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 26, 2001
/ / 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) 764-7600
(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 25, 2001, General Mills had 285,295,585 shares of its $.10 par
value common stock outstanding (excluding 123,011,079 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
-------------------------
AUGUST 26, August 27,
2001 2000
---------- ----------
Sales $ 1,771.2 $ 1,674.9
Costs and Expenses:
Cost of sales 720.4 653.3
Selling, general and administrative 738.9 724.9
Interest, net 48.9 54.8
Unusual Items (income) expense (14.8) .6
---------- ----------
Total Costs and Expenses 1,493.4 1,433.6
---------- ----------
Earnings before Taxes and Earnings
from Joint Ventures 277.8 241.3
Income Taxes 95.4 85.4
Earnings from Joint Ventures 8.7 3.0
---------- ----------
Earnings before cumulative effect
of change in accounting principle 191.1 158.9
Cumulative effect of change
in accounting principle (3.1) --
---------- ----------
Net Earnings $ 188.0 $ 158.9
========== ==========
Earnings per Share - Basic:
Earnings before cumulative effect
of change in accounting principle $ .67 $ .56
Cumulative effect of change
in accounting principle (.01) --
---------- ----------
Net Earnings $ .66 $ .56
========== ==========
Average Number of Common Shares
- Basic 284.7 283.7
========== ==========
Earnings per Share - Diluted:
Earnings before cumulative effect
of change in accounting principle $ .65 $ .55
Cumulative effect of change
in accounting principle (.01) --
---------- ----------
Net Earnings $ .64 $ .55
========== ==========
Average Number of Common Shares -
Assuming Dilution 294.8 290.5
========== ==========
Dividends per Share $ .275 $ .275
========== ==========
See accompanying notes to consolidated condensed financial statements.
Page 2
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Millions)
(Unaudited) (Unaudited)
----------- -----------
AUGUST 26, August 27, May 27,
2001 2000 2001
---------- ---------- ----------
ASSETS
Current Assets:
Cash and cash equivalents $ 53.5 $ 53.2 $ 64.1
Receivables 600.1 555.5 664.0
Inventories:
Valued primarily at FIFO 241.5 223.7 282.3
Valued at LIFO (FIFO value exceeds LIFO by
$29.8, $32.4 and $29.8, respectively) 340.2 334.7 236.6
Prepaid expenses and other current assets 82.2 78.4 99.3
Deferred income taxes 61.9 65.9 61.9
---------- ---------- ----------
Total Current Assets 1,379.4 1,310.9 1,408.2
---------- ---------- ----------
Land, Buildings and Equipment, at Cost 3,233.4 2,992.6 3,179.3
Less accumulated depreciation (1,721.6) (1,571.4) (1,678.1)
---------- ---------- ----------
Net Land, Buildings and Equipment 1,511.8 1,421.2 1,501.2
Goodwill 804.0 820.7 804.0
Other Intangible Assets 73.8 49.7 66.0
Other Assets 1,389.6 1,166.7 1,311.8
---------- ---------- ----------
Total Assets $ 5,158.6 $ 4,769.2 $ 5,091.2
========== ========== ==========
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable $ 548.1 $ 616.7 $ 619.1
Current portion of long-term debt 352.9 367.7 349.4
Notes payable 876.9 1,153.3 857.9
Accrued taxes 150.9 177.7 111.1
Other current liabilities 252.3 264.9 271.3
---------- ---------- ----------
Total Current Liabilities 2,181.1 2,580.3 2,208.8
Long-term Debt 2,213.1 1,917.9 2,221.0
Deferred Income Taxes 209.5 302.2 349.5
Deferred Income Taxes - Tax Leases 75.2 90.0 73.7
Other Liabilities 576.7 180.8 186.0
---------- ---------- ----------
Total Liabilities 5,255.6 5,071.2 5,039.0
---------- ---------- ----------
Stockholders' Equity:
Cumulative preference stock, none issued -- -- --
Common stock, 408.3 shares issued 763.5 696.2 744.7
Retained earnings 2,577.2 2,194.8 2,467.6
Less common stock in treasury, at cost, shares
of 123.7, 125.5 and 123.1, respectively (3,053.0) (3,051.0) (3,013.9)
Unearned compensation (50.2) (63.5) (53.4)
Accumulated other comprehensive income (334.5) (78.5) (92.8)
---------- ---------- ----------
Total Stockholders' Equity (97.0) (302.0) 52.2
---------- ---------- ----------
Total Liabilities and Equity $ 5,158.6 $ 4,769.2 $ 5,091.2
========== ========== ==========
See accompanying notes to consolidated condensed financial statements.
