General Mills
2005 Annual Report
General Mills at a Glance
Selected Brands
Cheerios, Betty Crocker, Wheaties, Pillsbury, Gold Medal, Hamburger Helper,
Old El Paso, Totino’s, Yoplait, Green Giant, Progresso, Bisquick,
Nature Valley, Cascadian Farm, Grands!, Chex Mix, Lucky Charms, Pop.Secret,
Bugles, Total, Häagen-Dazs, Chex, Muir Glen, Fruit Roll-Ups,
Gardetto’s, Kix, Colombo, Wanchai Ferry, Latina, La Salteña, Forno de Minas,
Frescarini, Nouriche, Cinnamon Toast Crunch
U.S. Retail
Bakeries and
Foodservice
International
Joint Ventures
Our U.S. Retail business
segment includes the
six major marketing divisions
listed below. We market our
products in a variety of
domestic retail outlets includ-
ing traditional grocery stores,
natural food chains, mass
merchandisers and member-
ship stores. This segment
accounts for 69 percent of
total company sales.
This segment of our
business generates over $1.7
billion in sales. We customize
packaging of our retail prod-
ucts and market them to
convenience stores and food-
service outlets such as
schools, restaurants and hotels.
We sell baking mixes and
frozen dough-based products
to supermarket, retail and
wholesale bakeries.We also sell
branded food products to
foodservice operators, whole-
sale distributors and bakeries.
We market our products in
more than 100 countries out-
side the United States. Our
largest international brands
are Häagen-Dazs ice cream,
OldEl Paso Mexican foods,
Green Giant vegetables and
Pillsbury dough products.
This business segment
accounts for 15 percent of
total company sales.
We are partners in several
joint ventures around the
world. Cereal Partners
Worldwide is our joint venture
with Nestlé. We participate
in four Häagen-Dazs joint
ventures, the largest of which
is in Japan. And we are
partners with DuPont in
8th Continent, which produces
soy beverages in the
United States.
Net Sales by Division
$ 7.78 billion in total
Net Sales by
Customer Segment
$ 1.74 billion in total
Net Sales by Region
$ 1.72 billion in total
Net Sales by Joint Venture*
$ 1.24 billion
proportionate share
24%
• Big G Cereals
22%
• Meals
20%
• Pillsbury USA
12%
• Snacks
• Baking Products 8%
14%
• Yoplait/Other
• Distributors/
Restaurants
• Bakery
Channels
• Convenience
51%
37%
Stores/Vending 12%
• Europe
• Canada
• Asia/Pacific
• Latin America
38%
30%
20%
12%
• Cereal Partners
Worldwide (CPW) 53%
• Snack Ventures
Europe (SVE)
• Häagen-Dazs
• 8th Continent
29%
16%
2%
* The SVE joint venture
was terminated in
February 2005.
Contents Letter to Shareholders 02
Health Innovation Worldwide 06 Convenience Innovation Worldwide 10
Corporate Directory 14 Selected Financial Information 15
Annual Report on Form 10-K 19
2005 Financial Highlights
In Millions, Except per Share Data
Fiscal Year Ended
Net Sales
Net Earnings
Diluted Earnings per Share
Average Diluted Common
Shares Outstanding
Dividends per Share
May 29, 2005
$11,244
1,240
3.08
409
$ 1.24
May 30, 2004
$11,070
1,055
2.60
413
$ 1.10
Change
2%
18
18
–1
13
Net Sales
(dollars in millions)
Net Earnings
(dollars in millions,
comparable for
goodwill)
Diluted Earnings
per Share
(dollars, comparable
for goodwill)
Fiscal 2004 included 53 weeks. All other fiscal periods shown included 52 weeks.
page 01
05040302010011,24411,07010,5067,9495,4505,1730504030201001,2401,0559174586876350504030201003.082.602.351.342.352.07 To Our Shareholders
Steve Sanger
Chairman of the Board and
Chief Executive Officer
Fiscal 2005 was a successful year for General Mills
in several key respects:
• Our net sales grew 2 percent to exceed
$11.2 billion worldwide.
• Net earnings rose 18 percent to exceed $1.2 bil-
lion. This included a gain of $284 million after
tax from two businesses divested during 2005 –
these were our 40.5 percent interest in Snack
Ventures Europe (SVE) and the Lloyd’s barbecue
business. That gain was partially offset by
expenses of $87 million after tax associated
with debt repurchases.
• Diluted earnings per share (EPS) grew to $3.08,
up 18 percent from $2.60 in 2004. These earn-
ings per share figures reflect our adoption of a
new accounting standard for contingently con-
vertible debt, which reduced reported EPS in
both years.
• We generated strong cash flows in 2005 that
enabled us to pay down $2 billion of our debt, pay
out increased shareholder dividends and invest
$434 million in capital to support future growth.
For the fiscal year, total return to General Mills
shareholders, through stock price performance and
dividends, outpaced the broader market’s return.
2005 Operating Results
Net sales for our largest business segment, U.S.
Retail, totaled $7.8 billion, which essentially matched
the prior year’s 53-week results. Unit volume grew
overall, with five of our six major product divisions
recording gains. Big G cereals was the exception –
volume for this business was down 3 percent on a
comparable 52-week basis due to reduced levels of
price discounting and merchandising in the second
half of the year. Total U.S. Retail volume was up
3 percent on a comparable-weeks basis led by Yoplait
yogurt and Snacks. Operating profits declined
5 percent, as this volume growth and productivity
savings did not offset the effects of unfavorable sales
mix, higher ingredient and fuel costs, and higher
promotional expense.
