EXHIBIT 13
MANAGEMENT DISCUSSION OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
General Mills' financial goal is to achieve
performance that places us in the top 10 percent
of major American companies, ranked by the
combination of growth in earnings per share and
return on capital. Over the past five years, our
earnings per share have grown at a 13 percent
compound rate and our after-tax return on capital
has averaged 21 percent, both before unusual
items. Meeting our financial objectives is the
key to providing superior returns to shareholders.
Results of Operations
In 1994, sales rose 5 percent to $8.52 billion.
Earnings per share from continuing operations were
$2.95 compared to $3.10 in 1993. After-tax
earnings were $469.7 million compared to $506.1
million a year ago. Results for 1994 include an
unusual after-tax charge of $87.1 million, or 55
cents per share, to cover estimated costs
associated with the actions of an independent
licensed contractor who made an improper pesticide
substitution in treating some of our oat supplies.
See note two to the consolidated financial
statements for further discussion. We voluntarily
suspended production and shipments of oat-
containing products for a period of time during
the first quarter of 1995 while resolving this
issue; therefore, there will be a negative impact
on 1995 first-quarter volume and earnings. There
was an unusual net after-tax charge in 1993 of
$57.3 million, or 35 cents per share, primarily
for restructuring actions at consumer foods
manufacturing facilities as well as selected
restaurant unit closings.
Segment operating results are summarized in note
eighteen to the consolidated financial statements
on page 32.
Consumer Foods' sales grew 3 percent in 1994 to
$5.55 billion with domestic packaged foods unit
volume increasing 3 percent. Operating profits
decreased 1 percent excluding unusual items from
both years. In 1994, there was an unusual charge
of $146.9 million related to the improper
pesticide application as noted above. Included in
operating profits for 1993 were unusual items
totaling $33.4 million for increasing
manufacturing productivity, and our share of
streamlining and tax-reorganization costs
associated with the formation of Snack Ventures
Europe (SVE), our joint venture with PepsiCo Foods
International. Including the unusual items,
operating profits for 1994 decreased to $653.1
million.
Big G's 1994 operating profit decline reflected
the year-long cereal market promotional escalation
and the fourth-quarter impact of our pricing and
promotional actions. In a departure from recent
cereal industry practices, the Company announced
actions in April 1994 to reduce spending on
inefficient cereal couponing and price promotion,
and to reduce prices on our largest cereal brands
by an average of 11 percent. These actions were
designed to deliver consumer value more directly
and efficiently, and are anticipated to have
positive profit impact in 1995, but are expected
to be volume and market share neutral.
Yoplait yogurt, Betty Crocker Products, Gorton's
seafood and Canada Foods posted double-digit
operating profit gains for the year. SVE showed
an excellent increase in operating profits and
volume, and expanded beyond its original six
European markets in Italy.
CPW, our cereal joint venture with Nestle,
continued to demonstrate progress in existing
markets and expanded operations to Belgium,
Switzerland, Austria, Greece and Chile during the
year. Consumer Foods' operating profits include a
loss of $30.3 million in 1994 and $30.6 million in
1993 for General Mills' share of CPW's losses.
The developmental spending burden for CPW is
expected to moderate as initial operations in
European markets approach profitability in 1995.
In 1993, Consumer Foods' sales and operating
profits grew 3 percent and 11 percent (excluding
unusual items), respectively, led by Betty Crocker
Products, Big G cereals, Yoplait yogurt,
Foodservice, Gorton's seafood and Canada Foods.
Restaurants' sales grew 8 percent in 1994 to $2.96
billion. An operating profit gain of 3 percent
before unusual items in the prior year was
achieved despite disappointing results at The
Olive Garden and the effects of unprecedented
harsh winter weather. A net total of 115 new
restaurants were opened in North America. Red
Lobster's profits increased strongly as new menu
items, improved service and a new decor package
favorably influenced results. The Olive Garden's
profits were lower, due to a decline in average
unit sales that resulted primarily from not
updating the successful concept soon enough to
meet changing consumer expectations. China Coast
commenced broader market expansion in 1994.
Twenty new units were opened during the year with
plans calling for faster expansion during 1995.
Including the unusual items for last year,
operating profits increased 21 percent.
In 1993, Restaurants' sales and operating profits
before unusual items increased 8 percent and 11
percent, respectively. Results reflected good
gains by The Olive Garden and good overall
performance by Red Lobster. Together, The Olive
Garden and Red Lobster added 112 new units in
North America. Results for Canadian restaurants
improved versus the prior year, but still trailed
expectations. A charge of $30.6 million was
recorded in 1993 for closing 31 Red Lobster and
The Olive Garden units in the United States and
Canada. Including the charge, operating profits
decreased 5 percent.
Interest expense in 1994 was $115.6 million, an
increase of $27.3 million from the prior year due
to borrowing to fund purchases of common shares
for treasury. The 1993 interest expense of $88.3
million was $12.4 million greater than 1992
primarily due to funding purchases of common
shares for treasury. Interest income of $14.7
million in 1993 was $3.0 million less than the
prior year reflecting lower rates.
The effective tax rates in 1994 and 1993 were 37.6
percent and 40.0 percent, respectively. Excluding
the unusual items in both years, the rates were
38.1 percent and 38.2 percent in 1994 and 1993,
respectively. The federal tax law changes in 1993
did not have a significant impact on 1994, but are
expected to have a slight negative impact in the
future.
It is management's 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. Management attempts to
minimize the effects of inflation through
appropriate planning and operating practices.
The Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt
and Equity Securities," in May 1993. The American
Institute of Certified Public Accountants issued
Statement of Position 93-7, "Reporting on
Advertising Costs," in December 1993. Neither of
these statements will have a significant impact on
the Company when adopted.
Financial Condition
The Company intends to manage its businesses and
financial ratios so as to maintain a strong "A"
bond rating, which allows access to financing at
reasonable costs. Currently, General Mills'
publicly issued long-term debt carries "A1"
(Moody's Investors Services, Inc.) and "A+"
(Standard & Poor's Corporation) ratings. Our
commercial paper has ratings of "P-1" (Moody's)
and "A-1" (Standard & Poor's) in the United States
and "R-1 (middle)" in Canada from Dominion Bond
Rating Service.
General Mills' financial condition remains strong.
As important measures of financial strength, the
Company focuses on the cash flow to debt and fixed
charge coverage ratios, which were 46 percent and
6.2 times, respectively, in 1994. The purchase of
2.4 million shares of common stock for our
treasury increased debt and reduced equity by
$145.7 million, contributing to a debt to capital
ratio of 65 percent.
