Mills, Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos. 2-49637 and 333-00745) on Form S-3 and Registration Statements (Nos.
2-13460, 2-53523, 2-95574, 33-24504, 33-27628, 33-32059, 33-36892, 33-36893,
33-50337, 33-62729, 333-13089 and 333-32509) on Form S-8 of General Mills, Inc.
of our reports dated June 30, 1998, relating to the consolidated balance sheets
of General Mills, Inc. and subsidiaries as of May 31, 1998 and May 25, 1997 and
the related consolidated statements of earnings, stockholders' equity, cash
flows and related financial statement schedule for each of the fiscal years in
the three-year period ended May 31, 1998, which reports are included or
incorporated by reference in the May 31, 1998 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 in fiscal 1997 for impairment of long-lived
assets and for long-lived assets to be disposed of.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 21, 1998
<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 31,
1998, May 25, 1997 and May 26, 1996 (incorporated herein by reference to
page 20 of the Registrant's 1998 Annual Report to Stockholders).
Consolidated Balance Sheets at May 31, 1998 and May 25, 1997
(incorporated herein by reference to page 21 of the Registrant's 1998
Annual Report to Stockholders).
Consolidated Statements of Cash Flows for the Fiscal Years Ended May 31,
1998, May 25, 1997 and May 26, 1996 (incorporated herein by reference to
page 22 of the Registrant's 1998 Annual Report to Stockholders).
Consolidated Statements of Stockholders' Equity for the Fiscal Years
Ended May 31, 1998, May 25, 1997 and May 26, 1996 (incorporated herein
by reference to page 23 of the Registrant's 1998 Annual Report to
Stockholders).
Notes to Consolidated Financial Statements (incorporated herein by
reference to pages 24 through 34 of the Registrant's 1998 Annual Report
to Stockholders).
2. FINANCIAL STATEMENT SCHEDULES:
For the Fiscal Years Ended May 31, 1998, May 25, 1997 and May 26, 1996:
II- Valuation and Qualifying Accounts
3. EXHIBITS:
EXHIBIT NO. DESCRIPTION
3.1 Registrant's Restated Certificate of Incorporation, as amended
to date (incorporated herein by reference to Exhibit 3(i) to
Registrant's Quarterly Report on Form 10-Q for the period ended
August 24, 1997).
3.2 Registrant's By-Laws, as amended to date.
4.1 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 4.1 to Registrant's Annual Report on Form
10-K for the fiscal year ended May 25, 1997).
4.2 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 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).
4.4 Indenture between Ralcorp Holdings, Inc. and The First National
Bank of Chicago, as supplemented to date by the First
Supplemental Indenture among Ralcorp Holdings, Inc., Registrant
and The First National Bank of Chicago (incorporated herein by
reference to Exhibit 4.1 to Registrant's Report on Form 8-K
dated January 31, 1997).
<PAGE>
EXHIBIT NO. DESCRIPTION
*10.1 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 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).
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 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 25, 1997).
*10.5 Management Continuity Agreement (incorporated herein by
reference to Exhibit 4 to Registrant's Report on Form 8-K dated
December 11, 1995).
*10.6 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 Executive Survivor Income Plan, as amended to date (incorporated
herein by reference to Exhibit 10.7 to Registrant's Annual
Report on Form 10-K for the fiscal year ended May 26, 1996).
*10.8 Executive Health Plan, as amended to date (incorporated herein
by reference to Exhibit 10.8 to Registrant's Annual Report on
Form 10-K for the fiscal year ended May 26, 1996).
*10.9 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 1996 Compensation Plan for Non-Employee Directors, as amended to
date.
*10.11 General Mills, Inc. 1995 Salary Replacement Stock Option Plan,
as amended to date.
*10.12 General Mills, Inc. Deferred Compensation Plan, as amended to
date.
*10.13 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 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 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 Protocol and Addendum No. 1 to Protocol of Cereal Partners
Worldwide (incorporated herein by reference to Exhibit 10.16 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 26, 1996).
*10.17 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).
10.18 Addendum No. 2 dated March 16, 1993 to Protocol of Cereal
Partners Worldwide.
10.19 Agreement dated July 31, 1992 by and between General Mills,
Inc. and PepsiCo, Inc.
*10.20 Stock Option and Long-Term Incentive Plan of 1993, as amended to
date (incorporated herein by reference to Exhibit 10.20 to
Registrant's Annual Report on Form 10-K for the fiscal year
ended May 25, 1997).
10.21 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).
* 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.
<PAGE>
EXHIBIT NO. DESCRIPTION
12 Statement of Ratio of Earnings to Fixed Charges (contained on
page 15 of this Report).
13 1998 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 8 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.
<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 21, 1998
By: /s/ S. S. MARSHALL
-----------------------
S. S. Marshall
Senior Vice President and General Counsel
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 7/29/98
(Richard M. Bressler)
/s/ L. DE SIMONE Director 7/30/98
(Livio D. DeSimone)
/s/ W.T. ESREY Director 8/3/98
(William T. Esrey)
/s/ C. W. GAILLARD Director, 7/29/98
(Charles W. Gaillard) President
/s/ RAYMOND V. GILMARTIN Director 7/31/98
(Raymond V. Gilmartin)
/s/ JUDITH R. HOPE Director 8/4/98
(Judith R. Hope)
/s/ KENNETH MACKE Director 7/30/98
(Kenneth A. Macke)
/s/ M.D. ROSE Director 7/30/98
(Michael D. Rose)
/s/ S. W. SANGER Chairman of the Board and 7/29/98
(Stephen W. Sanger) Chief Executive Officer
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ A. MICHAEL SPENCE Director 7/30/98
(A. Michael Spence)
/s/ D. A. TERRELL Director 8/3/98
(Dorothy A. Terrell)
/s/ RAYMOND G. VIAULT Director 7/29/98
(Raymond G. Viault) Vice Chairman
/s/ C. ANGUS WURTELE Director 7/30/98
(C. Angus Wurtele)
/s/ KENNETH L. THOME Senior Vice President, 8/17/98
(Kenneth L. Thome) Financial Operations
(Principal Accounting Officer)
<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 31, 1998.. $4.1 $ .7 $1.6 (a) $4.2
(1.0)(b)
---- ---- ---- ----
Total................ $4.1 $ .7 $ .6 $4.2
==== ==== ==== ====
Year ended May 25, 1997.. $4.1 $ .6 $1.1 (a) $4.1
(.5)(b)
---- ---- ---- ----
Total................ $4.1 $ .6 $ .6 $4.1
==== ==== ==== ====
Year ended May 26, 1996.. $4.1 $ .1 $ .4 (a) $4.1
(.3)(b)
---- ---- ---- ----
Total................ $4.1 $ .1 $ .1 $4.1
==== ==== ==== ====
- - -------------------
Notes:
(a) Bad debt write-offs.
(b) Other adjustments and reclassifications.
<PAGE>
EXHIBIT 12
GENERAL MILLS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
May 31, May 25, May 26, May 28, May 29,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges..5.63 6.54 6.94 4.10 6.18
</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.
<PAGE>
EXHIBIT INDEX
3.2 Registrant's By-Laws, as amended to date.
10.10 1996 Compensation Plan for Non-Employee Directors, as amended to date.
10.11 General Mills, Inc. 1995 Salary Replacement Stock Option Plan, as
amended to date.
10.12 General Mills, Inc. Deferred Compensation Plan, as amended to date.
10.18 Addendum No. 2 dated March 16, 1993 to Protocol of Cereal Partners
Worldwide.
10.19 Agreement dated July 31, 1992 by and between General Mills, Inc. and
PepsiCo, Inc.
12 Statement of Ratio of Earnings to Fixed Charges.
13 1998 Annual Report to Stockholders (only portions).
21 List of Subsidiaries of General Mills, Inc.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
EXHIBIT 3.2
BY-LAWS
of
GENERAL MILLS, INC.
as amended
through
June 22, 1998
<PAGE>
INDEX OF BY-LAWS
Page
ARTICLE I. STOCKHOLDERS.........................................1
Section 1. Place of Holding Meeting.............................1
Section 2. Quorum...............................................1
Section 3. Adjournment of Meetings..............................1
Section 4. Annual Election of Directors.........................1
Section 5. Special Meetings: How Called.........................2
Section 6. Voting at Stockholders' Meetings.....................2
Section 7. Notice of Stockholders' Meetings.....................2
Section 8. Notice of Stockholder Business and Nominations.......3
ARTICLE II. DIRECTORS............................................5
Section 1. Organization.........................................5
Section 2. Election of Officers.................................5
Section 3. Regular Meetings.....................................5
Section 4. Special Meetings: How Called: Notice................5
Section 5. Number: Qualifications: Quorum: Term................6
Section 6. Place of Meetings....................................6
Section 7. Powers of Directors..................................6
Section 8. Vacancies............................................6
Section 9. Resignation of Directors.............................6
Section 10. Compensation of Directors............................6
Section 11. Executive Committee..................................7
Section 12. Executive Committee: Powers..........................7
Section 13. Executive Committee: Organization: Meetings, Etc.....7
Section 14. Resignation and Removal of Member of Executive
Committee.........................................8
Section 15. Vacancies in the Executive Committee.................8
Section 16. Other Committees.....................................8
ARTICLE III. OFFICERS.............................................9
Section 1. Titles...............................................9
Section 2. Chairman.............................................9
Section 3. Vice Chairman........................................9
Section 4. President............................................9
Section 5. Vice President(s)....................................9
Section 6. Secretary............................................9
Section 7. Assistant Secretary.................................10
Section 8. Treasurer...........................................10
Section 9. Assistant Treasurer.................................10
Section 10. Senior Vice President, Financial Operations.........11
Section 11. Resignation and Removal of Officers.................11
Section 12. Salaries............................................11
i
<PAGE>
Page
ARTICLE IV. CAPITAL STOCK.......................................11
Section 1. Issue of Certificates of Stock......................11
Section 2. Transfer of Shares..................................12
Section 3. Dividends...........................................12
Section 4. Lost Certificates...................................12
Section 5. Rules as to Issue of Certificates...................12
Section 6. Holder of Record Deemed Holder in Fact..............12
Section 7. Closing of Transfer Books or Fixing Record Date.....12
ARTICLE V. CONTRACTS, CHECKS, DRAFTS,
BANK ACCOUNTS, ETC...............................13
Section 1. Contracts, Etc.: How Executed.......................13
Section 2. Loans...............................................13
Section 3. Deposits............................................13
Section 4. Checks, Drafts, Etc.................................14
Section 5. Transaction of Business.............................14
ARTICLE VI. MISCELLANEOUS PROVISIONS............................14
Section 1(a) Fiscal Year.........................................14
Section 1(b) Staff and Divisional Titles.........................14
Section 2. Notice and Waiver of Notice.........................14
Section 3. Inspection of Books.................................15
Section 4. Construction........................................15
Section 5. Adjournment of Meetings.............................15
Section 6. Indemnification.....................................15
Section 7. Resolution of Board of Directors Providing for
Issuance of Cumulative Preference Stock...........17
ARTICLE VII. AMENDMENTS..........................................18
Section 1. Amendment of By-Laws................................18
<PAGE>
BY-LAWS
of
GENERAL MILLS, INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. Place of Holding Meeting: Meetings of stockholders may be held
within or without the State of Delaware, and, unless otherwise determined by the
board of directors or the stockholders, all meetings of the stockholders shall
be held at the principal office of the corporation in the City of Minneapolis in
the State of Minnesota.
SECTION 2. Quorum: Any number of stockholders together holding one-half
(1/2) in amount of the stock issued and outstanding entitled to vote, who shall
be present in person or represented by proxy at any meeting duly called, shall
constitute a quorum for the transaction of business, except as may be otherwise
provided by law, by the certificate of incorporation, or by these by-laws. At
any meeting of stockholders for the election of directors at which any class or
classes of stock or any one or more series of any class or classes of stock
shall have a separate vote as such class or series for the election of directors
by such class or series, the absence of a quorum of any other class of stock or
of any other series of any class of stock shall not prevent the election of the
directors to be elected by such class or series.
SECTION 3. Adjournment of Meetings: If less than a quorum shall be in
attendance at the time for which the meeting shall have been called, the meeting
may be adjourned from time to time by the chairman of the meeting or by a
majority vote of the stockholders present or represented, without any notice
other than by announcement at the meeting, until a quorum shall attend. Any
meeting at which a quorum is present may also be adjourned, in like manner, for
such time, or upon such call, as may be determined by the chairman of the
meeting or by a majority vote of the stockholders. At any such adjourned meeting
at which a quorum may be present any business may be transacted which might have
been transacted at the meeting as originally called. In the absence of a quorum
of any class or classes of stock or any one or more series of any class or
classes of stock at any meeting of stockholders at which more than one class or
series of stock shall be entitled to vote separately as a class or series for
the election of directors, a majority in interest of the stockholders present in
person or by proxy of the class or classes or one or more series of stock which
lack a quorum shall also have the power to adjourn the meeting for the election
of directors which they are entitled to elect, from time to time, without notice
other than by announcement at the meeting, until a quorum of such class or
classes or one or more series of stock shall be present.
SECTION 4. Annual Election of Directors: The annual meeting of
stockholders for the election of directors and the transaction of other business
shall be held on such date and at such time as may be fixed by resolution of the
board of directors.
After the first election of directors no stock shall be voted on at any
election which shall have been transferred on the books of the corporation
within twenty (20) days next preceding such election, except where the transfer
books of the corporation shall have been closed or a date shall have been fixed
as a record date for the determination of the stockholders entitled to vote, as
hereinafter in article IV, section 7 of these by-laws provided.
The directors elected annually shall hold office until the next annual
election and until their successors are respectively elected and qualified;
provided, however, in the event that the holders of any class or classes of
stock or any one or more series of any class or classes of stock have the right
to elect directors separately as a class or series and such right shall have
vested, such right may be exercised as provided in the certificate of
incorporation of the corporation.
The secretary shall prepare, or cause to be prepared, at least ten (10)
days before every election, a complete list of stockholders entitled to vote,
arranged in alphabetical order, and such list shall be open at the place where
the election is to be held, for such ten (10) days, to the examination of any
stockholder, and shall be produced and kept at the time and place of election
during the whole time thereof, subject to the inspection of any stockholder who
may be present.
SECTION 5. Special Meetings: How Called: Special meetings of the
stockholders for any purpose or purposes may be called by the chairman of the
board of directors or by resolution of the board of directors. Special meetings
of the holders of any class or classes of stock or any one or more series of any
class or classes of stock for the purpose of electing directors in accordance
with a special right as a class or series shall be called as provided in the
certificate of incorporation of the corporation.
SECTION 6. Voting at Stockholders' Meetings: The board of directors shall
determine the voting power of any cumulative preference stock in accordance with
article IV of the certificate of incorporation. At all meetings of stockholders
all questions, except as otherwise provided by law or the certificate of
incorporation, shall be determined by a majority vote in interest of the
stockholders entitled to vote present in person or represented by proxy;
provided, however, that any qualified voter may demand a stock vote, and in that
case, such stock vote shall immediately be taken. A stock vote shall be by
ballot and each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and shall state the number of shares voted.
Shares of its own capital stock belonging to the corporation shall not be voted
upon directly or indirectly. The vote on stock of the corporation may be given
by the stockholder entitled thereto in person or by his proxy appointed by an
instrument in writing, subscribed by such stockholder or by his attorney
thereunto authorized, and delivered to the secretary of the meeting. No proxy
shall be voted on after three (3) years from its date, unless said proxy
provides for a longer period. In determining the number of votes cast for or
against a proposal, shares abstaining from voting on a matter (including
elections) will not be treated as a vote for or against the proposal. A non-vote
by a broker will be treated as if the broker never voted.
SECTION 7. Notice of Stockholders' Meetings: Written notice, stating the
time and place of the meeting and, in case of a special meeting, stating also
the general nature of the business to be considered, shall be given by the
secretary by mailing, or causing to be mailed, such notice, postage prepaid, to
each stockholder entitled to vote, at his post office address as the same
appears on the stock books of the corporation, or by delivering such notice to
him personally, at least ten (10) days before the meeting.
SECTION 8. Notice of Stockholder Business and Nominations:
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the board of directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual
meeting of stockholders (A) pursuant to the corporation's notice of
meeting, (B) by or at the direction of the board of directors or (C) by
any stockholder of the corporation who was a stockholder of record at the
time of giving of notice provided for in this section 8, who is entitled
to vote at the meeting and who complies with the notice procedures set
forth in this section 8.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (C) of
paragraph (a)(1) of this section 8, the stockholder must have given timely
notice thereof in writing to the secretary of the corporation and such
other business must otherwise be a proper matter for stockholder action.
To be timely, a stockholder's notice shall be delivered to the secretary
at the principal executive offices of the corporation not later than the
close of business on the 60th day nor earlier than the close of business
on the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to
such annual meeting and not later than the close of business on the later
of the 60th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first made
by the corporation. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving
of a stockholder's notice as described above. Such stockholder's notice
shall set forth (A) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating
to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14a-11
thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (B)
as to any other business that the stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as
to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address
of such stockholder, as they appear on the corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this section 8 to the contrary, in the event that the
number of directors to be elected to the board of directors of the
corporation is increased and there is no public announcement by the
corporation naming all of the nominees for director or specifying the size
of the increased board of directors at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this section 8 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the secretary at the principal executive offices of
the corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting.
Nominations of persons for election to the board of directors may be made
at a special meeting of stockholders at which directors are to be elected
pursuant to the corporation's notice of meeting (A) by or at the direction
of the board of directors or (B) provided that the board of directors has
determined that directors shall be elected at such meeting, by any
stockholder of the corporation who is a stockholder of record at the time
of giving of notice provided for in this section 8, who shall be entitled
to vote at the meeting and who complies with the notice procedures set
forth in this section 8. In the event the corporation calls a special
meeting of stockholders for the purpose of electing one or more directors
to the board of directors, any such stockholder may nominate a person or
persons (as the case may be), for election to such position(s) as
specified in the corporation's notice of meeting, if the stockholder's
notice required by paragraph (a)(2) of this section 8 shall be delivered
to the secretary at the principal executive offices of the corporation not
earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th
day prior to such special meeting or the 10th day following the day on
which public announcement is first made of the date of the special meeting
and of the nominees proposed by the board of directors to be elected at
such meeting. In no event shall the public announcement of an adjournment
of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this section 8 shall be eligible to serve
as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this section 8. Except as otherwise
provided by law, the chairman of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be brought
before the meeting was made or proposed, as the case may be, in accordance
with the procedures set forth in this section 8 and, if any proposed
nomination or business is not in compliance with this section 8, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this section 8, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and
Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.
(3) Notwithstanding the foregoing provisions of this section
8, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this section 8. Nothing in this section 8 shall be
deemed to affect any rights (i) of stockholders to request inclusion of
proposals in the corporation's proxy statement pursuant to Rule 14a-8
under the Exchange Act or any successor rule regarding shareholder
proposals or (ii) of the holders of any series of cumulative preference
stock to elect directors under specified circumstances pursuant to the
terms of such preference stock.
ARTICLE II
DIRECTORS
SECTION 1. Organization: The board of directors may hold a meeting for the
purpose of organization and the transaction of other business, if a quorum be
present, immediately before or after the annual meeting of the stockholders and
immediately before or after any special meeting at which directors are elected.
Notice of such meeting need not be given. Such organizational meeting may be
held at any other time or place, which shall be specified in a notice given as
hereinafter provided for special meetings of the board of directors, or in a
consent and waiver of notice thereof signed by all the directors.
SECTION 2. Election of Officers: At such meeting the board of directors
may elect from among its number a chairman of the board of directors, one or
more persons to serve as a vice chairman; a president and one or more corporate
and company vice presidents, a secretary, a treasurer, a senior vice president,
financial operations, one or more assistant secretaries, and one or more
assistant treasurers who need not be members of the Board of Directors. Such
officers shall hold office until the next annual election of officers and until
their successors are respectively elected and qualified, unless removed by the
board of directors as provided in section 11 of article III.
SECTION 3. Regular Meetings: Regular meetings of the board of directors
shall be held on such dates as are designated, from time to time, by resolutions
of the board, and shall be held at the principal office of the corporation, or
at such other location as the board selects. Each regular meeting shall commence
at the time designated by the Chairman of the Board on at least five (5) days'
written notice to each director when sent by mail and on at least three (3)
days' notice when sent by private express carrier or transmitted by telex,
facsimile or similar means.
SECTION 4. Special Meetings: How Called: Notice: Special meetings of the
board of directors may be called by the chairman of the board, a vice chairman
of the board, the president or by any three (3) directors who are not salaried
officers or salaried employees of the corporation. Written notice of the time,
place and purposes of each special meeting shall be sent by private express
carrier or transmitted by telex, facsimile or similar means to each director at
least twenty-four (24) hours prior to such meeting. Notwithstanding the
preceding, any meeting of the board of directors shall be a legal meeting
without any notice thereof if all the members of the board shall be present, or
if all absent members waive notice thereof.
SECTION 5. Number: Qualifications: Quorum: Term:
(a) The Board of Directors shall determine the number of directors on
the board, which shall be at least twelve (12).
(b) No person shall be eligible to become or to remain a director of
the corporation unless the person is a stockholder in the corporation. Not
more than six (6) of the members of the board of directors shall be officers
or employees of the corporation, but the chairman of the board shall not be
deemed such an officer or employee.
(c) Subject to the provisions of the certificate of incorporation, as
amended, one-third (1/3) of the total number of the directors (but in no
event less than two (2)) shall constitute a quorum for the transaction of
business. The affirmative vote of the majority of the directors present at a
meeting at which a quorum is constituted shall be the act of the board of
directors, unless the certificate of incorporation shall require a vote of a
greater number.
(d) Except as otherwise provided in these by-laws, directors shall hold
office until the next succeeding annual stockholders' meeting and thereafter
until their successors are respectively elected and qualified.
SECTION 6. Place of Meetings: The board of directors may hold its meetings
and keep the books of the corporation outside of the State of Delaware, at any
office or offices of the corporation, or at any other place, as it may from time
to time by resolution determine.
SECTION 7. Powers of Directors: The board of directors shall have the
management of the business of the corporation, and, subject to the restrictions
imposed by law, by the certificate of incorporation or by these by-laws, may
exercise all the powers of the corporation.
SECTION 8. Vacancies: Except as otherwise provided in the certificate of
incorporation, any vacancy in the board of directors because of death,
resignation, disqualification, increase in number of directors, or any other
cause may be filled by a majority of the remaining directors, though less than a
quorum, at any regular or special meeting of the directors; or any such vacancy
resulting from any cause whatsoever may be filled by the stockholders at the
first annual meeting held after such vacancy shall occur or at a special meeting
thereof called for the purpose.