For our Bakeries and Foodservice business segment,
second-half operating profits grew 27 percent.
That solid finish enabled the division to meet its goal
of stabilizing annual profits after a decline in 2004.
Net sales totaled $1.7 billion, essentially in line with
prior-year results.
Our International segment had a great year. Net
sales increased 11 percent to exceed $1.7 billion,
and operating profits rose more than 40 percent to
$171 million. Unit volume was up 6 percent on a
comparable-weeks basis, with gains in each of our
four geographic regions – Canada, Europe,
Latin America and Asia/Pacific.
Cash Flow from
Operations
(dollars in millions)
Total Debt Balance
(dollars in millions)
Dividends per Share
(dollars)
We also recorded a strong profit increase from joint-
venture operations. In total, earnings from joint
ventures grew 20 percent to reach $89 million after tax.
And that includes just nine months of earnings from
the SVE joint venture, which ended in February 2005
when our interest was redeemed.
Financial Highlights
During 2005, we took actions that significantly
strengthened our balance sheet and improved our
financial flexibility. Following our acquisition of
Pillsbury in fiscal 2002, our debt balance exceeded
$9 billion. We set a goal of reducing our debt to
$7 billion by the end of 2006. Thanks to strong cash
flow generated in 2005 – plus the added cash we
received from divesting SVE and Lloyd’s – we met
that debt-reduction goal a year ahead of schedule.
This debt paydown has improved key financial ratios
such as fixed charge coverage and cash flow to debt.
In addition, our interest expense fell10 percent in 2005,
and we expect it to be down further in 2006.
While we focused a significant portion of our cash
flow on reducing debt, we also increased share-
holder dividends. Dividends paid in 2005 totaled
$1.24 per share, a 13 percent increase from the prior
rate. Recently, the board of directors authorized a
further 6 percent increase in the dividend, to a new
annualized rate of $1.32, effective with the Aug. 1,
2005, quarterly payment. General Mills and its
predecessor firm now have paid dividends without
interruption or reduction for 107 years.
U.S. Retail Leading Market Positions
Dollars in Millions, Fiscal 2005
Ready-to-eat Cereals
Refrigerated Yogurt
Mexican Products
Frozen Vegetables
Ready-to-serve Soup
Refrigerated Dough
Dessert Mixes
Frozen Hot Snacks
Frozen Baked Goods
Microwave Popcorn
Fruit Snacks
Dry Dinners
Category
Sales
$7,600
3,410
2,220
2,200
1,750
1,620
1,520
960
900
850
660
610
Category
Sales Growth
Our Retail
Sales Growth
Our Dollar
Share
1%
10
4
2
3
4
6
7
3
–
8
–5
–2%
8
3
3
12
5
6
16
2
4
–3
2
30%
36
15
21
28
69
38
27
22
21
54
71
ACNielsen including panel projections for Wal-Mart, 52- versus 52-week basis
Rank
2
1
2
1
2
1
1
2
1
2
1
1
page 03
017110504031,7111,4611,6311.241.321.101.10088570504036,1928,2268,8570.001.2406*050403 Shareholder Return, Fiscal 2005
(price appreciation plus reinvested dividends)
Shareholder Return, Fiscal 2000–2005
(compound growth rates,
price appreciation plus reinvested dividends)
Dividends plus stock price appreciation in
fiscal 2005 generated an 11 percent total return to
General Mills shareholders. This return outpaced the
S&P food index and the S&P 500, which both
delivered returns of 9 percent. Over the most recent
five-year period, returns to General Mills shareholders
have averaged 7 percent annually, behind our peer
group’s 10 percent average annual return, but well
ahead of the overall market’s performance, which
resulted in a negative1percent average annual return.
Our Growth Outlook
We expect to deliver an attractive combination
of growth and returns in the years ahead. Over the
next three- to five-year period, we believe we are
well-positioned to deliver low single-digit growth in
net sales, mid single-digit growth in operating profit,
and high single-digit growth in earnings per share.
We believe this financial performance, together with
an attractive dividend yield, should result in consis-
tent, double-digit returns to our shareholders.
We plan to couple this growth with improving return
on capital. Specifically, we’ve set a goal to improve
our return on capital by an average of 50 basis points
a year over the next three years. The main driver of
improvement in this return ratio will be the numerator
– that is, our earnings growth. But we’ll influence the
denominator, too, by being disciplined about how we
use the strong cash flows we expect our businesses
to generate.
• We expect capital spending to remain
generally in line with depreciation, and steady
as a percentage of sales.
• We plan to make some further modest
reductions to our debt balance.
• And we intend to return significant cash to
shareholders through dividends and share repur-
chases. We expect dividends to grow over
time as our earnings grow. We expect share repur-
chases to reduce total shares outstanding by
a net 2 percent a year – not necessarily each and
every year, but on average. As a result, we
expect share repurchases to contribute to our
EPS growth beginning in fiscal 2006.
