Analysis of Debt
Total Debt (Carrying Amount)
General Mills Inc., balance sheet: debt
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
- Current Portion of Long-Term Debt
- Over the six-year period, the current portion of long-term debt displayed fluctuations without a consistent upward or downward trend. Starting at 1,250,600 thousand USD in 2014, it decreased in 2015 and 2017, reaching its lowest point of 604,700 thousand USD in 2017. Subsequently, it rose sharply to 1,600,100 thousand USD in 2018, followed by a moderate decline to 1,396,500 thousand USD in 2019.
- Notes Payable
- The notes payable exhibited considerable variability. The amount decreased significantly from 1,111,700 thousand USD in 2014 to 269,800 thousand USD in 2016. Afterward, there was a notable increase, peaking at 1,549,800 thousand USD in 2018, and then a slight decline to 1,468,700 thousand USD in 2019.
- Long-Term Debt (Excluding Current Portion)
- This category showed a general upward movement with some fluctuations. Starting at 6,423,500 thousand USD in 2014, long-term debt increased to 7,607,700 thousand USD in 2015 before a minor reduction in 2016 to 7,057,700 thousand USD. It then rose again to 7,642,900 thousand USD in 2017, with a pronounced surge to 12,668,700 thousand USD in 2018, before a decrease to 11,624,800 thousand USD in 2019.
- Total Debt (Carrying Amount)
- Total debt followed a somewhat similar pattern to long-term debt. There was an initial increase from 8,785,800 thousand USD in 2014 to 9,223,900 thousand USD in 2015, followed by a decline to 8,430,900 thousand USD in 2016. The figure rose again to 9,481,700 thousand USD in 2017, then experienced a significant increase to 15,818,600 thousand USD in 2018. In 2019, total debt decreased to 14,490,000 thousand USD.
- Overall Analysis
- The data reflects a period of variability in debt structure, with notable peaks in 2018 across most categories. The substantial increases in both long-term debt (excluding current portion) and total debt in 2018 suggest a period of intensified borrowing or refinancing. The current portion of long-term debt and notes payable also peaked around the same time but showed some decline in 2019. The patterns indicate a strategic adjustment in the company’s debt management, possibly related to capital investment cycles or changing financing conditions.
Total Debt (Fair Value)
| May 26, 2019 | |
|---|---|
| Selected Financial Data (US$ in thousands) | |
| Notes payable | 1,468,700) |
| Long-term debt, including the current portion | 13,272,800) |
| Total debt (fair value) | 14,741,500) |
| Financial Ratio | |
| Debt, fair value to carrying amount ratio | 1.02 |
Based on: 10-K (reporting date: 2019-05-26).
Weighted-average Interest Rate on Debt
Weighted-average interest rate on debt: 3.34%
| Interest rate | Debt amount1 | Interest rate × Debt amount | Weighted-average interest rate2 |
|---|---|---|---|
| 4.20% | 1,400,000) | 58,800) | |
| 3.15% | 1,000,000) | 31,500) | |
| 3.70% | 850,000) | 31,450) | |
| 4.00% | 800,000) | 32,000) | |
| 3.20% | 750,000) | 24,000) | |
| 4.70% | 650,000) | 30,550) | |
| 3.20% | 600,000) | 19,200) | |
| 2.10% | 560,100) | 11,762) | |
| 1.00% | 560,100) | 5,601) | |
| 4.55% | 500,000) | 22,750) | |
| 2.60% | 500,000) | 13,000) | |
| 5.40% | 500,000) | 27,000) | |
| 4.15% | 500,000) | 20,750) | |
| 3.65% | 500,000) | 18,250) | |
| 2.20% | 500,000) | 11,000) | |
| 1.50% | 448,100) | 6,722) | |
| 0.00% | 336,100) | —) | |
| 2.20% | 224,000) | 4,928) | |
| 6.59% | 104,200) | 6,867) | |
| 3.40% | 1,468,700) | 49,936) | |
| Total | 12,751,300) | 426,065) | |
| 3.34% | |||
Based on: 10-K (reporting date: 2019-05-26).
