Way back, before I was even a blip on the radar screen, my mother was an executive secretary at Minnesota's General Mills (NYSE:GIS). I doubt she would even recognize the company today. Since the carefree '60s, the international food game has seen more swapping than a deck of Pokemon cards, with the result that it can be tough to keep track of the players.
For instance, J. M. Smucker (NYSE:SJM) recently grabbed International Multifoods (NYSE:IMC), which had purchased parts of Pillsbury, which had been part of Diageo (NYSE:DEO) back when I -- following in my mother's footstep, except for the Wilma Flintstone look -- was a secretary at that food company. Adding to the confusion, General Mills originally sold portions of Pillsbury to International Multifoods, yet it still distributes some Pillsbury products. Whew.
If you think you're confused, you might be in good company. It's possible that the accountants at General Mills are just as befuddled, because the company revealed this morning that it has responded to a Wells notice. This means that the SEC is moving toward a civil lawsuit related to its accounting and disclosure of sales practices.
And that wasn't the end of the bad news. For the third quarter of fiscal 2004, General Mills posted flat earnings of $0.63 per share on a slim 2% rise in sales. If we strain out the costs related to the acquisitions summarized above (See how that goofy introduction actually becomes useful here?) the results would show a small drop in earnings, from $0.67 to $0.64 per share.
If there's a silver lining in these clouds, it's that Chairman and CEO Steve Sanger -- who could be a target of the SEC investigation -- didn't try to sugar coat the numbers, saying "Our third-quarter results were disappointing." The future outlook offers no cakewalk either, with guidance of 13% EPS growth for 2004 and single digits for 2005.
With the firm grinding through slow growth and the clouds of scandal gathering, shoppers would be better off leaving General Mills' stock out of their carts.
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Fool contributor Seth Jayson used to throw apples to the carp in the ponds at the General Mills Campus. He owns no stake in any company mentioned above. View his Fool profile here.
