SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED AUGUST 29, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM _____ TO _____
Commission file number: 1-1185
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware
41-0274440
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Number One General Mills Boulevard
Minneapolis, MN 55426
(Mail: P.O. Box 1113) (Mail:55440)
(Address of principal executive offices) (Zip Code)
(612) 764-2311
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
As of September 22, 1999, General Mills had 151,920,383 shares of its $.10 par
value common stock outstanding (excluding 52,232,949 shares held in treasury).
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
Thirteen Weeks Ended
August 29, August 30,
1999 1998
---------- ----------
Sales $1,573.6 $1,473.1
Costs and Expenses:
Cost of sales 621.4 583.7
Selling, general and administrative 677.2 634.1
Interest, net 32.7 29.8
------- -------
Total Costs and Expenses 1,331.3 1,247.6
------- -------
Earnings before Taxes and Earnings
(Losses) from Joint Ventures 242.3 225.5
Income Taxes 87.3 83.1
Earnings (Losses) from Joint Ventures 3.5 2.6
Net Earnings $ 158.5 $ 145.0
======= =======
Earnings per Share - Basic $ .52 $ .47
======= =======
Average Number of Common Shares 304.2 308.1
======= =======
Earnings per Share - Diluted $ .50 $ .46
======= =======
Average Number of Common Shares -
Assuming Dilution 314.2 314.7
======= =======
Dividends per Share $ .275 $ .265
======= =======
See accompanying notes to consolidated condensed financial statements.
<PAGE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
August 29, August 30, May 30,
1999 1998 1999
-------- -------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $ 46.0 $ 29.7 $ 3.9
Receivables 522.0 458.4 490.6
Inventories:
Valued primarily at FIFO 228.0 211.2 172.2
Valued at LIFO (FIFO value exceeds LIFO
by $34.0, $39.1 and $34.0, respectively) 282.1 261.6 254.5
Prepaid expenses and other current assets 77.4 74.0 83.7
Deferred income taxes 98.3 135.4 97.6
------- ------- --------
Total Current Assets 1,253.8 1,170.3 1,102.5
------- ------- --------
Land, Buildings and Equipment, at Cost 2,810.1 2,539.7 2,718.9
Less accumulated depreciation (1,459.2) (1,336.6) (1,424.2)
Net Land, Buildings and Equipment 1,350.9 1,203.1 1,294.7
Intangibles 838.6 625.4 722.0
Other Assets 1,061.0 1,026.1 1,021.5
------- ------- --------
Total Assets $4,504.3 $4,024.9 $4,140.7
======== ======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 678.1 $ 657.7 $ 647.4
Current portion of long-term debt 129.6 146.9 90.5
Notes payable 751.1 424.1 524.4
Accrued taxes 184.7 197.9 135.0
Other current liabilities 274.8 254.1 303.0
------- ------- --------
Total Current Liabilities 2,018.3 1,680.7 1,700.3
Long-term Debt 1,687.3 1,612.2 1,702.4
Deferred Income Taxes 293.6 282.5 288.9
Deferred Income Taxes - Tax Leases 111.5 129.4 111.3
Other Liabilities 177.3 174.3 173.6
------- ------- --------
Total Liabilities 4,288.0 3,879.1 3,976.5
------- ------- --------
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 408.3 shares issued 666.2 620.5 657.9
Retained earnings 1,902.7 1,686.2 1,827.4
Less common stock in treasury, at cost,
shares of 104.1, 101.9 and 104.3,
respectively (2,222.1) (2,048.0) (2,195.3)
Unearned compensation (69.1) (73.1) (68.9)
Accumulated other comprehensive income (61.4) (39.8) (56.9)
------- ------- --------
Total Stockholders' Equity 216.3 145.8 164.2
------- ------- --------
Total Liabilities and Equity $4,504.3 $4,024.9 $4,140.7
======== ======== ========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Thirteen Weeks Ended
August 29, August 30,
1999 1998
---------- -----------
Cash Flows - Operating Activities:
Net earnings $158.5 $145.0
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 47.9 47.1
Deferred income taxes 4.9 (3.9)
Change in current assets and liabilities (53.1) (41.2)
Other, net (10.6) (7.6)
------- -------
Cash provided by continuing operations 147.6 139.4
Cash used by discontinued operations (.7) (.8)
------ ------
Net Cash Provided by Operating Activities 146.9 138.6
------ ------
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (67.0) (63.0)
Investments in businesses, intangibles and
affiliates, net of investment returns and dividends (194.1)
(2.9)
Purchases of marketable investments (2.8) (2.4)
Proceeds from sale of marketable investments .4 16.8
Other, net 8.0 .9
------ ------
Net Cash Used by Investment Activities (255.5) (50.6)
------ -----
Cash Flows - Financing Activities:
Change in notes payable 226.0 161.8
Issuance of long-term debt 51.6 2.4
Payment of long-term debt (23.4) (31.8)
Common stock issued 41.0 10.4
Purchases of common stock for treasury (61.0) (125.6)
Dividends paid (83.7) (82.0)
Other, net .2 .1
------ ------
Net Cash Used by Financing Activities 150.7 (64.7)
------ ------
Increase in Cash and Cash Equivalents $ 42.1 $ 23.3
====== ======
See accompanying notes to consolidated condensed financial statements.