The composition of the Company's capital structure
is shown in the accompanying table.
Capital Structure
May 29, May 30,
In Millions 1994 1993
Notes payable $ 433.3 $ 339.6
Current portion of long-term
debt 115.2 64.3
Long-term debt 1,417.2 1,268.3
Deferred income taxes - tax
leases 189.8 195.6
Total debt 2,155.5 1,867.8
Debt adjustments:
Leases - debt equivalent 434.4 428.8
Domestic cash equivalents - (109.4)
Marketable investments (196.1) (137.0)
Adjusted debt 2,393.8 2,050.2
Common stock subject to
put options 122.0 -
Stockholders' equity 1,151.2 1,218.5
Total capital $3,667.0 $3,268.7
We selectively use derivatives to hedge financial
risks, primarily interest rate volatility and
foreign currency fluctuations. The derivatives
are generally treated as hedges for accounting
purposes. We manage our debt structure through
both issuance of fixed and floating-rate debt as
well as the use of derivatives. The debt
equivalent of our leases and deferred income taxes
related to tax leases are both fixed-rate
obligations. The table below, when reviewed in
conjunction with the capital structure table,
shows the composition of our debt structure
including the impact of derivatives.
Debt Structure
In Millions May 29, 1994 May 30, 1993
Floating-rate debt $ 733.4 31% $ 534.9 26%
Fixed-rate debt 1,036.2 43 890.9 43
Leases - debt equivalent 434.4 18 428.8 21
Deferred income taxes - tax
leases 189.8 8 195.6 10
Total debt $2,393.8 100% $2,050.2 100%
Commercial paper has historically been our primary
source of short-term financing. Bank credit lines
are maintained to ensure availability of short-
term funds on an as-needed basis. In June 1994,
our fee-paid credit lines were increased from
$500.0 million to $650.0 million.
Our shelf registration statement permits issuance
of up to $222.1 million net proceeds in unsecured
debt securities. The shelf registration
authorizes a medium-term note program that
provides additional flexibility in 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 1994 1993 1992
From operations $ 830.7 $ 859.9 $ 771.6
Fixed assets and other
investments-net (732.1) (714.4) (725.7)
From dispositions of
businesses - - 77.7
Change in marketable
investments (50.1) (69.7) -
Increase in outstanding
debt-net 287.7 585.7 91.0
Common stock issued 13.3 32.3 39.3
Treasury stock purchases (145.7) (420.2) (40.1)
Dividends paid (299.4) (274.8) (245.2)
Other (4.2) (7.4) (7.9)
Decrease in cash
and cash equivalents $ (99.8) $ (8.6) $ (39.3)
Operations generated $29.2 million less cash in
1994 than in the previous year primarily due to an
increase in inventory levels. We purchased
various marketable investments to take advantage
of interest rate spreads.
Capital expenditures in 1995 are estimated to be
approximately $525 million; an additional $50
million capital investment is anticipated for our
joint ventures, principally CPW. In July 1994,
the Company purchased 976,000 shares of common
stock for $56.4 million as privately placed put
options were exercised. The unusual item recorded
in 1994 will be substantially included in 1995 as
cash outflow. As a result, the Company is
anticipating a net cash outflow in 1995 and will
borrow either short- or long-term, depending on
market conditions.
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 29, 1994 and
May 30, 1993, and the related consolidated statements of earnings
and cash flows for each of the fiscal years in the three-year
period ended May 29, 1994. 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 29,
1994 and May 30, 1993, and the results of their operations and
their cash flows for each of the fiscal years in the three-year
period ended May 29, 1994 in conformity with generally accepted
accounting principles.
As discussed in notes thirteen and fifteen to the consolidated
financial statements, the Company adopted the provisions of the
Financial Accounting Standards Board's Statements of Financial
Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits, and No. 109, Accounting for Income
Taxes, in fiscal 1994.
KPMG PEAT MARWICK
Minneapolis, Minnesota
July 29, 1994
CONSOLIDATED STATEMENTS OF EARNINGS
Fiscal Year Ended
May 29, May 30, May 31,
In Millions, Except per Share Data 1994 1993 1992
Continuing Operations:
Sales $8,516.9 $8,134.6 $7,777.8
Costs and Expenses:
Cost of sales 4,458.2 4,297.6 4,123.2
Selling, general and administrative 2,755.5 2,578.2 2,516.3
Depreciation and amortization 303.8 274.2 247.4
Interest, net 99.2 73.6 58.2
Unusual expenses (income) 146.9 67.0 (11.8)
Total Costs and Expenses 7,763.6 7,290.6 6,933.3
Earnings from Continuing Operations
before Taxes 753.3 844.0 844.5
Income Taxes 283.6 337.9 338.9
Earnings from Continuing Operations 469.7 506.1 505.6
Discontinued Operations after Taxes - - (10.0)
Cumulative Effect to May 31, 1993
of Accounting Changes .2 - -
Net Earnings $ 469.9 $ 506.1 $ 495.6
Earnings per Share:
Continuing operations $ 2.95 $ 3.10 $ 3.05
Discontinued operations - - (.06)
Cumulative effect of accounting changes - - -
Net Earnings per Share $ 2.95 $ 3.10 $ 2.99
Average Number of Common Shares 159.1 163.1 165.7
<FN>
See accompanying notes to consolidated financial statements.
</FN>
CONSOLIDATED BALANCE SHEETS
May 29, May 30,
In Millions 1994 1993
Assets
Current Assets:
Cash and cash equivalents $ .2 $ 100.0
Receivables, less allowance for doubtful
accounts of $4.4 in 1994 and $4.3 in 1993 309.7 287.4
Inventories 488.3 439.0
Prepaid expenses and other current assets 110.6 108.2
Deferred income taxes 220.4 142.3
Total Current Assets 1,129.2 1,076.9
Land, Buildings and Equipment, at cost 3,092.6 2,859.6
Other Assets 976.5 714.3
Total Assets $5,198.3 $4,650.8
Liabilities and Equity
Current Liabilities:
Accounts payable $ 650.4 $ 617.0
Current portion of long-term debt 115.2 64.3
Notes payable 433.3 339.6
Accrued taxes 178.3 139.7
Accrued payroll 165.6 158.8
Other current liabilities 289.3 239.4
Total Current Liabilities 1,832.1 1,558.8
Long-term Debt 1,417.2 1,268.3
Deferred Income Taxes 297.4 262.0
Deferred Income Taxes -- Tax Leases 189.8 195.6
Other Liabilities 188.6 147.6
Total Liabilities 3,925.1 3,432.3
Common Stock Subject to Put Options 122.0 -
Stockholders' Equity:
Cumulative preference stock, none issued - -
Common stock, 204.2 shares issued 251.0 358.7
Retained earnings 2,457.9 2,284.5
Less common stock in treasury, at cost,
shares of 45.7 in 1994 and 43.7 in 1993 (1,334.4) (1,196.4)
Unearned compensation and other (160.2) (167.5)
Cumulative foreign currency adjustment (63.1) (60.8)
Total Stockholders' Equity 1,151.2 1,218.5
Total Liabilities and Equity $5,198.3 $4,650.8
<FN>
See accompanying notes to consolidated financial statements.