1 US$ in thousands
2 Weighted-average interest rate = 100 × 426,065 ÷ 12,751,300 = 3.34%
Interest Costs Incurred
General Mills Inc., interest costs incurred
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
- Interest Expense, Net of Capitalized Interest
- The net interest expense shows a generally increasing trend over the six-year period. Starting at $318,500 thousand in May 2014, the value increased slightly to $328,600 thousand in May 2015, followed by a modest decline in the next two years to $311,900 thousand in 2016 and $302,100 thousand in 2017. From 2017 onwards, there is a marked increase, with the expense rising significantly to $385,400 thousand in 2018 and peaking at $527,400 thousand in 2019. This indicates an overall upward pressure on net interest costs in recent years.
- Capitalized Interest
- Capitalized interest fluctuations display a declining trend over the timeline. Starting at $4,900 thousand in 2014, it peaked at $7,700 thousand in 2016 but has decreased steadily since then, dropping to $2,800 thousand by 2019. This reduction implies that less interest cost was added to the asset base over time, potentially affecting the net interest figures.
- Interest Expense
- The gross interest expense, before accounting for capitalized interest, follows a pattern similar to the net interest expense but with higher values as expected. Beginning at $323,400 thousand in May 2014, it climbed to $335,500 thousand in 2015 and then declined gradually until 2017. From 2017 to 2019, the interest expense rises sharply, increasing from $306,700 thousand to $530,200 thousand. This substantial increase in 2018 and 2019 aligns with the trend observed in net interest expense, highlighting escalating borrowing costs or increased debt levels in these years.
- Overall Analysis
- Over the six-year span, both net and gross interest expenses exhibit an overall upward trajectory, with especially pronounced increases in the last two years analyzed. In contrast, capitalized interest shows a decreasing trend after peaking mid-period, suggesting a reduction in capitalization of interest costs. The sharp increases in interest expenses toward the end of the period may indicate changing financial conditions, such as higher interest rates or increased borrowing.
Adjusted Interest Coverage Ratio
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
2019 Calculations
1 Interest coverage ratio (without capitalized interest) = EBIT ÷ Interest expense, net of capitalized interest
= 2,681,400 ÷ 527,400 = 5.08
2 Adjusted interest coverage ratio (with capitalized interest) = EBIT ÷ Interest expense
= 2,681,400 ÷ 530,200 = 5.06
- Interest Coverage Ratio (without capitalized interest)
- The interest coverage ratio exhibits a fluctuating but generally declining trend over the six-year period. Starting at a high of 9.62 in May 2014, it decreased sharply to 6.62 in May 2015. This was followed by a recovery to 8.99 in May 2016 and a slight decrease to 8.8 in May 2017. In the last two years, the ratio declined more significantly to 6.76 in May 2018 and further down to 5.08 in May 2019, indicating a reduced ability to cover interest expenses from operating earnings over time.
- Adjusted Interest Coverage Ratio (with capitalized interest)
- This adjusted metric shows a parallel trend to the non-adjusted interest coverage ratio but at marginally lower levels each year. Beginning at 9.47 in May 2014, it decreased to 6.48 in May 2015, rose to 8.77 in May 2016, and slightly dropped to 8.67 in May 2017. The ratio then declined to 6.69 in May 2018 and to 5.06 in May 2019. The consistent gap between the adjusted and non-adjusted ratios suggests capitalization slightly impacts the coverage, but the overall decreasing trend signals an increasing interest burden.
- Overall Insights
- Both ratios indicate a diminished interest coverage capability over the six years analyzed. The volatility in the middle years suggests some operational fluctuations or changes in financing costs, but the sharp decline towards the end of the period could hint at rising interest expenses or lower operating earnings. Close monitoring is advisable to assess future financial risk and the ability to meet interest obligations.