<PAGE>
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
These financial statements do not include certain information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments considered
necessary for a fair presentation have been included and are of a normal
recurring nature. Operating results for the thirteen weeks ended August 29, 1999
are not necessarily indicative of the results that may be expected for the
fiscal year ending May 28, 2000.
These statements should be read in conjunction with the financial statements and
footnotes included in our annual report for the year ended May 30, 1999. The
accounting policies used in preparing these financial statements are the same as
those described in our annual report.
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
(2) Acquisitions
On June 30, 1999, we acquired certain grain elevators and related assets from
Koch Agriculture Company. On August 12, 1999, we acquired Gardetto's Bakery,
Inc. of Milwaukee, Wisconsin. Gardetto's is a leading national marketer of baked
snack mixes and flavored pretzels.
The aggregate purchase price of these acquisitions, both of which were accounted
for using the purchase method, totaled approximately $162 million, subject to
adjustments. Goodwill associated with the Gardetto's acquisition is being
amortized on a straight-line basis over 40 years.
(3) Statements of Cash Flows
During the quarter, we made interest payments of $18.4 million (net of amount
capitalized) and paid $12.9 million in income taxes.
(4) Comprehensive Income
The following table summarizes total comprehensive income for the periods
presented (in millions):
Thirteen Weeks Ended
Aug. 29, Aug. 30,
1999 1998
--------- ---------
Net Earnings $158.5 $145.0
Other comprehensive income (loss):
Unrealized gain on securities (2.2) 2.7
Foreign currency translation adjustments (2.3) (1.4)
(4.5) 1.3
Total comprehensive income $154.0 $146.3
====== ======
<PAGE>
(5) Changes in Capital Stock
On September 27, 1999, the board of directors declared a two-for-one stock split
to be effected in the form of a 100% stock dividend whereby each holder of one
share of common stock issued and outstanding at the close of business on October
8, 1999, will be entitled to receive an additional share of common stock,
payable November 8, 1999. Information throughout these financial statements is
restated for the stock split, to present all data on a consistent and comparable
basis.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Continuing operations generated $8.2 million more cash in the first quarter of
fiscal 2000 than in the same prior-year period. The increase in cash provided by
operations as compared to last year was caused by a $20.1 million increase in
cash from operations, after adjustment for non-cash items, partially offset by a
$11.9 million increase in the working capital change.
Fiscal 2000 capital expenditures are estimated to be approximately $270 million.
During the first three months, capital expenditures totaled $67.0 million.
Our short-term outside financing is obtained through private placement of
commercial paper and bank notes. Our level of notes payable fluctuates based on
cash flow needs.
Our long-term outside financing is obtained primarily through our medium-term
note program. Activity through three months under this program consisted of the
issuance of $49.0 million in notes and debt payments of $23.3 million.
RESULTS OF OPERATIONS
Information throughout this section is restated for the stock split (see Note 5
of Notes To Consolidated Condensed Financial Statements), to present all data on
a consistent and comparable basis.
Sales in the first quarter grew 7 percent to $1,573.6 million. First quarter net
earnings of $158.5 million increased by 9 percent from $145.0 million. Basic
earnings per share of $.52 for the first quarter of fiscal 2000 were up 11
percent from $.47 earned in the same period last year. Diluted earnings per
share rose to $.50 from $.46 in the same period last year.
First-quarter domestic unit volume grew more than 5 percent. The gain included 3
percent volume growth by the company's established businesses, and incremental
volume from recent acquisitions.