Page 3
GENERAL MILLS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited) (In Millions)
Thirteen Weeks Ended
-------------------------
AUGUST 26, August 27,
2001 2000
---------- ----------
Cash Flows - Operating Activities:
Net earnings $ 188.0 $ 158.9
Adjustments to reconcile net earnings to cash flow:
Depreciation and amortization 52.6 51.1
Deferred income taxes 5.7 1.8
Change in current assets and liabilities
excluding effects of businesses acquired (4.1) (30.8)
Tax benefit on exercised options 9.0 5.7
Cumulative effect of change
in accounting principle 3.1 --
Unusual items (income) expense (14.8) .6
Other, net (24.0) (21.4)
---------- ----------
Cash provided by continuing operations 215.5 165.9
Cash used by discontinued operations (.6) (.1)
---------- ----------
Net Cash Provided by Operating Activities 214.9 165.8
---------- ----------
Cash Flows - Investment Activities:
Purchases of land, buildings and equipment (63.7) (60.3)
Investments in businesses, intangibles and affiliates,
net of investment returns and dividends (35.4) (35.6)
Purchases of marketable investments (39.5) (10.1)
Proceeds from sale of marketable investments 19.7 .4
Proceeds from disposal of land, buildings & equipment 7.4 .3
Other, net (5.4) (.6)
---------- ----------
Net Cash Used by Investment Activities (116.9) (105.9)
---------- ----------
Cash Flows - Financing Activities:
Change in notes payable 15.6 68.3
Issuance of long-term debt 3.3 177.9
Payment of long-term debt (17.5) (62.0)
Common stock issued 27.6 14.9
Purchases of common stock for treasury (60.4) (161.8)
Dividends paid (78.2) (78.1)
Other, net 1.0 8.5
---------- ----------
Net Cash Used by Financing Activities (108.6) (32.3)
---------- ----------
Increase (decrease) in Cash and Cash Equivalents $ (10.6) $ 27.6
========== ==========
See accompanying notes to consolidated condensed financial statements.
Page 4
GENERAL MILLS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(1) Background
These consolidated condensed financial statements do not include certain
information and footnotes required by accounting principles generally accepted
in the United States 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 26, 2001 are not necessarily indicative of the
results that may be expected for the fiscal year ending May 26, 2002.
These statements should be read in conjunction with the consolidated financial
statements and footnotes included in our annual report for the year ended May
27, 2001. The accounting policies used in preparing these consolidated condensed
financial statements are the same as those described in our annual report,
except as described in Note 4.
Certain amounts in the prior year consolidated financial statements have been
reclassified to conform to the current year presentation.
(2) Pending Acquisition
Our proposed acquisition of the worldwide Pillsbury operations from Diageo plc
(Diageo) has been approved by Diageo shareholders and General Mills
shareholders, and has received clearance from the European Commission. The U.S.
Federal Trade Commission (FTC) is continuing its review.
The acquisition of The Pillsbury Company will be accounted for as a purchase.
Under the terms of the July 2000 agreement, we would acquire Pillsbury in a
stock-for-stock exchange. The consideration to Diageo would include 141 million
shares of our common stock and the assumption of up to $5.14 billion of
Pillsbury debt. Up to $642 million of the total transaction value may be repaid
to us at the first anniversary of the closing, depending on our stock price at
that time. The total cost of the acquisition (exclusive of direct acquisition
costs) is estimated at approximately $10.2 billion.
At the time the Pillsbury acquisition was made public, we announced our
intention to divest certain Pillsbury businesses. On February 5, 2001,
International Multifoods Corporation (IMC) announced it had agreed to purchase
the Pillsbury dessert and specialty products businesses for approximately $305
million. IMC, which owns the Robin Hood baking products business in Canada, will
also acquire General Mills' Robin Hood flour business in the United States as
part of the transaction. The agreement for the sale of these businesses was
intended to gain regulatory clearance for General Mills' acquisition of
Pillsbury. The IMC transaction is contingent upon FTC approval and the
completion of our transaction with Diageo.