</FN>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fiscal Year Ended
May 29, May 30, May 31,
In Millions 1994 1993 1992
Cash Flows - Operating Activities:
Earnings from continuing operations $469.9 $506.1 $505.6
Adjustments to reconcile earnings to cash flow:
Depreciation and amortization 303.8 274.2 247.4
Deferred income taxes (27.8) 40.8 13.5
Change in current assets and liabilities, net
of effects from business acquired (72.0) 2.5 20.0
Unusual expenses 146.9 57.3 -
Other, net 15.2 (15.0) 3.9
Cash provided by continuing operations 836.0 865.9 790.4
Cash used by discontinued operations (5.3) (6.0) (18.8)
Net Cash Provided by Operating Activities 830.7 859.9 771.6
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (559.5) (623.8) (695.3)
Investments in businesses, intangibles and
affiliates, net of dividends (140.8) (55.8) (30.6)
Purchases of marketable investments (83.8) (82.8) (6.9)
Proceeds from sale of marketable investments 33.7 13.1 6.9
Proceeds from disposal of land, buildings and
equipment 7.2 5.2 8.1
Proceeds from dispositions - - 77.7
Other, net (39.0) (40.0) (7.9)
Net Cash Used by Investment Activities (782.2) (784.1) (648.0)
Cash Flows - Financing Activities:
Increase in notes payable 93.2 207.6 150.3
Issuance of long-term debt 273.6 422.6 188.7
Payment of long-term debt (79.1) (44.5) (248.0)
Common stock issued 13.3 32.3 39.3
Purchases of common stock for treasury (145.7) (420.2) (40.1)
Dividends paid (299.4) (274.8) (245.2)
Other, net (4.2) (7.4) (7.9)
Net Cash Used by Financing Activities (148.3) (84.4) (162.9)
Decrease in Cash and Cash Equivalents (99.8) (8.6) (39.3)
Cash and Cash Equivalents - Beginning of Year 100.0 .5 39.8
Reclassification of Marketable Investment - 108.1 -
Cash and Cash Equivalents - End of Year $ .2 $100.0 $ .5
Cash Flow from Changes in Current Assets
and Liabilities:
Receivables $(17.3) $(44.7) $ 2.1
Inventories (111.0) 28.7 .6
Prepaid expenses and other current assets (5.1) 4.6 (8.9)
Accounts payable 33.2 9.0 54.5
Other current liabilities 28.2 4.9 (28.3)
Change in Current Assets and Liabilities $(72.0) $ 2.5 $ 20.0
<FN>
See accompanying notes to consolidated financial statements.
</FN>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note One: Summary of Significant Accounting Policies
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 1994 and
1993 each consisted of 52 weeks and 1992 consisted of 53 weeks.
B. Land, Buildings, Equipment and Depreciation
Buildings and equipment are depreciated over estimated useful
lives ranging from three to 50 years, primarily using the
straight-line method. 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 purchase prices of
acquired companies and the related fair values of net assets
acquired and accounted for by the purchase method of accounting.
Goodwill acquired after October 1970 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 as required by Financial Accounting
Standard No. 87.
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 25,
1994, the Board of Directors affirmed that the remaining amounts
of these assets have continuing value.
E. Research and Development
All expenditures for research and development are charged against
earnings in the year incurred. The charges for 1994, 1993 and 1992
were $63.6 million, $60.1 million and $62.1 million, respectively.
F. Earnings per Share
Earnings per share has been determined by dividing the appropriate
earnings by the weighted average number of common shares outstanding
during the year. Common share equivalents were not material.
G. 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.
Gains and losses from foreign currency transactions are generally
included in net earnings for the period.
H. Interest Rate Swap Agreements
Any interest rate differential on an interest rate swap is
recognized as an adjustment of interest expense or income over
the term of the agreement. We enter into these agreements with a
diversified group of highly-rated financial institutions. We are
exposed to credit loss in the event of nonperformance by the
other parties to these agreements. However, we do not anticipate
any losses.
The fair value of interest rate swaps is the estimated amount we
would receive or pay to replace the swap agreements, taking into
consideration current interest rates. This estimated amount was
immaterial at May 29, 1994.
I. Statements of Cash Flows
For purposes of the statement of cash flows, we consider all
investments purchased with a maturity of three months or less to be
cash equivalents.
Note Two: Unusual Items
In 1994, we recorded an after-tax charge of $87.1 million ($.55 per
share) to cover estimated costs associated with the actions of an
independent licensed contractor who made an improper substitution of
a pesticide in treating some of our oat supplies, a portion of which
were used in production. While the substitution presented no
consumer health or safety issues, the pesticide had not been
registered for use on oats and thus its application represented a FDA
regulatory violation. Due to a lengthy government approval process
for registration, the affected finished oat-products inventory would
be past the Company's freshness standard dates. Therefore, the
charge includes costs associated with disposition of the finished oat
products and oats inventory as well as other related expenses.
Several consumer class action lawsuits have been filed in connection
with this matter. The Company believes these lawsuits are without
merit and will not have any material impact on the financial
condition of the Company.
We recorded restructuring charges in 1993 related primarily to
restaurant closings in the U.S. and Canada, costs for increasing
Consumer Foods manufacturing productivity and efficiency, and our
share of streamlining and tax reorganization costs associated with
the formation of Snack Ventures Europe. These charges resulted in a
reduction in net earnings of $57.3 million ($.35 per share). These
actions were substantially completed in 1994.
