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 FEBRUARY 27, 2000
/ / 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)
(763) 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 March 22, 2000, General Mills had 291,477,230 shares of its $.10 par value
common stock outstanding (excluding 116,829,434 shares held in treasury).
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------ ------------------------
February 27, February 28, February 27, February 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 1,619.6 $ 1,495.1 $ 5,010.4 $ 4,645.6
Costs and Expenses:
Cost of sales 650.6 618.8 2,000.2 1,901.5
Selling, general and administrative 687.4 618.8 2,124.6 1,920.7
Interest, net 36.5 31.4 103.3 90.6
Unusual items - - - 51.6
----------- ----------- ----------- ---------
Total Costs and Expenses 1,374.5 1,269.0 4,228.1 3,964.4
----------- ----------- ----------- ---------
Earnings before Taxes and Earnings
(Losses) from Joint Ventures 245.1 226.1 782.3 681.2
Income Taxes 86.3 79.5 277.9 246.3
Earnings (Losses) from Joint Ventures (5.5) (5.5) 1.1 (5.2)
---------- ---------- ---------- ---------
Net Earnings $ 153.3 $ 141.1 $ 505.5 $ 429.7
========= ========== ========== =========
Earnings per Share - Basic $ .51 $ .46 $ 1.67 $ 1.40
========= ========== ========== =========
Average Number of Common Shares 299.9 307.1 302.5 307.0
========= ========== ========== =========
Earnings per Share - Diluted $ .50 $ .45 $ 1.62 $ 1.36
========= ========== ========== =========
Average Number of Common Shares -
Assuming Dilution 306.3 316.7 311.2 315.0
========= ========== ========== =========
Dividends per Share $ .275 $ .275 $ .825 $ .805
========= ========== ========== =========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
----------- -----------
February 27, February 28, May 30,
2000 1999 1999
----------- ----------- -------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 47.5 $ 18.9 $ 3.9
Receivables 481.7 469.7 490.6
Inventories:
Valued primarily at FIFO 224.1 190.4 172.2
Valued at LIFO (FIFO value exceeds LIFO by
$32.0, $39.1 and $34.0, respectively) 305.5 251.9 254.5
Prepaid expenses and other current assets 82.7 83.1 83.7
Deferred income taxes 97.2 105.5 97.6
--------- -------- --------
Total Current Assets 1,238.7 1,119.5 1,102.5
--------- -------- --------
Land, Buildings and Equipment, at Cost 2,903.0 2,664.3 2,718.9
Less accumulated depreciation (1,505.6) (1,396.3) (1,424.2)
--------- -------- --------
Net Land, Buildings and Equipment 1,397.4 1,268.0 1,294.7
Intangibles 871.5 728.2 722.0
Other Assets 1,089.1 1,022.8 1,021.5
--------- -------- --------
Total Assets $ 4,596.7 $4,138.5 $4,140.7
========= ======== ========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 614.0 $ 627.2 $ 647.4
Current portion of long-term debt 408.9 91.3 90.5
Notes payable 795.4 414.3 524.4
Accrued taxes 153.9 155.3 135.0
Other current liabilities 365.1 401.3 303.0
--------- -------- --------
Total Current Liabilities 2,337.3 1,689.4 1,700.3
Long-term Debt 1,641.8 1,700.6 1,702.4
Deferred Income Taxes 303.6 285.3 288.9
Deferred Income Taxes - Tax Leases 95.2 115.8 111.3
Other Liabilities 184.1 179.5 173.6
--------- -------- --------
Total Liabilities 4,562.0 3,970.6 3,976.5
--------- -------- --------
Stockholders' Equity:
Cumulative preference stock, none issued - - -
Common stock, 408.3 shares issued 670.2 640.3 657.9
Retained earnings 2,002.8 1,721.7 1,827.4
Less common stock in treasury, at cost, shares
of 111.3, 101.3 and 104.3, respectively (2,504.8) (2,073.6) (2,195.3)
Unearned compensation (64.9) (71.3) (68.9)
Accumulated other comprehensive income (68.6) (49.2) (56.9)
--------- -------- --------
Total Stockholders' Equity 34.7 167.9 164.2
--------- -------- --------
Total Liabilities and Equity $ 4,596.7 $4,138.5 $4,140.7
========= ======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Thirty-Nine Weeks Ended
--------------------------
February 27, February 28,
2000 1999
----------- -----------
<S> <C> <C>
Cash Flows - Operating Activities:
Net earnings $ 505.5 $ 429.7
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 149.4 142.4
Deferred income taxes 18.3 32.2
Change in current assets and liabilities (125.4) (98.4)
Unusual items - 51.6