Our 2006 goals include a target of low single-digit
growth in net sales, helped by some carryover bene-
fit from pricing actions taken in 2005. We expect
segment operating profits to grow at a mid single-
digit rate, outpacing sales growth due in part to
productivity savings. To meet our goals for the year,
we will need to sustain the growth momentum in
our International business and the Bakeries and
Foodservice segment. In U.S. Retail, we must renew
sales and profit growth for our Big G cereal division.
We’re addressing that challenge with increased
new product activity, competitive merchandising
programs, and continued strong levels of consumer
advertising to support our established cereal
brands, all of which now are made with whole grain.
+11%+9%+5%+9%+0%General MillsS&P Packaged Foods IndexS&P Consumer Staples IndexS&P 500+7%+10%+6%–1%+0%General MillsS&P Packaged Foods IndexS&P Consumer Staples IndexS&P 500011-110 Product innovation is key to our growth.
We’ve got a strong lineup of new products coming
across all of our businesses in 2006.
Long-term Growth Drivers
The key drivers of our growth in 2006 and beyond
will be the same factors that have fueled our
progress over the past decade. They are: product
innovation, channel expansion, international
expansion and margin expansion. We feel we’ve got
a strong lineup of product news and innovation
planned in 2006. Some of those new items are
pictured above – you’ll find others on the following
pages of this report. We see terrific opportunities
for our brands in the many diverse retail channels
that are selling packaged food today. Our Bakeries
and Foodservice division sells to the many other
channels for food eaten away from home. We have
excellent opportunities to grow volume, sales
and profits for our international businesses, including
our Häagen-Dazs joint ventures in Asia and our
Cereal Partners Worldwide joint venture. And we
expect our productivity initiatives companywide to
drive margin expansion in the years ahead.
With Steve’s retirement, several members of the
General Mills leadership team have taken on new
or expanded responsibilities. Randy Darcy has
been named Executive Vice President, Worldwide
Operations and Technology. Jim Lawrence, Executive
Vice President and Chief Financial Officer, now
has responsibility for all International operations,
including Canada. Ken Powell has been named
Executive Vice President and Chief Operating Officer,
U.S. Retail. And Jeff Rotsch was named Executive
Vice President, Worldwide Sales and Channel
Development, including responsibility for Bakeries
and Foodservice. A complete listing of our senior
leadership team appears on page 14 of this report.
In closing, I want to acknowledge the many impor-
tant accomplishments and contributions of our
27,800 employees worldwide. Their talent and com-
mitment give me confidence that General Mills
will build on its record of delivering superior returns
to shareholders in the years ahead.
Acknowledgments
Vice Chairman Steve Demeritt retired from
the company and the board of directors this June,
following a distinguished 36-year career with
General Mills. Steve made outstanding contribu-
tions to the growth and success of our businesses,
and we will miss him. We also will miss Livio
“Desi” DeSimone, who will be retiring from the
General Mills board in September following
16 years of highly valued service.
Sincerely,
STEPHEN W. SANGER
Chairman of the Board
and Chief Executive Officer
July 29, 2005
page 05
A Healthy Mix
of Great-tasting Foods
We market a wide variety of delicious
foods that offer health and nutritional benefits.
From whole-grain cereals and Green Giant
vegetables to Yoplait yogurt and organic foods,
we’re developing products that meet consumers’
growing demands for healthy food options.
The Benefits of Whole Grain
Foods that use the entire grain, not just one or two parts, deliver
vitamins, minerals, fiber and natural phytonutrients. These nutrients
appear to work together in powerful ways to help protect
against heart disease, diabetes, obesity and certain types of cancer.
Big G Whole-grain News
International Reach
A Healthy Breakfast Anywhere
The new U.S. Department of Agriculture
MyPyramid food guide recommends
at least three daily servings of whole grain.
Breakfast cereal accounts for almost
one-third of whole-grain consumption in
the United States, and it’s a leading
source for kids aged 18 and under. Every
Big G cereal brand now contains at
least 8 grams of whole grain per
serving. That includes new Yogurt Burst
Cheerios, shipping in August 2005.
We’re bringing the benefits of whole-
grain cereal to consumers around the
world. All Cereal Partners Worldwide
(CPW) brands in the United Kingdom
now are made with whole grain, and
CPW will be expanding this initiative to
additional markets outside of North
America. We’ve gained share in Canada’s
growing ready-to-eat cereal category
for six years straight. Now our entire
Canadian cereal line is whole-grain – news
that should help fuel continued growth.
Studies show that kids who frequently
eat cereal for breakfast have healthier
body weights than kids who don’t. Our
cereal bowl packs are a popular choice
for school breakfast programs. We’ve
also developed cereal bars that meet
the dietary requirements of elementary
school food programs. And sales for
our cereal-in-a-cup grew 24 percent
in fiscal 2005 as we gained distribution
in foodservice outlets ranging from
college cafeterias to hotel restaurants.
page 07
Calorie Counting with Progresso
Watching your weight? Our Progresso soup line has
25 varieties that contain 100 calories or less per serving.
In fiscal 2005, retail sales for the entire Progresso
line increased 12 percent, and our dollar share of
the $1.7 billion ready-to-serve soup category grew more
than two percentage points. This fall, six flavors of
Progresso soup will be available in microwaveable bowls.
All that great Progresso taste, ready in seconds.