(3) Unusual Items
In the first quarter of fiscal 2002, we reached settlements with additional
insurance companies that participated in the reinsurance of a property policy
covering a 1994 oats handling incident. We recorded $27.4 million pretax income,
net of associated costs, related to these settlements. This income was partially
offset by pretax charges of (1) $4.6 million associated with our pending
acquisition of The Pillsbury Company; (2) $4.5 million, primarily severance, for
the exit from the SQUEEZIT beverage business; and (3) $3.5 million, net of
anticipated insurance recovery, associated with a flash flood at our Cincinnati,
Ohio, cereal plant. The net of these unusual items was $14.8 million pretax
income, $9.3 million after tax ($.03 income per diluted share).
In the first quarter of fiscal 2001, we recorded an unusual items charge that
reflected certain transaction costs associated with the pending acquisition of
The Pillsbury Company. The charge amounted to $.6 million pretax, $.4 million
after tax (no impact on earnings per diluted share).
Page 5
(4) Accounting Rules Adopted
Effective with the first quarter fiscal 2002, we adopted Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities", which requires all derivatives to be recorded at fair value
on the balance sheet and establishes new accounting rules for hedging. At May
28, 2001, we recorded the cumulative effect of adopting this accounting change,
as follows:
Included in
Accumulated
Included Other
in Comprehensive
(Dollars in millions) Earnings Income
-------- --------
Pretax (4.9) (251.4)
Income tax effects 1.8 93.4
------- -------
Total (3.1) (158.0)
Per diluted share net earnings effect (.01) --
The cumulative effect on earnings and on Accumulated Other Comprehensive Income
was primarily associated with the impact of lower interest rates on the
fair-value calculation for the delayed-starting interest rate swaps we entered
into in anticipation of our Pillsbury acquisition and other financing
requirements. Refer to Note 5 "Comprehensive Income" and Note 6 "Derivatives and
Hedges" for more information.
On May 28, 2001, we adopted SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Intangible Assets". SFAS No. 141 requires that the purchase
method be used for all business combinations initiated after June 30, 2001. SFAS
No. 142 eliminates the amortization of goodwill and instead requires that
goodwill be tested for impairment. Because we adopted these statements effective
with the beginning of our fiscal 2002, we do not have goodwill amortization in
the current quarter. Our goodwill amortization expense in the first quarter of
2001 totaled $5.6 million pretax, $5.5 million after tax ($.02 per diluted
share). We will test our goodwill for impairment during fiscal 2002 and, if
necessary, adjust the carrying value of our goodwill. Refer to Note 7 "Goodwill
and Intangibles", for more information.
Page 6
(5) Comprehensive Income
The following table summarizes total comprehensive income for the periods
presented (in millions):
Thirteen Weeks Ended Thirteen Weeks Ended
August 26, 2001 August 27, 2000
---------------------------------- ----------------------------------
Pretax Tax Net Pretax Tax Net
-------- -------- -------- -------- -------- --------
Earnings $ 283.4 $ (95.4) $ 188.0 $ 244.3 $ (85.4) $ 158.9
Other Comprehensive Income:
Foreign currency
translation adjustments 8.0 -- 8.0 1.8 -- 1.8
Other Fair Value
Changes:
Securities 2.3 (.8) 1.5 8.6 (3.2) 5.4
Hedge derivatives (149.9) 55.7 (94.2) -- -- --
Reclassification to earnings
for hedge derivatives 1.6 (.6) 1.0 -- -- --
Cumulative effect of
adopting SFAS No. 133 (251.4) 93.4 (158.0) -- -- --
-------- -------- -------- -------- -------- --------
(389.4) 147.7 (241.7) 10.4 (3.2) 7.2
-------- -------- -------- -------- -------- --------
Comprehensive Income $ (106.0) $ 52.3 $ (53.7) $ 254.7 $ (88.6) $ 166.1
Accumulated other comprehensive income (loss) balances were as follows (in
millions):
Aug. 26, Aug. 27, May 27,
2001 2000 2001
-------- -------- --------
Foreign currency
translation adjustments $ (100.5) $ (99.2) $ (108.5)
Unrealized gain (loss) from:
Securities 28.6 27.2 27.1
Hedge derivatives (251.2) -- --
Pension plan minimum liability (11.4) (6.5) (11.4)
-------- -------- --------
Accumulated comprehensive income $ (334.5) $ (78.5) $ (92.8)
The changes in other comprehensive income are primarily non-cash items.