In 1992, we recognized a gain on the sale of the stock of our
Spanish frozen food subsidiary, Preparados y Congelados Alimenticios,
S.A. (PYCASA) and also recorded charges primarily related to
restructuring of Betty Crocker packaged mixes production, European
food operations, and Consumer Foods national sales organization, and
the call of our 9 3/8% sinking fund debentures. These transactions
resulted in no net effect on earnings.
Note Three: Foreign Exchange
We selectively hedge the potential effect of foreign currency
fluctuations related to operating activities and net investments in
foreign operations by entering into foreign exchange contracts with
major financial institutions. Realized and unrealized gains and
losses on contracts that hedge operating activities are recognized
currently in net earnings. Realized and unrealized gains and losses
on contracts that hedge net investments are recognized in the
foreign currency adjustment in stockholders' equity.
The components of our net foreign investment exposure by
geographic region are as follows:
May 29, May 30,
In Millions 1994 1993
Europe $118.3 $103.9
North/South America 43.3 41.7
Asia 12.1 13.0
Total exposure 173.7 158.6
After-tax hedges (30.2) (134.1)
Net exposure $143.5 $ 24.5
At May 29, 1994, we had forward contracts maturing in 1995 to sell
$59.5 million and purchase $7.5 million of foreign currencies. We
also had foreign currency put options expiring in 1995 of $26.8
million. The fair value of these contracts is based on third-party
quotes and is immaterial at May 29, 1994.
Note Four: Acquisition and Investments
We purchased the Colombo yogurt business for approximately $75.0
million from a U.S. subsidiary of Bongrain S.A. effective December
1993. Colombo has a refrigerated yogurt business in the Northeast
and is a leading producer of soft frozen yogurt, as well as premium
hard pack frozen yogurt. The transaction did not have any material
effect on our 1994 earnings.
During 1994 and 1993, we made capital contributions and advances of
$48.3 million and $66.1 million, respectively, to Cereal Partners
Worldwide (CPW), our joint venture with Nestle, S.A.
In 1993, we entered into a joint venture, Snack Ventures Europe
(SVE), with PepsiCo Foods International to merge six existing
Continental European snack operations (three from each company) into
one company to develop, manufacture and market snack foods. We own
40.5 percent of SVE. The merger was effective July 1992. We
reclassified the net individual assets and liabilities of our
operations to investment in affiliates and excluded the noncash
transaction from our statement of cash flows.
Note Five: Inventories
The components of inventories are as follows:
May 29, May 30,
In Millions 1994 1993
Raw materials, work in process and supplies $245.0 $206.2
Finished goods 249.3 252.6
Grain 47.0 40.5
Reserve for LIFO valuation method (53.0) (60.3)
Total inventories $488.3 $439.0
At May 29, 1994 and May 30, 1993, respectively, inventories of
$245.1 million and $244.5 million were valued at LIFO.
Note Six: Balance Sheet Information
The components of certain balance sheet items are as follows:
May 29, May 30,
In Millions 1994 1993
Land, Buildings and Equipment:
Land $ 360.9 $ 302.3
Buildings 1,655.6 1,452.6
Equipment 2,373.8 2,048.1
Construction in progress 299.5 436.5
Total land, buildings and equipment 4,689.8 4,239.5
Less accumulated depreciation (1,597.2) (1,379.9)
Net land, buildings and equipment $3,092.6 $2,859.6
Other Assets:
Prepaid pension $ 288.0 $ 257.4
Marketable investments, at cost 196.1 137.0
Investments in and advances to affiliates 188.3 163.9
Intangible assets 157.3 70.6
Miscellaneous 146.8 85.4
Total other assets $ 976.5 $ 714.3
Based on quoted market prices, the fair value of the marketable
investments was $231.4 million at May 29, 1994 and $186.9
million at May 30, 1993.
We have interest rate and currency swap agreements related to
marketable investments that convert fixed interest rates to
variable interest rates and foreign currencies to U.S. dollars
on a notional amount of $81.9 million. These agreements mature
from December 1994 to January 2001.
Note Seven: Notes Payable
The components of notes payable are as follows:
May 29, May 30,
In Millions 1994 1993
U.S. commercial paper $339.2 $255.5
Canadian commercial paper 83.3 75.9
Financial institutions 260.8 208.2
Amount reclassified to long-term debt (250.0) (200.0)
Total notes payable $433.3 $339.6
To ensure availability of funds, we maintain bank credit lines
sufficient to cover our outstanding commercial paper. As of
May 29, 1994, we had $500.0 million fee-paid lines and $179.4
million uncommitted, no-fee lines available in the U.S. and Canada.
In addition, other foreign subsidiaries had unused credit lines of
$37.1 million.
We have a revolving credit agreement expiring in 1999 that
provides for the fee-paid credit lines. This agreement provides
us with the ability to refinance short-term borrowings on a long-
term basis, and therefore we have reclassified a portion of our
notes payable to long-term debt.
We occasionally enter into swap agreements to lock in interest
rates on notes payable that may result in fixed rates higher than
short-term rates. At May 29, 1994 we had interest rate swap
agreements on a notional amount of $145.0 million that convert an
average interest rate of 2.8% to an average interest rate of
5.7%. These agreements mature from June 1994 to August 1994. At
May 30, 1993 we had interest rate swap agreements on a notional
amount of $169.0 million that converted an average interest rate
of 3.3% to an average interest rate of 7.9%.
We purchased and sold interest rate cap agreements, expiring in
May 1995, on a notional amount of $200.0 million with strike
rates of 5.0% and 6.5%, respectively. These agreements limit our
exposure to an increase in short-term interest rates. If rates
are between 5.0-6.5%, our rate is limited to 5.0%; if rates are
greater than 6.5%, our rate will be 150 basis points less than
market rates until the agreements expire.
Note Eight: Long-term Debt
May 29, May 30,
In Millions 1994 1993
4.3% to 9.1% medium-term notes,
due 1994 to 2033 $1,080.3 $ 918.3
Zero coupon notes, yield 11.1%, $327.0
due August 15, 2013 41.4 47.1
ESOP loan guaranty, variable rate (3.7% at
May 29, 1994), due December 31, 2007 50.0 50.0
8.3% ESOP loan guaranty,
due through June 30, 2007 78.3 82.0
Zero coupon notes, yield 11.7%, $64.4
due August 15, 2004 20.2 18.0
Notes payable, reclassified 250.0 200.0
Other 12.2 17.2
1,532.4 1,332.6
Less amounts due within one year (115.2) (64.3)
Total long-term debt $1,417.2 $1,268.3
Our shelf registration statement permits the issuance of up to
$222.1 million net proceeds in unsecured debt securities to
reduce short-term debt and for other general corporate purposes.