Health News Around
the Globe
Consumers around the world are looking
for healthy, fast and easy foods. Sales
for Green Giant vegetables grew 13 per-
cent in fiscal 2005 in the United Kingdom,
where we’re reminding consumers to
get their five daily servings of vegetables.
In India, our Atta flour is made from
100 percent whole wheat. And in Australia,
we’ve launched a new lower-fat line of
Latina pastas and sauces.
The Skinny on Soymilk
Organic Food Choices
Soymilk is a good source of calcium,
and soy protein can help lower cholesterol
and the risk of heart disease. With this
healthy profile, refrigerated soymilk sales
have been increasing by double digits in
recent years. Retail sales of 8th Continent
soymilk, a product of our joint venture
with DuPont, grew 23 percent in fiscal 2005.
We’re currently introducing the category’s
first national fat-free soymilk, which
offers soy’s nutritional benefits and
25 percent fewer calories per serving.
U.S. sales for organic foods have grown
at a 19 percent rate over the past four
years. Our Cascadian Farm and Muir Glen
brands are well-known in organic and
natural food channels, and we’ve been
extending their presence in traditional
grocery outlets. New Cascadian Farm
Great Measure cereal is an excellent
choice for your weight management plan.
And Muir Glen is introducing a line
of organic soups.
U.S. Refrigerated Soymilk
Category Sales
(calendar year, dollars in millions)
U.S. Organic Food
Category Sales
(calendar year, dollars in billions)
Source: SPINS / Company estimates
Source: Nutrition Business Journal
32819240748754000010203047.46.18.610.412.10001020304 U.S. Yogurt Category Sales
(fiscal year, dollars in billions)
Yoplait Yogurt Still on Fire
Source: ACNielsen plus panel projections
for Wal-Mart
Health news is driving strong growth
for the $3.4 billion U.S. yogurt category
and for our Yoplait brand. Retail sales
of Yoplait Light grew 24 percent last year
due in part to advertising that shows
it’s a great choice for consumers manag-
ing their weight. Our newest yogurt
offerings include Yoplait Smoothies, avail-
able in select markets, and chocolate
mousse-flavored Yoplait Whips! intro-
duced in June 2005.
page 09
2.32.02.62.93.100010203043.405 Making it Fast, Making it Easy
Whether it’s making a meal faster or
eating on the go, today’s consumers are looking
for more convenient food options.
We’re responding to the needs of consumers
and foodservice operators with innovative
options for good food fast.
Faster, Fresher Baked Goods
There’s nothing better than a hot roll or cookie, fresh from the oven.
But what if you haven’t got the time – or talent – to bake from scratch?
We have a broad portfolio of products for bakers of all kinds.
Faster and Fresher
for Foodservice
Foodservice operators appreciate the
convenience of products that reduce
labor and waste. We recently introduced
a line of improved cinnamon rolls
that not only beats competitive offerings
on taste but also stays fresh longer.
Consumers like the improved product
quality. Bakeries like the extended
freshness that reduces their waste.
From the Refrigerator
to the Oven
Pillsbury is the market leader in the
$1.6 billion refrigerated dough category.
This product line posted solid
sales growth in fiscal 2005, led by great
performance on cookies. Retail sales
for our ready-to-bake cookies grew
17 percent thanks to their convenience
and some indulgent new flavors.
We’re bringing new users to refrigerated
dough with our Perfect Portions line,
which lets consumers prepare just a
couple of biscuits at a time.
Frozen to Golden
in Minutes
Pillsbury Oven Baked dinner rolls go
from the freezer to hot from the oven in
just minutes. Consumers can bake one
or two rolls at a time, perfect for smaller
households. With several new flavor
varieties and a great advertising perfor-
mance from the Pillsbury Doughboy,
retail sales for this line grew 8 percent
in fiscal 2005.
page 11
Faster Dinners Around the World
Consumers the world over want a good meal fast.
In the United States, dinner mixes are a $610 million
category where our Helper line gained more than
five points of market share in 2005. In China, Wanchai
Ferry frozen dumplings offer homemade quality in
a fraction of the time it takes to make dumplings by
hand. Volume for this line grew 23 percent last year.
And Old El Paso volume grew 4 percent last year in
Europe, where consumers enjoy these convenient
Mexican dinner kits.
Easy Baking with Betty
Hot Snacks in Seconds
Cool Treats On the Go
U.S. retail sales for Betty Crocker dessert
mixes grew 6 percent in fiscal 2005.
Now, we’re taking dessert preparation to
the next level of convenience with Warm
Delights. These microwaveable single
servings of warm brownies and cakes are
ready in minutes. In the United Kingdom,
volume for Betty Crocker dessert mixes
grew 31 percent last year, with strong
performance by our convenient cookie
mixes – all you add is water.
Totino’s hot snacks appeal to moms
and kids alike, since kids can make them
on their own in the microwave. Retail
sales for this line grew 16 percent in 2005,
outpacing category growth. In Canada,
retail sales for our microwaveable
Pillsbury Pizza Pops snacks increased
5 percent last year. New snack-sized
Pop.Secret popcorn appeals to consumers
counting calories – plenty of delicious
popcorn and 100 calories per serving.