SECTION 9. Resignation of Directors: Any director of the corporation may
resign at any time by giving written notice to the chairman of the board or to
the secretary of the corporation. Such resignation shall take effect at the time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 10. Compensation of Directors: The board of directors shall have the
authority to fix the compensation of directors. In addition, each director shall
be entitled to be reimbursed by the corporation for expenses incurred in
attending meetings of the board of directors or of any committee of which he or
she is a member. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation for such services from the corporation; provided, however, that any
person who is receiving a stated compensation as an officer of the corporation
for services as such officer shall not receive any additional compensation for
services as a director during such period. A director entitled to receive stated
compensation for services as director, who shall serve for only a portion of a
year, shall be entitled to receive only that portion of the annual stated
compensation on which the period of service during the year bears to the entire
year. The annual compensation of directors shall be paid at such times and in
such installments as the board of directors may determine.
SECTION 11. Executive Committee:
(a) The board of directors may appoint from its number an executive
committee of not less than eight (8) members.
(b) Not more than four (4) members shall be officers or employees of
the corporation but the chairman of the board shall not be deemed such an
officer or employee.
(c) A majority shall constitute a quorum, and in every case the
affirmative vote of a majority of all the members of the committee shall be
necessary for the adoption of any motion, provided that in order to procure
and maintain a quorum at any meeting of the executive committee in the
absence or disqualification of any member of such committee, the member or
members thereof present at such meeting and not disqualified from voting,
whether or not they constitute a quorum, may unanimously appoint another
member of the board of directors (subject always to the limitations of
subsection (b) above) to act at the meeting in the place of any such absent
or disqualified member.
(d) Each member of the executive committee, if appointed, shall hold
office until the election at the next succeeding annual meeting of the
stockholders of the corporation of a new board of directors; subject to the
provisions of section 14 of this article.
SECTION 12. Executive Committee: Powers: During the intervals
between the meetings of the board of directors, the executive committee
shall have and may exercise all the powers of the board of directors in the
management of the business and affairs of the corporation, including power
to authorize the execution of any papers and to authorize the seal of the
corporation to be affixed to all papers which may require it, in such
manner as such committee shall deem best for the interests of the
corporation, in all cases in which specific directions shall not have been
given by the board of directors.
SECTION 13. Executive Committee: Organization: Meetings, Etc.: The chairman
of the executive committee shall preside at all meetings of the executive
committee and the secretary of the corporation shall act as secretary of the
executive committee. In the absence of the chairman of the executive committee
the committee shall appoint another member thereof to act as chairman of the
meeting, and in the absence of the secretary, an assistant secretary of the
corporation shall act as secretary of the meeting. In the absence of all of such
persons, the committee shall appoint a chairman or a secretary of the meeting,
as the case may be. If an executive committee shall be appointed it shall hold
regular meetings on such dates and at such times and places as the chairman or a
majority of the members of the executive committee shall determine, unless the
board of directors shall otherwise provide. A special meeting of the executive
committee may be called by the chairman of the board, the chairman of the
executive committee or the secretary of the corporation upon such notice as may
be given for special meetings of the board of directors. Any meeting of the
executive committee shall be a legal meeting without notice thereof if all the
members of the committee shall be present or if all absent members waive notice
thereof. The committee shall keep a record of its acts and proceedings and
report thereon to the board of directors at the regular meeting thereof held
next after they shall have been taken.
SECTION 14. Resignation and Removal of Member of Executive Committee: Any
member of the executive committee may resign at any time or may be removed at
any time either with or without cause by resolution adopted by a majority of the
whole board of directors at any meeting of the board of directors at which a
quorum is present.
SECTION 15. Vacancies in the Executive Committee: Any vacancy in the
executive committee shall be filled in the manner prescribed by these by-laws
for the original appointment of such committee.
SECTION 16. Other Committees: The board of directors may by resolution
designate one or more other committees, in addition to the executive committee,
each of which shall consist of two or more directors of the corporation. The
board of directors may designate one or more directors as alternate members of
any such other committee, who may replace any absent or disqualified member at
any meeting of such committee. Any such other committee may, to the extent
permitted by law, exercise such powers and shall have such responsibilities as
shall be specified in the designating resolution. In the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not constituting a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member. Each such committee shall keep written minutes of its
proceedings and shall report such proceedings to the board of directors when
required. The chairman or a majority of the members of any such other committee
may fix the time and place of its meetings, unless the board of directors shall
otherwise provide. Notice of such meetings shall be given to each member of the
committee in the manner provided for in sections 3 and 4 of this article II with
respect to meetings of the board of directors. The board of directors shall have
power at any time to fill vacancies in, to change the membership of, or to
dissolve any such committee. Nothing herein shall be deemed to prevent the board
of directors from appointing one or more committees consisting in whole or in
part of persons who are not directors of the corporation; provided, however,
that no such committee shall have or may exercise any authority limited by law
to the board of directors or a committee thereof.
ARTICLE III
OFFICERS
SECTION 1. Titles: The corporate and company officers to be elected by the
board of directors shall be a chairman of the board of directors and one or more
persons to serve as a vice chairman, and a president, who shall be directors,
and one or more corporate or company vice presidents, a secretary, a treasurer,
a senior vice president, financial operations, one or more assistant
secretaries, and one or more assistant treasurers who need not be directors. The
board shall designate one of the corporate officers to serve as chief executive
officer.
SECTION 2. Chairman: The chairman of the board of directors shall preside at
all meetings of the board, all meetings of the stockholders, as well as all
meetings of the executive committee. The chairman, upon being designated the
chief executive officer, shall have supervisory authority over the policies of
the corporation as well as the management and control of the business and
affairs of the corporation. He or she shall also exercise such other powers as
the board of directors may from time to time direct or which may be required by
law.
SECTION 3. Vice Chairman: The officer or officers serving as vice chairman
shall have such duties and responsibilities relating to the management of the
corporation as may be defined and designated by the chief executive officer or
the board of directors.
SECTION 4. President: The president shall have responsibility for the
management of the operating businesses of the corporation and shall do and
perform all acts incident to the office of president or which are authorized by
the chief executive officer, the board of directors or as may be required by
law.
SECTION 5. Vice President(s): Each corporate vice president shall have such
designations and such powers and shall perform such duties as may be assigned by
the board of directors or the chief executive officer. The board of directors
may designate one or more corporate vice presidents to be a senior executive
vice president, executive vice president, senior vice president, or group vice
president.
Each company vice president shall have such designations and such powers,
and shall perform such duties as may be assigned by the board of directors, the
chief executive officer or by a corporate vice president.
SECTION 6. Secretary: The secretary shall:
(a) keep the minutes of the meetings of the stockholders, of the board
of directors and of the executive committee in books provided for the
purpose;
(b) see that all notices are duly given in accordance with the
provisions of these by-laws or as required by law;
(c) be custodian of the records and have charge of the seal of the
corporation and see that it is affixed to all stock certificates prior to
their issuance and to all documents the execution of which on behalf of the
corporation under its seal is duly authorized in accordance with the
provisions of these by-laws;
(d) have charge of the stock books of the corporation and keep or cause
to be kept the stock and transfer books in such manner as to show at any
time the amount of the stock of the corporation issued and outstanding, the
manner in which and the time when such stock was paid for, the names,
alphabetically arranged, and the addresses of the holders of record thereof,
the number of shares held by each, and the time when each became such holder
of record; exhibit or cause to be exhibited at all reasonable times to any
director, upon application, the original or duplicate stock ledger;
(e) see that the books, reports, statements, certificates and all other
documents and records required by law are properly kept, executed and filed;
and
(f) in general, perform all duties incident to the office of secretary,
and such other duties as from time to time may be assigned by the board of
directors.
SECTION 7. Assistant Secretary: The board of directors may elect an
assistant secretary or more than one assistant secretary. At the request of the
secretary, or in his or her absence or disability, an assistant secretary may
perform all the duties of the secretary, and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the secretary. Each
assistant secretary shall have such other powers and shall perform such other
duties as may be assigned by the board of directors.
SECTION 8. Treasurer: The treasurer, if required so to do by the board of
directors, shall give a bond for the faithful discharge of his or her duties in
such sum, and with such sureties, as the board of directors shall require. The
treasurer shall:
(a) have charge and custody of, and be responsible for, all funds and
securities of the corporation (until deposited to the credit or account of
the corporation with an authorized depositary) and deposit all such funds in
the name of the corporation in such banks, banking firms, trust companies or
other depositaries as shall be selected in accordance with the provisions of
article V of these by-laws;
(b) exhibit at all reasonable times the books of account and records to
any of the directors of the corporation upon application during business
hours at the office of the corporation where such books and records are
kept;
(c) receive, and give receipt for, moneys due and payable to the
corporation from any source whatsoever; and
(d) in general, perform all the duties incident to the office of
treasurer and such other duties as from time to time may be assigned by the
board of directors.
The Chief Executive Officer may designate another title for a corporate
officer fulfilling the duties described herein.
SECTION 9. Assistant Treasurer: The board of directors may elect an
assistant treasurer or more than one assistant treasurer. At the request of the
treasurer, or in his or her absence or disability, an assistant treasurer may
perform all the duties of the treasurer and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the treasurer. Each
assistant treasurer shall have such other powers and shall perform such other
duties as may be assigned by the board of directors.
SECTION 10. Senior Vice President, Financial Operations: The senior vice
president, financial operations shall perform all of the duties incident to the
office of senior vice president, financial operations, as such duties may from
time to time be designated or approved by the board of directors. Included in
such duties shall be the establishment and maintenance of sound accounting and
auditing policies and practices, in respect to which duties he or she shall be
responsible directly to the board of directors through its chairman.
The Chief Executive Officer may designate another title for a corporate
officer fulfilling the duties described herein.
SECTION 11. Resignation and Removal of Officers: Any officer of the
corporation may resign at any time by giving written notice to the chairman of
the board or to the secretary. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein the acceptance of such
resignation shall not be necessary to make it effective.
Any officer may be removed for cause at any time by a majority of the board
of directors and any officer may be removed summarily without cause by such
vote.
SECTION 12. Salaries: The salaries of officers shall be fixed from time to
time by the board of directors or the executive committee or other committee
appointed by the board. The board of directors or the executive committee of the
board may authorize and empower the chief executive officer, the president, any
vice chairman, or any vice president of the corporation designated by the board
of directors or by the executive committee to fix the salaries of all officers
of the corporation who are not directors of the corporation. No officer shall be
prevented from receiving a salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE IV
CAPITAL STOCK
SECTION 1. Issue of Certificates of Stock: Certificates for the shares of
the capital stock of the corporation shall be in such forms as shall be approved
by the board of directors. Each stockholder shall be entitled to a certificate
for shares of stock under the seal of the corporation, signed by the chairman,
the president, a vice chairman or a vice president and also by the secretary or
an assistant secretary or by the treasurer or an assistant treasurer; provided,
however, that where a certificate is countersigned by a transfer agent, other
than the corporation or its employee, or by a registrar, other than the
corporation or its employee, the corporate seal and any other signature on such
certificate may be a facsimile, engraved, stamped or printed. In case any
officer, transfer agent or registrar of the corporation who shall have signed,
or whose facsimile signature shall have been used on any such certificate, shall
cease to be such officer, transfer agent or registrar, whether because of death,
resignation, or otherwise, before such certificate shall have been delivered by
the corporation, such certificate shall nevertheless be deemed to have been
adopted by the corporation and may be issued and delivered as though the person
who signed such certificate or whose facsimile signature shall have been used
thereon had not ceased to be such officer, transfer agent or registrar.
SECTION 2. Transfer of Shares: The shares of stock of the corporation shall
be transferable upon its books by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon such transfer the old
certificates shall be surrendered to the corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers, or to such
other person as the board of directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued for the shares so
transferred to the person entitled thereto. A record shall be made of each
transfer and whenever a transfer shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer.
SECTION 3. Dividends: The board of directors may declare lawful dividends as
and when it deems expedient. Before declaring any dividend, there may be
reserved out of the accumulated profits such sum or sums as the board of
directors from time to time, in its discretion, thinks proper for working
capital or as a reserve fund to meet contingencies or for equalizing dividends,
or for such other purposes as the board of directors shall think conducive to
the interests of the corporation.
SECTION 4. Lost Certificates: Any person claiming a certificate of stock to
be lost or destroyed shall make an affidavit or affirmation of that fact, and if
requested to do so by the board of directors of the corporation shall advertise
such fact in such manner as the board of directors may require, and shall give
to the corporation, its transfer agent and registrar, if any, a bond of
indemnity in such sum as the board of directors may direct, but not less than
double the value of stock represented by such certificate, in form satisfactory
to the board of directors and to the transfer agent and registrar of the
corporation, if any, and with or without sureties as the board of directors with
the approval of the transfer agent and registrar, if any, may prescribe;
whereupon the chairman, the president, a vice chairman or a vice president and
the treasurer or an assistant treasurer or the secretary or an assistant
secretary may cause to be issued a new certificate of the same tenor and for the
same number of shares as the one alleged to have been lost or destroyed. The
issuance of such new certificates shall be under the control of the board of
directors.
SECTION 5. Rules as to Issue of Certificates: The board of directors may
make such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates of stock of the corporation. It may
appoint one or more transfer agents and/or registrars of transfers, and may
require all certificates of stock to bear the signature of either or both. Each
and every person accepting from the corporation certificates of stock therein
shall furnish the corporation with a written statement of his or her residence
or post office address, and in the event of changing such residence shall advise
the corporation of such new address.
SECTION 6. Holder of Record Deemed Holder in Fact: The board of directors
shall be entitled to treat the holder of record of any share or shares of stock
as the holder in fact thereof, and accordingly shall not be bound to recognize
any equitable or other claim to, or interest in, such share or shares on the
part of any other person, whether or not it shall have express or other notice
thereof, save as expressly provided by law.
SECTION 7. Closing of Transfer Books or Fixing Record Date: The board of
directors shall have the power to close the stock transfer books of the
corporation for a period not exceeding sixty (60) days preceding the date of any
meeting of stockholders or the date for payment of any dividend or the date for
the allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect; provided, however, that in lieu of closing
the stock transfer books as aforesaid, the board of directors may fix in advance
a date, not exceeding sixty (60) days preceding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, as a record date for the determination of
the stockholders entitled to notice of, and to vote at, any such meeting, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and in such case only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the corporation
after any such record date fixed as aforesaid.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. Contracts, Etc.: How Executed: The board of directors or
such officer or person to whom such power shall be delegated by the board
of directors by resolution, except as in these by-laws otherwise provided,
may authorize any officer or officers, agent or agents, either by name or
by designation of their respective offices, positions or class, to enter
into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined
to specific instances; and, unless so authorized, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement, or to pledge its credit or to render it liable
pecuniarily for any purpose or in any amount.
SECTION 2. Loans: No loans shall be contracted on behalf of the corporation
and no negotiable paper shall be issued in its name, unless and except as
authorized by the vote of the board of directors or by such officer or person to
whom such power shall be delegated by the board of directors by resolution. When
so authorized by the board of directors or by such officer or person to whom
such power shall be delegated by the board of directors by resolution, any
officer or agent of the corporation may obtain loans and advances at any time
for the corporation from any bank, banking firm, trust company or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the corporation, and, when authorized as aforesaid
to give security for the payment of any loan, advance, indebtedness or liability
of the corporation, may pledge, hypothecate or transfer any and all stocks,
securities and other personal property at any time held by the corporation, and
to that end endorse, assign and deliver the same, but only to the extent and in
the manner authorized by the board of directors. Such authority may be general
or confined to specific instances.
SECTION 3. Deposits: All funds of the corporation shall be deposited from
time to time to the credit of the corporation with such banks, banking firms,
trust companies or other depositaries as the board of directors may select or as
may be selected by any officer or officers, agent or agents of the corporation
to whom such power may be delegated from time to time by the board of directors.
SECTION 4. Checks, Drafts, Etc.: All checks, drafts or other orders for the
payment of money, notes, acceptances, or other evidences of indebtedness issued
in the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall be determined
from time to time by resolution of the board of directors or by such officer or
person to whom such power of determination shall be delegated by the board of
directors by resolution. Endorsements for deposit to the credit of the
corporation in any of its authorized depositaries may be made, without any
countersignature, by the chairman of the board, the president, a vice chairman,
or any vice president, or the treasurer or any assistant treasurer, or by any
other officer or agent of the corporation appointed by any officer of the
corporation to whom the board of directors, by resolution, shall have delegated
such power of appointment, or by hand-stamped impression in the name of the
corporation.
SECTION 5. Transaction of Business: The corporation, or any division or
department into which any of the business or operations of the corporation may
have been divided, may transact business and execute contracts under its own
corporate name, its division or department name, a trademark or a trade name.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1.
(a) Fiscal Year: The fiscal year of the corporation shall end with the
last Sunday of May of each year.
(b) Staff and Divisional Titles: The chief executive officer may
appoint at his or her discretion such persons to hold the title of staff
vice president, divisional president or divisional vice president or other
similar designation. Such persons shall not be officers of the corporation
and shall retain such title at the sole discretion of the chief executive
officer who may from time to time make or revoke such designation.
SECTION 2. Notice and Waiver of Notice: Whenever any notice is required by
these by-laws to be given, personal notice to the person is not meant unless
expressly so stated; and any notice so required shall be deemed to be sufficient
if given by depositing the same in a post office or post box in a sealed
postpaid wrapper, addressed to the person entitled thereto at the post office
address as shown on the stock books of the corporation, in case of a
stockholder, and at the last known post office address in case of an officer or
director who is not a stockholder; and such notice shall be deemed to have been
given on the day of such deposit. In the case of notice by private express
carrier, telex, facsimile or similar means, notice shall be deemed to be
sufficient if transmitted or sent to the person entitled to notice or to any
person at the residence or usual place of business of the person entitled to
notice who it is reasonably believed will convey such notice to the person
entitled thereto; and notice shall be deemed to have been given at the time of
receipt at such residence or place of business. Any notice required by these
by-laws may be given to the person entitled thereto personally and attendance of
a person at a meeting shall constitute a waiver of notice of such meeting.
Whenever notice is required to be given under these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice.
SECTION 3. Inspection of Books: The board of directors shall determine from
time to time whether and, if allowed, when and under what conditions and
regulations the accounts, records and books of the corporation (except such as
may, by statute, be specifically open to inspection), or any of them, shall be
open to the inspection of the stockholders, and the stockholders' rights in this
respect are and shall be restricted and limited accordingly.
SECTION 4. Construction: All references herein (i) in the plural shall be
construed to include the singular, (ii) in the singular shall be construed to
include the plural and (iii) in the masculine gender shall be construed to
include the feminine gender, if the context so requires.
SECTION 5. Adjournment of Meetings: If less than a quorum shall be present
at any meeting of the board of directors of the corporation, or of the executive
committee of the board, or other committee, the meeting may be adjourned from
time to time by a majority vote of members present, without any notice other
than by announcement at the meeting, until a quorum shall attend. Any meeting at
which a quorum is present may also be adjourned in like manner, for such time or
upon such call, as may be determined by vote. At any such adjourned meeting at
which a quorum may be present, any business may be transacted which might have
been transacted at the meeting originally held if a quorum had been present
thereat.
SECTION 6. Indemnification:
(a) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he or she is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of such
action or suit if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b), or in
defense of any claim, issue or matter therein, the person shall be
indemnified or reimbursed against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
(d) Any indemnification under sub-sections (a) and (b) (unless ordered
by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because the person
has met the applicable standard of conduct set forth in sub-sections (a) and
(b) of this section. Such determination shall be made (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding,
even though less than a quorum, or (2) by a committee of such directors
designated by a majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or, if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders, or (5) in the case of a determination with respect to
employees or agents (who are not then directors or officers of the
corporation), by the Chief Executive Officer, the President, a Vice Chairman
or the General Counsel.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) The corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against any such person and incurred by any such person in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the provisions of this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as the person would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to an employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
SECTION 7. Resolution of Board of Directors Providing for Issuance of
Cumulative Preference Stock: For purposes of these by-laws the certificate of
incorporation shall be deemed to include any certificate filed and recorded in
accordance with section 151(g) of the Delaware Corporation Law which, in
accordance with said section, sets forth the resolution or resolutions adopted
by the board of directors providing for the issuance of cumulative preference
stock or any series thereof.
ARTICLE VII
AMENDMENTS
SECTION 1. Amendment of By-Laws: All by-laws of the corporation shall be
subject to alteration or repeal, and new by-laws may be made, either by the
stockholders at an annual meeting or at any special meeting, provided notice of
the proposed alteration or repeal or of the proposed new by-laws be included in
the notice of any such special meeting, or by the affirmative vote of a majority
of the whole board of directors of the corporation at any regular meeting or at
any special meeting of the board of directors, provided that notice of the
proposed alteration or repeal or of the proposed new by-laws be included in the
notice of any such special meeting; and provided further that no by-law shall be
adopted which shall be in conflict with the provisions of the certificate of
incorporation or any amendment thereto. By-laws made or altered by the
stockholders or by the board of directors shall be subject to alteration or
repeal either by the stockholders or by the board of directors; provided,
however, that the board of directors shall have no power or authority to alter
or repeal sub-section (b) of section 5 or sub-section (b) of section 11 of
article II of these by-laws respecting eligibility of officers or employees of
the corporation as members of the board of directors and of the executive
committee of the board, or to make any alteration in sub-section (a) of section
5 or in sub-section (a) of section 11 of said article II which would reduce the
number composing the board of directors below twelve (12) or the number
composing the executive committee below eight (8); the sole right to make any
such change being reserved to the stockholders. So long as any class or classes
of stock or any one or more series of any class or classes of stock which have a
separate vote as such class or series for the election of directors by such
class or series shall be outstanding, no alteration, amendment, or repeal of the
provisions of sections 2, 3, 4, 5 and 6 of article I, sections 1, 5, 8 and 9 of
article II, section 7 of article VI, and article VII of these by-laws which
affects adversely the rights or preferences of any such outstanding class or
series of stock shall be made without the consent or affirmative vote of the
holders of at least two-thirds (2/3) of each such class or series entitled to
vote; provided, however, that any increase or decrease in the number of
directors set forth in the first sentence of sub-section (a) of section 5 of
article II shall not be deemed adversely to affect such rights or preferences.
EXHIBIT 10.10
GENERAL MILLS, INC.
1996 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
As Amended Through June 22, 1998
<PAGE>
GENERAL MILLS, INC.
1996 COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
PART I
GENERAL PROVISIONS
A. PURPOSE
The purpose of the General Mills, Inc. 1996 Compensation Plan for
Non-Employee Directors (the "Plan") is to provide a compensation program which
will attract and retain qualified individuals not employed by General Mills,
Inc. or its subsidiaries (the "Company") to serve on the Board of Directors of
the Company (the "Board") and to further align the interests of non-employee
directors with those of the stockholders by providing that a portion of
compensation will be linked directly to increases in stockholder value.