This registration includes a medium-term note program that
allows us to issue debt quickly for various amounts and at
various rates and maturities.
In 1994, we issued $217.9 million of debt under our medium-
term note program with maturities from one to 40 years and
interest rates from 4.3% to 7.3%. In 1993, $366.7 million of
debt was issued under this program with maturities from one to
30 years and interest rates from 3.5% to 8.6%.
We had interest rate swap agreements that convert an average
interest rate of 5.5% to an average interest rate of 3.2% on
$162.9 million notional amount of medium-term notes. These
agreements mature from October 1994 to January 1999. In 1994,
we sold a swap option that gives the holder the right, if
exercised, to receive a fixed payment of 6.8% and pay a floating
rate based on commercial paper on a notional amount of $21.3
million from February 1995 until February 1997. At May 30, 1993
we had interest rate swap agreements that converted an average
interest rate of 5.4% to an average interest rate of 2.9% on
$120.0 million notional amount of medium-term notes.
In 1992, we called our 9 3/8% sinking fund debentures due
March 1, 2009 (see note two). This transaction resulted in a
decrease in net earnings of $3.5 million ($.02 per share).
The Company has guaranteed the debt of the Employee Stock
Ownership Plans; therefore, the loans are reflected on our
consolidated balance sheets as long-term debt with a related
offset in stockholders' equity, "Unearned compensation and
other."
Based on borrowing rates currently available for debt with
similar terms and average maturities, the fair value of our long-
term debt, excluding current portion, was $1,476.4 million at
May 29, 1994 and $1,413.4 million at May 30, 1993.
The sinking fund and principal payments due on long-term debt
are (in millions) $115.2, $72.0, $94.2, $101.0 and $99.7 in
years ending 1995, 1996, 1997, 1998 and 1999, respectively. The
notes payable that are reclassified under our revolving credit
agreement are not included in these principal payments.
Our marketable investments 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, 2013 and 2004.
Note Nine: Stock Options
The following table contains information on stock options:
Average Option
Shares Price per Share
Granted
1994 4,868,098 $63.22
1993 3,384,144 66.64
1992 2,574,008 58.29
Exercised
1994 562,714 $31.08
1993 1,962,063 22.90
1992 1,026,760 19.64
Expired
1994 459,800 $62.56
1993 288,907 61.63
1992 175,804 39.12
Outstanding at year end
1994 18,009,478 $49.52
1993 14,163,894 44.50
1992 13,030,720 35.88
Exercisable at year end
1994 10,278,466 $38.73
1993 9,488,948 36.23
1992 8,938,384 28.71
A total of 10,622,403 shares (including 2,535,750 shares for
salary replacement options and 321,164 shares for restricted
stock) are available for grants of options or restricted stock to
employees under our 1990 and 1993 stock plans through October 1,
1998. An additional 3,083,400 shares are available for grants on
a one-for-one basis as common stock shares are repurchased by the
Company. The options may be granted at a price not less than
100% of fair market value on the date the option is granted.
Options now outstanding include some granted under the 1980, 1984
and 1988 option plans, under which no further options or other
rights may be granted. All options expire within 10 years plus
one month after the date of grant. The plans provide for full
vesting of the option in the event there is a change of control.
The 1993 plan permits awards of restricted stock to key
employees subject to a restricted period and a purchase price, if
any, to be paid by the employee as determined by the Compensation
Committee of the Board of Directors. Most of the restricted
stock awards require the employee to deposit personally owned
shares (on a one-for-one basis) with the Company during the
restricted period. In 1994, grants of 95,685 shares of
restricted stock were made and on May 29, 1994, there were
188,822 of such shares outstanding.
The 1988 plan also permitted the granting of performance units
corresponding to stock options granted. The value of performance
units will be 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 29, 1994, there were 2,894,984 outstanding
options with corresponding performance units or performance unit
accounts.
A total of 52,300 shares are available for grants of options and
restricted stock to non-employee directors until September 30, 1995
under a separate 1990 stock plan. Each newly elected non-employee
director is granted an option to purchase 2,500 shares at fair market
value on the date of grant. Options expire 10 years after the date
of grant. Each year 400 shares of restricted stock will be awarded
to each non-employee director, restricted until the later of the
expiration of one year or completion of service on the Board of Directors.
Note Ten: Stockholders' Equity and Put Options
$.10 Par Value Common Stock Cumulative
(One Billion Shares Authorized) Unearned Foreign
In Millions, Except Issued Treasury Retained Compensation Currency
per Share Data Shares Amount Shares Amount Earnings and Other Adjustment Total
Balance at May 26, 1991 204.2 $320.2 (39.1) $ (777.4) $1,795.5 $(177.6) $(47.2) $1,113.5
Net earnings 495.6 495.6
Cash dividends declared
($1.48 per share), net
of income taxes of $3.1 (242.1) (242.1)
Stock option, profit
sharing and ESOP plans 23.4 1.1 21.5 44.9
Shares purchased on open
market (.7) (47.0) (47.0)
Unearned compensation related
to restricted stock awards (4.3) (4.3)
Earned compensation 9.6 9.6
Translation adjustments, net
of income taxes of $.7 (6.7) (6.7)
Amount charged to gain on
sale of foreign operation 7.4 7.4
Balance at May 31, 1992 204.2 343.6 (38.7) (802.9) 2,049.0 (172.3) (46.5) 1,370.9
Net earnings 506.1 506.1
Cash dividends declared ($1.68
per share), net of income
taxes of $4.2 (270.6) (270.6)
Stock option, profit sharing
and ESOP plans 15.1 1.3 19.7 34.8
Shares purchased on open
market (6.3) (413.2) (413.2)
Unearned compensation related
to restricted stock awards (3.2) (3.2)
Earned compensation 9.6 9.6
Minimum pension liability
adjustment (1.6) (1.6)
Translation adjustments, net
of income tax benefit of $2.0 (14.3) (14.3)
Balance at May 30, 1993 204.2 358.7 (43.7) (1,196.4) 2,284.5 (167.5) (60.8) 1,218.5
Net earnings 469.9 469.9
Cash dividends declared ($1.88
per share), net of income
taxes of $2.9 (296.5) (296.5)
Stock option, profit sharing
and ESOP plans 8.0 .4 7.5 15.5
Shares purchased on open market (2.4) (145.7) (145.7)
Put option premium 6.3 .2 6.5
Transfer of put options (122.0) (122.0)
Unearned compensation related
to restricted stock awards (3.9) (3.9)
Earned compensation 9.6 9.6
Minimum pension liability
adjustment 1.6 1.6
Translation adjustments, net
of income taxes of $4.2 (2.3) (2.3)
Balance at May 29, 1994 204.2 $251.0 (45.7) $(1,334.4) $2,457.9 $(160.2) $(63.1) $1,151.2
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-fourth of a 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% or more, or makes a tender offer for
20% or more, of the common stock. If the Company is then
acquired in a merger or other business combination
transaction, each right will entitle the holder (other than
the acquiring company) to receive, upon exercise, common stock
of either the Company or the acquiring company having a value
equal to two times the exercise price of the right. The
rights are redeemable by the Board in certain circumstances
and expire on March 7, 1996. At May 29, 1994, there were 39.6
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 placements, 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
1994, we issued put options for 2.6 million shares for $6.5
million in premiums. As of May 29, 1994, put options for 2.2
million shares remain outstanding at strike prices ranging
from $50.00 to $59.99 per share with exercise dates from July
1994 to March 1995. The amount related to our potential
obligation has been transferred from stockholders' equity to
"Common Stock Subject to Put Options."