(6) Derivatives and Hedges
The Company is exposed to certain market risks as a part of its ongoing business
operations and uses derivative financial and commodity instruments, where
appropriate, to manage these risks. In general, instruments used as hedges must
be effective at reducing the risk associated with the exposure being hedged and
must be designated as a hedge at the inception of the contract.
With the adoption of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as of May 28, 2001, we record the fair value of all
outstanding derivatives in receivables or other liabilities. Gains and losses
related to the ineffective portion of any hedge are recorded in various costs
and expenses, depending on the nature of the derivative.
Page 7
Qualifying derivatives are reported as part of hedge arrangements as follows:
CASH FLOW HEDGES
Gains and losses on these instruments are recorded in Other Comprehensive Income
until the underlying transaction is recorded in earnings. When the hedged item
is realized, gains or losses are reclassified from Accumulated Other
Comprehensive Income to the Consolidated Statements of Earnings on the same line
item as the underlying transaction risk.
* FOREIGN EXCHANGE RISK
The Company is exposed to fluctuations in foreign currency cash flows
related primarily to third-party purchases, inter-company product
shipments, and inter-company loans. Forward contracts of generally less
than twelve months duration are used to hedge some of these risks.
Effectiveness is assessed based on changes in spot rates.
* INTEREST RATE RISK
The Company is exposed to interest rate volatility with regard to
existing issuances of variable rate debt and planned future issuances
of fixed rate debt. The Company uses interest rate swaps, including
forward-starting swaps, to reduce interest rate volatility, and to
achieve a desired proportion of variable versus fixed rate debt, based
on current and projected market conditions.
Variable-to-fixed interest rate swaps are accounted for as cash flow
hedges, with effectiveness assessed based on changes in the present
value of interest payments on the underlying debt.
* PRICE RISK
The Company is exposed to price fluctuations primarily as a result of
anticipated purchases of raw and packaging materials. The Company uses
the combination of long cash positions with suppliers, and
exchange-traded futures and option contracts to reduce price
fluctuations in a desired percentage of forecasted purchases over a
period of generally less than one year. Commodity contracts are
accounted for as cash flow hedges, with effectiveness assessed based on
changes in futures prices.
Unrealized losses from cash flow hedges recorded in accumulated other
comprehensive income at August 26, 2001, was $251.2 million, primarily related
to delayed-starting interest rate swaps we entered into in anticipation of our
proposed acquisition of the Pillsbury business and other financing requirements,
which will be reclassified into interest expense over the life of the interest
rate hedge subsequent to the completion of the acquisition. Other insignificant
amounts related to foreign currency and commodity price cash flow hedges will be
reclassified, as appropriate, into earnings during the next twelve months.
FAIR VALUE HEDGES
Fair value hedges involve recognized assets, liabilities or firm commitments as
the hedge risks.
* FOREIGN EXCHANGE TRANSLATION
The Company is exposed to fluctuations in the value of foreign currency
investments in subsidiaries and cash flows related primarily to
repatriation of these investments. Forward contracts, generally less
than twelve months duration, are used to hedge some of these risks.
Effectiveness is assessed based on changes in spot rates. Effective
gains and losses on these instruments are recorded as a foreign
currency translation adjustment in other comprehensive income.
Page 8
The Company enters into foreign currency forward contracts to reduce
volatility in the translation of foreign currency earnings to U.S.
Dollars. Gains and losses on these instruments are recorded in selling,
general and administrative expense, generally reducing the exposure to
translation volatility during a full-year period.
* INTEREST RATE RISK
The Company currently uses interest rate swaps to reduce funding costs
associated with certain debt issues and to achieve a desired proportion
of variable versus fixed rate debt, based on current and projected
market conditions.
Fixed-to-variable interest rate swaps are accounted for as fair value
hedges with effectiveness assessed based on changes in the fair value
of the underlying debt, using incremental borrowing rates currently
available on loans with similar terms and maturities. Effective gains
and losses on these derivatives and the underlying hedged items are
recorded as interest expense.
(7) Goodwill and Intangibles
Our adoption of SFAS No. 142, "Goodwill and Intangible Assets" eliminates the
amortization of goodwill in our current quarter. Our goodwill amortization
expense in the first quarter of 2001 totaled $5.6 million pretax, $5.5 million
after tax ($.02 per diluted share). The following table adjusts earnings and
earnings per share for the adoption of SFAS No. 142.