Other, net (31.0) (38.9)
-------- -----
Cash provided by continuing operations 516.8 518.6
Cash used by discontinued operations (2.0) (2.9)
-------- -----
Net Cash Provided by Operating Activities 514.8 515.7
-------- -----
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (204.9) (206.2)
Investments in businesses, intangibles and affiliates,
net of investment returns and dividends (269.5) (148.3)
Purchases of marketable investments (11.4) (7.3)
Proceeds from sale of marketable investments 7.0 18.3
Other, net 9.2 48.1
-------- --------
Net Cash Used by Investment Activities (469.6) (295.4)
-------- --------
Cash Flows - Financing Activities:
Change in notes payable 271.6 147.6
Issuance of long-term debt 356.9 181.0
Payment of long-term debt (91.0) (170.4)
Common stock issued 63.8 82.8
Purchases of common stock for treasury (331.4) (189.2)
Dividends paid (249.9) (247.5)
Other, net (21.6) (12.1)
-------- --------
Net Cash Used by Financing Activities (1.6) (207.8)
-------- --------
Increase in Cash and Cash Equivalents $ 43.6 $ 12.5
======== ========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
These financial statements do not include certain information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments considered
necessary for a fair presentation have been included and are of a normal
recurring nature. Operating results for the thirty-nine weeks ended February 27,
2000 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. On January 13, 2000, we acquired Small Planet
Foods, a leading producer of branded organic food products (Cascadian Farm and
Muir Glen) based in Sedro-Woolley, Washington.
The aggregate purchase price of these acquisitions, all of which were accounted
for using the purchase method, totaled approximately $227 million, subject to
adjustments. Goodwill associated with the Gardetto's and Small Planet Foods
acquisitions is being amortized on a straight-line basis over 40 years.
(3) Unusual Items
In last year's second quarter, we recorded restructuring charges of $51.6
million pretax, $32.3 million after tax ($.10 per diluted share). The
restructuring actions primarily reflected further streamlining of our supply
chain as part of the broad consolidation of these activities announced in May
1998. Actions included consolidating manufacturing of certain products into
fewer locations, and consolidating warehouse, distribution and sales activities
across the company's packaged food, foodservice and milling operations. In
addition, the second-quarter charge included our share of restructuring by Snack
Ventures Europe, our joint venture with PepsiCo, to improve its manufacturing
cost structure. Slightly more than half of the total charge reflected write-down
of assets; the remaining cash portion was primarily related to severance and
asset redeployment expenses. These restructuring activities were substantially
completed by the end of fiscal 1999.
(4) Statements of Cash Flows
During the first nine months, we made interest payments of $98.1 million (net of
amount capitalized) and paid $212.4 million in income taxes.
<PAGE>
(5) Comprehensive Income
The following table summarizes total comprehensive income for the periods
presented (in millions):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
Feb. 27, Feb. 28, Feb. 27, Feb. 28,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Earnings $ 153.3 $ 141.1 $ 505.5 $429.7
Other comprehensive income (loss):
Unrealized gain
on securities (2.3) (4.1) (6.5) (.1)
Foreign currency
translation adjustments (3.8) (11.0) (5.2) (8.0)
-------- ------- ------ -------
(6.1) (15.1) (11.7) (8.1)
------- ------- ------ -------
Total comprehensive income $147.2 $ 126.0 $493.8 $421.6
======= ======= ======= ======
</TABLE>
(6) Stockholders' Equity
On September 27, 1999, the Board of Directors declared a two-for-one stock split
effected in the form of a 100 percent stock dividend whereby each shareholder
received one additional share of General Mills common stock on November 8, 1999,
for each share owned at the close of business on October 8, 1999. Prior year
information throughout these financial statements is restated for the stock
split, to present all data on a consistent and comparable basis.