For Big G cereals, first-quarter unit volume grew nearly 3 percent and retail
pound volume (consumer movement) in Nielsen-measured outlets increased 7
percent. U.S. cereal category volume for the quarter was even with the prior
year. As a result, Big G's pound market share for the quarter grew to more than
26 percent, and dollar market share rose to 32 percent. The share gains included
continued good performance from Cheerios, Honey Nut Cheerios, Wheaties, Kix and
other established brands. In addition, three recently introduced new cereals --
Honey Nut Chex, NesQuik, and Sunrise -- contributed to Big G's unit volume and
share results.
<PAGE>
Combined unit volume for convenience foods (snack products and yogurt) grew 3
percent in the quarter. Yoplait and Colombo yogurt led this performance, with
continued double-digit growth in both shipments and retail volume. Distribution
of new Yoplait Go-Gurt expanded from 40 to 60 percent of the U.S. market in
June, and helped increase Yoplait-Colombo dollar market share by 4 points to 33
percent for the quarter. In snacks, Pop Secret popcorn, Nature Valley granola
bars and fruit snacks volumes were up. However, those gains were offset by weak
performance from Bugles and other snack bars, so total snacks volume was below
last year's first quarter. Unit volume for Betty Crocker (baking products, side
dish and dinner mixes) grew nearly 3 percent, with continued good performance by
the Chicken Helper line and incremental contributions from new rice and pasta
side-dish items. Lloyd's posted good results in the quarter, reflecting growth
in established retail accounts and distribution gains. Foodservice unit volume
grew 5 percent.
Combined unit volume for the company's international operations grew 1 percent
in the first quarter, and international earnings grew at a double-digit rate.
Cereal Partners Worldwide (CPW), the company's joint venture with Nestle, led
international results with a 9 percent unit volume increase. CPW recorded volume
and market share gains in most of its major markets, and the venture's combined
global market share grew to more than 19 percent. Snack Ventures Europe (SVE),
the company's joint venture with PepsiCo, posted first-quarter volume 6 percent
below last year's due to continuing market weakness in Russia. In its core
western European markets, SVE posted 5 percent volume growth. Earnings after tax
from the company's joint ventures increased to $3.5 million in the period,
compared to $2.6 million last year. For the company's wholly owned food business
in Canada, first quarter volume declined 3 percent; however, cereal retail
volume and market share were up for the period.
During the quarter, we repurchased approximately 1.6 million shares of common
stock (on a restated basis) at an average price of about $40 per share (about
$80 per share pre-stock split). This activity is consistent with the company's
ongoing share repurchase program, which has a goal of reducing the net number of
shares outstanding by an average of 1 to 2 percent annually. Average shares
outstanding (basic) for the quarter totaled 304.2 million this year, 3.9 million
shares lower than the 308.1 million average a year earlier. Assuming dilution,
average shares outstanding were 314.2 million this year, essentially even with
the 314.7 million average for last year's first quarter. Interest expense for
the quarter totaled $32.7 million, up about $3 million versus the prior year due
to increased debt levels associated with share repurchases and acquisitions.
Our tax rate for the quarter was 36.0 percent compared to 36.9 percent in last
year's quarter. The rate decrease was due to positive effects of various tax
initiatives and credits.
<PAGE>
YEAR 2000
We are devoting significant resources throughout the company to minimize the
risk of potential disruption from year 2000 issues related to computers or other
equipment with date-sensitive software and embedded chip systems. If we, or our
significant customers, suppliers or other third parties fail to correct year
2000 issues, our ability to operate our businesses could be adversely affected.
We have completed the assessment, inventory and classification of year 2000
issues on all of our information systems infrastructure and non-technical assets
(e.g., plant production equipment). Information systems that were year 2000
deficient have been modified, upgraded or replaced and tested for compliance.
All non-I.T. assets (including production equipment) have been tested and
certified year 2000 compliant. Based on assessments and testing to date, we do
not expect the financial impact of addressing internal system year 2000 issues
will be material to our financial position, results of operations or cash flows.
Total costs are estimated to be approximately $26 million, of which about 99
percent has been incurred to date.
We surveyed significant customers, suppliers and third parties critical to our
business operations to determine their year 2000 compliance. Cross-functional
planning teams assessed the associated risks and developed contingency plans in
the event that a third party failure disrupts our operations. These contingency
plans include identifying and securing alternate suppliers, adjusting
manufacturing schedules, stockpiling of certain materials and equipment,
contracting additional staff, procuring backup generators, and other measures
considered appropriate by management. We also established backup manual
procedures similar to existing procedures developed for our disaster recovery
plan.