(In millions, except per share data)
Thirteen Weeks Ended
--------------------
AUG. 26, Aug. 27,
2001 2000
-------- --------
Reported Net Earnings: $ 188.0 $ 158.9
Addback Goodwill amortization -- 5.5
-------- --------
Adjusted Net Earnings 188.0 164.4
Addback cumulative effect of change
in accounting principle 3.1 --
-------- --------
Adjusted earnings before cumulative
effect of change in accounting principle 191.1 164.4
Basic Earnings per Share:
Reported EPS-Basic $ .66 $ .56
Addback Goodwill amortization -- .02
-------- --------
Adjusted Basic EPS .66 .58
Addback cumulative effect of change
in accounting principle .01 --
-------- --------
Adjusted Basic EPS before cumulative
effect of change in accounting principle .67 .58
Diluted Earnings per Share:
Reported EPS-Diluted $ .64 $ .55
Addback Goodwill amortization -- .02
-------- --------
Adjusted Diluted EPS .64 .57
Addback cumulative effect of change
in accounting principle .01 --
-------- --------
Adjusted Diluted EPS before cumulative
effect of change in accounting principle .65 .57
Page 9
(8) Statements of Cash Flows
During the first three months, we made interest payments of $29.1 million (net
of amounts capitalized), versus $34.6 million last year. Through three months,
we paid $27.7 million in income taxes, compared to $2.3 million during the same
period one year ago.
(9) New Accounting Rules
In May 2000, the Emerging Issues Task Force (EITF) of the FASB reached a
consensus on Issue 00-14, "Accounting for Certain Sales Incentives". The issue
addresses recognition and income statement classification of certain sales
incentives. In April 2001, the EITF reached a consensus on Issue 00-25, "Vendor
Income Statement Characterization of Consideration Paid to a Reseller of the
Vendor's Products". The issue addresses when consideration from a vendor is
either (a) an adjustment of the selling prices of the vendor's products to the
retailer and therefore, should be deducted from revenue when recognized in the
vendor's income statement, or (b) a cost incurred by the retailer to the vendor
for assets or services provided by the retailer to the vendor and, therefore,
should be included as a cost or expense when recognized on the vendor's income
statement. Issues 00-14 and 00-25 will be effective for us in our fourth quarter
2002. Since the adoption of these issues will result only in the
reclassification of certain sales incentive and trade promotion expenses from
selling, general and administrative expense to a reduction of net sales, it will
not affect our financial position or net earnings.
Page 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Net cash provided by operating activities increased by $49.6 million from one
year ago because of the $29.1 million increase in net earnings in the first
three months of 2002 and the improvement in working capital. Working capital
improved in this year's first quarter largely because of the receipt of funds
related to additional settlements with insurance companies covering a 1994 oats
handling incident.
During the first three months, capital expenditures totaled $63.7 million.
Fiscal 2002 capital expenditures are estimated to be approximately $300 million,
exclusive of any capital expenditures associated with the Pillsbury business we
propose to acquire.
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 debt
payments of $17.5 million. We have completely utilized our available capacity
under our domestic shelf registration statement. However, we believe that our
existing sources of short-term financing, together with our plans for issuance
of long-term debt, will be adequate to meet our liquidity and capital needs.
In anticipation of our proposed acquisition of the Pillsbury business and other
financing requirements, we have entered into interest rate swap contracts to
attempt to lock in our interest rate on associated debt. As of August 26, 2001,
these contracts totaled $5.45 billion notional amount and prospectively convert
floating-rate debt to an average fixed rate of approximately 6.7 percent with
maturities averaging 4.5 years.
RESULTS OF OPERATIONS
Sales for the first quarter totaled $1,771.2 million, up 6 percent from the
prior year. Basic earnings per share of 66 cents for the first quarter ended
August 26, 2001, were up 18 percent from 56 cents a year earlier. Diluted
earnings per share of 64 cents for the first quarter of fiscal 2002 were up 16
percent from 55 cents per share earned in the same period last year.
Reported earnings before the cumulative effect of change in accounting principle
were $191.1 million in the first quarter of fiscal 2002 as compared to $158.9
million in fiscal 2001. In addition, there was a $3.1 million charge
representing the cumulative effect of adopting SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which requires all derivatives
to be recorded at fair value on the balance sheet and establishes new accounting
rules for hedging. As a result, reported net earnings after tax grew 18 percent
to $188.0 million.