Note Eleven: Interest Expense
The components of net interest expense are as follows:
Fiscal Year
In Millions 1994 1993 1992
Interest expense $121.7 $99.8 $89.5
Capitalized interest (6.1) (11.5) (13.6)
Interest income (16.4) (14.7) (17.7)
Interest expense, net $ 99.2 $73.6 $58.2
During 1994, 1993 and 1992, we paid interest (net of amount
capitalized) of $99.0 million, $77.0 million and $70.7 million,
respectively.
Note Twelve: 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 and
regulations. Our principal plan covering salaried employees has
a provision that any excess pension assets would be vested in
plan participants if the plan is terminated within five years of
a change in control. Plan assets consist principally of listed
equity securities and corporate obligations, and U.S. government
securities.
Components of net pension income are as follows:
Fiscal Year
Expense (Income) in Millions 1994 1993 1992
Service cost--benefits earned $ 19.1 $ 14.7 $ 14.2
Interest cost on projected benefit obligation 57.8 52.6 51.2
Actual return on plan assets (50.5) (136.6) (75.0)
Net amortization and deferral (47.0) 38.3 (26.1)
Net pension expense (income) $(20.6) $(31.0) $(35.7)
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 8.8% and 4.6% in 1994, and 8.5% and
5.1% in 1993, 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 (as determined as of May 31, 1994
and 1993) are as follows:
May 29, 1994 May 30, 1993
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
In Millions Benefits Assets Benefits Assets
Actuarial present value of
benefit obligations:
Vested benefits $572.7 $ 24.1 $545.5 $ 12.1
Nonvested benefits 55.9 3.3 55.0 2.3
Accumulated benefit obligations 628.6 27.4 600.5 14.4
Projected benefit obligation 688.4 30.3 680.9 18.8
Plan assets at fair value 920.8 10.7 921.6 -
Plan assets in excess of
(less than) the projected
benefit obligation 232.4 (19.6) 240.7 (18.8)
Unrecognized prior service cost 31.4 2.9 40.1 .3
Unrecognized net loss 148.1 10.7 125.3 6.0
Recognition of minimum liability - (10.1) - (10.7)
Unrecognized transition (asset)
liability (130.6) 6.2 (148.7) 8.8
Prepaid (accrued) pension cost $281.3 $ (9.9) $257.4 $(14.4)
We have defined contribution plans covering salaried and non-
union employees. Contributions are determined by matching a
percentage of employee contributions. Such plans had net assets
of $665.3 million at May 31, 1994. Expense recognized in 1994,
1993 and 1992 was $6.7 million, $9.6 million and $12.7 million,
respectively.
Within our defined contribution plans we have Employee Stock
Ownership Plans (ESOPs). These ESOPs borrowed funds guaranteed
by the Company with terms described in the long-term debt
footnote, as well as originally borrowed $35.0 million from the
Company at a variable interest rate. At May 29, 1994, the
interest rate was 4.6% with outstanding amounts of $21.0 million
due December 2014 and $7.2 million with sinking fund payments to
June 2015. Compensation expense is recognized as contributions
are accrued. Our contributions to the plans, plus the dividends
accumulated on the common stock held by the ESOPs, are used to
pay principal, interest and expenses of the plans. As loan
payments are made, common stock is allocated to ESOP
participants. In 1994, 1993 and 1992, the ESOPs incurred
interest expense of $9.0 million, $9.6 million and $11.3 million,
respectively, and used dividends received of $8.9 million, $8.2
million and $7.8 million and contributions received from the
Company of $7.4 million, $7.4 million and $7.1 million,
respectively, to pay principal and interest on their debt.
Note Thirteen: Other Postretirement and Postemployment Benefits
We sponsor several 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 plans for certain employees and retirees on an annual
basis. In 1994, 1993 and 1992 we contributed $38.3 million,
$30.6 million and $4.2 million, respectively. Plan 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 1994 1993 1992
Service cost--benefits earned $ 5.6 $ 3.6 $3.5
Interest cost on accumulated benefit obligation 14.0 11.0 9.7
Actual return on plan assets (1.5) (3.9) (3.0)
Net amortization and deferral (4.5) (1.0) (1.2)
Net postretirement expense $13.6 $ 9.7 $9.0
The funded status of the plans and the amount recognized on our consolidated
balance sheets are as follows:
May 29, 1994 May 30, 1993
Assets Accumulated Accumulated
Exceed Benefits Benefits
Accumulated Exceed Exceed
In Millions Benefits Assets Assets
Accumulated benefit obligations:
Retirees $ 36.3 $48.7 $ 80.0
Fully eligible active employees 12.7 8.0 19.3
Other active employees 27.0 48.5 70.4
Accumulated benefit obligations 76.0 105.2 169.7
Plan assets at fair value 89.3 7.4 60.8
Accumulated benefit obligations in excess
of (less than) plan assets (13.3) 97.8 108.9
Unrecognized prior service cost .1 12.2 14.3
Unrecognized net loss (28.1) (27.7) (51.1)
Accrued (prepaid) postretirement benefits $(41.3) $82.3 $ 72.1
The discount rates used in determining the actuarial present value of the
benefit obligations were 8.8% and 8.5% in 1994 and 1993, respectively.
The expected long-term rate of return on assets was 10%.