Häagen-Dazs ice cream is a refreshing
treat from Paris to Tokyo. Sales in Europe
grew 5 percent this past year thanks to
the introduction of Häagen-Dazs Cream
Crisp ice cream sandwiches. In Japan,
we are partners in a Häagen-Dazs joint
venture where new products, such as
the Häagen-Dazs parfait, drove 4 percent
volume growth. We also continue to
develop unique flavors, such as Chai ice
cream in Japan and Panna Cotta in Europe.
Growing Sales in Convenience Stores
We’re making our products available wherever
consumers buy food. Our sales in convenience
stores have grown at an 11 percent compound
rate over the past three years, outpacing overall
food sales growth in this channel. Our newest
introductions here include Nature Valley Sweet &
Salty Nut bars and Gardetto’s garlic rye chips.
Convenience Store Food Sales
(calendar year, dollars in billions)
Source: National Association of
Convenience Stores
36.537.036.339.943.80001020304 Teacher Says: Eat Your Vegetables
The Green Giant is known the world over for
high-quality vegetables. In the United States,
Green Giant is the leader in the $2 billion frozen
vegetable category. In Canada, retail sales
on large-sized bags of frozen vegetables and
sauce grew at a double-digit pace thanks to
several new flavors. And in Europe, new grilled
vegetables make a great specialty side dish
served right from the jar.
page 13
Corporate Directory
Our Commitment to Corporate Governance
We have a long-standing commitment to strong corporate governance. The cornerstone of our practices is an independent
board of directors. All directors stand annually for election by shareholders, and all active board committees are composed entirely
of independent directors. In addition, our management practices demand high standards of ethics as described by our Employee
Code of Conduct. For more information on our governance practices, see our 2005 Proxy Statement.
Board of Directors (as of July 29, 2005)
Paul Danos
Dean, Tuck School of Business
and Laurence F. Whittemore
Professor of Business
Administration,
Dartmouth College (2)
Hanover, New Hampshire
Livio D. DeSimone †
Retired Chairman of the Board
and Chief Executive Officer, 3M
(diversified manufacturer) (1,2,3*,6)
St. Paul, Minnesota
Raymond V. Gilmartin
Special Advisor to the Executive
Committee, Merck & Company,
Inc. (pharmaceuticals) (1,3,5*)
Whitehouse Station,
New Jersey
Hilda Ochoa-Brillembourg
Founder, President and
Chief Executive Officer, Strategic
Investment Group
(investment management) (4,5,6)
Arlington, Virginia
Judith Richards Hope
Distinguished Visitor from
Practice and Adjunct Professor,
Georgetown University
Law Center (1,2,4,6*)
Washington, D.C.
Steve Odland
Chairman and
Chief Executive Officer,
Office Depot, Inc.
(office products retailer) (5)
Delray Beach, Florida
William T. Esrey
Chairman Emeritus,
Sprint Corporation
(telecommunication
systems) (1,2,4*,5)
Vail, Colorado
Heidi G. Miller
Executive Vice President and
chief executive officer,
Treasury & Security Services,
J.P. Morgan Chase & Co. (2,3,4)
New York, New York
Michael D. Rose
Chairman of the Board,
Gaylord Entertainment Company
(diversified entertainment) (3,5,6)
Memphis, Tennessee
Board Committees: 1. Executive 2. Audit 3. Compensation 4. Finance 5. Corporate Governance
6. Public Responsibility
* Denotes Committee Chair
Stephen W. Sanger
Chairman of the Board and
Chief Executive Officer,
General Mills, Inc.(1*)
A. Michael Spence
Partner, Oak Hill
Venture Partners;
Professor Emeritus and
Former Dean,
Graduate School of Business,
Stanford University (1,2*,3)
Stanford, California
Dorothy A. Terrell
President and Chief Executive
Officer, Initiative for a
Competitive Inner City
(nonprofit organization);
Limited Partner, First Light Capital
(venture capital) (2,5,6)
Boston, Massachusetts
Senior Management (as of July 29, 2005)
Y. Marc Belton
Senior Vice President,
Worldwide Health, Brand and
New Business Development
Peter J. Capell
Senior Vice President;
President, Big G Cereals
Juliana L. Chugg
Vice President;
President, Baking Products
Randy G. Darcy
Executive Vice President,
Worldwide Operations and
Technology
Rory A.M. Delaney
Senior Vice President,
Strategic Technology
Development
† Retiring as of Sept. 26, 2005
Ian R. Friendly
Senior Vice President;
Chief Executive Officer,
Cereal Partners Worldwide
James A. Lawrence
Executive Vice President,
Chief Financial Officer and
International
John T. Machuzick
Senior Vice President;
President, Bakeries and
Foodservice
Siri S. Marshall
Senior Vice President,
General Counsel,
Chief Governance and
Compliance Officer and
Secretary
Kimberly A. Nelson
Vice President;
President, Snacks Unlimited
Christopher D. O’Leary
Senior Vice President;
President, Meals
Michael A. Peel
Senior Vice President,
Human Resources and
Corporate Services
Kendall J. Powell
Executive Vice President;
Chief Operating Officer,
U.S. Retail
Lucio Rizzi
Senior Vice President;
President, International
Peter B. Robinson
Senior Vice President;
President, Pillsbury USA
Jeffrey J. Rotsch
Executive Vice President,
Worldwide Sales and
Channel Development
Stephen W. Sanger
Chairman of the Board and
Chief Executive Officer
Christina L. Shea
Senior Vice President,
External Relations and President,
General Mills Foundation
Christi L. Strauss
Vice President; President,
General Mills Canada
Kenneth L. Thome
Senior Vice President,
Financial Operations
David B. Van Benschoten
Vice President, Treasurer
Robert F. Waldron
Vice President;
President, Yoplait-Colombo
Selected Financial Information
This section provides selected information on our
financial performance and future expectations. It is
not intended to provide all of the information
required for a comprehensive financial presentation.
