UNITED STATES
|
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 23, 2003 |
| o | 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: 1-1185GENERAL MILLS, INC.
|
| 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) 764-7600
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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes X No _____ As of December 19, 2003, General Mills had 374,832,974 shares of its $.10 par value common stock outstanding (excluding 127,473,690 shares held in treasury). |
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
GENERAL MILLS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In Millions, Except per Share Data)
| Thirteen Weeks Ended | Twenty-Six Weeks Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Nov. 23, 2003 | Nov. 24, 2002 | Nov. 23, 2003 | Nov. 24, 2002 | |||||||||||
| Net Sales | $ | 3,060 | $ | 2,953 | $ | 5,578 | $ | 5,315 | ||||||
| Costs and Expenses: | ||||||||||||||
| Cost of sales | 1,797 | 1,711 | 3,271 | 3,060 | ||||||||||
| Selling, general and administrative | 677 | 685 | 1,268 | 1,269 | ||||||||||
| Interest, net | 127 | 140 | 261 | 282 | ||||||||||
| Restructuring and other exit costs | 9 | 16 | 9 | 57 | ||||||||||
| Total Costs and Expenses | 2,610 | 2,552 | 4,809 | 4,668 | ||||||||||
| Earnings before Taxes and Earnings | ||||||||||||||
| from Joint Ventures | 450 | 401 | 769 | 647 | ||||||||||
Income Taxes | 158 | 139 | 270 | 226 | ||||||||||
Earnings from Joint Ventures | 16 | 14 | 36 | 31 | ||||||||||
Net Earnings | $ | 308 | $ | 276 | $ | 535 | $ | 452 | ||||||
Earnings per Share – Basic | $ | .82 | $ | .75 | $ | 1.44 | $ | 1.23 | ||||||
Average Number of Common Shares | 374 | 368 | 373 | 368 | ||||||||||
Earnings per Share – Diluted | $ | .81 | $ | .73 | $ | 1.40 | $ | 1.20 | ||||||
Average Number of Common Shares – | ||||||||||||||
| Assuming Dilution | 383 | 377 | 383 | 376 | ||||||||||
Dividends per Share | $ | .275 | $ | .275 | $ | .550 | $ | .550 | ||||||
2
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
| (Unaudited) | (Unaudited) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| November 23, 2003 | November 24, 2002 | May 25, 2003 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 695 | $ | 1,747 | $ | 703 | |||||
| Receivables | 1,196 | 1,236 | 980 | ||||||||
| Inventories: | |||||||||||
| Valued primarily at FIFO | 286 | 419 | 315 | ||||||||
| Valued at LIFO (FIFO value exceeds LIFO by | |||||||||||
| $29, $31 and $27, respectively) | 1,035 | 861 | 767 | ||||||||
| Prepaid expenses and other current assets | 177 | 155 | 184 | ||||||||
| Deferred income taxes | 209 | 264 | 230 | ||||||||
| Total Current Assets | 3,598 | 4,682 | 3,179 | ||||||||
| Land, Buildings and Equipment, at Cost | 5,088 | 4,590 | 4,929 | ||||||||
| Less accumulated depreciation | (2,075 | ) | (1,867 | ) | (1,949 | ) | |||||
| Net Land, Buildings and Equipment | 3,013 | 2,723 | 2,980 | ||||||||
| Goodwill | 6,671 | 6,369 | 6,650 | ||||||||
| Other Intangible Assets | 3,619 | 3,611 | 3,622 | ||||||||
| Other Assets | 1,878 | 1,891 | 1,796 | ||||||||
Total Assets | $ | 18,779 | $ | 19,276 | $ | 18,227 | |||||
LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | 1,296 | $ | 1,499 | $ | 1,303 | |||||
| Current portion of long-term debt | 246 | 100 | 105 | ||||||||
| Notes payable | 956 | 2,379 | 1,236 | ||||||||
| Other current liabilities | 637 | 848 | 800 | ||||||||
| Total Current Liabilities | 3,135 | 4,826 | 3,444 | ||||||||
| Long-term Debt | 7,817 | 7,480 | 7,516 | ||||||||
| Deferred Income Taxes | 1,711 | 1,734 | 1,661 | ||||||||
| Other Liabilities | 1,075 | 1,128 | 1,131 | ||||||||
| Total Liabilities | 13,738 | 15,168 | 13,752 | ||||||||
Minority Interests | 298 | 299 | 300 | ||||||||
Stockholders' Equity: | |||||||||||
| Cumulative preference stock, none issued | — | — | — | ||||||||
| Common stock, 502 shares issued | 5,702 | 5,672 | 5,684 | ||||||||
| Retained earnings | 3,409 | 2,818 | 3,079 | ||||||||
| Less common stock in treasury, at cost, shares | |||||||||||
| of 128, 134 and 132, respectively | (4,077 | ) | (4,250 | ) | (4,203 | ) | |||||
| Unearned compensation | (48 | ) | (55 | ) | (43 | ) | |||||
| Accumulated other comprehensive loss | (243 | ) | (376 | ) | (342 | ) | |||||
| Total Stockholders' Equity | 4,743 | 3,809 | 4,175 | ||||||||
Total Liabilities and Equity | $ | 18,779 | $ | 19,276 | $ | 18,227 | |||||
See accompanying notes to consolidated condensed financial statements.