B. EFFECTIVE DATE, DURATION OF PLAN AND TRANSITION RIGHTS
This Plan shall become effective as of September 30, 1996, subject to the
approval of the Plan by the stockholders. The Plan will terminate on September
30, 2001 or such earlier date as determined by the Board or the Compensation
Committee of the Board (the "Committee"); provided that no such termination
shall affect rights earned or accrued under the Plan prior to the date of
termination.
This Plan supersedes and replaces the General Mills, Inc. Compensation Plan
for Non-Employee Directors, effective as of January 1, 1979 (the "1979 Plan"),
the General Mills, Inc. Retirement Plan for Non-Employee Directors, effective as
of April 28, 1986 (the "1986 Plan") and the General Mills Stock Plan for
Non-Employee Directors, effective as of September 17, 1990 (the "1990 Plan").
Participant rights accrued as of September 30, 1996 under the 1979 Plan and the
1990 Plan shall remain in effect but no new rights or benefits shall accrue
pursuant to such plans. The 1986 Plan was terminated in February 1996.
Participants who have accrued rights under the 1986 Plan shall receive a one
time grant of Stock Units ("Stock Units") representing the right to receive
shares of General Mills, Inc. Common Stock ($.10 per value) ("Common Stock")
equal to the value as of September 30, 1996 of the participant's accrued benefit
under the 1986 Plan. The value of each Stock Unit shall be deemed equal to the
mean of the high and low price of shares of Common Stock on the New York
Exchange on September 30, 1996. Common Stock issued in respect of Stock Units
granted in lieu of accrued benefits under the 1986 Plan shall be distributed
commencing on the director's retirement from the Board, on the date or dates
elected by the director at least one year prior to the date of his or her
retirement from the Board. In the absence of such an election, such Common Stock
shall be issued in ten substantially equal annual installments on the January 1
of each year following the year in which the participant ceases to be a
director. Each participant awarded Stock Units shall receive, upon distribution,
one share of Common Stock for each Stock Unit awarded, and the Company shall
issue to and register in the name of each such participant a certificate for
that number of shares of Common Stock. Participants receiving Stock Units
pursuant to this Part I, Section B. shall have the same rights, protections and
limitations as those provided participants receiving Stock Units pursuant to
Part III, Section B.3. and Section C.1. hereof.
C. PARTICIPATION
Each member of the Board who is not an employee of the Company at the date
compensation is earned or accrued shall be eligible to participate in the Plan.
D. COMMON STOCK SUBJECT TO THE PLAN
Common Stock to be issued under this Plan may be made available from the
authorized but unissued Common Stock, shares of Common Stock held in the
treasury, or Common Stock purchased on the open market or otherwise. Subject to
the provisions of the next succeeding paragraph, the maximum aggregate number of
shares authorized to be issued under the Plan shall be 250,000.
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 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, (ii) the
number of shares of Common Stock subject to outstanding awards under the Plan,
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.
PART II
ANNUAL RETAINER AND MEETING FEES
A. COMPENSATION STRUCTURE
1. Each non-employee director shall be entitled to receive an annual
retainer and meeting fees as shall be determined from time to time by
the Board.
2. Each non-employee director of the Company may elect by written notice
to the Company on or before each annual stockholders' meeting to
participate in the compensation alternative provisions of the Plan.
Any combination of the alternatives -- Cash, Deferred Cash and/or
Common Stock -- may be elected, provided the aggregate of the
alternatives elected equals one hundred percent of the non-employee
director's compensation at the time of the election.
3. The election shall remain in effect for a one-year period which shall
begin the day of the annual stockholders' meeting and terminate the
day before the succeeding annual stockholders' meeting (hereinafter
"Plan Year").
4. The Plan Year shall include four plan quarters (hereinafter "Plan
Quarters"). Plan Quarters shall correspond to the Company's fiscal
quarters.
5. A director elected to the Board at a time other than the annual
stockholders' meeting may elect, by written notice to the Company
before such director's term begins, to participate in the compensation
alternatives for the remainder of that Plan Year, and elections for
succeeding years shall be on the same basis as other directors.
6. Periodically, the Company shall supply to each participant an account
statement of participation under the Plan.
B. CASH ALTERNATIVE
1. Each non-employee director who elects to participate under the cash
compensation provision of the Plan shall be paid all or the specified
percentage of his or her compensation for the Plan Year in cash, and
such cash payment shall be made as of the end of each Plan Quarter.
2. If a participant dies during a Plan Year, the balance of the amount
due to the date of the participant's death shall be payable in full to
such participant's designated beneficiary, or, if none, the estate as
soon as practicable following the date of death.
C. DEFERRED CASH ALTERNATIVE
1. Each non-employee director may elect to have all or a specified
percentage of his or her compensation for the Plan Year deferred until
the participant ceases to be a director.
2. For each director who has made this deferred cash election, the
Company shall establish a deferred compensation account and shall
credit such account at the end of each plan quarter for the
compensation due. Interest shall be credited to each such account
monthly based on the following rates as specified by the Committee
from time to time:
a. the rate of return as from time to time earned by the Fixed
Income Fund of the Voluntary Investment Plan of General Mills,
Inc. (VIP); or
b. the rate of return as from time to time earned by the Equity Fund
of the VIP; or
c. any other rates of return of other funds or portfolios
established under a qualified benefit plan maintained by the
Company which the Minor Amendment Committee, or its delegate, in
its discretion, may from time to time establish.
3. Distribution of the participant's deferred compensation account shall
be as follows:
a. at the time, and in the form of payment, elected by the
participant at the time of deferral; or
b. in the absence of an election at the time of deferral, in ten
substantially equal annual installments beginning on January 1 of
each year following the year in which the participant ceases to
be a director; provided, however, that for compensation earned in
Plan Years commencing after December 9, 1996, distributions must
be made or commenced by the later of (i) the date the participant
attains age 70 and (ii) five years after the director's
retirement from the Board.
4. In the event of the termination of a participant from Board service
other than by retirement, the Committee may in its sole discretion
require that distribution of all amounts allocated to a participant's
deferred compensation account be accelerated and distributed as of the
first business day of the calendar year next following termination.
5. The Company has established a Supplemental Benefits Trust with Norwest
Bank Minnesota, N.A. as Trustee to hold assets of the Company under
certain circumstances as a reserve for the discharge of the Company's
obligations as to deferred cash compensation under the Plan and
certain other plans of deferred compensation of the Company. In the
event of a Change in Control as defined in Part IV hereinbelow, the
Company shall be obligated to immediately contribute such amounts to
the Trust as may be necessary to fully fund all cash benefits payable
under the Plan. Any participant of the Plan shall have the right to
demand and secure specific performance of this provision. All assets
held in the trust remain subject only to the claims of the Company's
general creditors whose claims against the Company are not satisfied
because of the Company's bankruptcy or insolvency (as those terms are
defined in the Trust Agreement). No participant has any preferred
claim on, or beneficial ownership interest in, any assets of the Trust
before the assets are paid to the participant and all rights created
under the Trust, as under the Plan, are unsecured contractual claims
of the participant against the Company.
D. GMI COMMON STOCK ALTERNATIVE
1. Each participant may elect to receive all or a specified percentage of
his or her compensation in shares of Common Stock, which will be
issued at the end of each Plan Quarter.
2. The Company shall ensure that an adequate number of shares of Common
Stock are available for distribution to those participants making this
election.
3. Only whole numbers of shares will be issued, with any fractional share
amounts paid in cash.
4. For purposes of computing the number of shares earned each Plan
Quarter, the value of each share shall be equal to the mean of the
high and low price of shares of Common Stock on the New York Stock
Exchange on the third Business Day preceding the last day of each Plan
Quarter. For the purposes of this Plan, "Business Day" shall mean a
day on which the New York Stock Exchange is open for trading.
5. If a participant dies during a Plan Year, the balance of the amount
due to the date of the participant's death shall be payable in full to
the participant's designated beneficiary, or, if none, to the
participant's estate, in cash, as soon as practicable following the
date of death.
PART III
STOCK COMPENSATION
A. NON-QUALIFIED STOCK OPTIONS
1. Grant of Options. Each non-employee director on the effective date of
the Plan (or, if first elected after the effective date of the Plan,
on the date the non-employee director is first elected) shall be
awarded an option (an "Option") to purchase 2,500 shares of Common
Stock. As of the close of business on each successive annual
stockholders' meeting date after the date of the original award, each
non-employee director re-elected to the Board shall be granted an
additional Option to purchase 2,500 shares of Common Stock. All
Options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal
Revenue Code of 1986, as amended.
2. Option Exercise Price. The per share price to be paid by the
non-employee director at the time an Option is exercised shall be 100%
of the Fair Market Value of the Common Stock on the date of grant.
"Fair Market Value" shall equal the mean of the high and low price for
the Common Stock on the New York Stock Exchange on the relevant date
or, if the New York Stock Exchange is closed on that date, on the last
preceding date on which the Exchange was open for trading.
3. Term of Option. Each Option shall expire ten (10) years from the date
of grant.
4. Exercise and Vesting of Option. Each Option will vest on the date of
the annual stockholders' meeting next following the date the Option is
granted. If, for any reason, a non-employee director ceases to serve
on the Board prior to the date an Option vests, such Option shall be
forfeited and all further rights of the non-employee director to or
with respect to such Option shall terminate. If a participant should
die while employed by the Company, any vested Option may be exercised
by the person designated in such participant's last will and testament
or, in the absence of such designation, by the participant's estate
and any unvested Options shall vest and become exercisable in a
proportionate amount, based on the full months of service completed
during the vesting period of the Option from the date of grant to the
date of death.
5. Method of Exercise and Tax Obligations. Each notice of exercise shall
be accompanied by the full purchase price of the shares being
purchased. Such payment may be made in cash, check, shares of Common
Stock valued using the Fair Market Value as of the exercise date or a
combination thereof. The Company may also require payment of the
amount of any federal, state or local withholding tax attributable to
the exercise of an Option or the delivery of shares of Common Stock.
6. Non-transferability. Except as provided by rule adopted by the
Committee, an Option shall be non-assignable and non-transferable by a
non-employee director other than by will or the laws of descent and
distribution. A non-employee director shall forfeit any Option
assigned or transferred, voluntarily or involuntarily, other than as
permitted under this subsection.
B. DEFERRAL OF STOCK OPTION GAINS
Under the Plan, Participants may defer receipt of the net shares of Common
Stock to be issued upon the stock-for-stock exercise of an Option issued
hereunder, as well as dividend equivalents on the net shares.
1. Option Gain Deferral Election. A participant can elect to defer
receipt of Net Shares (defined below) of Common Stock resulting from a
stock-for-stock exercise of an exercisable Option issued to the
participant by completing and submitting to the Company an irrevocable
stock option deferral election at least six months in advance of
exercising the Option (which exercise must be done on or prior to the
expiration of the Option) and, on or prior to the exercise date,
delivering personally-owned shares equal in value to the Option
exercise price on the date of the exercise. "Net Shares" means the
difference between the number of shares of Common Stock subject to the
Option exercise and the number of shares of Common Stock delivered to
satisfy the Option exercise price. A participant may not revoke an
Option gain deferral election after it is received by the Company. A
participant may choose to defer receipt of all or only a portion of
the Net Shares to be received upon exercise of an Option. If only a
portion of the Net Shares is deferred, the balance will be issued at
the time of exercise.
2. Distribution of Deferred Common Stock. At the time of a participant's
election to defer receipt of Common Stock issuable upon an Option
exercise or upon the election to receive Stock Units as provided in
Part III, Section C.1. a participant must also select a distribution
date and a form of distribution. The distribution date may be any date
that is at least one year subsequent to either the exercise date for
the related Option or the date of grant in the case of Stock Units
granted under Part III, Section C.1. but the distribution must be made
or commenced by the later of (i) the date the participant attains age
70 and (ii) five year after the date of the director's retirement from
the Board.
A participant may elect to have deferred Common Stock distributed in a
single payment or in substantially equal annual installments for a
period not to exceed ten (10) years, or in another form requested by
the Participant, in writing, and approved by the Committee. In the
absence of an election, Common Stock issued in respect of Stock Units
shall be distributed in ten substantially equal annual installments
beginning on January 1 of each year following the year in which the
participant ceases to be a director. Common Stock issuable under a
single Option grant or pursuant to a single grant under Part III,
Section C.1. shall have the same distribution date and form of
distribution. Notwithstanding the above, the following provisions
shall apply:
a. If an Option as to which a participant has made an Option gain
deferral election terminates prior to the exercise date selected
by the participant, or if the participant dies or fails to
deliver personally-owned shares in payment of the exercise price,
then the deferral election shall not become effective.
b. In the event of the termination of a participant from Board
service other than by retirement, the Committee may, in its sole
discretion, require that distribution of all Stock Units
allocated to a participant's Deferred Stock Unit Accounts (as
defined in Part III, Section B.3.a. below) be accelerated and
distributed as of the first business day of the calendar year
next following the date of termination.
c. At the time elected by the participant for distribution of Common
Stock attributable to allocations under the participant's
Deferred Stock Unit Accounts, the Company shall cause to be
issued to the Participant, within three (3) days of the date of
distribution, shares of Common Stock equal to the number of Stock
Units credited to the Deferred Stock Unit Account and cash equal
to any dividend equivalent amounts which had not been used to
"purchase" additional Stock Units as provided below. Prior to
distribution and pursuant to any rules the Committee may adopt, a
Participant may authorize the Company to withhold a portion of
the shares of Common Stock to be distributed for the payment of
all federal, state, local and foreign withholding taxes required
to be collected in respect of the distribution.
3. Deferred Stock Unit Accounts and Dividend Equivalents.
a. A deferred stock unit account ("Deferred Stock Unit Account")
will be established for each Option grant covered by a
participant election to defer the receipt of Common Stock under
Part III, Section B.1. above and, for each Net Share deferred, a
Stock Unit will be credited to the Deferred Stock Unit Account as
of the date of the Option exercise. A Deferred Stock Unit Account
will also be established each time a participant elects to
receive Stock Units pursuant to Part III, Section C.1. hereof.
Participants may make an election to receive dividend equivalents
on Stock Units in cash or reinvest such amount, and any change to
such election shall become effective six months after the date of
the change. If the amounts are reinvested, on each dividend
payment date for the Company's Common Stock, the Company will
credit each Deferred Stock Unit Account with an amount equal to
the dividends paid by the Company on the number of shares of
Common Stock equal to the number of Stock Units in the Deferred
Stock Unit Account. Dividend equivalent amounts credited to each
Deferred Stock Unit Account shall be used to "purchase"
additional Stock Units for the Deferred Stock Unit Account at a
price equal to the mean of the high and low price of the Common
Stock on the New York Stock Exchange on the dividend date. No
fractional Stock Units will be credited. The Committee may, in
its sole discretion, direct either that all dividend equivalent
amounts be paid currently or all such amounts be reinvented if,
for any reason, such Committee believes it is in the best
interest of the Company to do so. If the participant fails to
make an election, the dividend equivalent amounts shall be
reinvested. Periodically, each participant will receive a
statement of the number of Stock Units in his or her Deferred
Stock Unit Account(s).
b. Participants who elect under the Plan to defer the receipt of
Common Stock issuable upon the exercise of Options or elect to
receive Stock Units under Part III, Section C.1. below will have
no rights as stockholders of the Company with respect to
allocations made to their Deferred Stock Unit Account(s), except
the right to receive dividend equivalent allocations under Part
III, Section B.3.a. above. Stock Units may not be sold,
transferred, assigned, pledged or otherwise encumbered or
disposed.
C. RESTRICTED STOCK AND STOCK UNITS
1. Awards. On the effective date of the Plan (or, if a non-employee
director is first elected after the effective date of the Plan, on the
date the non-employee director is first elected) and at the close of
business on each successive annual stockholders' meeting date, each
non-employee director may elect to receive either (i) an award of five
hundred (500) shares of Restricted Stock subject to vesting and
restricted as described in subsection 2 hereof (the "Restricted
Stock") or (ii) an award of five hundred (500)Stock Units, subject to
vesting as provided in subsection 2. Only non-employee directors
re-elected to the Board shall be entitled to a grant under this
Section III. C.1. of Restricted Stock or Stock Units awarded at the
close of business on an annual meeting date after the date of the
original grant to the non-employee director.
2. Vesting of and Restrictions on Restricted Stock and Stock Units. A
participant's interest in the Restricted Stock and Stock Units shall
vest on the date of the annual stockholders' meeting next following
the date of the award of the Restricted Stock or Stock Units (the
"Restricted Period"). If, for any reason, a non-employee director
ceases to serve on the Board prior to the date the non-employee
director's interest in a grant of Restricted Stock or Stock Units
vests, such Restricted Stock and Stock Units shall be forfeited and
all further rights of the non-employee director to or with respect to
such Restricted Stock or Stock Units shall terminate. A participant
who dies prior to the vesting of Restricted Stock or Stock Units shall
vest in a proportionate number of shares of Restricted Stock or Stock
Units, based on the full months of service completed during the
vesting period of the Restricted Stock or Stock Units from the date of
grant to the date of death. Restricted Stock may not be sold,
transferred, assigned, pledged or otherwise encumbered or disposed
until the Restricted Period has expired and Stock Units may not be
sold, transferred, assigned, pledged or otherwise encumbered or
disposed until such time as share certificates for Common Stock are
issued to the participants.
3. Distribution of Stock Units.
a. Each participant electing the award of Stock Units under Part
III, Section C.1. above must select a date of distribution and
form of distribution as provided under Part III, Section B.2. The
participant may also elect to have dividend equivalents payable
on Stock Units paid currently or reinvested in Stock Units as
provided under Part III, Section B.3.
4. Other Terms and Conditions. Any shares of Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee deems
appropriate, including, without limitation, book-entry registration or
issuance of stock certificates, and may be held in escrow. Each
participant granted Restricted Stock shall have all rights as a
stockholder with respect to such shares, including the right to vote
the shares and receive dividends and other distributions. The Company
may require payment of the amount of any federal, state or local
withholding tax attributable to the constructive or actual delivery of
shares of Common Stock pursuant to the terms of this Agreement.
D. GENERAL PROVISIONS FOR DEFERRED CASH, OPTION GAINS AND RSU's
The following provisions shall apply to the deferral of cash compensation
described in Part II, Section C hereof, the deferral of receipt of Common Stock
issued upon exercise of Options described in Part III, Section B hereof and the
treatment of Stock Units granted under Part III, Section C hereof.
1. A participant may, at any time prior or subsequent to the commencement
of benefit payments or distribution of Common Stock in respect of
Stock Units under this Plan, elect in writing to have his or her form
of distribution under this Plan changed to an immediate single
distribution which shall be made within one (1) business day of
receipt by the Company of such request in the case of deferred cash
and three (3) business days in the case of Common Stock; provided that
the cash amount or number of shares of Common Stock subject to such
single distribution shall be reduced by an amount or number of shares
of Common Stock equal to the product of (X) the rate for set forth in
Statistical Release H.15(519), or any successor publication, as
published by the Board of Governors of the Federal Reserve System for
one-year U.S. Treasury notes under the heading "Treasury Constant
Maturities" for the first day of the calendar month in which the
request for a single sum distribution is received by the Company and
(Y) either (i) as to a cash distribution, the total single sum
distribution otherwise payable (based on the value of the account as
of the first day of the month in which the single sum amount is paid,
adjusted by a pro-rata portion of the specified rate of return for the
prior month in which the single sum is paid, determined by multiplying
the actual rate of return for such prior month by a fraction, the
numerator of which is the number of days in the month in which the
request is received prior to the date of payment, and the denominator
of which is the number of days in the month), or (ii) as to a
distribution of Common Stock in respect of Stock Units, the number of
Stock Units held on behalf of the participant multiplied by the mean
of the high and low price of shares of Common Stock on the New York
Stock Exchange on the date of the request or, if the date of the
request is not a Business Day, on the Business Day preceding the date
of the request.
2. In the event of a severe financial hardship occasioned by an
emergency, including, but not limited to, illness, disability or
personal injury sustained by the participant or a member of the
participant's immediate family, a participant may apply to receive a
distribution, including a distribution of Common Stock in respect of
Stock Units, earlier than initially elected. The Committee may, in its
sole discretion, either approve or deny the request. The determination
made by the Committee will be final and binding on all parties. If the
request is granted, the distributions will be accelerated only to the
extent reasonably necessary to alleviate the financial hardship.
3. If the death of a participant occurs before a full distribution of
deferred cash amounts or Common Stock in respect of Stock Units is
made, a single distribution shall be made to the beneficiary
designated by the participant to receive such amounts. This
distribution shall be made as soon as practical following notification
that death has occurred. In the absence of any such designation, the
distribution shall be made to the personal representative, executor or
administrator of the participant's estate.
4. As to all previous and future Plan years, and subject to the last
sentence of the first paragraph of Part III, Section B.2. hereof, a
participant who (a) has elected a distribution date and distribution
in either a single distribution or substantially equal installments
and (b) is not within twelve (12) months of the date that such
deferred amount, deferred Common Stock or the first installment
thereof would be distributed under this Plan, shall be permitted to
make no more than two amendments to the initial election to defer
distributions such that his or her distribution date is either in the
same calendar year as the date of the distribution which would have
been made in the absence of such election amendment(s) or is at least
one year after the date of the distribution which would have been made
in the absence of such election amendment(s). A participant satisfying
the conditions set forth in the preceding sentence may also amend such
election so that his or her form of distribution is changed to
substantially equal annual installments for a period not to exceed ten
(10) years or is changed to a single distribution.
5. Notwithstanding any other provision of this Plan to the contrary, the
Committee, by majority approval, may, in its sole discretion, direct
that distributions be made before such distributions are otherwise due
if, for any reason (including, but not limited to, a change in the tax
or revenue laws of the United States of America, a published ruling or
similar announcement issued by the Internal Revenue Service, a
regulation issued by the Secretary of the Treasury or his or her
delegate, or a decision by a court of competent jurisdiction involving
a participant or beneficiary), it believes that a participant or
beneficiary has recognized or will recognize income for federal income
tax purposes with respect to distributions that are or will be payable
to such participants under the Plan before they are paid to him. In
making this determination, the Committee shall take into account the
hardship that would be imposed on the participant or beneficiary by
the payment of federal income taxes under such circumstances.
E. CHANGE OF CONTROL
Stock Options granted under the Plan will become immediately exercisable,
restrictions on the Restricted Stock will lapse and Common Stock and dividend
equivalents to be issued in respect of Stock Units will be immediately
distributed upon the occurrence of a "Change of Control" as defined in Part IV
hereinbelow.