On February 21, 2000, the Board of Directors approved an increase in the number
of common shares authorized to be held in our treasury from 120 million to 170
million shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Continuing operations generated $1.8 million less cash in the first nine months
of fiscal 2000 than in the same prior-year period. The change in cash provided
by operations as compared to last year reflects a $25.2 million increase in cash
from operations, after adjustment for non-cash items, more than offset by a
$27.0 million increase in the unfavorable working capital change.
Fiscal 2000 fixed asset expenditures are estimated to be approximately $270 to
$285 million. During the first nine months, fixed asset expenditures totaled
$204.9 million. Total capital investments, including investments in joint
ventures, are estimated to be approximately $300 to $330 million in fiscal 2000.
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 nine months under this program consisted of the
issuance of $349.0 million in notes and debt payments of $85.2 million.
<PAGE>
RESULTS OF OPERATIONS
All per share references in the following discussion are based on diluted
shares, except where indicated, and all prior year per share data have been
restated for the two-for-one stock split effective November 8, 1999.
Sales for the third quarter ended February 27, totaled $1,620 million, up 8
percent from the prior year. Earnings per share of 50 cents for the third
quarter of fiscal 2000, were up 11 percent from 45 cents per share earned in the
same period last year. Basic earnings per share of 51 cents for the third
quarter were up 11 percent from 46 cents. After-tax earnings grew 9 percent to
$153.3 million.
Nine-month sales of $5,010 million were up 8 percent from the first nine months
one year ago. Through nine months, earnings per share totaled $1.62, up 10
percent from $1.47 earned before unusual items last year. Basic earnings per
share of $1.67 for the first nine months were up 11 percent from $1.50 before
unusual items. Earnings after tax grew 9 percent before unusual items to $505.5
million.
General Mills' net earnings for last year's nine months included a restructuring
charge of $32.3 million after-tax, or 10 cents per diluted share, primarily
related to streamlining supply chain activities (See Note (3) Unusual Items).
Including this unusual item, earnings per share totaled $1.36 in last year's
first nine months.
General Mills' domestic unit volume grew 8 percent in the quarter, including
contributions from four businesses acquired since January 1999: Lloyd's
refrigerated entrees, Farmhouse Foods side dishes, Gardetto's snacks and Small
Planet organic foods. Excluding incremental volume from those new businesses,
U.S. unit volume grew 5 percent, with every major division reporting volume
gains.
The company's convenience foods businesses (snacks and yogurt) posted the
strongest volume growth in the quarter, up 16 percent. That gain was led by new
Go-Gurt portable yogurt and core Yoplait yogurt lines, fruit snacks, and Chex
Mix and Gardetto's snack mix products. Excluding the new Gardetto's business,
convenience foods volume grew 11 percent.
Volume for Betty Crocker products was up 4 percent in the quarter, including 7
percent growth for Hamburger Helper mixes. Foodservice volume rose 8 percent
with the strongest growth coming from convenience store sales and yogurt.
Through the first nine months of the year, unit volume for combined non-cereal
operations was up 9 percent.
For Big G cereals, third quarter unit volume grew 3 percent. This included good
performance from new products including Brown Sugar and Oat Total cereal, which
was introduced in October 1999, and Honey Nut Chex. In addition, the established
Chex cereal varieties posted double-digit volume gains in the quarter, a period
of high seasonal merchandising activity for those brands. Big G continued to
outpace the cereal category's growth, as industry pound volume in all
Nielsen-measured outlets declined slightly during the quarter. Through nine
months, Big G pound market share was up 1.5 points to 27.4 percent, and dollar
market share was up 1.7 points to 33.1 percent.
<PAGE>
Third-quarter unit volume for the company's international operations grew 6
percent. In Canada, unit volume was up 8 percent for the period. That included a
14 percent increase in cereal shipments, led by the Cheerios brand franchise,
child cereals, and new Honey Nut Chex. Through nine months, cereal pound market
share in Canada grew to 17.3 percent, and dollar share increased to 20.2
percent.
Quarterly volume for Cereal Partners Worldwide (CPW), the company's joint
venture with Nestle, grew 10 percent, led by strong gains in France, the United
Kingdom and Mexico. Third-quarter volume for Snack Ventures Europe was up 8
percent in total, with volume for core western European markets up 6 percent.