3
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
| Twenty-six Weeks Ended | ||||||||
|---|---|---|---|---|---|---|---|---|
| November 23, 2003 | November 24, 2002 | |||||||
| Cash Flows – Operating Activities: | ||||||||
| Net earnings | $ | 535 | $ | 452 | ||||
| Adjustments to reconcile net earnings to cash flow: | ||||||||
| Depreciation and amortization | 189 | 180 | ||||||
| Deferred income taxes | 46 | 55 | ||||||
| Changes in current assets and liabilities | ||||||||
| excluding effects of businesses acquired | (550 | ) | (14 | ) | ||||
| Tax benefit on exercised options | 30 | 10 | ||||||
| Pension and other postretirement activity | (18 | ) | (39 | ) | ||||
| Restructuring and other exit costs | 9 | 57 | ||||||
| Other, net | 9 | (22 | ) | |||||
| Net Cash Provided by Operating Activities | 250 | 679 | ||||||
| Cash Flows – Investment Activities: | ||||||||
| Purchases of land, buildings and equipment | (272 | ) | (211 | ) | ||||
| Investments in businesses, intangibles and affiliates, | ||||||||
| net of investment returns and dividends | (24 | ) | (54 | ) | ||||
| Purchases of marketable investments | (4 | ) | (59 | ) | ||||
| Proceeds from sale of marketable investments | 40 | 38 | ||||||
| Proceeds from disposal of land, buildings & equipment | 21 | 1 | ||||||
| Other, net | (11 | ) | (44 | ) | ||||
| Net Cash Used by Investment Activities | (250 | ) | (329 | ) | ||||
| Cash Flows – Financing Activities: | ||||||||
| Change in notes payable | (293 | ) | (1,216 | ) | ||||
| Issuance of long-term debt | 576 | 1,985 | ||||||
| Payment of long-term debt | (157 | ) | (248 | ) | ||||
| Proceeds from minority investors, net | — | 147 | ||||||
| Common stock issued | 78 | 53 | ||||||
| Purchases of common stock for treasury | (5 | ) | (20 | ) | ||||
| Dividends paid | (205 | ) | (202 | ) | ||||
| Other, net | (2 | ) | (77 | ) | ||||
| Net Cash (Used) Provided by Financing Activities | (8 | ) | 422 | |||||
| (Decrease) Increase in Cash and Cash Equivalents | $ | (8 | ) | $ | 772 | |||
| Cash Flows from Changes in Current Assets and | ||||||||
| Liabilities, Excluding Effects of Businesses Acquired: | ||||||||
| Receivables | (199 | ) | (223 | ) | ||||
| Inventories | (230 | ) | (227 | ) | ||||
| Prepaid expenses and other current assets | 8 | — | ||||||
| Accounts payable | (22 | ) | 284 | |||||
| Other current liabilities | (107 | ) | 152 | |||||
| Changes in Current Assets and Liabilities | $ | (550 | ) | $ | (14 | ) | ||
See accompanying notes to consolidated condensed financial statements.
4
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
The accompanying consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the twenty-six weeks ended November 23, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending May 30, 2004.
These statements should be read in conjunction with the consolidated financial statements and footnotes included in our Form 10-K for the year ended May 25, 2003. The accounting policies used in preparing these consolidated condensed financial statements are the same as those described in Note One of our Form 10-K.
Certain amounts in prior-period consolidated condensed financial statements have been reclassified to conform with current period classifications. Certain expenses, amounting to $57 million in the second quarter of fiscal 2003 and $94 million in the first half of fiscal 2003, have been reclassified from cost of sales to selling, general and administrative expense to more appropriately categorize these expenses that are not clearly associated with production activity. In addition, certain items reported in fiscal 2003 as unusual items have been reclassified to restructuring and other exit costs ($16 million in the second quarter, $57 million in the first half), and to selling, general and administrative expense ($5 million in the second quarter, $19 million in the first half).
Stock-based Compensation Expense for Stock Options
We use the intrinsic value 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) be the market value as of the grant date. The following table illustrates the pro forma effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation.
| 13 Weeks Ended | 26 Weeks Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| In Millions, except per share data |
Nov. 23, 2003 | Nov. 24, 2002 | Nov. 23, 2003 | Nov. 24, 2002 | ||||||||||
| Net earnings, as reported | $ | 308 | $ | 276 | $ | 535 | $ | 452 | ||||||
Add: Stock-based employee compensation | ||||||||||||||
| expense included in reported net | ||||||||||||||
| earnings, net of related tax effects | 4 | 4 | 7 | 7 | ||||||||||
Deduct: Total stock-based employee | ||||||||||||||
| compensation expense determined under | ||||||||||||||
| fair value based method for all | ||||||||||||||
| awards, net of related tax effects | (15 | ) | (16 | ) | (29 | ) | (32 | ) | ||||||
| Pro forma net earnings | $ | 297 | $ | 264 | $ | 513 | $ | 427 | ||||||
| Earnings per share: | ||||||||||||||
| Basic – as reported | $ | .82 | $ | .75 | $ | 1.44 | &n | |||||||