PART IV
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
full power to interpret the Plan, formulate additional details and regulations
for carrying out the Plan and amend or modify the Plan as from time to time it
deems proper and in the best interests of the Company, provided that after a
"Change in Control" no amendment, modification of or action to terminate the
Plan may be made which would affect compensation earned or accrued prior to such
amendment, modification or termination without the written consent of a majority
of participants determined as of the day before a "Change in Control." Any
decision or interpretation adopted by the Committee shall be final and
conclusive. A "Change of Control" means:
1. The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (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 Company
Voting Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not be deemed to
result in a Change of Control: (i) any acquisition directly from the
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 (3) below; and
provided, further, that if any Person's beneficial ownership of the
Outstanding Company 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 Company Voting Securities; or
2. Individuals who, as of the date hereof, constitute the Board (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 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
3. The approval by the shareholders of the Company of a reorganization,
merger, consolidation, 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 shareholders, 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 Company 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 through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business combination of the Outstanding Company 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
4. Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
PART V
ADDITIONAL PROVISIONS
A. GOVERNING LAW
The validity, construction and effect of the Plan and any such actions
taken under or relating to the Plan shall be determined in accordance with the
laws of the State of Delaware and applicable Federal law.
B. NOTICES
Unless otherwise notified, all notices under this Plan shall be sent in
writing to the Company, attention Corporate Compensation, P.O. Box 1113,
Minneapolis, Minnesota 55440. All correspondence to the participants shall be
sent to the address which is their recorded address as listed on the election
forms.
Effective as of September 30, 1996
As amended December 9, 1996
As amended April 2, 1998
As amended June 22, 1998
EXHIBIT 10.11
GENERAL MILLS, INC.
1995 SALARY REPLACEMENT
STOCK OPTION PLAN
As Amended Through June 22, 1998
<PAGE>
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 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 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
Except as provided by rule adopted by the Committee, 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 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 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 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.
(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.
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
Amended as of June 22, 1998
EXHIBIT 10.12
GENERAL MILLS, INC.
DEFERRED COMPENSATION PLAN
As Amended Through March 31, 1998
<PAGE>
GENERAL MILLS, INC.
DEFERRED COMPENSATION PLAN
1. PURPOSE OF PLAN
General Mills, Inc. (the "Company") hereby establishes a Deferred
Compensation Plan (the "Plan") for a select group of its key management
employees of the Company and its affiliates as a means of sheltering a
portion of income from current taxation while accumulating resources for
future investments or retirement. Under the Plan, Participants may defer
both cash incentive compensation and delivery and receipt of common stock
issued under the Company's stock option plans. As to deferred cash,
Participants shall earn a "rate of return" on the deferred amounts which
track the investment return achieved under the Voluntary Investment Plan of
General Mills, Inc. (the "VIP") and/or rates equivalent to investment
results of other funds or portfolios as may be made available from time to
time pursuant to the provisions of the Plan. As to stock options,
Participants may defer receipt of the net shares of General Mills, Inc.
common stock ("Common Stock") resulting from a Participant's
stock-for-stock option exercise and dividend equivalents on the net shares.
Under current tax law, amounts properly deferred and the "rate of return"
or earnings credited to such amounts are not taxable (except for FICA
taxation, as required) as income until they are distributed to the
Participants. Under current tax law, distributions from this Plan will be
taxed as ordinary income in the year in which they are received.
2. ELIGIBILITY
An individual is a Participant in the Plan if such individual (i) is a
Participant in the Executive Incentive Plan, (ii) has been selected by
management to participate in "Compensation Plus," or (iii) has an
individual agreement, approved by the Minor Amendment Committee, which
provides for participation in this Plan and has elected to defer
compensation or receipt of Common Stock pursuant to the provisions of any
of these programs or the agreement. Former employees of the Company who
have retired from the Company may also participate if they would have been
eligible to participate at the time they retired from the Company.
3. PLAN ADMINISTRATION
(i) Minor Amendment Committee. Except as provided below, this Plan shall
be administered by the Minor Amendment Committee (the "Minor Amendment
Committee"). The Minor Amendment Committee shall act by affirmative
vote of a majority of its members at a meeting or in writing without a
meeting. The Minor Amendment Committee shall appoint a secretary who
may be but need not be one of its own members. The secretary shall
keep complete records of the administration of the Plan. The Minor
Amendment Committee may authorize each and any one of its members to
perform routine acts and to sign documents on its behalf. To the
extent necessary to maintain any exemption under Rule 16b-3 or any
successor rule ("Rule 16b-3") under the Securities Exchange Act of
1934 as to certain officers of the Company, certain portions of this
Plan shall be administered by the Compensation Committee.
(ii) Plan Administration. The Minor Amendment Committee may appoint such
persons or establish such subcommittees, employ such attorneys,
agents, accountants or investment advisors necessary or desirable to
advise or assist it in the performance of its duties hereunder, and
the Minor Amendment Committee may rely upon their respective written
opinions or certifications.
Administration of the Plan shall consist of interpreting and carrying
out the provisions of the Plan. The Minor Amendment Committee shall
determine the eligibility of employees to participate in the Plan,
their rights while Participants in the Plan and the nature and amount
of benefits to be received therefrom. The Minor Amendment Committee
shall decide any disputes which may arise under the Plan. The Minor
Amendment Committee may provide rules and regulations for the
administration of the Plan consistent with its terms and provisions.
Any construction or interpretation of the Plan and any determination
of fact in administering the Plan made in good faith by the Minor
Amendment Committee shall be final and conclusive for all Plan
purposes.
(iii) Claims Procedure.
(a) The Minor Amendment Committee shall prescribe a form for the
presentation of claims under the terms of the Plan.
(b) Upon presentation to the Minor Amendment Committee of a claim on
the prescribed form, the Minor Amendment Committee shall make a
determination of the validity thereof. If the determination is
adverse to the claimant, the Minor Amendment Committee shall
furnish to the claimant within a reasonable period of time after
the receipt of the claim a written notice setting forth the
following:
(1) The specific reason or reasons for the denial;
(2) Specific reference to pertinent provisions of the Plan on
which the denial is based;
(3) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(4) An explanation of the Plan's claim review procedure.
(c) In the event of a denial of a claim, the claimant may appeal such
denial to the Minor Amendment Committee for a full and fair
review of the adverse determination. The claimant's request for
review must be in writing and be made to the Minor Amendment
Committee within 60 days after receipt by the claimant of the
written notification required under subsection (b) above. The
claimant or his or her duly authorized representative may submit
issues and comments in writing which shall be given full
consideration by the Minor Amendment Committee in its review.
(d) The Minor Amendment Committee may, in its sole discretion,
conduct a hearing. A request for a hearing will be given full
consideration. At such hearing, the claimant shall be entitled to
appear and present evidence and be represented by counsel.
(e) A decision on a request for review shall be made by the Minor
Amendment Committee not later than 60 days after receipt of the
request; provided, however, in the event of a hearing or other
special circumstances, such decision shall be made not later than
120 days after receipt of such request.
(f) The Minor Amendment Committee's decision on review shall state in
writing the specific reasons and references to the Plan
provisions on which it is based. Such decision shall be
immediately provided to the claimant. In the event the claimant
disagrees with the findings of the Minor Amendment Committee, the
matter shall be referred to arbitration in accordance with
Section 14 hereof.
(g) The Minor Amendment Committee may allocate its responsibilities
among its several members, except that all matters involving the
hearing of and decision on claims and the review of the
determination of benefits shall be made by the full Minor
Amendment Committee. No member of the Minor Amendment Committee
shall participate in any matter relating solely to himself.
4. DEFERRAL AND PAYMENT OF COMPENSATION
(i) Cash Deferral Election. A Participant can elect to defer cash
incentive compensation by completing and submitting to the Company a
cash deferral election form by December 31 of each year. Such election
shall apply to the Participant's cash incentive compensation, if any,
to be paid in the next calendar year. A Participant's cash deferral
election may apply to:
(a) 100% of the cash incentive compensation,
(b) any amount in excess of a specified dollar amount,
(c) any amount up to a specified dollar amount, or
(d) a specified percentage (in whole numbers) of the cash incentive
compensation.
(ii) Stock Option Gain Deferral Election. A Participant can elect to defer
receipt of Net Shares (defined below) of Common Stock resulting from a
stock-for-stock exercise of an exercisable stock option issued to the
Participant by completing and submitting to the Company an irrevocable
stock option deferral election at least six months in advance of
exercising the stock option (which exercise must be done on or prior
to the expiration of the stock option) and, on or prior to the
exercise date, delivering personally-owned shares equal in value to
the option exercise price on the date of the exercise. At the time of
the deferral election, the Participant can also choose to use some of
the shares subject to the stock option to satisfy any FICA, Medicare
or any other taxes due upon the stock option exercise. "Net Shares"
means the difference between the number of shares of Common Stock
subject to the stock option exercise and the number of shares of
Common Stock delivered to satisfy the stock option exercise price less
any shares used to satisfy FICA, Medicare or any other taxes due upon
the stock option exercise. A Participant may not revoke a stock option
gain deferral election after it is received by the Company. A
Participant may choose to defer receipt of all or only a portion of
the Net Shares to be received upon exercise of a stock option. If only
a portion of the Net Shares is deferred, the balance will be issued at
the time of exercise.
(iii) Distribution of Deferred Cash and Common Stock. At the time of a
Participant's deferral election, a Participant must also select a
distribution date and a form of distribution. The distribution date
may be any date that is at least one year subsequent to either the
date the compensation would otherwise be payable or the exercise date
for the related stock option, as the case may be. The deferral
election must provide that distribution shall be made or commenced as
of the date the Participant attains age 70.
A Participant may elect to have deferred cash amounts paid or Common
Stock distributed, as the case may be, in a single payment or in
substantially equal annual installments for a period not to exceed ten
(10) years, or up to fifteen (15) years for elections made until
December 31, 1985, or in another form requested by the Participant, in
writing, and approved by the Minor Amendment Committee. Common Stock
issuable under a single stock option grant shall have the same
distribution date and form of distribution. Notwithstanding the above,
the following provisions shall apply:
(a) If the employment of a Participant terminates for any reason
other than retirement prior to the date of receipt of any
incentive compensation award, then any cash deferral election
made with respect to such incentive compensation award shall not
become effective.
(b) If a stock option, as to which a Participant has made a stock
option gain deferral election, terminates prior to the exercise
date selected by the Participant, or if the Participant dies or
fails to deliver personally-owned shares in payment of the
exercise price, then the deferral election shall not become
effective.
(c) In the event of the termination of a Participant other than by
retirement, the Minor Amendment Committee may, with sole and
complete discretion, if it determines that such distribution is
in the best interest of the Company, require that distribution of
all cash and Stock Units (as defined in Section 8(i) below)
allocated to a Participant's Deferred Cash Accounts or Deferred
Stock Unit Accounts (as defined in Section 8(i) below) be
accelerated and distributed as of the first business day of the
calendar year next following the date of termination.
(d) As to all previous and future Plan years, a Participant who (A)
has elected a distribution date and distribution in either a
single distribution or substantially equal installments and (B)
is not within twelve (12) months of the date that such deferred
amount, deferred Common Stock or the first installment thereof
would be distributed under this Plan, shall be permitted to make
no more than two amendments to the initial election to defer
distributions such that his or her distribution date is either in
the same calendar year as the date of the distribution which
would have been made in the absence of such election amendment(s)
or is at least one year after the date of the distribution which
would have been made in the absence of such election
amendment(s). A Participant satisfying the conditions set forth
in the preceding sentence may also amend such election so that
his or her form of distribution is changed to substantially equal
annual installments for a period not to exceed ten (10) years or
is changed to a single distribution.
(e) A Participant may, at any time prior or subsequent to the
commencement of cash benefit payments under this Plan, elect in
writing to have his or her form of payment of any or all amounts
due under this Plan changed to an immediate lump-sum distribution
which shall be paid within one (1) business day of receipt by the
Company of such request; provided that the amount of any such
lump-sum distribution shall be reduced by an amount equal to the
product of (X) the total lump-sum distribution otherwise payable
(based on the value of the account as of the first day of the
month in which the lump-sum amount is paid, adjusted by a
pro-rata portion of the rate of return for the prior month in
which the lump-sum is paid, determined by multiplying the actual
rate of return for such prior month by a fraction, the numerator
of which is the number of days in the month in which the request
is received prior to the date of payment, and the denominator of
which is the number of days in the month), and (Y) the rate set
forth in Statistical Release H.15(519), or any successor
publication, as published by the Board of Governors of the
Federal Reserve System for one-year U.S. Treasury notes under the
heading "Treasury Constant Maturities" for the first day of the
calendar month in which the request for a lump-sum distribution
is received by the Company.
(f) A Participant may, at any time prior or subsequent to the
commencement of distribution of Common Stock under this Plan,
elect to have his or her form of distribution of any or all
distributions of Common Stock to be made under this Plan changed
to an immediate single distribution which shall be made within
three (3) days of receipt by the Company of such request;
provided, that the number of shares of Common Stock to be
distributed in the single distribution shall be reduced by the
number of shares equal in value to the product of (X) the number
of Stock Units allocated to the Participant's Deferred Stock Unit
Account, (Y) the mean of the high and low price of the shares of
Common Stock on the New York Stock Exchange on the date of the
request, and (Z) the rate set forth in Statistical Release
H.15(519), or any successor publication as published by the Board
of Governors of the Federal Reserve System for one-year U.S.
Treasury notes under the heading "Treasury Constant Maturities"
for the first day of the calendar month in which the request for
a single Common Stock distribution is received by the Company.
Only whole numbers of shares will be issued, with any fractional
share amounts and dividend equivalents not used to "purchase"
additional Stock Units paid in cash.
(g) At the time elected by the Participant for distribution of Common
Stock attributable to allocations under the Participant's
Deferred Stock Unit Accounts, the Company shall issue to the
Participant, within three (3) days of the date of distribution,
shares of Common Stock equal to the number of Stock Units
credited to the Deferred Stock Unit Account and cash equal to any
dividend equivalent amounts which had not been used to "purchase"
additional Stock Units as provided below. Prior to distribution
and pursuant to any rules the Committee may adopt, a Participant
may authorize the Company to withhold a portion of the shares of
Common Stock to be distributed for the payment of all federal,
state, local and foreign withholding taxes required to be
collected in respect of the distribution.
(iv) Rabbi Trust. The Company has established a Supplemental Benefits Trust
with Norwest Bank Minneapolis, N.A. as Trustee to hold assets of the
Company under certain circumstances as a reserve for the discharge of
the Company's obligations as to deferred cash incentive compensation
under the Plan and certain other plans of deferred compensation of the
Company. In the event of a "Change in Control" (as defined in Section
12 below), the Company shall be obligated to immediately contribute
such amounts to the Trust as may be necessary to fully fund all cash
benefits payable under the Plan. Any Participant in the Plan shall
have the right to demand and secure specific performance of this
provision. All assets held in the Trust remain subject only to the
claims of the Company's general creditors whose claims against the
Company are not satisfied because of the Company's bankruptcy or
insolvency (as those terms are defined in the Trust Agreement). No
Participant has any preferred claim on, or beneficial ownership
interest in, any assets of the Trust before the assets are paid to the
Participant and all rights created under the Trust, as under the Plan,
are unsecured contractual claims of the Participant against the
Company.
(v) Common Stock Distribution. In the event of a Change of Control, shares
of Common Stock and cash attributable to Stock Units and dividend
equivalents credited to each Participant's Deferred Stock Unit Account
shall be immediately distributed to the Participant.
5. DEFERRED CASH ACCOUNTS AND INVESTMENT RETURNS ON AMOUNTS IN DEFERRED
ACCOUNTS
A deferred cash incentive compensation account ("Deferred Cash Account")
will be established on behalf of each Participant electing to defer cash
incentive compensation under Section 4(i) above, and the amount of deferred
cash incentive compensation will be credited to each Participant's Deferred
Cash Account as of the first of the month coincident with or next following
the month in which a deferral becomes effective. Each Participant's
Deferred Cash Account will be credited monthly with a "rate of return" on
the total deferred cash amount accruing as of the first of the month
coincident with or next following the date deferred incentive compensation
is credited to the Participant's Deferred Cash Account. Such "rate of
return" shall be based upon the actual investment performance of funds in
the VIP, or at such other rates as may be made available to Participants
from time to time pursuant to the provisions of the Plan. A Participant may
elect to have the "rate of return" credited to his or her Deferred Cash
Account at any of the following rates:
(a) the rate of return as from time to time earned by the Fixed Income
Fund of the VIP;
(b) the rate of return as from time to time earned by the Equity Fund of
the VIP; or
(c) any other rates of return of other funds or portfolios established
under a qualified benefit plan maintained by the Company which the
Minor Amendment Committee may establish as an available rate of return
under this Plan.
Participants may elect to have any combination of the above "rates of
return" accrue on amounts in their Deferred Cash Account, from 1% to 100%,
provided that the sum of the percentages attributable to such rates equals
100%. A Participant may change the "rate(s) of return" to be credited to
his or her Deferred Cash Account, except as to a Unit Performance Fund, as
of the first day of any month by notifying the Company, in writing, of such
election by the last business day of the preceding month.
Each Participant's Deferred Cash Account will be credited monthly with the
"rate(s) of return" elected by the Participant until the amount in each
Participant's Deferred Cash Account is distributed to the Participant on
the distribution date(s) elected by the Participant. Each Participant shall
receive a periodic statement of the balance of his or her Deferred Cash
Account.
6. COMPANY CONTRIBUTIONS TO DEFERRED CASH ACCOUNTS
As of the first of the month coincident with or next following the month in
which a deferral is made hereunder, each Participant's Deferred Cash
Account will be credited with hypothetical interest in an amount equal to 2
1/2% of the Participant's deferred cash incentive compensation, or such
amount as will otherwise equal the value of the "Base Allocation" (as that
term is defined in the VIP) which would have been allocated to the
Participant if the Participant had contributed such deferred cash incentive
compensation amount to the VIP. In addition, as soon as practicable
following the end of each fiscal year, each Participant's Deferred Cash
Account may be credited with hypothetical interest in an amount not to
exceed 2 1/2% of the Participant's deferred cash incentive compensation, or
such amount as will otherwise equal the value of the "Variable Allocation"
(as that term is defined in the VIP) which would have been allocated to the
Participant if the Participant had contributed such deferred cash incentive
compensation amount to the VIP.
7. SHORT-TERM DEFERRALS
Notwithstanding the foregoing provisions of the Plan, the Company may also
permit Participants to elect to defer all or part of cash incentive
compensation, if any, to a date certain selected by the Company within the
taxable year it would otherwise be paid, upon written notice to the Company
received by December 31 of the preceding calendar year. Interest shall be
credited on such deferred cash amount at a rate selected by the Company and
communicated to the Participants at the same time the availability of any
such short-term deferral opportunity is communicated to Participants.
8. DEFERRED STOCK UNIT ACCOUNTS AND DIVIDEND EQUIVALENTS
(i) A deferred stock unit account ("Deferred Stock Unit Account") will be
established for each stock option grant covered by a Participant
election to defer the receipt of Common Stock under Section 4(ii)
above and, for each Net Share deferred, a Stock Unit ("Stock Unit")
will be credited to the Deferred Stock Unit Account as of the date of
the stock option exercise. Participants may make elections, which
shall become effective six months after they are made, either to
receive dividend equivalent cash amounts on Stock Units currently or
to have the amounts reinvested. If the amounts are reinvested, on each
dividend payment date for the Company's Common Stock, the Company will
credit each Deferred Stock Unit Account with an amount equal to the
dividends paid by the Company on the number of shares of Common Stock
equal to the number of Stock Units in the Deferred Stock Unit Account.
Dividend equivalent amounts credited to each Deferred Stock Unit
Account shall be used to "purchase" additional Stock Units for the
Deferred Stock Unit Account at a price equal to the mean of the high
and low price of the Common Stock on the New York Stock Exchange on
the dividend date. No fractional Stock Units will be credited. The
Minor Amendment Committee may, in its sole discretion, direct either
that all dividend equivalent amounts be paid currently or all such
amounts be reinvested if, for any reason, such Committee believes it
is in the best interest of the Company to do so. If the Participant
fails to make an election, the dividend equivalent amounts shall be
reinvested. Each Participant will receive a periodic statement of the
number of Stock Units in his or her Deferred Stock Unit Account(s).
(ii) The Plan governs the deferral of receipt of Common Stock issuable upon
the exercise of stock options of the Company. The stock options are
governed by the stock option plan under which they are granted. No
stock options or shares of Common Stock are authorized to be issued
under the Plan. Participants who elect under the Plan to defer the
receipt of Common Stock issuable upon the exercise of stock options
will have no rights as stockholders of the Company with respect to
allocations made to their Deferred Stock Unit Account(s), except the
right to receive dividend equivalent allocations under Section 8(i)
above.
(iii) In the event that the Compensation 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 to the Participants' allocations to their Deferred
Stock Unit Account(s) is appropriate to prevent reduction or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Compensation Committee may, in its
sole discretion and in such manner as it may deem equitable, adjust
the Stock Units allocated to Participants' Deferred Stock Unit
Account(s).
9. FINANCIAL HARDSHIP PAYMENTS
In the event of a severe financial hardship occasioned by an emergency,
including, but not limited to, illness, disability or personal injury
sustained by the Participant or a member of the Participant's immediate
family, a Participant may apply to receive a distribution, including a
distribution of Common Stock related to allocations of Stock Units under
Deferred Stock Unit Account(s), earlier than initially elected. Subject to
Section 3(i), the Minor Amendment Committee may, in its sole discretion,
either approve or deny the request. The determination made by the Minor
Amendment Committee will be final and binding on all parties. If the
request is granted, the distributions will be accelerated only to the
extent reasonably necessary to alleviate the financial hardship.
10. DEATH OF A PARTICIPANT
If the death of a Participant occurs before a full distribution of the
Participant's Deferred Cash Account(s) or Deferred Stock Unit Account(s) is
made, a single distribution shall be made to the beneficiary designated by
the Participant to receive such amounts. This distribution shall be made as
soon as practical following notification that death has occurred. In the
absence of any such designation, the distribution shall be made to the
personal representative, executor or administrator of the Participant's
estate.
11. IMPACT ON OTHER BENEFIT PLANS
The Company may maintain life, disability, retirement and/or savings plans
under which benefits earned or payable are related to earnings of a
Participant.
Life and disability plan benefits will generally be based upon the earnings
that a Participant would have earned in a given calendar year in the
absence of any deferral hereunder.
Retirement benefits under a qualified pension plan maintained by the
Company or an affiliate will be based upon earnings actually paid to a
Participant during any given Plan year. If a person terminates employment
with a right to a vested benefit under a qualified plan maintained by the
Company or an affiliate, and if the actual income for pension purposes was
reduced because of a cash deferral under this Plan, the Company will
provide a supplemental pension equal to the difference between the actual
benefit payable from the pension plan and the benefit that such Participant
would have been received had income not been deferred. If such a
supplemental benefit is due, such benefit would be subject to all of the
provisions and in accordance with the terms and conditions of the
Supplemental Retirement Plan of General Mills, Inc. This supplemental
retirement benefit will not apply to Participants who terminate before
becoming vested under the qualified pension plan.
