Comparing Two Companies In The Same Industry: Kellogg’s and General Mills
Kellogg’s and General Mills are very similar in reporting their financial activities. Both companies use the indirect method of operating cash flow. The largest adjustment to net income for both companies was the depreciation and amortization expense. In 2006 the net cash provided by operating activities for General Mills was $1,771 millions, which was an increase of $60 millions from the $1711 millions in 2005. The largest adjustment to convert accrual net income into cash from operation was depreciation and amortization expenses totaling $424 millions in 2006. As for Kellogg’s in 2006 the net cash provided by operating activities was 1,410.5 millions, which was an increase of $267.2 millions from the $1,143.3 millions in 2005.Kellogg’s largest adjustment to net income was depreciation and amortization expense as well which was $352.7 millions in 2006.
Both Kellogg’s and General Mills acquired properties and equipments in their recent year. In 2006 Kellogg’s spent $453.1 millions in property acquisitions, while in 2005 Kellogg’s spent $374.2 millions in property acquisitions. This means that there was an increase from 2005 to 2006 of $78.9 millions. General Mills spent $360 millions on the purchase of land, building and equipments in 2006. In 2005 the amount spent on PPE was $434 millions, which unlike Kellogg’s increase in purchases represents a decrease of $74 millions.
Kellogg’s source of financing was the issuance of notes payable with maturities greater than 90 days; non-trade related. Kellogg’s re-acquired 649.8 million dollars in treasury stock. General Mills’ primary source of financing was borrowing in non-trade notes payable as well. General Mills re-acquired 885 million shares of treasury stock. Kellogg’s and General Mills might have had the same reasons for using this source of financing. Both companies probably needed shares of stock for their employees’ stock options....
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