The health care cost trend rate increase in the per capita charges for
benefits ranged from 6.2% to 9.8% for 1995 depending on the medical service
category. The rates gradually decrease to 4.4% to 5.7% for 2007 and remain
at that level thereafter. If the health care cost trend rate increased by
one percentage point in each future year, the aggregate of the service and
interest cost components of postretirement expense would increase for 1994
by $3.1 million and the accumulated benefit obligation as of May 29, 1994
would increase by $24.6 million.
In 1994, we adopted Statement of Financial Accounting
Standards (SFAS) No. 112, "Employers' Accounting for
Postemployment Benefits." The cumulative effect as of May 31,
1993 of changing to the accrual basis for severance and
disability costs was a decrease in net earnings of $17.3
million ($.11 per share).
Note Fourteen: Profit-sharing Plans
We have profit-sharing plans to provide incentives to key
individuals who have the greatest potential to contribute to
current earnings and successful future operations. These plans
were approved by the Board of Directors upon recommendation of
the Compensation Committee. The awards under these plans depend
on profit performance in relation to pre-established goals. The
plans are administered by the Compensation Committee, which
consists solely of outside directors. Profit-sharing expense,
including performance unit accruals, was $1.7 million, $7.3
million and $8.8 million in 1994, 1993 and 1992, respectively.
Note Fifteen: Income Taxes
We adopted SFAS No. 109, "Accounting for Income Taxes" as of
May 31, 1993. The adoption of SFAS 109 changed our method of
accounting for income taxes from the deferred method to the
asset and liability method. Deferred income taxes reflect the
differences between assets and liabilities recognized for
financial reporting purposes and amounts recognized for tax
purposes measured using the current enacted tax rates. The
cumulative effect of adoption was an increase in net earnings of
$17.5 million ($.11 per share).
The components of earnings before income taxes and the income
taxes thereon are as follows:
Fiscal Year
In Millions 1994 1993 1992
Earnings (loss) before income taxes:
U.S. $746.4 $887.2 $818.3
Foreign 6.9 (43.2) 26.2
Total earnings before income taxes $753.3 $844.0 $844.5
Income taxes:
Current:
Federal $246.5 $243.1 $254.0
State and local 60.9 60.2 55.1
Foreign 4.0 (6.2) 16.3
Total current 311.4 297.1 325.4
Deferred (principally U.S.) (27.8) 40.8 13.5
Total income taxes $283.6 $337.9 $338.9
During 1994, income tax benefits of $3.5 million were allocated
to stockholders' equity. These benefits were attributable to
the exercise of employee stock options, dividends paid on
unallocated ESOP shares and translation adjustments.
During 1994, 1993 and 1992, we paid income taxes of $273.8
million, $268.3 million and $326.4 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 on 1994, 1993 and 1992
operations were increased by approximately $10 million, $10
million and $8 million, respectively, due to the 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
1994 1993 1992
U.S. statutory rate 35.0% 34.0% 34.0%
State and local income taxes, net of
federal tax benefits 5.0 5.2 4.9
Other, net (2.4) .8 1.2
Effective income tax rate 37.6% 40.0% 40.1%
The tax effects of temporary differences that give rise to
deferred tax assets and liabilities at May 29, 1994 are as
follows:
In Millions
Accrued liabilities $129.1
Unusual charge for oats 59.8
Compensation and employee benefits 59.6
Disposition liabilities 37.5
Foreign tax loss carryforward 16.2
Other 13.6
Gross deferred tax assets 315.8
Depreciation 219.5
Prepaid pension asset 112.0
Intangible assets 12.7
Other 37.5
Gross deferred tax liabilities 381.7
Valuation allowance 11.1
Net deferred tax liability $ 77.0
As of May 29, 1994, we have foreign operating loss carryovers
for tax purposes of $40.9 million, which will expire as follows
if not offset against future taxable income: $11.0 million in
1998, $9.3 million in 1999, $10.9 million in 2000 and $9.7
million in 2001.
We have not recognized a deferred tax liability for unremitted
earnings of $60.1 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 Sixteen: Leases and Other Commitments
An analysis of rent expense by property leased follows:
Fiscal Year
In Millions 1994 1993 1992
Restaurant space $41.2 $39.5 $33.9
Warehouse space 13.8 13.0 12.6
Equipment 10.6 10.6 8.3
Other 3.9 5.5 5.4
Total rent expense $69.5 $68.6 $60.2
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) $60.6
in 1995, $56.2 in 1996, $52.0 in 1997, $46.9 in 1998, $43.6 in
1999 and $236.5 after 1999, with a cumulative total of $495.8.
We are contingently liable under guarantees and comfort
letters for $88.5 million. The guarantees and comfort
letters are issued to support borrowing arrangements,
primarily for our joint ventures.
Note Seventeen: Discontinued Operations
We recorded a net after-tax charge related to previously discontinued
operations of $10.0 million ($.06 per share) in 1992. This charge
primarily related to a lease adjustment with the
R. H. Macy Company, which is operating under bankruptcy law
protection.
Note Eighteen: Segment Information
Unallocated
Consumer Corporate Consolidated
In Millions Foods Restaurants Items (a) Total
Sales
1994 $5,553.9 $2,963.0 $8,516.9
1993 5,397.2 2,737.4 8,134.6
1992 5,233.8 2,544.0 7,777.8
Operating Profits
1994 653.1(b) 219.4 $(119.2) 753.3
1993 772.6(c) 181.4(c) (110.0) 844.0
1992 744.3(d) 190.8 (90.6) 844.5
Identifiable Assets
1994 2,820.8 1,834.9 542.6 5,198.3
1993 2,576.4 1,605.0 469.4 4,650.8
1992 2,481.2 1,419.3 404.5 4,305.0
Capital Expenditures
1994 207.7 343.3 8.5 559.5
1993 321.6 301.2 1.0 623.8
1992 397.1 297.0 1.2 695.3
Depreciation and Amortization
1994 176.6 125.4 1.8 303.8
1993 155.8 116.8 1.6 274.2
1992 142.2 101.0 4.2 247.4
Unallocated
Corporate Consolidated
U.S.A. Foreign Items (a) Total
Sales
1994 $8,172.1 $344.8 $8,516.9
1993 7,719.4 415.2 8,134.6
1992 7,039.6 738.2 7,777.8
Operating Profits
1994 875.6(b) (3.1) $(119.2) 753.3
1993 997.1(c) (43.1)(c) (110.0) 844.0
1992 896.3(d) 38.8 (d) (90.6) 844.5
Identifiable Assets
1994 4,297.6 358.1 542.6 5,198.3
1993 3,828.3 353.1 469.4 4,650.8
1992 3,452.2 448.3 404.5 4,305.0
<FN>
(a) Corporate expenses reported here include net interest expense
and general corporate expenses.