12. NON-ASSIGNABILITY OF INTERESTS
The interests herein and the right to receive distributions under this Plan
may not be anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, or subjected to any charge or legal process, and if any attempt
is made to do so, or a Participant becomes bankrupt, the interests of the
Participant under the Plan may be terminated by the Minor Amendment
Committee, which, in its sole discretion, may cause the same to be held or
applied for the benefit of one or more of the dependents of such
Participant or make any other disposition of such interests that it deems
appropriate. Notwithstanding the foregoing, in the event a Participant has
received an overpayment from the Supplemental Retirement Plan of General
Mills, Inc. and has failed to repay such amounts upon written demand of the
Company, the Company shall be authorized and empowered, at the discretion
of the Company, to deduct such amount from the Participant's Deferred Cash
Account(s).
13. AMENDMENTS TO PLAN
The Company, or if specifically delegated, its delegate, reserves the right
to suspend, amend or otherwise modify or terminate this Plan at any time,
without notice. However, this Plan may not be suspended, amended, otherwise
modified, or terminated after a Change in Control without the written
consent of a majority of Participants determined as of the day before such
Change in Control occurs. A "Change of Control" means:
(a) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (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 Company
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
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 Company 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 Company Voting Securities; or
(b) Individuals who, as of the date hereof, constitute the Board (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 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 shareholders, 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 Company 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 through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business combination of the Outstanding Company 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 shareholders of the Company of a complete liquidation
or dissolution of the Company.
Notwithstanding any other provision of this Plan to the contrary and except
as provided in Section 3(i), the Minor Amendment Committee may, in its sole
discretion, direct that distributions be made before such distributions are
otherwise due to be made if, for any reason (including, but not limited to
a change in the tax or revenue laws of the United States of America, a
published ruling or similar announcement issued by the Internal Revenue
Service, a regulation issued by the Secretary of the Treasury or his
delegate, or a decision by a court of competent jurisdiction involving a
Participant or beneficiary), such Committee believes that Participants or
their beneficiaries have recognized or will recognize income for federal
income tax purposes with respect to distributions that are or will be
distributed to such Participants under the Plan before such distributions
are scheduled to be paid. In making this determination, the Minor Amendment
Committee shall take into account the hardship that would be imposed on
Participants or their beneficiaries by the payment of federal income taxes
under such circumstances.
14. ARBITRATION
(i) Any controversy or claim arising out of or relating to this Plan, or
any alleged breach of the terms or conditions contained herein, shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association (the "AAA")
as such rules may be modified herein.
(ii) An award rendered in connection with an arbitration pursuant to this
Section shall be final and binding and judgment upon such an award may
be entered and enforced in any court of competent jurisdiction.
(iii) The forum for arbitration under this Plan shall be Minneapolis,
Minnesota and the governing law for such arbitration shall be laws of
the State of Minnesota.
(iv) Arbitration under this Section shall be conducted by a single
arbitrator selected jointly by the Company and the Participant or
Beneficiary, as applicable (the "Complainant"). If within thirty (30)
days after a demand for arbitration is made, the Company and the
Complainant are unable to agree on a single arbitrator, three
arbitrators shall be appointed. Each party shall select one arbitrator
and those two arbitrators shall then select a third neutral arbitrator
within thirty (30) days after their appointment. In connection with
the selection of the third arbitrator, consideration shall be given to
familiarity with executive compensation plans and experience in
dispute resolution between parties, as a judge or otherwise. If the
arbitrators selected by the parties cannot agree on the third
arbitrator, they shall discuss the qualifications of such third
arbitrator with the AAA prior to selection of such arbitrator, which
selection shall be in accordance with the Commercial Arbitration Rules
of the AAA.
(v) If an arbitrator cannot continue to serve, a successor to an
arbitrator selected by a party shall be also selected by the same
party, and a successor to a neutral arbitrator shall be selected as
specified in subsection (d) of this Section. A full rehearing will be
held only if the neutral arbitrator is unable to continue to serve or
if the remaining arbitrators unanimously agree that such a rehearing
is appropriate.
(vi) The arbitrator or arbitrators shall be guided, but not bound, by the
Federal Rules of Evidence and by the procedural rules, including
discovery provisions, of the Federal Rules of Civil Procedure. Any
discovery shall be limited to information directly relevant to the
controversy or claim in arbitration.
(vii)The parties shall each be responsible for their own costs and
expenses, except for the fees and expenses of the arbitrators, which
shall be shared equally by the Company and the Complainant.
15. EFFECTIVE DATE AND PLAN YEAR
This Plan became effective as of May 1, 1984. It shall operate on a
calendar year basis thereafter. The Plan has been amended and restated
effective as of January 1, 1986; and amended as of February 9, 1987; July
1, 1987; June 21, 1990; April 29, 1991; May 1, 1991; November 15, 1991;
December 15, 1992, December 1, 1994, January 1, 1995, June 3, 1996,
November 7, 1996 and March 31, 1998.
EXHIBIT 10.18
ADDENDUM NO. 2 TO THE
PROTOCOL OF CEREAL PARTNERS WORLDWIDE
THIS ADDENDUM No. 2 is to the Protocol of Cereal Partners Worldwide between
General Mills, Inc. and Nestle S.A. executed on the 21st day of November, 1989.
Upon execution hereof, this Addendum No. 2 shall become an integral part of the
Protocol.
Capitalized terms not defined herein shall have the meanings assigned in the
Protocol.
SECTION 1. DEFINITIONS. The territory and field of the JV business as
defined in Sections 1 and 3 of the Protocol are hereby amended and the parties
adopt the following definitions:
(a) The "Territory" of the JV, as used herein and in all other agreements
among the parties and/or CPW S.A. shall be defined as all countries of the world
with the exception of the United States of America, its military installations,
territories and possessions, the Commonwealth of Puerto Rico, the Dominion of
Canada and Iceland. This list of exceptions is exhaustive and any amendment to
it must be included in the Protocol.
(b) The field of the JV business is Breakfast Cereals. "Breakfast Cereals"
as used herein and in all other JV agreements shall mean all family, child and
adult ready-to-eat, dry cereals. It shall not include, unless agreed upon at a
later date, grain-based products presented in the form of snack bars and the
like. Also excluded are products intended to be consumed as a drink and
grain-based products which when served are fairly homogenous with no distinct
cereal pieces, have a paste-like consistency and are normally prepared as paps
diluted in liquids.
SECTION 2. NESTLE BREAKFAST CEREALS. Nestle companies presently have in
various countries where CPW is not present a Breakfast Cereal business using
Nestle's roller dryer technology and Nestle brands such as GOLD GRAIN or GRAIN
D'OR, all of which CPW has presently no intention to use for its own Breakfast
Cereal product range.
Notwithstanding the definitions of the Territory and of Breakfast Cereals in
this Addendum No. 2, the parties agree that the Nestle companies can, for their
own account, continue to manufacture and sell, and can introduce such roller
dryer Breakfast Cereals, under Nestle brands which are not used by CPW, subject
to CPW's instruction and right to request at any time the transfer of such
roller dryer Breakfast Cereal business to CPW.
SECTION 3. GENERAL MILLS EXPORTS. General Mills presently exports to
various countries, where CPW is not present, Breakfast Cereals manufactured in
the United States. Notwithstanding the definition of the Territory in this
Addendum No. 2, the parties agree that General Mills can, for its own account,
continue to export such Breakfast Cereals until December 31, 1994, subject to
CPW's instruction and right to request the transfer of such export business to
CPW. Accordingly, CPW shall plan the development of its operations with a
progressive takeover of these exports.
SECTION 4. SUPERVISORY BOARD. Section 4 of the Protocol shall be amended to
provide that the Supervisory Board of the JV shall consist of an even number of
members, which shall not be less than six. All other provisions of Section 4 of
the Protocol, including the right of General Mills, Inc. and Nestle S.A. to each
elect one half of the members, remain unchanged.
Executed this 16th day of March 1993.
NESTLE S.A.
By /s/ Ramon Masip
Its President and Chief
Operating Officer - Food
GENERAL MILLS, INC.
By /s/ Mark H. Willes
Its Vice Chairman
EXHIBIT 10.19
AGREEMENT
AGREEMENT, dated July 31, 1992, by and between General Mills, Inc., a
Delaware corporation ("Protected") and PepsiCo, Inc., a North Carolina
corporation ("Limited"), (Protected and Limited are hereinafter collectively
referred to as the "Parties").
WHEREAS, the Parties propose to enter into certain negotiations concerning
a possible joint venture between them (the "Joint Venture") and, in connection
with such negotiations and with the formation and operations of the Joint
Venture in the event agreement is reached in that connection, Limited has
requested access to certain confidential business information of Protected.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and in consideration of Protected's disclosure of the above-referenced
confidential business information to Limited (the scope and other terms of which
disclosure are not governed by this instrument), the Parties hereto agree, with
the intention of being legally bound, as follows:
1. Certain Definitions
(a) "Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations, as currently
in effect (the "Exchange Act Rules"), under the Securities Exchange Act of
1934, as amended, as currently in effect (the "Exchange Act").
(b) "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 of the Exchange Act Rules, and, for the purposes of this Agreement, a
Person shall have "Beneficial Ownership" of securities of which such Person
is the Beneficial Owner.
(c) "Common Stock" shall mean the common stock $.75 par value, of Protected.
(d) "Protected Security" shall mean any equity or debt security of Protected,
or right to acquire any such equity or debt security, including by
purchase, conversion or exchange, including, but not limited to, Common
Stock, preferred stock, notes, debentures and other evidence of
indebtedness.
(e) "Group" shall mean any partnership, limited partnership, syndicate or other
group within the meaning of Section 13(d)(3) of the Exchange Act.
(f) "Participation" shall have the meaning ascribed to such term in Regulation
14A of the Exchange Act Rules.
(g) "Person" shall mean any individual, firm, corporation, partnership, trust
or other entity.
(h) "Proxies" shall have the meaning ascribed to such term in Regulation 14A of
the Exchange Act Rules.
(i) "Solicitation" shall have the meaning ascribed in such term in Regulation
14A of the Exchange Act Rules.
(j) "Subsidiary" shall mean, with respect to any Person, any corporation which
is controlled by such Person, by ownership of securities or otherwise.
2. Representation and Warranty by Limited
Limited represents and warrants to Protected that as of the date of this
Agreement neither Limited nor any of its Affiliates or Associates, (other
than employee benefit plans or pension trusts), is either the Beneficial
Owner or has any control of any Protected Securities.
3. Certain Agreements by Limited
Limited covenants with Protected that, without the prior written consent of
Protected, Limited and its Affiliates and Associates, (other than employee
benefit plans or pension trusts), singly or acting together, in concert, or
as a Group with each other or any other Person, directly or indirectly
through one or more intermediaries or otherwise, shall not:
(a) acquire, offer to acquire or agree to acquire, by purchase or otherwise,
Beneficial Ownership of, or become the Beneficial Owner of, or acquire an
interest in, any Protected Securities or any of the assets of either
Protected or any Subsidiary of Protected;
(b) (i) directly or indirectly solicit proxies or become a participant in a
solicitation of proxies with respect to any matter presented to Protected's
stockholders for the exercise of their voting rights, or (ii) engage in any
course of conduct for the purpose of influencing or affecting the
stockholders of Protected with respect to the exercise of their voting
rights on any matter presented for a vote by Protected's stockholders;
(c) otherwise act to seek control of the Board of Directors, management,
policies or affairs of either Protected or any Subsidiary of Protected;
(d) publicly (or in a manner requiring Protected to disclose publicly) (i)
propose any acquisition of any or all of the assets of Protected or any of
its Subsidiaries, or any acquisition of any Protected Securities, or any
merger, consolidation, business combination or similar transaction with, or
change control of, Protected or any of its Subsidiaries or its or their
assets, (ii) make or propose a tender or exchange offer for any Protected
Securities, (iii) propose or suggest the possibility of any of the other
actions set forth in this section 3, or (iv) propose any amendment to, or
modification or waiver of, any provision of this Agreement.
(e) solicit, initiate, encourage, finance or assist any other Person, Persons
or Group to take or seek to take any action which Limited is precluded
hereunder from taking itself.
4. Term of Agreement
The term of this Agreement shall be ten (10) years from the last date on
which both Protected and Limited have an interest in the Joint Venture.
5. Miscellaneous
(a) Applicable Law. This Agreement and the rights and liabilities of the
Parties hereto shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to contracts made and to be
performed therein.
(b) Submission to Jurisdiction. Each of the Parties hereby agrees to submit to
the exclusive jurisdiction of the United States District Court for the
District of Minnesota, sitting in Minneapolis, Minnesota, in any legal
action or proceeding relating to or arising out of this Agreement and all
actions contemplated hereby. The Parties agree that service of process in
any such legal action or proceeding in the manner provided in Section 5(e)
hereof, in addition to any other means of service permitted by the laws and
rules applicable to such court, shall be deemed valid service thereof.
(c) Specific Performance. Limited agrees and acknowledges that in the event of
any breach by it of the terms of this Agreement, Protected would be
irreparably harmed and could not be made whole by monetary damages. It is
accordingly agreed that Protected, in addition to any other remedy to which
it may be entitled at law or in equity, shall be entitled to compel
specific performance of this Agreement, and shall be entitled to mandatory
injunctive or other relief, including the divestiture of Protected
Securities by Limited, as may be necessary or appropriate to carry out the
intent of the Parties with respect to this Agreement, in any action
instituted in any court having subject matter jurisdiction thereof.
(d) Counterparts. This Agreement may be executed in any number of counterparts.
Any single counterpart or set of counterparts signed by the Parties shall
constitute a full and original Agreement for all purposes.
(e) Notices. In any case where any notice, service of process or other
communication is required or permitted to be given hereunder, such notice,
service of process or other communication shall be in writing and (i)
personally delivered, (ii) sent by postage prepaid registered first class
post (if inland) or airmail (if overseas) or (except for service of
process) (iii) transmitted by telex, telecopy or cable (with postage
prepaid confirmation) at the following addresses (or such other address as
the Parties may designate from time to time to each other by due notice
pursuant to this Section 5(e)):
If to Protected: General Mills, Inc.
Number One General Mills Boulevard
Minneapolis, MN 55426
Attention: General Counsel
If to Limited: PepsiCo, Inc.
700 Anderson Hill Road
Purchase, NY 10577
Attention: General Counsel
(f) Successors. This Agreement shall be binding upon and inure to the benefit
of the Parties hereto and their respective directors, officers, legal
representatives, attorneys, successors and assigns, including any Person
who may succeed to the assets or business of either Party by way of a
consolidation, merger, sale of substantially all of such Party's assets or
purchase of substantially all of such Party's stock. This Agreement shall
not be assigned without the prior written consent of all the Parties
hereto.
(g) Entire Agreement. The terms and condition contained herein constitute the
entire agreement between the Parties relating to the subject matter of this
Agreement and shall supersede all previous communications between the
Parties with respect to the subject matter of this Agreement.
(h) Amendment. This Agreement may be varied, amended or extended only by the
written agreement of the Parties through their duly authorized officers or
representatives.
(i) Expenses. Each of the Parties shall pay its own legal and other costs,
charges and expenses connected with this Agreement and the performance of
their obligations hereunder.
(j) Severability. If any provision (or any part thereof) of this Agreement is
held illegal or unenforceable in a judicial proceeding, such provision (or
the affected part thereof) shall be severed from this Agreement to that
extent and shall be inoperative so long as such judicial determination
shall remain in effect, and the remainder of this Agreement shall otherwise
remain binding on the Parties hereto, it being the intention of the
parties, in the event any such provision is held illegal or unenforceable
in part, that such provision be enforced to the fullest scope and extent
permissible consistent with the original intent of such provision and the
ruling of such judicial authority.
(k) Headings. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
(l) No Waiver of Rights. No failure or delay on the part of any Party in the
exercise of any power or right hereunder shall operate as a waiver thereof.
No single or partial exercise of any right or power hereunder shall operate
as a waiver of such right or power or of any other right or power. The
waiver by any Party of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other or subsequent breach
hereunder. All rights and remedies existing under this Agreement are
cumulative with, and not exclusive of, any rights or remedies otherwise
available.
(m) No Third-Party Rights. This Agreement shall not be deemed or construed in
any way to result in the creation of any rights in any Person not a Party
to this Agreement.
(n) Further Assurances. At the request of either Party hereto, the other Party
hereto shall execute and deliver (and shall cause their Affiliates and
Associates to execute and deliver) to such Party such other documents and
instruments as may be reasonably necessary to implement or evidence the
foregoing.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their respective duly authorized officers as of the day and year first
written above.
GENERAL MILLS, INC.
/s/ Clifford L. Whitehill
Clifford L. Whitehill
Senior Vice President, General
Counsel and Secretary
PEPSICO, INC.
/s/ Lawrence F. Dickie
Lawrence F. Dickie,
Vice President, Associate General
Counsel and Assistant Secretary
EXHIBIT 12
GENERAL MILLS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Fiscal Year Ended
May 31, May 25, May 26, May 28, May 29,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges.........5.63 6.54 6.94 4.10 6.18
</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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
We believe the keys to delivering increased value for General Mills'
shareholders are profit growth, high returns on the capital employed in our
businesses, and financial strength. This section of the annual report discusses
the recent results of our operations, our financial position and our risk
management.
RESULTS OF OPERATIONS - 1998 VS. 1997
Our record financial results in fiscal 1998 were driven by strong growth in
worldwide unit volumes and continued productivity gains. For the 53-week period
ended May 31, 1998, reported sales grew 8 percent to $6.03 billion. Earnings
after tax grew 10 percent to reach $522 million before unusual items. Basic
earnings per share of $3.30 and fully diluted earnings per share of $3.22 before
unusual items also were up 10 percent from prior-year results.
In the United States, unit volume grew 8 percent, and each one of our
domestic operating divisions posted earnings growth of 10 percent or better. The
unit volume increase included broad-based gains by established businesses, and
strong contributions from the branded cereal and snacks businesses acquired from
Ralcorp on Jan. 31, 1997. Excluding incremental volume contributed by these
acquired brands in the first eight months of fiscal 1998, domestic unit volume
grew 3 percent.
Big G cereals led U.S. performance, with sales up 11 percent to $2.44 billion
and total unit volume up 8 percent. This volume gain reflected good growth by
several key established brands including CHEERIOS, along with strong
contributions from new TEAM CHEERIOS and CINNAMON GRAHAMS plus the acquired
COOKIE CRISP and CHEX cereals. Excluding incremental volume from acquired
brands, Big G unit volume grew nearly 1 percent in 1998.
U.S. convenience foods volume grew 16 percent, with double-digit gains
recorded by both the snacks business and by our Yoplait-Colombo yogurt
operations. Excluding the eight-month incremental volume provided by the CHEX
MIX snack line, convenience foods volume was up 8 percent for the year. Combined
unit volume for BETTY CROCKER baking and dessert products, dinner mixes and side
dishes grew 2 percent. Foodservice volume was up 6 percent for the year.
International unit volume, including our proportionate share of joint-venture
results, grew 15 percent in 1998. International earnings increased 35 percent to
exceed $15 million after tax. Cereal Partners Worldwide (CPW), our joint venture
with Nestle, led international performance, posting 19 percent unit volume
growth and strong profit progress. CPW operations in the four initial markets
entered in 1991 reached profitability in 1994, and the venture is expected to
reach operating profitability overall in calendar 1999. Snack Ventures Europe
(SVE), our joint venture with PepsiCo, recorded an 11 percent unit volume gain
in 1998, led by strong performance in Spain and Russia. Unit volume grew 4
percent for International Dessert Partners (IDP), our joint venture in Latin
America with Bestfoods.
The stronger operating leverage created by our unit volume growth, along with
productivity gains and favorable raw material costs, combined to reduce 1998
cost of goods sold to 39.6 percent of sales, nearly 2 percentage points lower
than 1997 levels. Selling, general and administrative expense was 1.5 points
higher as a percentage of sales in 1998. That increase was consistent with our
plans to restore a balanced level of marketing support under our brands,
following spending reductions made in the previous year to partially offset
lower cereal prices. Despite this increase in expense for brand-building,
earnings before interest and taxes grew nearly 11 percent in 1998 to 15.7
percent of sales, a margin improvement of .4 points from the prior year.
Our good earnings growth was coupled with a strong return on invested
capital. Return on average invested capital (ROC) before unusual items was 23.9
percent in 1998. This was down slightly from 24.6 percent in 1997, reflecting
the full-year impact of the Ralcorp acquisition, but it still ranks among the
highest returns on capital in U.S. industry. Our financial goals include a
targeted minimum ROC of 25 percent, and we expect to meet that objective in
1999.
Net earnings for 1998 included restructuring charges of 63 cents per share,
which primarily related to improving the cost structure of our North American
cereal operations. We shut down one cereal line at our Lodi, Calif., facility
and closed our two smallest plants, located in Chicago, Ill., and Etobicoke,
Ontario. Annual ongoing cost savings from these actions are estimated at 14
cents per share. Net earnings in 1997 included a non-cash charge of 18 cents per
share for the adoption of SFAS No. 121 (accounting for the impairment of
long-lived assets.) Including these unusual items in both years, basic earnings
per share were $2.67 in 1998 and $2.82 in 1997. Diluted earnings per share after
unusual items were $2.60 in 1998 and $2.76 in 1997.
Net interest expense totaled $117.2 million in 1998, up from $100.5 million
in 1997 and $101.4 million in 1996 due to increased borrowings associated with
the Ralcorp acquisition and our ongoing share repurchase program. Given our
continuing share repurchases and other investment activities, we expect somewhat
higher net interest expense in 1999.
The effective income tax rate on earnings as reported in 1998 was 36.3
percent. Excluding the unusual items described above, our effective tax rate was
37.0 percent in 1998, compared to 36.6 percent in 1997 and 36.8 percent in 1996.
It is our 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. We attempt to minimize the effects of inflation through
appropriate planning and operating practices. Our market risk management
practices are discussed later in this section.
For a discussion of new accounting rules effective in future fiscal years,
see Note One to the consolidated financial statements.
CASH FLOW FROM OPERATIONS
dollars in millions
-------------------
1994 561
1995 457
1996 676
1997 594
1998 775
1997 COMPARED TO 1996
For the year ended May 25, 1997, earnings before unusual items totaled $474.6
million and basic earnings per share were $3.00. These results were essentially
flat compared to 1996, when earnings totaled $476.4 million and basic earnings
per share were $3.00.
Three primary factors hindered 1997 earnings progress. The most significant
of these was price deflation in the U.S. ready-to-eat cereal market, as the
major competitors lowered prices. Big G's actions reduced prices an average 11
percent on cereal brands accounting for 42 percent of volume. The second factor
to affect 1997 earnings was lower-than-expected unit volume growth in the second
half of the year. This shortfall was largely related to Big G volume declines in
the second half, when reductions in marketing spending made to partially offset
the price declines interrupted momentum. And finally, 1997 earnings were reduced
approximately 5 cents per share as anticipated by the acquisition of the Ralcorp
branded cereal and snacks businesses.