Joint-venture results for the quarter were unchanged from a year earlier,
bringing nine-month earnings to $1.1 million. The company continues to expect
the joint ventures to record an after-tax profit for fiscal 2000 as a whole,
compared to a loss of $8.2 million recorded for fiscal 1999.
During the third quarter, General Mills repurchased 5.8 million shares of common
stock under the company's ongoing program. Through the first nine months of
fiscal 2000, a total of 9.9 million shares have been repurchased at an average
price of approximately $37 per share. Average diluted shares outstanding for the
quarter totaled 306.3 million, compared to 316.7 million in the prior year.
Interest expense of $36.5 million in the quarter was up from the prior year,
reflecting higher rates and higher debt levels associated with acquisitions and
share repurchase activity. Share repurchase activity is continuing in the fourth
quarter and so we expect fourth quarter interest expense to be higher than the
third quarter level.
Our effective tax rates (excluding unusual items) for the third quarter and
first nine months of fiscal 2000 were 35.2 percent and 35.5 percent,
respectively, compared to 35.2 percent and 36.2 percent in last year's third
quarter and first nine months. Our reported tax rates for the first nine months
of fiscal 2000 and 1999 were 35.5 percent and 36.2 percent, respectively.
<PAGE>
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
The Company did not file any reports on Form 8-K during the third
quarter of fiscal 2000.
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 April 11, 2000 /s/ S. S. Marshall
-------------- -------------------------------------
S. S. Marshall
Senior Vice President,
General Counsel
Date April 11, 2000 /s/ K. L. Thome
-------------- -------------------------------------
K. L. Thome
Senior Vice President,
Financial Operations
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
GENERAL MILLS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In Millions, Except per Share Data)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------------- --------------------------
February 27, February 28, February 27, February 28,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Earnings $153.3 $ 141.1 $505.5 $429.7
====== ======= ====== ======
Average Number of Common Shares -
Basic EPS (a) 299.9 307.1 302.5 307.0
Incremental Share Effect from:
-Stock options (b) 4.8 9.5 8.1 7.9
-Restricted stock, stock rights
and puts 1.6 .1 .6 .1
------ ------ ------ ------
Average Number of Common Shares -
Diluted EPS 306.3 316.7 311.2 315.0
===== ===== ===== =====
Earnings per Share - Basic $ .51 $ .46 $1.67 $1.40
===== ===== ===== =====
Earnings per Share - Diluted $ .50 $ .45 $1.62 $1.36
===== ===== ===== =====
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.
</TABLE>
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
Thirty-Nine Weeks Ended Fiscal Year Ended
-------------------------- --------------------------------------
February 27, February 28, May 30, May 31, May 25, May 26, May 28,
2000 1999 1999 1998 1997 1996 1995
-------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings
to Fixed Charges 7.24 7.10 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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from our Form
10-Q for the thirty-nine week period ended February 27, 2000, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-28-2000
<PERIOD-START> MAY-31-1999
<PERIOD-END> FEB-27-2000
<CASH> 47,500,000
<SECURITIES> 0
<RECEIVABLES> 481,700,000
<ALLOWANCES> 0
<INVENTORY> 529,600,000
<CURRENT-ASSETS> 1,238,700,000
<PP&E> 2,903,000,000
<DEPRECIATION> (1,505,600,000)
<TOTAL-ASSETS> 4,596,700,000
<CURRENT-LIABILITIES> 2,337,300,000
<BONDS> 1,641,800,000
0
0
<COMMON> 670,200,000
<OTHER-SE> (635,500,000)
<TOTAL-LIABILITY-AND-EQUITY> 4,596,700,000
<SALES> 5,010,400,000
<TOTAL-REVENUES> 5,010,400,000
<CGS> 2,000,200,000
<TOTAL-COSTS> 2,000,200,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103,300,000
<INCOME-PRETAX> 782,300,000
<INCOME-TAX> 277,900,000
<INCOME-CONTINUING> 505,500,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 505,500,000
<EPS-BASIC> 1.67 <F1>
<EPS-DILUTED> 1.62 <F1>
<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,
payable November 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>