For a complete presentation of General Mills’ finan-
cial results, including the consolidated financial
statements, Management’s Discussion and Analysis
(MD&A), and accompanying notes and schedules,
refer to our 2005 Annual Report on Form 10-K,
which follows this section.
Cash Flow Overview
In fiscal 2005, our cash flow from operations totaled
$1.7 billion, up 17 percent from fiscal 2004. The
increase in cash flow came primarily from our working
capital discipline. The change in working capital
included in cash flow from operations led to a cash
increase of $258 million in 2005. Core working
capital, defined as the sum of accounts receivable
and inventories less accounts payable, is a measure
we use to gauge the assets involved in running
our day-to-day business. During fiscal 2005, core work-
ing capital decreased by $28 million, freeing up
that amount for use in other areas of our business.
During 2005, our investments in capital projects
totaled $434 million, slightly below 4 percent of our
net sales and roughly in line with depreciation and
amortization expense of $443 million. We completed
a number of business support and productivity proj-
ects, and added manufacturing capacity for the
launch of our microwaveable soup and yogurt bev-
erage lines. We expect capital expenditures over the
next several years to remain roughly in line with
Reconciliation of Total Adjusted Debt
In Millions
Total Debt
Debt Adjustments:
Deferred income taxes – tax leases
Leases – debt equivalent
Certain cash and cash equivalents
Marketable investments, at cost
Adjusted Debt
Certain Minority Interests
Total Adjusted Debt
Capital Expenditures Trend
(dollars in millions)
depreciation and amortization expense, and steady
as a percentage of sales. We estimate capital
expenditures of approximately $450 million in 2006.
In fiscal 2005, our total debt as defined by generally
accepted accounting principles (GAAP) declined
by $2.0 billion, to $6.2 billion. Internally, we measure
total adjusted debt, a broader definition that
includes the debt equivalent of lease expense, tax
benefit leases and certain minority interests, and is
net of marketable investments and most of our cash
balance. The following table reconciles total debt to
total adjusted debt.
May 29, 2005
$6,192
May 30, 2004
$8,226
May 25, 2003
$8,857
64
672
(511)
(24)
$6,393
300
$6,693
66
600
(699)
(54)
$8,139
299
$8,438
68
550
(623)
(142)
$8,710
300
$9,010
page 15
050403443434399653365750Capital ExpendituresDepreciation and Amortization Selected Financial Information continued
Total adjusted debt declined by over $1.7 billion in
2005, bringing our two-year cumulative reduction to
$2.3 billion. We plan to further reduce total
adjusted debt by $100 to $200 million in fiscal 2006.
Due in part to our declining debt balance, interest
expense fell to $455 million in fiscal 2005, down from
$508 million last year and $547 million in fiscal 2003.
Our 2005 interest expense also fell as the result of
the maturation of approximately $2 billion notional
amount of interest rate swaps. These swaps helped
us hedge our exposure to interest rate changes and
reduce the volatility of our financing costs. Prior to
our acquisition of Pillsbury, we entered into swap
agreements in order to hedge the expected debt
component of the purchase, at rates averaging
between 6 and 7 percent. With the further reduction
of our debt balance, and the full-year impact of
the reduced amount of interest rate swaps, we expect
even lower interest expense in fiscal 2006.
With less cash required for interest expense and
debt repayment, we are renewing our practice
of buying back General Mills common stock. Prior
to the acquisition of Pillsbury, it was our practice
to repurchase shares on the open market, sufficient
to offset the impact of option exercises and further
reduce shares outstanding by an average of 1 to
2 percent per year. Since the acquisition, we’ve bought
back more than 70 million shares from Diageo,
but through 2005 we hadn’t made any significant
open-market repurchases. We will resume open-
market share repurchases in fiscal 2006. Over the next
several years, we expect share repurchases to reduce
total shares outstanding by a net of 2 percent
per year on average.
We also have increased the amount of cash we return
to shareholders through dividend payments. General
Mills and its predecessor firm have paid regular divi-
dends for 107 years without reduction or interruption.
In 2005, we made $461 million of dividend payments
at a rate of $1.24 per share. The board of directors
declared a dividend increase of 6 percent, to an
annual rate of $1.32 per share, effective with the
dividend payable Aug.1, 2005. It is our goal to continue
paying attractive dividends roughly in line with the
payout ratios of our peer group, and to increase divi-
dends as our earnings grow.
Forward-looking Statements
This report to shareholders contains forward-
looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 that are
based on management’s current expectations and
assumptions. Such statements are subject to certain
risks and uncertainties that could cause actual
results to differ materially from potential results dis-
cussed in such statements. For a full disclosure of
the risks and uncertainties of these forward-looking
statements, refer to the information set forth under
the heading “Cautionary Statement Relevant to
Forward-looking Information for the Purpose of ‘Safe
Harbor’ Provisions of the Private Securities Litigation
Reform Act of 1995,” in Item One of our 2005 Annual
Report on Form 10-K.