Total domestic unit volume for established businesses grew 3 percent in 1997
and, including the acquired Ralcorp brands for the final four months of the
year, total U.S. volume was up more than 4 percent. Market shares were even or
up for nearly all of our major retail businesses. In addition, foodservice
operations posted a 6 percent volume gain. International unit volumes, including
our share of joint venture results, grew 7 percent. Total international earnings
were below the prior year's, however, as a result of development spending for
the IDP joint venture with Bestfoods, and lower sales and unit volumes for the
SVE joint venture with PepsiCo.
Fiscal 1996 basic earnings per share of $3.00 represented a 28 percent
increase from prior-year results. In the United States, unit volume grew 7
percent, led by 10 percent growth in Big G cereal volume. International results
included overall unit volume growth of 13 percent and a more than 50 percent
improvement in earnings.
FINANCIAL CONDITION
We continue to believe that the ratios of fixed charge coverage and cash flow to
debt are the most important measures of our financial strength. The fixed charge
coverage ratio measures the number of times each year that we earn enough to
cover fixed charges. The cash flow to debt ratio measures the amount of cash we
generate each year as a percentage of our total debt. Fiscal 1998 fixed charge
coverage of 6.8 times excluding unusual items remains very strong. Our cash flow
to debt declined slightly to 34.6 percent, due to increased debt levels
associated with the Ralcorp acquisition and share repurchase activity. We expect
this ratio to increase in 1999.
Our balance sheet reflects the impact of several recent transactions. At the
end of fiscal 1995, we spun off our restaurant operations, reducing
shareholders' equity by approximately $1.2 billion. In January 1997, we acquired
the branded ready-to-eat cereal and snack businesses from Ralcorp. For this
transaction, we issued approximately $355 million in General Mills common stock
(approximately 5.4 million shares) to Ralcorp shareholders and assumed about
$215 million of Ralcorp public debt and related accrued interest. This
acquisition has been accounted for using the purchase method of accounting.
Acquired goodwill totals approximately $550 million and will be amortized on a
straight line basis over 40 years. Under our ongoing share repurchase program,
we made open-market purchases totaling 6.2 million shares in fiscal 1997 and 7.5
million shares in 1998. These purchases totaled nearly $900 million and reduced
stockholders' equity. As a result, stockholders' equity represents $190.2
million of our $2,491.9 million in total capital for 1998.
The company's capital structure is shown in the table below.
CAPITAL STRUCTURE
- - ------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - ------------------------------------------------------------
Notes payable $ 264.1 $ 204.3
Current portion of
long-term debt 153.2 139.0
Long-term debt 1,640.4 1,530.4
Deferred income taxes -
tax leases 129.1 143.7
- - ------------------------------------------------------------
Total debt 2,186.8 2,017.4
Debt adjustments:
Leases - debt equivalent 218.1 184.4
Marketable investment,
at cost (103.2) (132.7)
Adjusted debt 2,301.7 2,069.1
Stockholders' equity 190.2 494.6
Total capital $2,491.9 $2,563.7
- - ------------------------------------------------------------
We intend to manage our businesses and financial ratios so as to maintain an
"A" bond rating, which allows access to financing at reasonable costs.
Currently, General Mills' publicly issued long-term debt carries ratings of "A2"
(Moody's Investors Services, Inc.) and "A+" (Standard and Poor's Corporation).
Our commercial paper has ratings of "P-1" (Moody's) and "A-1" (Standard and
Poor's) in the United States and "R-1 (middle)" in Canada (Dominion Bond Rating
Service).
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 above, shows the composition of our
debt structure including the impact of derivatives.
DEBT STRUCTURE
- - ----------------------------------------------------------------
Dollars in Millions May 31, 1998 May 25, 1997
- - ----------------------------------------------------------------
Floating-rate debt $ 819.3 36% $ 706.0 34%
Fixed-rate debt 1,135.2 49 1,035.0 50
Leases - debt
equivalent 218.1 9 184.4 9
Deferred income
taxes - tax leases 129.1 6 143.7 7
- - ----------------------------------------------------------------
Total debt $2,301.7 100% $2,069.1 100%
- - ----------------------------------------------------------------
Commercial paper is a continuing source of short-term financing. We can
isssue commercial paper in the United States and Canada, and subsequent to year
end, we established a European commercial paper program. Bank credit lines are
maintained to ensure availability of short-term funds on an as-needed basis. As
of May 31, 1998, we had fee-paid credit lines of $700 million.
Our shelf registration statement permits us to issue up to $232 million net
proceeds in unsecured debt securities. The shelf registration authorizes a
medium-term note program that provides additional flexibility in quickly
accessing the debt markets.
Sources and uses of cash in the past three years are shown in the
accompanying table.
CASH SOURCES (USES)
- - ---------------------------------------------------------
In Millions 1998 1997 1996
- - ---------------------------------------------------------
From continuing
operations $ 775.3 $ 594.1 $ 676.4
From discontinued
operations (5.8) (6.8) (16.6)
Fixed assets and
other investments,
net - continuing (233.0) (231.8) (173.9)
Change in marketable
securities 29.7 39.7 .9
Proceeds from disposition
of businesses -- 6.5 --
Increase (decrease) in
outstanding debt - net 198.9 221.9 (164.8)
Common stock issued 92.5 60.5 38.0
Treasury stock purchases (524.9) (361.8) (35.6)
Dividends paid (336.3) (320.7) (303.6)
Other (2.8) (9.4) (13.2)
- - ---------------------------------------------------------
Increase (decrease)
in cash and
cash equivalents $ (6.4) $ (7.8) $ 7.6
- - ---------------------------------------------------------
Continuing operations generated $181.2 million more cash in 1998 than in
1997, primarily due to strong earnings growth recorded by domestic operations
and a positive impact from the change in working capital.
Capital investment for fixed assets and joint venture development totaled
approximately $211 million in 1998, compared with $209 million in 1997. For
fiscal 1999 through 2001, we currently expect our capital investment needs to
average about $225 million annually.
MARKET RISK MANAGEMENT
General Mills is exposed to market risk stemming from changes in interest rates,
foreign exchange rates and commodity prices. Changes in these factors could
cause fluctuations in our earnings and cash flows. In the normal course of
business, we actively manage our exposure to these market risks by entering into
various hedging transactions, authorized under company policies that place clear
controls on these activities. Our hedging transactions involve the use of a
variety of derivative financial instruments. We use derivatives only where there
is an underlying exposure; we do not use them for trading or speculative
purposes. Additional information regarding our use of financial instruments is
included in Note Seven to the consolidated financial statements.
INTEREST RATES - We manage our debt structure and our interest-rate risk through
the use of fixed- and floating-rate debt, and through the use of derivatives. We
use interest-rate swaps to hedge our exposure to interest rate changes, and also
to lower our financing costs. Generally under these swaps, we agree with a
counterparty to exchange the difference between fixed-rate and floating-rate
interest amounts based on an agreed notional principal amount. Our primary
exposure is to U.S. interest rates.
FOREIGN CURRENCY RATES - Foreign currency fluctuations can affect our net
investments and earnings denominated in foreign currencies. We primarily use
foreign currency forward contracts and option contracts to selectively hedge our
exposure to changes in exchange rates. These contracts function as hedges since
they change in value inversely to the change created in the underlying exposure
as foreign exchange rates fluctuate. Our primary exchange rate exposure is with
various European currencies and the Canadian dollar against the U.S. dollar.
COMMODITIES - Certain ingredients used in our products are exposed to commodity
price changes. We manage this risk through an integrated set of financial
instruments, including purchase orders, non-cancelable contracts, futures
contracts, futures options and swaps. Our primary commodity price exposures are
with cereal grains, sugar, fruits, other agricultural products, vegetable oils,
packaging materials and energy costs.
VALUE AT RISK - These estimates are intended to measure the maximum potential
fair value or earnings General Mills could lose in one day from adverse changes
in market interest rates, foreign exchange rates or commodity prices, under
normal market conditions. A variance/co-variance value at risk (VAR) methodology
was used to quantify the market risk for our exposures. The models assumed
normal market conditions and used a 95 percent confidence level.
The VAR calculation used historical interest rates, foreign exchange rates
and commodity prices from the past year to estimate the potential volatility and
correlation of these rates in the future. For interest rate and foreign exchange
rate market factors, the data were drawn from the JP Morgan RiskMetrics(TM)
dataset. The calculations are not intended to represent actual losses in fair
value or pre-tax earnings that we expect to incur. The model does not consider
favorable changes in market rates. Further, since the hedging instrument (the
derivative) inversely correlates with the underlying exposure, we would expect
that any loss or gain in the fair value of our derivatives would be generally
offset by an increase or decrease in the fair value of our underlying exposures.
The positions included in the calculations were: debt, investments, interest
rate swaps, foreign exchange forwards and commodity swaps, futures and options.
The calculations do not include the underlying foreign exchange and
commodities-related positions that are hedged by these market-risk sensitive
instruments.
The table below presents the estimated maximum potential one-day loss in fair
value or pre-tax earnings for our interest rate, foreign currency, and commodity
market-risk sensitive instruments outstanding at May 31, 1998, calculated using
the VAR methodology described above.
- - -----------------------------------------------------------------------
Pre-tax
In Millions Fair Value Impact Earnings Impact
- - -----------------------------------------------------------------------
VALUE AT RISK AMOUNTS
Interest rate instruments $ 5.3 $ .2
Foreign exchange rate
instruments .6 .2
Commodity instruments 1.5 1.5
- - -----------------------------------------------------------------------
YEAR 2000
The year 2000 issue is the result of computer programs written using two digits
(rather than four) to define years. Computers or other equipment with
date-sensitive software may recognize "00" as 1900 rather than 2000. This could
result in system failures or miscalculations. If we, or our significant
customers or suppliers, fail to correct year 2000 issues, our ability to operate
our businesses could be affected.
We have assessed the impact of year 2000 issues on the processing of
date-related information for all of our information systems infrastructure and
non-technical assets (e.g., plant production equipment). All systems and assets
have been inventoried and classified as to their compliance with year 2000 data
processing. Any systems found year 2000 deficient will be modified, upgraded or
replaced. Project plans anticipate all existing, critical information systems
infrastructure to be year 2000 compliant by the end of calendar 1998 and all
plant production equipment to be year 2000 compliant by the middle of calendar
1999. Contingency plans will be in place to address any failures resulting from
relationships with customers, suppliers or other third parties. We cannot
guarantee that circumstances beyond our control will not have an adverse impact
on us. However, based on assessments and testing to date, we do not expect the
financial impact of addressing any potential internal system issues to be
material to our financial position, results of operations or cash flows.
CAUTIONARY STATEMENTS
Here and elsewhere in this report to shareholders, we discuss some of our
expectations regarding General Mills' future performance. These forward-looking
statements are based on our current views and assumptions. Actual results could
differ materially from these current expectations and projections, and from
historical performance. For example, our future results could be affected by
such factors as: the competitive dynamics in the U.S. ready-to-eat cereal
market, including competitive promotional spending levels; the rate of our unit
volume growth and our product mix; fluctuations in the cost and availability of
supply-chain resources; currency rate fluctuations; and the effect of stock
market conditions on our share repurchase activity. Our 1998 Form 10-K contains
further discussion of these matters.
<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 31, 1998 and May 25, 1997, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the fiscal years in the three-year period ended May 31, 1998. 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 31, 1998 and May 25, 1997, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended May 31, 1998 in conformity with generally accepted
accounting principles.
As discussed in Note Three to the consolidated financial statements, the
Company adopted the provisions of the Financial Accounting Standards Board's
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," in fiscal 1997.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
June 30, 1998
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
In Millions, Except per Share Data, Fiscal Year Ended May 31, 1998 May 25, 1997 May 26, 1996
- - --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $6,033.0 $5,609.3 $5,416.0
Costs and Expenses:
Cost of sales 2,389.3 2,328.4 2,241.0
Selling, general and administrative 2,498.6 2,239.2 2,128.3
Depreciation and amortization 194.9 182.8 186.7
Interest, net 117.2 100.5 101.4
Unusual items 166.4 48.4 --
- - --------------------------------------------------------------------------------------------------------
Total Costs and Expenses 5,366.4 4,899.3 4,657.4
Earnings before Taxes and Earnings (Losses) from
Joint Ventures 666.6 710.0 758.6
Income Taxes 241.9 258.3 279.4
Earnings (Losses) from Joint Ventures (2.9) (6.3) (2.8)
Net Earnings $ 421.8 $445.4 $ 476.4
- - --------------------------------------------------------------------------------------------------------
Earnings per Share $ 2.67 $ 2.82 $ 3.00
Average Number of Common Shares 158.1 158.2 158.9
Earnings per Share - Assuming Dilution $ 2.60 $ 2.76 $ 2.94
Average Number of Common Shares - Assuming Dilution 162.3 161.6 162.0
- - --------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
In Millions May 31, 1998 May 25, 1997
- - ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6.4 $ 12.8
Receivables, less allowance for doubtful accounts
of $4.2 in 1998 and $4.1 in 1997 395.1 419.1
Inventories 389.7 364.4
Prepaid expenses and other current assets 107.2 107.3
Deferred income taxes 136.9 107.7
- - ---------------------------------------------------------------------------------------------
Total Current Assets 1,035.3 1,011.3
Land, Buildings and Equipment at cost, net 1,186.3 1,279.4
Other Assets 1,639.8 1,611.7
- - ---------------------------------------------------------------------------------------------
Total Assets $3,861.4 $3,902.4
=============================================================================================
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 593.1 $ 599.7
Current portion of long-term debt 153.2 139.0
Notes payable 264.1 204.3
Accrued taxes 148.5 97.0
Accrued payroll 129.7 129.4
Other current liabilities 155.1 123.1
- - ---------------------------------------------------------------------------------------------
Total Current Liabilities 1,443.7 1,292.5
Long-term Debt 1,640.4 1,530.4
Deferred Income Taxes 284.8 272.1
Deferred Income Taxes - Tax Leases 129.1 143.7
Other Liabilities 173.2 169.1
- - ---------------------------------------------------------------------------------------------
Total Liabilities 3,671.2 3,407.8
- - ---------------------------------------------------------------------------------------------
Stockholders' Equity:
Cumulative preference stock, none issued - -
Common stock, 204.2 shares issued 619.6 578.0
Retained earnings 1,622.8 1,535.4
Less common stock in treasury, at cost, shares
of 49.4 in 1998 and 44.3 in 1997 (1,935.7) (1,501.9)
Unearned compensation and other (48.1) (58.0)
Cumulative foreign currency adjustment (68.4) (58.9)
- - ---------------------------------------------------------------------------------------------
Total Stockholders' Equity 190.2 494.6
- - ---------------------------------------------------------------------------------------------
Total Liabilities and Equity $3,861.4 $3,902.4
=============================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
In Millions, Fiscal Year Ended May 31, 1998 May 25, 1997 May 26, 1996
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows - Operating Activities:
Net earnings $ 421.8 $ 445.4 $ 476.4
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization 194.9 182.8 186.7
Deferred income taxes (29.3) 20.9 42.4
Change in current assets and liabilities, net of effects
from business acquired 54.5 (86.4) (25.9)
Unusual items 166.4 48.4 -
Other, net (33.0) (17.0) (3.2)
- - --------------------------------------------------------------------------------------------------------------------------------
Cash provided by continuing operations 775.3 594.1 676.4
Cash used by discontinued operations (5.8) (6.8) (16.6)
- - --------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 769.5 587.3 659.8
- - --------------------------------------------------------------------------------------------------------------------------------
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (183.6) (162.5) (128.8)
Investments in businesses, intangibles and affiliates,
net of investment returns and dividends (9.5) (42.0) (40.0)
Purchases of marketable securities (10.6) (8.0) (21.6)
Proceeds from sale of marketable securities 40.3 47.7 22.5
Proceeds from disposal of land, buildings and equipment 2.1 2.6 6.2
Proceeds from disposition of businesses - 6.5 -
Other, net (42.0) (29.9) (11.3)
- - --------------------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investment Activities (203.3) (185.6) (173.0)
- - --------------------------------------------------------------------------------------------------------------------------------
Cash Flows - Financing Activities:
Change in notes payable 63.9 312.7 (42.4)
Issuance of long-term debt 286.6 76.2 42.3
Payment of long-term debt (151.6) (167.0) (164.7)
Common stock issued 92.5 60.5 38.0
Purchases of common stock for treasury (524.9) (361.8) (35.6)
Dividends paid (336.3) (320.7) (303.6)
Other, net (2.8) (9.4) (13.2)
- - --------------------------------------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (572.6) (409.5) (479.2)
- - --------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents (6.4) (7.8) 7.6
Cash and Cash Equivalents - Beginning of Year 12.8 20.6 13.0
- - --------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year $ 6.4 $ 12.8 $ 20.6
================================================================================================================================
Cash Flow from Changes in Current Assets and Liabilities:
Receivables $ 23.7 $ (80.0) $ (59.5)
Inventories (26.4) 45.0 (23.7)
Prepaid expenses and other current assets 1.6 2.5 (6.3)
Accounts payable 4.0 (27.8) 93.2
Other current liabilities 51.6 (26.1) (29.6)
- - --------------------------------------------------------------------------------------------------------------------------------
Change in Current Assets and Liabilities $ 54.5 $ (86.4) $ (25.9)
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
$.10 Par Value Common Stock Cumulative
(One Billion Shares Authorized) Unearned Foreign
Issued Treasury Retained Compensation Currency
In Millions, Except per Share Data Shares Amount Shares Amount Earnings and Other Adjustment Total
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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/settlements, net - .2 .2
Unearned compensation related to
restricted stock awards (6.5) (6.5)
Earned compensation and other 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
Net earnings 445.4 445.4
Cash dividends declared
($2.03 per share), net of
income taxes of $2.1 (318.6) (318.6)
Shares issued in acquisition - 181.4 5.4 173.0 354.4
Stock option, profit sharing and
ESOP plans - 9.3 1.7 57.4 66.7
Shares purchased via puts, or on
open market (6.2) (368.0) (368.0)
Put and call option premium/
settlements, net - 3.0 - 3.1 6.1
Unearned compensation related to
restricted stock awards (7.9) (7.9)
Earned compensation and other 13.1 13.1
Change in unrealized gain, net of
income taxes of $.1, on
available-for-sale securities (.1) (.1)
Minimum pension liability adjustment (1.9) (1.9)
Amount removed on disposition of
foreign operation 6.1 6.1
Translation adjustments (8.4) (8.4)
Balance at May 25, 1997 204.2 578.0 (44.3) (1,501.9) 1,535.4 (58.0) (58.9) 494.6
Net earnings 421.8 421.8
Cash dividends declared
($2.12 per share), net of
income taxes of $1.9 (334.4) (334.4)
Stock option, profit sharing and
ESOP plans - 29.3 2.4 83.9 113.2
Shares purchased via puts, or on
open market (7.5) (518.7) (518.7)
Put and call option premium/
settlements, net - 12.3 - 1.0 13.3
Unearned compensation related to
restricted stock awards (7.3) (7.3)
Earned compensation and other 11.9 11.9
Change in unrealized gain, net of
income taxes of $5.2, on
available-for-sale securities 8.2 8.2
Minimum pension liability adjustment (2.9) (2.9)
Translation adjustments (9.5) (9.5)
- - --------------------------------------------------------------------------------------------------------------------------------
Balance at May 31, 1998 204.2 $619.6 (49.4) $(1,935.7) $1,622.8 $(48.1) $(68.4) $ 190.2
================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - 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.
(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 1997 and 1996 each
consisted of 52 weeks and 1998 consisted of 53 weeks.
(B) LAND, BUILDINGS, EQUIPMENT AND DEPRECIATION - Buildings and equipment are
depreciated over estimated useful lives, primarily using the straight-line
method. Buildings are usually depreciated over 40 to 50 years and equipment over
three to 15 years. 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 the
purchase price of acquired companies and the related fair value 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.
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 27, 1998, the Audit Committee affirmed that the remaining amounts of these
assets have continuing value based upon a return on capital analysis.
(E) RECOVERABILITY OF LONG-LIVED ASSETS - We review long-lived assets,
including identifiable intangibles and associated goodwill, for impairment when
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. An asset is deemed impaired and written down to its fair
value if estimated related future cash flows are less than its carrying amount.
(F) 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.
(G) FINANCIAL INSTRUMENTS - See Note Seven for a description of the
accounting policies related to financial instruments.
(H) RESEARCH AND DEVELOPMENT - All expenditures for research and development
are charged against earnings in the year incurred. The charges for 1998, 1997
and 1996 were $66.3 million, $61.4 million and $60.1 million, respectively.
(I) ADVERTISING COSTS - Advertising expense (including production and
communication costs) for 1998, 1997 and 1996 was $366.1 million, $306.5 million
and $319.7 million, respectively. Prepaid advertising costs (including
syndication properties) of $25.5 million and $22.6 million were reported as
assets at May 31, 1998 and May 25, 1997, respectively. We expense the production
costs of advertising the first time that the advertising takes place.
(J) STOCK-BASED COMPENSATION - We use the "intrinsic value-based method" for
measuring the cost of compensation paid in Company common 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 stock option
plans require that the employee's payment (i.e., exercise price) is the market
value as of the grant date.
(K) EARNINGS PER SHARE - We adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share" in our third quarter of fiscal
1998. SFAS No. 128 requires dual presentation of basic and diluted earnings per
share (EPS) on the statement of earnings. Basic EPS is computed by dividing net
earnings by the weighted average number of common shares outstanding. Diluted
EPS includes the effect of all dilutive potential common shares (primarily
related to outstanding stock options). All prior periods have been restated.
(L) SEGMENT INFORMATION - We operate exclusively in the consumer foods
industry.
(M) STATEMENTS OF CASH FLOWS - For purposes of the statement of cash flows,
we consider all investments purchased with an original maturity of three months
or less to be cash equivalents.
(N) NEW ACCOUNTING RULES - During 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income," SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information," and
SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." These standards, which are all effective in our 1999, revise related
disclosures. There will be no impact on our financial position, results of
operations, or cash flows from adoption of these standards.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 is effective for fiscal years
beginning after December 15, 1998 and provides guidance on accounting for the
described costs. SOP 98-1 should not have a material impact on our financial
position, results of operations, or cash flows when adopted.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 is effective for us in our fiscal
2001. We have not yet determined the impact of adoption on our financial
statements; however, we do not expect the impact to be material.
NOTE 2 - ACQUISITION
On January 31, 1997, we acquired the branded ready-to-eat cereal and snack mix
businesses of Ralcorp Holdings, Inc., including its CHEX and COOKIE CRISP
brands. This acquisition included a Cincinnati, Ohio, manufacturing facility,
and trademark and technology rights for the branded products in the Americas.
The purchase price of $570 million involved the issuance of about $355 million
in General Mills common stock (approximately 5.4 million shares) to Ralcorp
shareholders and the assumption of about $215 million of Ralcorp public debt and
accrued interest. This acquisition has been accounted for using the purchase
method of accounting. The purchase price was allocated based on fair values at
date of acquisition and resulted in acquired goodwill of approximately $550
million, which is being amortized on a straight-line basis over 40 years. The
results of the acquired businesses have been included in the consolidated
financial statements since the acquisition date. 1997 earnings were reduced
approximately $.05 per share by the acquisition.