(b) Consumer Foods operating profits include a charge of $146.9
million for unusual items described in note two.
(c) Consumer Foods and Restaurants operating profits include a
charge of $33.4 million and $30.6 million, respectively,
(U.S.A. $35.5 million; Foreign $28.5 million) for unusual
items.
(d) Consumer Foods operating profits include a net gain of $17.5
million (U.S.A. $20.5 million loss; Foreign $38.0 million
gain) for unusual items.
</FN>
Note Nineteen: Quarterly Data (unaudited)
Summarized quarterly data for 1994 and 1993 follows:
First Second Third
In Millions, Except per Share Quarter Quarter Quarter
and Market Price Amounts 1994 1993 1994 1993 1994 1993
Sales $2,089.8 2,019.6 $2,182.2 $2,096.9 $2,101.4 $2,010.7
Gross profit (a) 1,011.7 977.3 1,055.1 1,016.6 994.6 941.4
Earnings from operations 165.6 159.6 140.7 138.1 145.0 140.9(b)
Earnings per share from operations 1.04 .97 .88 .85 .91 .86
Cumulative effect of accounting changes .2 - - - - -
Net earnings 165.8 159.6 140.7 138.1 145.0 140.9
Net earnings per share 1.04 .97 .88 .85 .91 .86
Dividends per share .47 .42 .47 .42 .47 .42
Market price of common stock:
High 68 3/4 71 1/8 67 3/4 73 7/8 63 72 1/2
Low 56 7/8 62 59 5/8 64 1/2 55 1/2 65
Fourth Total
In Millions, Except per Share Quarter Year
and Market Price Amounts 1994 1993 1994 1993
Sales $2,143.5 $2,007.4 $8,516.9 $8,134.6
Gross profit (a) 997.3 901.7 4,058.7 3,837.0
Earnings from operations 18.4(c) 67.5(d) 469.7 506.1
Earnings per share from operations .12 .42 2.95 3.10
Cumulative effect of accounting changes - - .2 -
Net earnings 18.4 67.5 469.9 506.1
Net earnings per share .12 .42 2.95 3.10
Dividends per share .47 .42 1.88 1.68
Market price of common stock:
High 57 74 1/8 68 3/4 74 1/8
Low 49 7/8 64 1/8 49 7/8 62
<FN>
(a) Before charges for depreciation.
(b) Includes an after-tax loss of $8.7 million ($.05 per share) for a restructuring charge for SVE.
(c) Includes an after-tax loss of $87.1 million ($.55 per share) related to the improper treatment of oat supplies.
(d) Includes an after-tax loss of $47.0 million ($.29 per share) for restructuring charges related to restaurant closings and
Consumer Foods manufacturing costs.
</FN>
ELEVEN YEAR FINANCIAL SUMMARY AS REPORTED
May 29, May 30, May 31, May 26, May 27,
In Millions, Except per Share Data 1994 1993 1992 1991 1990
Financial Results
Earnings (loss) per share (a) $ 2.95 $ 3.10 $ 2.99 $ 2.87 $ 2.32
Return on average equity 37.7% 39.1% 39.9% 49.2% 49.5%
Dividends per share (a) 1.88 1.68 1.48 1.28 1.10
Sales 8,516.9 8,134.6 7,777.8 7,153.2 6,448.3
Costs and expenses:
Cost of sales 4,458.2 4,297.6 4,123.2 3,722.1 3,485.1
Selling, general and administrative 2,902.4 2,645.2 2,504.5 2,386.0 2,138.0
Depreciation and amortization 303.8 274.2 247.4 218.4 180.1
Interest 99.2 73.6 58.2 61.1 32.4
Earnings before income taxes 753.3(b) 844.0(c) 844.5 765.6 612.7
Net earnings (loss) 469.9 506.1 495.6 472.7 381.4
Net earnings (loss) as a percent of sales 5.5% 6.2% 6.4% 6.6% 5.9%
Weighted average no. of common shares(a) 159.1 163.1 165.7 164.5 164.4
Taxes (income, payroll, property, etc.)
per share (a) 2.98 3.14 3.09 2.77 2.29
Financial Position
Total assets 5,198.3 4,650.8 4,305.0 3,901.8 3,289.5
Land, buildings and equipment, net 3,092.6 2,859.6 2,648.6 2,241.3 1,934.5
Working capital at year end (702.9) (481.9) (337.1) (190.1) (263.1)
Long-term debt, excluding current portion 1,417.2 1,268.3 920.5 879.0 688.5
Stockholders' equity 1,151.2 1,218.5 1,370.9 1,113.5 809.7
Stockholders' equity per share (a) 7.26 7.59 8.28 6.74 4.96
Other Statistics
Cash provided by operations 836.0 865.9 790.4 548.6 657.1
Total dividends 299.4 274.8 245.2 210.6 180.8
Gross capital expenditures 559.5 623.8 695.3 554.6 540.0
Research and development 63.6 60.1 62.1 57.0 48.2
Advertising media expenditures 409.5 395.4 426.8 419.6 394.9
Wages, salaries and employee benefits 1,490.0 1,433.2 1,398.5 1,331.6 1,171.5
Number of employees 125,670 121,290 111,501 108,077 97,238
Accumulated LIFO reserve 53.0 60.3 67.0 75.9 71.4
Common stock price range (a) 68 3/4 74 1/8 75 7/8 60 7/8 39 5/8
49 7/8 62 54 1/4 37 7/8 31 3/8
<FN>
(a) Year 1990 has been adjusted for the two-for-one stock split in
November 1990.
(b) Includes pretax unusual expense of $146.9 million.
(c) Includes pretax restructuring charge of $67.0 million.
</FN>
FINANCIAL DATA FOR CONTINUING OPERATIONS
Fiscal Year Ended
In Millions, Except May 29, May 30, May 31, May 26, May 27,
per Share Data 1994 1993 1992 1991 1990
Sales $8,516.9 $8,134.6 $7,777.8 $7,153.2 $6,448.3
Earnings after taxes 469.7 506.1 505.6 464.2 373.7
Earnings per share 2.95 3.10 3.05 2.82 2.27