Page 11
Diluted earnings per share in the 2002 first quarter of 64 cents included a 3
cent net gain from unusual items ($9.3 million after tax), and a 1 cent charge
related to the adoption of SFAS No. 133 referred to above. Excluding these
items, first quarter 2002 earnings per share totaled 62 cents. In the first
quarter of 2002, we also adopted SFAS No. 142, "Goodwill and Other Intangible
Assets", which eliminated the amortization of goodwill. Prior year first-quarter
earnings before unusual items would have been $164.8 million after tax, or 57
cents per diluted share, if goodwill amortization had not been expensed in that
period. On this comparable basis, first quarter 2002 earnings after tax grew 10
percent to $181.8 million, and diluted earnings per share grew 9 percent to 62
cents.
Domestic unit volume for the first quarter grew 4 percent. This growth was led
by the company's convenience foods business (snacks and yogurt), which posted an
8 percent volume increase. Yogurt volume grew at a double-digit rate, with
strong performance from core 6-ounce cup product lines and from EXPRESSE and
GO-GURT portable yogurt. Snacks volume grew 5 percent, led by strong performance
from NATURE VALLEY granola bars, POP SECRET microwave popcorn and fruit snacks.
Combined volume for BETTY CROCKER meals, side dishes and baking products grew 4
percent. Meals and side dish volume grew 5 percent, with double-digit growth for
LLOYD'S refrigerated entrees and the BOWL APPETIT! line of microwaveable lunch
entrees. BETTY CROCKER Baking Products saw a 4 percent volume increase for the
quarter, spurred on by good performance from pouch dessert mixes and family
flour. Foodservice volume increased 2 percent above prior year volume, which
grew 14 percent.
Unit volume for Big G cereals was down slightly in the first quarter, following
a 6 percent unit volume increase in the fourth quarter of 2001. That strong
finish reflected expanding distribution for several new products, including
HARMONY and WHEATIES ENERGY CRUNCH cereals. First-quarter retail volume for Big
G cereals in all ACNielsen-measured outlets grew 5 percent, reflecting good
initial consumer response to these new products plus continued good performance
by key established cereal brands. U.S. ready-to-eat cereal category volume grew
2 percent in the quarter, and Big G's share of the market's retail dollar sales
grew by half a percentage point to approximately 32 percent. New CHEX MORNING
MIX, which blends cereal, fruit and nut pieces in convenient single-serving
pouches, was introduced in 40 percent of the U.S. in July and is currently
expanding to the remainder of the country. In October, Big G plans to begin
shipping new FROSTED MINI CHEX cereal to markets comprising about 40 percent of
the U.S.
Unit volume for General Mills' international operations grew 11 percent in the
first quarter. Snack Ventures Europe (SVE), the company's joint venture with
PepsiCo, posted an 8 percent volume gain. This increase was driven by growth in
core Western European markets, particularly Spain. Cereal Partners Worldwide
(CPW), the company's joint venture with Nestle, achieved a 10 percent unit
volume increase in the first quarter. Earnings after tax for General Mills'
international joint ventures exceeded $9 million in the quarter, up sharply from
$3 million a year earlier.
Unit volume for the company's wholly owned international businesses grew at a
double-digit rate in the first quarter. Canada posted a volume increase of 15
percent driven by double-digit growth in cereal volume. Newer businesses in
China and the United Kingdom also contributed to the international volume gain.
Page 12
Shares Outstanding and Financial Items
Average basic shares outstanding for the quarter increased slightly from 283.7
million shares to 284.7 million shares. Average diluted shares increased from
290.5 million shares to 294.8 million due to the impact of a higher stock price
year over year on the calculation of diluted shares. Through three months, the
Company has repurchased approximately 1.7 million shares at an average price of
$31 per share, including the effect of put and call options.
Interest expense for the quarter totaled $48.9 million, down from the prior
year's level due to lower interest rates. The Company's effective tax rate for
the quarter was 34.3 percent, down from last year's rate of 35.4 percent in the
period. This year's tax rate is lower than last year's primarily due to the
elimination of non-deductible goodwill amortization this year.
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 27, 2001, 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.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the first
quarter of fiscal 2002.
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 4, 2001 /s/ S. S. Marshall
--------------- ----------------------------------------
S. S. Marshall
Senior Vice President,
General Counsel
Date October 4, 2001 /s/ K. L. Thome
--------------- ----------------------------------------
K. L. Thome
Senior Vice President,
Financial Operations
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