Certifications
The most recent certifications by our Chief Executive
Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act are filed as
exhibits to our Form 10-K. We also have filed with the
New York Stock Exchange the most recent Annual CEO
Certification as required by Section 303A.12(a) of the
New York Stock Exchange Listed Company Manual.
Six-year Financial Summary
In Millions, Except Per Share Data
and Number of Employees
FINANCIAL RESULTS
Earnings per share – basic
Earnings per share – diluted
Dividends per share
Return on average total capital
Net sales
Costs and expenses:
Cost of sales
Selling, general and administrative
Interest, including minority interest, net
Restructuring and other exit costs
Divestitures (gain)
Debt repurchase costs
Earnings before income taxes and earnings from
joint ventures
Income taxes
Earnings from joint ventures
Earnings before accounting changes
Accounting changes
Net earnings
Net earnings as a percent of sales
Average common shares:
Basic
Diluted
FINANCIAL POSITION AT YEAR-END
Total assets
Land, buildings and equipment, net
Long-term debt, excluding current portion
Stockholders’ equity
OTHER STATISTICS
Total dividends
Purchases of land, buildings and equipment
Research and development
Advertising media expenditures
Wages, salaries and employee benefits
Number of full- and part-time employees
Common stock price:
High for year
Low for year
Year-end
May 29,
2005
May 30,
2004
May 25,
2003
$
3.34
3.08
1.24
9.9%1
$
2.82
2.60
1.10
10.5%
$
2.49
2.35
1.10
10.0%
11,244
11,070
10,506
6,834
2,418
455
84
(499)
137
1,815
664
89
1,240
–
1,240
6,584
2,443
508
26
–
–
1,509
528
74
1,055
–
1,055
11.0%
9.5%
371
409
18,066
3,007
4,255
5,676
461
414
168
477
1,492
27,804
53.89
43.01
49.68
375
413
18,448
3,111
7,410
5,248
413
628
158
512
1,494
27,580
49.66
43.75
46.05
6,109
2,472
547
62
–
–
1,316
460
61
917
–
917
8.7%
369
395
18,227
2,980
7,516
4,175
406
711
149
519
1,395
27,338
48.18
37.38
46.56
May 26,
2002
$
1.38
1.34
1.10
9.1%
7,949
4,662
2,070
416
134
–
–
667
239
33
461
(3)
458
5.8%
331
342
16,540
2,764
5,591
3,576
358
506
131
489
1,105
28,519
52.86
41.61
45.10
May 27,
2001
May 28,
2000
$
2.34
2.28
1.10
23.6%
$
2.05
2.00
1.10
24.4%
5,450
2,841
1,393
206
12
–
–
998
350
17
665
–
665
12.2%
284
292
5,091
1,501
2,221
52
312
307
83
358
666
11,001
46.35
31.38
42.20
5,173
2,698
1,376
152
–
–
–
947
336
3
614
–
614
11.9%
299
307
4,574
1,405
1,760
(289)
329
268
77
361
644
11,077
43.94
29.38
41.00
1Excludes effects of the divestitures of our 40.5% interest in SVE and the Lloyd’s barbecue business, and the loss from debt repurchases.
Return on average total capital is 11.5% including those items.
Diluted earnings per share and diluted share data for fiscal 2004 and 2003 have been restated for the adoption of EITF Issue 04-8.
Certain items reported as unusual items prior to fiscal 2003 have been reclassified to restructuring and other exit costs, to selling, general
and administrative expense, and to cost of sales.
All sales-related and selling, general and administrative information prior to fiscal 2002 has been restated for the adoption of
EITF Issue 01-09.
page 17
page 18
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 29, 2005
Commission File Number 1-1185
GENERAL MILLS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation or organization)
Number One General Mills Boulevard
Minneapolis, Minnesota
(Mail: P.O. Box 1113)
(Address of principal executive offices)
41-0274440
(IRS Employer
Identification No.)
55426
(Mail: 55440)
(Zip Code)
(763) 764-7600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $.10 par value
Preferred Share Purchase Rights
Name of each exchange
on which registered
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes A No u
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorpo-
rated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. A
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes A No u
Aggregate market value of Common Stock held by non-affiliates of the registrant, based on the closing price of $44.95
per share as reported on the New York Stock Exchange on November 26, 2004 (the last business day of the registrant’s
most recently completed second fiscal quarter): $16,344 million.
Number of shares of Common Stock outstanding as of July 15, 2005: 366,023,704 (excluding 136,282,960 shares held in
the treasury).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement for its 2005 Annual Meeting of Stockholders are incorporated by reference
into Part III.
TABLE OF CONTENTS
Part I
Item 1.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market for Registrant’s Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors and Executive Officers of the Registrant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
1
8
9
9
10
10
11
23
24
56
56
56
56
56
57
57
57
57
62
PART I
Item 1 Business
COMPANY OVERVIEW
General Mills, Inc. was incorporated in Delaware in 1928.
The terms “General Mills,” “Company,” “Registrant,”
“we,” “us” and “our” mean General Mills, Inc. and its
subsidiaries unless the context indicates otherwise.
We are a leading producer of packaged consumer
foods and operate exclusively in the consumer foods
industry. Our businesses are divided into three report-
able segments:
(cid:127)
(cid:127)
(cid:127)
U.S. Retail;
Bakeries and Foodservice; and
International.
