General Mills reached a partial settlement with several global companies which took part in the reinsurance of a property policy covering a 1994 oats handling case.
General Mills plans to record this partial settlement, amounting nearly $55 million pre-tax net of associated costs ($34 million after tax), in the fourth quarter of fiscal 2001. The settlement proceeds will be recorded as an unusual item. Despite the move, General Mills should continue on track to record double-digit growth in reported earnings per share for the 2001 fiscal year prior to registering unusual items.
Currently, an arbitration proceeding is under way regarding the liability of the remaining reinsurers in the matter. Previously, General Mills obtained a separate insurance settlement related to the incident from another carrier, a settlement which was included in fiscal 1998 results.
The insurance settlements go back to a 1994 incident, where an independent licensed contractor to General Mills allegedly substituted one pesticide for another in the treatment of some of the company’s raw oat supplies, a substituted pesticide which was not approved by the Environmental Protection Agency for use with oats.
The contractor is alleged to have purposely concealed the substitution from the company, and was convicted on criminal charges. The company reported an after-tax charge to fiscal 1994 earnings.
Topics Pollution
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