Our contingency plans will not guarantee that circumstances beyond our control
will not adversely impact our operations. We will continue to evaluate and
modify these plans through the year 2000 transition period as additional
information becomes available.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information.
This report contains certain forward-looking statements which are based on
management's current views and assumptions regarding future events and financial
performance. These statements are qualified by reference to the section
"Cautionary Statement Relevant to Forward-Looking Information" in Item 1 of our
Annual Report on Form 10-K for the fiscal year ended May 30, 1999, which lists
important factors that could cause actual results to differ materially from
those discussed in this report.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 11 Statement of Computation of Earnings per Share.
Exhibit 12 Statement of Ratio of Earnings to Fixed Charges.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
On June 30, 1999, the Company filed a Form 8-K report containing (as
exhibits) the distribution agreement and forms of notes for the
Company's $782,000,000 Series F Medium Term Notes.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENERAL MILLS, INC.
(Registrant)
Date October 7, 1999 /s/ S. S. Marshall
--------------- ------------------------------------
S. S. Marshall
Senior Vice President, Corporate
Affairs and General Counsel
Date October 7, 1999 /s/ K. L. Thome
--------------- ------------------------------------
K. L. Thome
Senior Vice President, Financial Operations
Exhibit 11
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Thirteen Weeks Ended
August 29, August 30,
1999 1998
---------- ----------
Net Earnings $158.5 $145.0
====== ======
Average Number of Common Shares - Basic EPS (a) 304.2 308.1
Incremental Share Effect from:
-Stock options (b) 9.8 6.4
-Restricted stock, stock rights and puts .2 .2
------- ------
Average Number of Common Shares - Diluted EPS 314.2 314.7
====== =====
Earnings per Share - Basic $ .52 $ .47
====== =====
Earnings per Share - Diluted $ .50 $ .46
====== =====
Notes to Exhibit 11:
(a) Computed as the weighted average of net shares outstanding on stock-exchange
trading days.
(b) Incremental shares from stock options are computed by the "treasury stock"
method. This method first determines the number of shares issuable under
stock options that had an option price below the average market price for
the period, and then deducts the number of shares that could have been
repurchased with the proceeds of options exercised.
Exhibit 12
RATIO OF EARNINGS TO FIXED CHARGES
Thirteen Weeks Ended Fiscal Year Ended
August 29,August 30, May 30, May 31, May 25, May 26, May 28,
1999 1998 1999 1998 1997 1996 1995
------------------- ---------------------------------------
Ratio of Earnings
to Fixed Charges 7.29 7.29 6.67 5.63 6.54 6.94 4.10
For purposes of computing the ratio of earnings to fixed charges, earnings
represent pretax income from continuing operations, plus pretax earnings or
losses of joint ventures plus fixed charges (net of capitalized interest). Fixed
charges represent interest (whether expensed or capitalized) and one-third (the
proportion deemed representative of the interest factor) of rents of continuing
operations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from our
Form 10-Q for the thirteen week period ended August 29, 1999, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-28-2000
<PERIOD-START> MAY-31-1999
<PERIOD-END> AUG-29-1999
<CASH> 46,000,000
<SECURITIES> 0
<RECEIVABLES> 522,000,000
<ALLOWANCES> 0
<INVENTORY> 510,100,000
<CURRENT-ASSETS> 1,253,800,000
<PP&E> 2,810,100,000
<DEPRECIATION> (1,459,200,000)
<TOTAL-ASSETS> 4,504,300,000
<CURRENT-LIABILITIES> 2,018,300,000
<BONDS> 1,687,300,000
0
0
<COMMON> 666,200,000
<OTHER-SE> (449,900,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,504,300,000
<SALES> 1,573,600,000
<TOTAL-REVENUES> 1,573,600,000
<CGS> 621,400,000
<TOTAL-COSTS> 621,400,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,700,000
<INCOME-PRETAX> 242,300,000
<INCOME-TAX> 87,300,000
<INCOME-CONTINUING> 158,500,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 158,500,000
<EPS-BASIC> 0.52<F1>
<EPS-DILUTED> 0.50
<FN>
On September 27, 1999, the company's board of directors declared a 2 for 1
split of General Mills common stock for shareholders of record on October 8,
1999. All share and per share data have been adjusted to reflect the stock
split. Prior Financial Data Schedules have not been restated for the stock
split.
</FN>
</TABLE>