The following unaudited pro forma information presents a summary of our
consolidated results of operations and the acquired branded ready-to-eat cereal
and snack mix businesses of Ralcorp as if the acquisition had occurred on May
29, 1995.
- - ------------------------------------------------------------
Fiscal Year
In Millions, Except per Share Data 1997 1996
- - ------------------------------------------------------------
Sales $5,892.0 $5,809.6
Net earnings 459.4 487.7
Net earnings per share 2.84 2.97
- - ------------------------------------------------------------
These unaudited pro forma results have been prepared for comparative purposes
only and include certain adjustments, such as additional amortization expense as
a result of goodwill and an increased interest expense on acquisition debt. They
do not purport to be indicative of the results of operations that actually would
have resulted had the combination occurred on May 29, 1995, or of future results
of operations of the consolidated entities.
NOTE 3 - UNUSUAL ITEMS
In 1998, we recorded a net charge of $166.4 million pre-tax, $100.2 million
after tax ($.63 per share) primarily related to shutting down one cereal system
at our Lodi, California, facility and closing our two smallest cereal plants
based in Chicago, Illinois, and Etobicoke, Ontario. We also received an
insurance settlement from one of our carriers related to costs incurred in
fiscal 1995 and 1996 (charged against fiscal 1994) from the improper use of a
pesticide by an independent contractor in treating some of the Company's oat
supplies. Snack Ventures Europe (SVE), our joint venture with PepsiCo, recorded
restructuring charges for productivity initiatives primarily related to
production consolidation. We also recorded charges associated with restructuring
our sales regions and our trade and promotion organization. The charges include
approximately $147 million in non-cash items primarily related to asset
write-offs and approximately $19 million of net cash outflows, primarily related
to disposal of assets, severance costs and the insurance settlement. These
restructuring activities will be substantially completed in fiscal 1999 and
there has been no adjustment to the original reserve. At May 31, 1998, there was
a remaining reserve of $30.5 million.
In 1997, we adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The initial,
non-cash charge upon adoption of SFAS 121 was $48.4 million pre-tax, $29.2
million after tax ($.18 per share). The charge represented 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
impairments related to assets not currently in use, assets significantly
underutilized, and assets with limited planned future use.
NOTE 4 - INVESTMENTS IN JOINT VENTURES
We are involved in four joint ventures. We have a 50% equity interest in Cereal
Partners Worldwide (CPW), our joint venture with Nestle, which manufactures and
markets ready-to-eat cereals outside North America. We have a 40.5% equity
interest in Snack Ventures Europe, our joint venture with PepsiCo, which
manufactures and markets snack foods in continental Europe. We have a 50% equity
interest in International Dessert Partners (IDP), our joint venture with
Bestfoods, which manufactures and markets baking mixes and desserts in Latin
America. We have a 50% equity interest in Tong Want, a new joint venture formed
in 1998 with Want Want Holdings Ltd. This venture has a goal of developing a
savory snacks business in China, but is not yet operating.
The joint ventures are reflected in our 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, and excluding the impact of SVE
restructuring charges which are included in unusual items, the effect on our net
income related to the joint ventures was a charge of $2.9 million, $6.3 million
and $2.8 million in 1998, 1997 and 1996, respectively.
Our cumulative investment in these joint ventures (including our share of
earnings and losses) was $214.3 million, $234.6 million and $229.8 million at
the end of 1998, 1997 and 1996, respectively. We made aggregate investments in
the joint ventures of $6.8 million (net of a $20.9 million loan repayment),
$46.5 million and $45.3 million in 1998, 1997 and 1996, respectively. We
received aggregate dividends from the joint ventures of $.9 million, $7.5
million and $8.2 million in 1998, 1997 and 1996, respectively.
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 as of and for the twelve months ended March 31.
The SVE information is consistent with our May year end.
COMBINED FINANCIAL INFORMATION -
JOINT VENTURES - 100% BASIS
- - --------------------------------------------------------------
Fiscal Year Ended
In Millions May 31, 1998 May 25, 1997 May 26, 1996
- - --------------------------------------------------------------
Sales $1,732.5 $1,627.6 $1,599.5
Gross Profit 907.7 843.5 838.1
Earnings (losses)
before Taxes 20.1 (7.3) 12.1
Earnings (losses)
after Taxes (6.3) (24.7) (13.1)
- - --------------------------------------------------------------
- - -------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - -------------------------------------------------------
Current Assets $432.4 $419.6
Non-current Assets 675.6 602.4
Current Liabilities 609.0 488.8
Non-current Liabilities 47.6 106.1
- - -------------------------------------------------------
Our proportionate share of the sales of the joint ventures was $780.7
million, $728.2 million and $705.7 million for 1998, 1997 and 1996,
respectively.
NOTE 5 - BALANCE SHEET INFORMATION
The components of certain balance sheet accounts are as follows:
- - ------------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - ------------------------------------------------------------------
Land, Buildings and Equipment:
Land $ 17.8 $ 17.5
Buildings 539.9 526.7
Equipment 1,790.4 1,911.2
Construction in progress 140.9 116.2
- - ------------------------------------------------------------------
Total land, buildings and equipment 2,489.0 2,571.6
Less accumulated depreciation (1,302.7) (1,292.2)
- - ------------------------------------------------------------------
Net land, buildings and equipment $1,186.3 $1,279.4
==================================================================
Other Assets:
Prepaid pension $ 471.8 $ 402.5
Marketable securities, at market 142.1 158.0
Investments in and
advances to affiliates 201.9 221.8
Net intangible assets,
primarily goodwill 630.4 655.2
Miscellaneous 193.6 174.2
- - ------------------------------------------------------------------
Total other assets $1,639.8 $1,611.7
==================================================================
Accumulated amortization included in net intangible assets was $62.7 million
and $39.8 million at May 31, 1998 and May 25, 1997, respectively.
As of May 31, 1998, a comparison of cost and market values of our marketable
securities (all of which are debt securities and considered available-for-sale)
was as follows:
- - ------------------------------------------------------------------
Market Gross Gross
In Millions Cost Value Gain Loss
- - ------------------------------------------------------------------
In "Other Current Assets" $ 14.6 $ 14.6 $ - $ -
In "Other Assets" 88.6 142.1 53.5 -
- - ------------------------------------------------------------------
Total marketable securities $103.2 $156.7 $53.5 $ -
- - ------------------------------------------------------------------
Realized gains from sales of marketable securities were $.1 million, $.6
million and $3.8 million in 1998, 1997 and 1996, respectively. In addition,
realized losses from purchases of our related debt (see Note Nine) were $.9
million and $2.3 million in 1997 and 1996, respectively. 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.
Scheduled maturities of our marketable securities are as follows:
- - ------------------------------------------------------------------
In Millions Cost Market Value
- - ------------------------------------------------------------------
Under one year (current) $ 14.6 $ 14.6
From 1 to 3 years 4.2 4.2
From 4 to 7 years 30.9 45.4
Over 7 years 53.5 92.5
- - ------------------------------------------------------------------
Totals $103.2 $156.7
==================================================================
NOTE 6 - INVENTORIES
The components of inventories are as follows:
- - ------------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - ------------------------------------------------------------------
Raw materials, work in
process and supplies $ 83.3 $ 77.4
Finished goods 262.5 270.5
Grain 83.0 64.0
Reserve for LIFO valuation method (39.1) (47.5)
- - ------------------------------------------------------------------
Total inventories $389.7 $364.4
==================================================================
At May 31, 1998 and May 25, 1997, respectively, inventories of $221.4 million
and $208.5 million were valued at LIFO. The impact of LIFO accounting increased
1998 and 1997 earnings by $.03 and $.03 per share, respectively, and reduced
1996 earnings by $.01 per share.
NOTE 7 - 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 (based on
current market quotes and interest rates) of our financial instruments at the
balance-sheet dates are as follows:
- - ------------------------------------------------------------------------
May 31, 1998 May 25, 1997
- - ------------------------------------------------------------------------
Carrying Fair Carrying Fair
In Millions Amount Value Amount Value
- - ------------------------------------------------------------------------
Assets:
Cash and
cash equivalents $ 6.4 $ 6.4 $ 12.8 $ 12.8
Receivables 395.1 395.1 419.1 419.1
Marketable securities 156.8 156.8 174.8 174.8
Liabilities:
Accounts payable 593.1 593.1 599.7 599.7
Debt 2,057.7 2,180.1 1,873.7 1,932.3
Derivatives relating to:
Marketable securities (.1) (.1) (1.8) (1.8)
Debt - 19.2 - 9.2
Commodities - (.4) - -
- - ------------------------------------------------------------------------
Each derivative we enter into and hold is designated at inception as a hedge
of risks associated with specific assets, liabilities or future commitments and
is monitored to determine if it remains an effective hedge. The effectiveness of
the derivative as a hedge is based on changes in its market value being highly
correlated with changes in market value of the underlying hedged item. We do not
enter into 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, foreign exchange, and commodity swap agreements are made
with a diversified group of highly rated financial institutions, while
commodities futures are entered into through various regulated exchanges. These
transactions expose the Company to credit risk 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 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 during time periods ranging from 1999 to 2023.
- - -----------------------------------------------------------------------
May 31, 1998 May 25, 1997
- - -----------------------------------------------------------------------
Dollars in Millions Asset Liability Asset Liability
- - -----------------------------------------------------------------------
Receive fixed swaps -
notional amount $ - $118.3 $ - $99.9
Average receive rate - 5.9% - 6.5%
Average pay rate - 5.4% - 5.4%
Pay fixed swaps -
notional amount $ 14.3 $116.5 $ 4.2 $16.5
Average receive rate 5.5% 5.6% 5.9% 5.6%
Average pay rate 7.1% 5.8% 8.9% 8.2%
- - -----------------------------------------------------------------------
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.
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. At May 31, 1998,
we had no interest rate options outstanding.
(2) FOREIGN-CURRENCY EXPOSURE - We are exposed to potential losses from
foreign currency fluctuations affecting net investments and earnings denominated
in foreign currencies. We selectively hedge the potential effect of these
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 cumulative foreign currency adjustment in stockholders'
equity.
The components of our net foreign investment exposure by geographic region
are as follows:
- - --------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - --------------------------------------------------------------
Europe $140.1 $153.8
North/South America 28.5 40.2
Asia 1.5 2.3
- - --------------------------------------------------------------
Total exposure $170.1 $196.3
- - --------------------------------------------------------------
At May 31, 1998, we had forward and option contracts maturing in 1999 to sell
$37.8 million of foreign currencies. The fair value of these contracts is based
on third-party quotes and was immaterial at May 31, 1998.
(3) COMMODITIES - The Company uses an integrated set of financial instruments
in its purchasing cycle, including purchase orders, noncancelable contracts,
futures contracts, futures options and swaps. Except as described below, these
instruments are all used to manage purchase prices and inventory values as
practical for the Company's production needs. 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 production flows through cost of goods sold. The net gains and losses
deferred and expensed are immaterial. At May 31, 1998 and May 25, 1997, the
aggregate fair value of our ingredient derivatives position was $156.7 million
and $92.9 million, respectively.
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
determinable market values. Neither results of operations nor the year-end
positions from our grain-merchandising operations was material to the Company's
overall results.
NOTE 8 - NOTES PAYABLE
The components of notes payable and their respective weighted average interest
rates at the end of the periods are as follows:
- - ----------------------------------------------------------------------
May 31, 1998 May 25, 1997
- - ----------------------------------------------------------------------
Weighted Weighted
Average Average
Notes Interest Notes Interest
Dollars in Millions Payable Rate Payable Rate
- - ----------------------------------------------------------------------
U.S. commercial paper $428.2 5.5% $379.0 5.5%
Canadian commercial paper 20.4 5.0 32.2 3.2
Financial institutions 295.5 5.2 273.1 5.1
Amounts reclassified
to long-term debt (480.0) - (480.0) -
- - ----------------------------------------------------------------------
Total notes payable $264.1 $204.3
- - ----------------------------------------------------------------------
See Note Seven for a description of related interest rate derivative
instruments.
To ensure availability of funds, we maintain bank credit lines sufficient to
cover our outstanding short-term borrowings. As of May 31, 1998, we had $700.0
million fee-paid lines and $63.8 million uncommitted, no-fee lines available in
the U.S. and Canada. In addition, we had foreign no-fee lines of $70.4 million,
of which $14.9 million are unused.
We have a revolving credit agreement expiring in January 2002 covering the
fee-paid credit lines that provides us with the ability to refinance short-term
borrowings on a long-term basis. Therefore we have reclassified a portion of our
notes payable to long-term debt.
NOTE 9 - LONG-TERM DEBT
- - ---------------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - ---------------------------------------------------------------------
Medium-term notes, 5.1% to 9.1%,
due 1998 to 2033 $ 997.6 $ 877.9
Zero coupon notes, yield 11.1%,
$278.8 due August 15, 2013 54.3 48.7
8.2% ESOP loan guaranty,
due through June 30, 2007 57.7 63.5
7.0% Notes due September 15, 2004 163.0 165.1
Zero coupon notes, yield 11.7%,
$64.2 due August 15, 2004 31.8 28.3
Notes payable, reclassified 480.0 480.0
Other 9.2 5.9
- - ---------------------------------------------------------------------
1,793.6 1,669.4
Less amounts due within one year (153.2) (139.0)
- - ---------------------------------------------------------------------
Total long-term debt $1,640.4 $1,530.4
- - ---------------------------------------------------------------------
See Note Seven for a description of related interest rate derivative
instruments.
As of May 31, 1998 our debt shelf registration permits the issuance of up to
$232.0 million net proceeds in unsecured debt securities to reduce short-term
debt and for other general corporate purposes, and includes a medium-term note
program that allows us to issue debt quickly for selected amounts, rates and
maturities.
In 1998, we issued $268.0 million of debt under our medium-term note program
with maturities varying from one to 25 years and interest rates from 5.1% to
5.8%. In 1997, $62.0 million of debt was issued under this program with
maturities from one to 12 years and interest rates from 5.6% to 7.5%.
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) $153.2, $90.6, $62.8, $47.9 and $96.6 in 1999, 2000, 2001, 2002 and
2003, 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 10 - STOCKHOLDERS' EQUITY
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 in which case 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 any
time prior to the acquisition of 20 percent or more of the outstanding common
stock. The rights expire on February 1, 2006. On May 31, 1998, there were 154.8
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 1998 and 1997 that are a part of our
stock repurchase program, we issued put options that entitle the holder to sell
shares of our common stock to us, at a specified price, if the holder exercises
the option. In 1998 and 1997, we issued put options for 6.8 million and 4.5
million shares for $12.7 million and $7.4 million in premiums paid to the
Company, respectively. As of May 31, 1998, put options for 2.8 million shares
remain outstanding at exercise prices ranging from $67.00 to $70.00 per share
with exercise dates from June 1998 to December 1998.
NOTE 11 - STOCK PLANS
A total of 7,109,367 shares (including 5,290,430 shares for salary replacement
options, 69,273 shares for restricted stock, and 173,537 shares for non-employee
directors) are available for grant of options, restricted stock, or restricted
stock units under our 1993, 1995 and 1996 stock plans through October 1, 1998,
September 30, 2000, and September 30, 2001, respectively. Options may be granted
at a price not less than 100 percent of the fair market value on the date of
grant. 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 and one month after the date of grant. The stock plans
provide for full vesting of options upon completion of specified service
periods, or in the event there is a change of control.
Stock subject to a restricted period and a purchase price, if any, as
determined by the Compensation Committee of the Board of Directors may be
granted to key employees under the 1993 plan and the Executive Incentive Plan.
Most of the employee restricted stock awards require the employee to deposit
personally owned shares (on a one-for-one basis) with the Company during the
restricted period. The 1996 plan allows non-employee directors to annually
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. The 1990 plan also allowed grants of
restricted stock to directors. In 1998, 1997 and 1996, grants of 128,466,
176,955 and 132,092 shares of restricted stock and units were made, with
weighted average values at grant of $65.59, $59.29 and $54.32 per share,
respectively. On May 31, 1998, a total of 467,896 restricted shares and units
were 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 31, 1998, there
were 936,875 outstanding options with corresponding performance unit accounts.
The value of the outstanding options exceeds the value of the performance unit
accounts.
The following table contains information on stock option activity:
- - ----------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
Exercisable Per Share Outstanding Per Share
- - ----------------------------------------------------------------------
Balance at
May 28, 1995 12,576,580 $33.37 21,974,796 $41.60
Granted 4,127,602 52.55
Exercised (1,778,823) 25.87
Expired (730,343) 49.40
- - ----------------------------------------------------------------------
Balance at
May 26, 1996 11,315,131 37.70 23,593,232 44.46
Granted 3,973,277 59.33
Exercised (2,335,956) 31.74
Expired (429,898) 51.84
- - ----------------------------------------------------------------------
Balance at
May 25, 1997 11,949,600 42.53 24,800,655 47.91
Granted 3,185,783 73.10
Exercised (2,730,311) 31.92
Expired (236,524) 52.51
- - ---------------------------------------------------------------------
Balance at
May 31, 1998 12,044,170 $47.63 25,019,603 $52.82
- - ----------------------------------------------------------------------
The following table provides information regarding exercisable and
outstanding options as of May 31, 1998.
- - -----------------------------------------------------------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Options Exercise Options Exercise Remaining
Price Exer- Price per Out- Price per Contractual
per Share cisable Share standing Share Life(years)
- - -----------------------------------------------------------------------------
Under $40 2,751,418 $31.90 2,751,418 $31.90 1.67
$40-$50 2,622,387 46.60 5,181,816 45.82 5.14
$50-$60 6,165,398 53.78 11,259,079 53.26 5.83
$60-$70 504,967 63.60 3,797,213 63.93 8.62
Over $70 - - 2,030,077 75.78 9.46
- - -----------------------------------------------------------------------------
12,044,170 $47.63 25,019,603 $52.82 5.95
- - -----------------------------------------------------------------------------
Stock-based compensation expense related to restricted stock for 1998, 1997
and 1996 was $6.0 million, $4.8 million and $3.0 million, respectively, using
the "intrinsic value-based method" of accounting for stock-based compensation
plans. Effective with 1997, we adopted the disclosure requirements of SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 allows either a
fair value based method or an intrinsic value-based method of accounting for
such compensation plans. Had compensation expense for our stock option plan
grants been determined using the fair value based method, net earnings, basic
earnings per share and diluted earnings per share would have been approximately
$406.1 million, $2.57 and $2.52, respectively, for 1998; $435.2 million, $2.75
and $2.71, respectively, for 1997; and $470.3 million, $2.96 and $2.92,
respectively, for 1996. These pro forma amounts are not likely to be
representative of the difference between the two methods in future years,
because many of our options require service over periods longer than three years
for full vesting. The weighted average fair values at grant date of the options
granted in 1998, 1997 and 1996 were estimated as $16.59, $11.76 and $9.39,
respectively, using the Black-Scholes option-pricing model with the following
weighted average assumptions:
- - -------------------------------------------------------------------
1998 1997 1996
- - -------------------------------------------------------------------
Risk-free interest rate 6.1% 6.5% 6.1%
Expected life 7 years 7 years 7 years
Expected volatility 18% 18% 18%
Expected dividend growth rate 8% 8% 8%
- - -------------------------------------------------------------------
The Black-Scholes model requires the input of highly subjective assumptions
and may not necessarily provide a reliable measure of fair value.
NOTE 12 - EARNINGS PER SHARE
Basic and diluted earnings per share (EPS) were calculated using the following:
- - ------------------------------------------------------------------
Fiscal Year
In Millions 1998 1997 1996
- - ------------------------------------------------------------------
Net Earnings $421.8 $445.4 $476.4
- - ------------------------------------------------------------------
Average number of common
shares - basic EPS 158.1 158.2 158.9
- - ------------------------------------------------------------------
Incremental share effect from:
Stock options 4.1 3.4 3.1
Restricted stock, stock rights
and puts .1 - -
- - ------------------------------------------------------------------
Average number of common
shares - diluted EPS 162.3 161.6 162.0
- - ------------------------------------------------------------------
NOTE 13 - INTEREST EXPENSE
The components of net interest expense are as follows:
- - -------------------------------------------------------------
Fiscal Year
In Millions 1998 1997 1996
- - -------------------------------------------------------------
Interest expense $130.3 $115.7 $117.2
Capitalized interest (.7) (1.1) (.6)
Interest income (12.4) (14.1) (15.2)
- - -------------------------------------------------------------
Interest expense, net $117.2 $100.5 $101.4
- - -------------------------------------------------------------
During 1998, 1997 and 1996, we paid interest (net of amount capitalized) of
$117.2 million, $103.6 million and $103.8 million, respectively.
NOTE 14 - 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.
Our principal plan covering salaried employees has a provision that any excess
pension assets would vest 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 1998 1997 1996
- - ----------------------------------------------------------------
Service cost -
benefits earned $ 14.7 $ 14.3 $ 14.1
Interest cost on projected
benefit obligation 62.4 59.0 56.7
Actual return on plan assets (230.2) (168.7) (162.3)
Net amortization and deferral 107.0 59.2 61.4
Curtailment loss and special
termination benefits expense 6.1 - -
- - ----------------------------------------------------------------
Net pension income $ (40.0) $ (36.2) $ (30.1)
- - ----------------------------------------------------------------
The curtailment loss and special termination benefits expense of $6.1 million
was recorded in fiscal 1998 as part of the restructuring charge described in
Note Three.
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 7.0% and 4.4% in 1998, and 8.3% and 4.4% in 1997,
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 (determined as of May 31, 1998 and 1997) are as follows:
- - -----------------------------------------------------------------------
May 31, 1998 May 25, 1997
- - -----------------------------------------------------------------------
Assets Accu- Assets Accu-
Exceed mulated Exceed mulated
Accu- Benefits Accu- Benefits
mulated Exceed mulated Exceed
In Millions Benefits Assets Benefits Assets
- - -----------------------------------------------------------------------
Actuarial present value
of benefit obligations:
Vested benefits $ 807.6 $ 25.7 $ 668.0 $ 20.2
Nonvested benefits 52.4 1.1 41.9 .8
- - -----------------------------------------------------------------------
Accumulated benefit
obligations 860.0 26.8 709.9 21.0
- - -----------------------------------------------------------------------
Projected benefit
obligation 921.7 29.8 751.3 22.4
Plan assets at
fair value 1,384.6 - 1,184.1 -
- - -----------------------------------------------------------------------
Plan assets in excess
of (less than) the
projected benefit
obligation 462.9 (29.8) 432.8 (22.4)
Unrecognized prior
service cost 34.1 1.8 39.3 2.2
Unrecognized
net loss 39.1 12.1 10.8 5.8
Recognition
minimum liability - (13.3) - (10.0)
Unrecognized transition
(asset) liability (64.3) 2.4 (80.4) 3.4
- - -----------------------------------------------------------------------
Prepaid (accrued)
pension cost $ 471.8 $(26.8) $ 402.5 $(21.0)
- - -----------------------------------------------------------------------
The General Mills Savings Plan is a defined contribution plan that covers our
salaried and non-union employees. It had net assets of $876.2 million at May 31,
1998 and $768.2 million at May 25, 1997. This plan is a 401(k) savings plan that
includes several investment funds and an Employee Stock Ownership Plan (ESOP).
