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General Mills Inc. Reports Operating Results (10-K)

July 03, 2012 | About:
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10qk

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General Mills Inc. (GIS) filed Annual Report for the period ended 2012-05-27.

General Mills, Inc. has a market cap of $24.95 billion; its shares were traded at around $39.02 with a P/E ratio of 15.1 and P/S ratio of 1.5. The dividend yield of General Mills, Inc. stocks is 3.2%. General Mills, Inc. had an annual average earning growth of 7.7% over the past 10 years. GuruFocus rated General Mills, Inc. the business predictability rank of 5-star.

Highlight of Business Operations:

Cost of sales increased $1,686 million in fiscal 2012 to $10,613 million. This increase was driven by an $877 million increase attributable to higher volume and a $610 million increase attributable to higher inputs costs and product mix. We recorded a $104 million net increase in cost of sales related to mark-to-market valuation of certain commodity positions and grain inventories as described in Note 7 to the Consolidated Financial Statements in Item 8 of this report, compared to a net decrease of $95 million in fiscal 2011.

Cost of sales increased $91 million in fiscal 2011 to $8,927 million. This was driven by a $157 million increase attributable to higher net input costs and product mix and an $84 million increase attributable to higher volume, partially offset by a $95 million net decrease in cost of sales related to mark-to-market valuation of certain commodity positions and grain inventories compared to a net increase of $7 million in fiscal 2010. In fiscal 2010, we recorded a charge of $48 million resulting from a change in the capitalization threshold for certain equipment parts.

In fiscal 2012, our operations generated $2.4 billion of cash compared to $1.5 billion in fiscal 2011. The $875 million increase primarily reflects changes in current assets and liabilities, including a $384 million increase driven by inventory reduction efforts in fiscal 2012. Prepaid expenses and other current assets accounted for a $245 million increase, primarily reflecting changes in foreign currency hedges and the fair value of open grain contracts. Other current liabilities accounted for a $386 million increase, primarily reflecting changes in accrued income taxes as a result of audit settlements and court decisions in fiscal 2011 and changes in consumer marketing and related accruals. The favorable change in working capital was offset by a $214 million decrease in net earnings. Additionally, fiscal 2012 includes non-cash restructuring charges of $101 million reflecting employee severance expense and the write-off of certain long-lived assets. In both fiscal 2012 and fiscal 2011, we made a $200 million voluntary contribution to our principal domestic pension plans.

In fiscal 2011, our operations generated $1.5 billion of cash compared to $2.2 billion in fiscal 2010. The decrease primarily reflects an $864 million increase in use of cash for net current assets and liabilities and a $200 million voluntary contribution to our principal domestic pension plans, partially offset by the $268 million increase in net earnings and a $183 million change in deferred income taxes primarily related to our pension plan contribution and a change in tax legislation related to depreciation deductions.

Growth in return on average total capital is one of our key performance measures (see the Non-GAAP Measures section below for our discussion of this measure, which is not defined by GAAP). Return on average total capital decreased from 13.8 percent in fiscal 2011 to 12.7 percent in fiscal 2012 primarily reflecting the impact of the acquisition of Yoplait S.A.S. and Yoplait Marques S.A.S. We also believe that the ratio of fixed charge coverage and the ratio of operating cash flow to debt are important measures of our financial strength. Our fixed charge coverage ratio in fiscal 2012 was 6.26 compared to 7.03 in fiscal 2011. The measure decreased from fiscal 2011 as earnings before income taxes and after-tax earnings from joint ventures decreased by $218 million and fixed charges increased by $18 million, driven mainly by higher interest and rent expense. Our operating cash flow to debt ratio increased 10.1 percentage points to 32.3 percent in fiscal 2012, primarily driven by an increase of $875 million in cash flows from operations.

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