The ESOP's only assets are Company common stock and temporary cash balances.
Expense recognized in 1998, 1997 and 1996 was $4.9 million, $3.2 million and
$6.9 million, respectively. The ESOP's share of this expense was $4.5 million,
$2.7 million and $6.6 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 further 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 principally with funds
borrowed from third parties (and guaranteed by the Company). 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 Note Nine.
The Company treats cash 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
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 1998, 1997
and 1996, the ESOP incurred interest expense of $5.3 million, $5.7 million and
$6.3 million, respectively. The ESOP used dividends of $9.4 million, $8.1
million and $9.1 million, along with Company contributions of $4.4 million, $2.7
million and $6.7 million to make interest and principal payments in the
respective years.
The number of shares of Company common stock in the ESOP are summarized as
follows:
- - ---------------------------------------------------------------------
Number of Shares May 31, 1998 May 25, 1997
- - ---------------------------------------------------------------------
Unreleased shares 1,873,000 2,164,000
Committed to be allocated 19,000 29,000
Allocated to participants 2,329,000 2,185,000
- - ---------------------------------------------------------------------
Total shares 4,221,000 4,378,000
- - ---------------------------------------------------------------------
NOTE 15 - OTHER POSTRETIREMENT BENEFITS
We sponsor 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 related trusts for certain employees and retirees on an annual basis.
In 1998, 1997 and 1996 we contributed $9.8 million, $8.1 million and $14.0
million, respectively. Trust 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 1998 1997 1996
- - -----------------------------------------------------------------
Service cost - benefits earned $ 4.5 $ 4.6 $ 4.9
Interest cost on accumulated
benefit obligation 14.4 14.2 14.2
Actual return on plan assets (34.0) (27.4) (18.7)
Net amortization and deferral 15.8 12.2 6.9
Curtailment loss 4.3 - -
- - -----------------------------------------------------------------
Net postretirement expense $ 5.0 $ 3.6 $ 7.3
- - -----------------------------------------------------------------
The curtailment loss of $4.3 million was recorded in fiscal 1998 as part of
the restructuring charge described in Note Three.
The funded status of the plans and the amount recognized on our consolidated
balance sheets are as follows:
- - ----------------------------------------------------------------------
May 31, 1998 May 25, 1997
- - ----------------------------------------------------------------------
Assets Accu- Assets Accu-
Exceed mulated Exceed mulated
Accu- Benefits Accu- Benefits
mulated Exceed mulated Exceed
In Millions Benefits Assets Benefits Assets
- - ----------------------------------------------------------------------
Accumulated benefit
obligations:
Retirees $ 51.6 $ 61.8 $ 40.4 $ 54.8
Fully eligible active
employees 13.4 11.6 13.8 6.1
Other active
employees 40.5 42.7 33.2 34.0
- - ----------------------------------------------------------------------
Accumulated
benefit obligations 105.5 116.1 87.4 94.9
Plan assets at
fair value 169.8 24.9 142.9 18.2
- - ----------------------------------------------------------------------
Plan assets in excess
of (less than) accumu-
lated benefit obligations 64.3 (91.2) 55.5 (76.7)
Unrecognized prior
service credits - (9.3) - (11.5)
Unrecognized net
(gain) loss (13.5) 26.3 (6.1) 12.2
- - ----------------------------------------------------------------------
Prepaid (accrued) post-
retirement benefits $ 50.8 $(74.2) $ 49.4 $(76.0)
- - ----------------------------------------------------------------------
The discount rates used in determining the actuarial present value of the
benefit obligations were 7.0% and 8.3% in 1998 and 1997, 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 5.4% to 8.1% for 1999 depending on the medical service
category. The rates gradually decrease to a range of 4.4% to 5.7% for 2007 and
remain at that level thereafter. If the health care cost trend rate were to
increase by one percentage point in each future year, the aggregate of the
service and interest cost components of postretirement expense would increase
for 1998 by $2.8 million and the accumulated benefit obligation as of May 31,
1998 would increase by $27.2 million.
NOTE 16 - PROFIT-SHARING PLAN
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 Compensation
Committee, which consists solely of outside directors, and they depend on profit
performance in relation to pre-established goals approved by the Committee.
Profit-sharing expense was $6.7 million, $4.5 million and $7.0 million in 1998,
1997 and 1996, respectively.
NOTE 17 - INCOME TAXES
The components of earnings before income taxes and earnings (losses) of joint
ventures and the income taxes thereon are as follows:
- - --------------------------------------------------------------
Fiscal Year
In Millions 1998 1997 1996
- - --------------------------------------------------------------
Earnings before income taxes:
U.S. $688.1 $698.5 $744.0
Foreign (21.5) 11.5 14.6
- - --------------------------------------------------------------
Total earnings before
income taxes $666.6 $710.0 $758.6
==============================================================
Income taxes:
Current:
Federal $242.8 $208.2 $206.5
State and local 31.0 25.7 28.5
Foreign (2.6) 3.5 2.0
- - --------------------------------------------------------------
Total current 271.2 237.4 237.0
- - --------------------------------------------------------------
Deferred:
Federal (17.1) 17.1 33.7
State and local (3.3) 3.9 7.1
Foreign (8.9) (.1) 1.6
- - --------------------------------------------------------------
Total deferred (29.3) 20.9 42.4
- - --------------------------------------------------------------
Total income taxes $241.9 $258.3 $279.4
- - --------------------------------------------------------------
During 1998 and 1997, net income tax benefits of $36.0 million and $28.0
million, respectively, were allocated to stockholders' equity. These benefits
were attributable to the exercise of employee stock options, dividends paid on
unallocated ESOP shares, translation adjustments and unrealized gain on
marketable securities.
During 1998, 1997 and 1996, we paid income taxes of $185.6 million, $230.3
million and $194.0 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 1998,
1997 and 1996 operations were increased by approximately $16 million, $16
million and $15 million, respectively, due to the current effect of tax leases.
These tax payments do not affect taxes 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
1998 1997 1996
- - -----------------------------------------------------------------
U.S. STATUTORY RATE 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefits 2.7 2.7 3.0
Other, net (1.4) (1.3) (1.2)
- - -----------------------------------------------------------------
Effective income tax rate 36.3% 36.4% 36.8%
- - -----------------------------------------------------------------
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
- - ------------------------------------------------------------------
In Millions May 31, 1998 May 25, 1997
- - ------------------------------------------------------------------
Accrued liabilities $112.5 $ 90.5
Unusual charges 18.2 6.6
Compensation and employee benefits 58.2 50.7
Disposition liabilities 9.2 11.3
Foreign tax loss carryforward 4.1 8.6
Other 14.3 25.7
- - ------------------------------------------------------------------
Gross deferred tax assets 216.5 193.4
- - ------------------------------------------------------------------
Depreciation 122.5 127.7
Prepaid pension asset 185.3 166.5
Intangible assets 1.8 10.2
Other 44.5 42.2
- - ------------------------------------------------------------------
Gross deferred tax liabilities 354.1 346.6
- - ------------------------------------------------------------------
Valuation allowance 10.3 11.2
- - ------------------------------------------------------------------
Net deferred tax liability $147.9 $164.4
- - ------------------------------------------------------------------
As of May 31, 1998, we have a foreign operating loss carryover for tax
purposes of $9.2 million, which will expire in 2001 if not offset against future
taxable income.
We have not recognized a deferred tax liability for unremitted earnings of
$69.7 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 18 - LEASES AND OTHER COMMITMENTS
An analysis of rent expense by property leased follows:
- - -----------------------------------------------------------
Fiscal Year
In Millions 1998 1997 1996
- - -----------------------------------------------------------
Warehouse space $20.9 $17.6 $14.9
Equipment 8.2 7.1 7.3
Other 5.8 4.8 3.3
- - -----------------------------------------------------------
Total rent expense $34.9 $29.5 $25.5
- - -----------------------------------------------------------
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) $29.9 in 1999, $28.9
in 2000, $27.0 in 2001, $16.8 in 2002, $7.0 in 2003 and $4.5 after 2003, with a
cumulative total of $114.1.
We are contingently liable under guaranties and comfort letters for $48.3
million. The guaranties and comfort letters are principally issued to support
borrowing arrangements, primarily for our joint ventures. We remain the
guarantor on certain leases and other obligations of Darden Restaurants, Inc.
(Darden), an entity we spun-off as of May 28, 1995.
However, Darden has indemnified us against any loss.
NOTE 19 - GEOGRAPHIC INFORMATION
- - -------------------------------------------------------------------------
Unallocated Consol-
Corporate idated
In Millions U.S.A. Foreign Items(a) Total
- - -------------------------------------------------------------------------
Sales
1998 $5,793.9 $239.1 $ - $6,033.0
1997 5,376.4 232.9 - 5,609.3
1996 5,204.5 211.5 - 5,416.0
- - -------------------------------------------------------------------------
Operating Profits
1998 842.7(b) (22.6)(b) (153.5)(b) 666.6
1997 806.4(c) 24.1 (120.5) 710.0
1996 862.7 24.0 (128.1) 758.6
- - -------------------------------------------------------------------------
Identifiable Assets
1998 3,095.6 254.3 511.5 3,861.4
1997 3,106.8 306.5 489.1 3,902.4
1996 2,509.1 293.2 492.4 3,294.7
- - -------------------------------------------------------------------------
(a) Corporate expenses reported here include net interest expense and general
corporate expenses.
(b) U.S.A., Foreign and Corporate operating profits are net of charges of
$113.6 million, $49.3 million and $3.5 million, respectively, for the
unusual items described in Note Three.
(c) U.S.A. operating profits are net of a $48.4 million charge for the
unusual item described in Note Three.
The foreign sales reflected above were made primarily by our Canadian
subsidiary. Our proportionate share of the joint ventures' sales (not shown
above) was $780.7 million, $728.2 million and $705.7 million for 1998, 1997 and
1996, respectively. The foreign operating profits above also exclude our share
of the results from the joint ventures. See Note Four.
NOTE 20 - QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for 1998 and 1997 follows:
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------------------------------------
In Millions,
Except per Share
and Market First Quarter Second Quarter Third Quarter
Price Amounts 1998 1997 1998 1997 1998 1997
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,416.5 $1,315.6 $1,638.3 $1,560.1 $1,424.7 $1,289.6
Gross profit(a) 872.6 779.8 984.6 900.7 872.3 741.3
Net earnings 134.3(b) 97.7(c) 64.6(b) 156.7 131.1 122.8
Net earnings
per share .84 .62 .41 1.00 .83 .78
Net earnings per
share-assuming
dilution .82 .61 .40 .98 .81 .76
Dividends per share .53 .50 .53 .50 .53 .50
Market price of
common stock:
High 71 1/2 58 1/4 75 7/16 60 5/8 78 1/4 68 3/4
Low 60 52 63 3/8 54 3/8 69 9/16 60 7/8
- - ------------------------------------------------------------------------------------------------------------
<CAPTION>
- - -------------------------------------------------------------------------------
In Millions,
Except per Share
and Market Fourth Quarter Total Year
Price Amounts 1998 1997 1998 1997
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,553.5 $1,444.0 $6,033.0 $5,609.3
Gross profit(a) 914.2 859.1 3,643.7 3,280.9
Net earnings 91.8(d) 68.2(d) 421.8 445.4
Net earnings
per share .59 .42 2.67 2.82
Net earnings per
share-assuming
dilution .57 .41 2.60 2.76
Dividends per share .53 .53 2.12 2.03
Market price of
common stock:
High 76 1/16 67 3/4 78 1/4 68 3/4
Low 66 7/16 57 3/4 60 52
- - -------------------------------------------------------------------------------
<FN>
(a) Before charges for depreciation.
(b) Includes an after tax loss of $.1 million in the first quarter and $100.1
million ($.63 per share) in the second quarter for unusual items described
in Note Three.
c) Includes an after-tax loss of $29.2 million ($.18 per share) in the first
quarter related to the adoption of SFAS No. 121.
(d) The earnings impacts of LIFO reserve adjustments were not material to any
quarter except the fourth quarter of 1997, when an after-tax credit of
$7.2 million ($.05 per share) was recorded.
</FN>
</TABLE>
<PAGE>
ELEVEN-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
In Millions, May 31, May 25, May 26, May 28, May 29,
Except per Share Data 1998 1997 1996 1995 1994
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Results
Net earnings per share $2.67 $2.82 $3.00 $2.33 $2.95
Net earnings per share - assuming
dilution 2.60 2.76 2.94 2.29 2.91
Continuing operations earnings
per share 2.67 2.82 3.00 1.64 2.14
Continuing operations earnings per
share - assuming dilution 2.60 2.76 2.94 1.62 2.11
Return on average equity 123.2% 111.0% 212.3% 52.0% 37.7%
Dividends per share 2.12 2.03 1.91 1.88 1.88
Sales 6,033 5,609 5,416 5,027 5,327
Costs and expenses:
Cost of sales 2,389 2,328 2,241 2,123 2,012
Selling, general and administrative 2,499 2,239 2,128 2,008 2,351
Depreciation and amortization 195 183 187 192 174
Interest, net 117 101 101 101 79
Unusual expenses (income) 166 48 - 183 147
Total costs and expenses 5,366 4,899 4,657 4,607 4,763
Earnings from continuing
operations before taxes and
earnings (losses) of joint ventures 667 710 759 420 564
Income taxes 242 259 280 153 217
Earnings (losses) of joint ventures (3) (6) (3) (7) (7)
Earnings from continuing operations 422 445 476 260 340
Discontinued operations after taxes - - - 107 134
Accounting changes - - - - (4)
Net earnings 422 445 476 367 470
Earnings from continuing
operations as a percent of sales 7.0% 7.9% 8.8% 5.2% 6.4%
Average common shares
outstanding:
Basic 158 158 159 158 159
Diluted 162 162 162 160 162
Taxes (income, payroll,
property, etc.) per share 1.93 2.00 2.11 1.30 1.68
- - --------------------------------------------------------------------------------------------
Financial Position
Total assets 3,861 3,902 3,295 3,358 4,804
Land, buildings and equipment, net 1,186 1,279 1,312 1,457 1,503
Working capital at year end (408) (281) (197) (324) (630)
Long-term debt, excluding
current portion 1,640 1,530 1,221 1,401 1,413
Stockholders' equity 190 495 308 141 1,151
Stockholders' equity per share 1.23 3.09 1.94 .89 7.26
- - --------------------------------------------------------------------------------------------
Other Statistics
Total dividends 336 321 304 297 299
Gross capital expenditures 184 163 129 157 213
Research and development 66 61 60 60 59
Advertising media expenditures 366 306 320 324 292
Wages, salaries and
employee benefits 608 564 541 538 558
Number of employees (actual) 10,228 10,200 9,790 9,882 10,616
Accumulated LIFO reserve 39 48 56 53 43
- - --------------------------------------------------------------------------------------------
Common stock price range(a):
High 78 1/4 68 3/4 60 1/2 63 3/4 68 3/4
Low 60 52 50 49 3/8 49 7/8
Close 68 1/4 64 1/4 58 1/4 60 5/8 54 1/2
- - --------------------------------------------------------------------------------------------
<FN>
(a) Prices shown prior to 1996 are before the spin-off of our former
restaurant operations. 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: Excluding return on equity, amounts presented in this summary have been
restated to a continuing operations basis.
</FN>
</TABLE>
EXHIBIT 21
GENERAL MILLS, INC. SUBSIDIARIES
<TABLE>
<CAPTION>
Percentage
Country or of Voting
State in Which Securities
Each Subsidiary Owned
Was Organized (Note 1)
<S> <C> <C>
COLOMBO DAIRY FOODS LTD. Ontario 100
COLOMBO, 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 (BVI) LTD. British Virgin Islands 100
CPW SINGAPORE (PTE.) LTD. Singapore 50
GENERAL MILLS CONTINENTAL, INC. (Note 11) Delaware 100
CEREALES 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
Snack Ventures S.A. 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 INTERNATIONAL LIMITED (Note 11) Delaware 100
Bimaler S.A. Uruguay 50
Cereal Partners Czech Republic, s.r.o. Czech Republic 50
Cereal Partners Hungaria Ltd. Hungary 50
Cereales Partners L.L.C. Delaware 50
Cereal Partners Slovak Republic, s.r.o. Slovak Republic 50
CPW do Brasil Ltda. Brazil 50
CPW Trinidad & Tobago, Ltd. Trinidad 50
General Mills Asia Pte. Ltd. Singapore 100
CPW Philippines, Inc. Philippines 50
International Dessert Partners SRLtda. Peru 50
SVE (Hungary) Trading and Manufacturing Limited Hungary 40.5
GENERAL MILLS MAARSSEN B.V. The Netherlands 100
GENERAL MILLS MAURITIUS, INC. Mauritius 100
GENERAL MILLS MISSOURI, INC. Missouri 100
CHEX INC. Delaware 100
GENERAL MILLS OPERATIONS, INC. (Note 14) Delaware 100
GENERAL MILLS PRODUCTS CORP. Delaware 100
INMOBILIARIA SELENE, S.A. DE C.V. Mexico 100
GENERAL MILLS CANADA, INC. (Note 8) Canada 100
GENERAL MILLS SALES, INC. Delaware 100
INTERNATIONAL DESSERT PARTNERS L.L.C. Delaware 50
GENERAL MILLS SERVICES, INC. Delaware 100
GOLD MEDAL INSURANCE CO. (Note 9) Minnesota 100
MILLS MEDIA, INC. Minnesota 100
NESTLE ASEAN PHILIPPINES, INC. (Note 12) The Philippines 30
POPCORN DISTRIBUTORS, INC. Delaware 100
TONG WANT Taiwan 50
TORUN-PACIFIC SP. Z O.O. Poland 50
YOPLAIT USA, INC. Delaware 100
</TABLE>
<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.
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; and a 50%
ownership interest in a limited liability company organized under the laws
of the state of North Dakota.
EXHIBIT 23
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
General Mills, Inc.:
We consent to incorporation by reference in the Registration Statements
(Nos. 2-49637 and 333-00745) on Form S-3 and Registration Statements (Nos.
2-13460, 2-53523, 2-95574, 33-24504, 33-27628, 33-32059, 33-36892, 33-36893,
33-50337, 33-62729, 333-13089 and 333-32509) on Form S-8 of General Mills, Inc.
of our reports dated June 30, 1998, relating to the consolidated balance sheets
of General Mills, Inc. and subsidiaries as of May 31, 1998 and May 25, 1997 and
the related consolidated statements of earnings, stockholders' equity, cash
flows and related financial statement schedule for each of the fiscal years in
the three-year period ended May 31, 1998, which reports are included or
incorporated by reference in the May 31, 1998 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 in fiscal 1997 for impairment of long-lived
assets and for long-lived assets to be disposed of.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 21, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from our Form
10-K for the fiscal year ended May 31, 1998, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> MAY-25-1997
<PERIOD-END> MAY-31-1998
<CASH> 6,400,000
<SECURITIES> 0
<RECEIVABLES> 399,300,000
<ALLOWANCES> (4,200,000)
<INVENTORY> 389,700,000
<CURRENT-ASSETS> 1,035,300,000
<PP&E> 2,489,000,000
<DEPRECIATION> (1,302,700,000)
<TOTAL-ASSETS> 3,861,400,000
<CURRENT-LIABILITIES> 1,443,700,000
<BONDS> 1,640,400,000
0
0
<COMMON> 619,600,000
<OTHER-SE> (429,400,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,861,400,000
<SALES> 6,033,000,000
<TOTAL-REVENUES> 6,033,000,000
<CGS> 2,389,300,000
<TOTAL-COSTS> 2,389,300,000
<OTHER-EXPENSES> 194,900,000
<LOSS-PROVISION> 700,000
<INTEREST-EXPENSE> 117,200,000
<INCOME-PRETAX> 666,600,000
<INCOME-TAX> 241,900,000
<INCOME-CONTINUING> 421,800,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 421,800,000
<EPS-PRIMARY> 2.67
<EPS-DILUTED> 2.60
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from our Form
10-K for the fiscal year ended May 25, 1997, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-25-1997
<PERIOD-START> MAY-27-1996
<PERIOD-END> MAY-25-1997
<CASH> 12,800,000
<SECURITIES> 0
<RECEIVABLES> 423,200,000
<ALLOWANCES> (4,100,000)
<INVENTORY> 364,400,000
<CURRENT-ASSETS> 1,011,300,000
<PP&E> 2,571,600,000
<DEPRECIATION> (1,292,200,000)
<TOTAL-ASSETS> 3,902,400,000
<CURRENT-LIABILITIES> 1,292,500,000
<BONDS> 1,530,400,000
0
0
<COMMON> 578,000,000
<OTHER-SE> (83,400,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,902,400,000
<SALES> 5,609,300,000
<TOTAL-REVENUES> 5,609,300,000
<CGS> 2,328,400,000
<TOTAL-COSTS> 2,328,400,000
<OTHER-EXPENSES> 182,800,000
<LOSS-PROVISION> 600,000
<INTEREST-EXPENSE> 100,500,000
<INCOME-PRETAX> 710,000,000
<INCOME-TAX> 258,300,000
<INCOME-CONTINUING> 445,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 445,400,000
<EPS-PRIMARY> 2.82
<EPS-DILUTED> 2.76
</TABLE>
<TABLE> <S> <C>
<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>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-26-1996
<PERIOD-START> MAY-29-1995
<PERIOD-END> MAY-26-1996
<CASH> 20,600,000
<SECURITIES> 0
<RECEIVABLES> 341,900,000
<ALLOWANCES> (4,100,000)
<INVENTORY> 395,500,000
<CURRENT-ASSETS> 995,100,000
<PP&E> 2,508,000,000
<DEPRECIATION> (1,195,600,000)
<TOTAL-ASSETS> 3,294,700,000
<CURRENT-LIABILITIES> 1,191,900,000
<BONDS> 1,220,900,000
0
0
<COMMON> 384,300,000
<OTHER-SE> (76,600,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,294,700,000
<SALES> 5,416,000,000
<TOTAL-REVENUES> 5,416,000,000
<CGS> 2,241,000,000
<TOTAL-COSTS> 2,241,000,000
<OTHER-EXPENSES> 186,700,000
<LOSS-PROVISION> 100,000
<INTEREST-EXPENSE> 101,400,000
<INCOME-PRETAX> 758,600,000
<INCOME-TAX> 279,400,000
<INCOME-CONTINUING> 476,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 476,400,000
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 2.94
</TABLE>