Our operating segments are organized generally by
product categories. U.S. Retail reflects business with a
wide variety of grocery stores; specialty stores; drug,
dollar and discount chains; and mass merchandisers
operating throughout the United States. Our major
product categories in this business segment are ready-
to-eat cereals, meals, refrigerated and frozen dough
products, baking products, snacks, yogurt and organic
foods. Our Bakeries and Foodservice segment consists
of products marketed throughout the United States and
Canada to retail and wholesale bakeries, commercial and
noncommercial foodservice distributors and operators,
and convenience stores. Our International segment is
made up of retail businesses outside of the United States
and foodservice businesses outside of the United States
and Canada. A more detailed description of the
product categories for each reportable segment is set
forth below.
BUSINESS SEGMENTS
In the United States, we market our retail
U.S. RETAIL.
products primarily through our own sales organization,
supported by advertising and other promotional activi-
ties. Our products primarily are distributed directly to
retail food chains, cooperatives, membership stores and
wholesalers. Certain food products also are sold through
distributors and brokers. Our principal product catego-
ries in the U.S. Retail segment are as follows:
Big G Cereals. We produce and sell a number of
ready-to-eat cereals, including such brands as: Cheerios,
Honey Nut Cheerios, Frosted Cheerios, Apple Cinnamon
Cheerios, MultiGrain Cheerios, Berry Burst Cheerios,
Team Cheerios, Wheaties, Lucky Charms, Total Corn
Flakes, Whole Grain Total, Total Raisin Bran, Brown Sugar
and Oat Total, Trix, Golden Grahams, Wheat Chex, Corn
Chex, Rice Chex, Multi-Bran Chex, Honey Nut Chex, Kix,
Berry Berry Kix, Fiber One, Reese’s Puffs, Cocoa Puffs,
Cookie Crisp, Cinnamon Toast Crunch, French Toast
Crunch, Peanut Butter Toast Crunch, Clusters, Oatmeal
Crisp, Basic 4 and Raisin Nut Bran.
Meals. We manufacture and sell several lines of
convenient dinner products, including Betty Crocker
dry packaged dinner mixes under the Hamburger Helper,
Tuna Helper and Chicken Helper trademarks, Old El Paso
Mexican foods and dinner kits, Progresso soups and
ingredients, and Green Giant canned and frozen
vegetables and meal starters. Also under the Betty
Crocker trademark, we sell dry packaged specialty
potatoes, Potato Buds instant mashed potatoes,
Suddenly Salad salad mix and Bac*O’s salad topping. We
also manufacture and market shelf-stable microwave
meals under the Betty Crocker Bowl Appetit! trademark
and packaged meals under the Betty Crocker Complete
Meals trademark.
Pillsbury USA. We manufacture and sell refrigerated
and frozen dough products, frozen breakfast products,
and frozen pizza and snack products. Refrigerated dough
products marketed under the Pillsbury brand include
Grands! biscuits and sweet rolls, Golden Layers biscuits,
Pillsbury Ready To Bake! and Big Deluxe Classics
cookies, and Pillsbury rolls, biscuits, cookies, breads and
pie crust. Frozen dough product offerings include Oven
Baked biscuits, rolls and other bakery goods. Breakfast
products sold under the Pillsbury trademark include
Toaster Strudel pastries, Toaster Scrambles pastries and
Pillsbury frozen pancakes, waffles and waffle sticks. All
the breakfast and refrigerated and frozen dough prod-
ucts incorporate the well-known Doughboy logo. Frozen
pizza and snack products are marketed under the
Totino’s and Jeno’s trademarks.
Baking Products. We make and sell a line of dessert
mixes under the Betty Crocker trademark, including
01
SuperMoist cake mixes, Rich & Creamy and Soft
Whipped ready-to-spread frostings, Supreme brownie
and dessert bar mixes, muffin mixes and other mixes
used to prepare dessert and baking items. We market a
variety of baking mixes under the Bisquick trademark,
sell pouch mixes under the Betty Crocker name and
produce family flour under the Gold Medal brand
introduced in 1880.
Snacks. We market Pop(cid:127)Secret microwave popcorn; a
line of grain snacks including Nature Valley granola bars
and Milk n’Cereal bars; a line of fruit snacks including
Fruit Roll-Ups, Fruit By The Foot and Gushers; a line of
snack mix products including Chex Mix and Gardetto’s
snack mix; and savory snacks marketed under the
name Bugles.
Yoplait-Colombo. We manufacture and sell yogurt
products, including Yoplait Original, Yoplait Light, Yoplait
Thick and Creamy, Trix, Yumsters, Go-GURT - yogurt-in-a-
tube, Yoplait Whips! - a mousse-like yogurt, Yoplait
Nouriche - a meal replacement yogurt drink, Go-GURT
Smoothie - a yogurt beverage for kids, and Yoplait
Smoothie - an all-family snack size smoothie. We also
manufacture and sell a variety of refrigerated cup yogurt
products under the Colombo brand name.
Organic. We market organic frozen fruits and vegeta-
bles, a wide variety of canned tomato products including
tomatoes and spaghetti sauce, salsa, ketchup, soup,
frozen juice concentrates, pickles, fruit spreads, granola
bars, frozen desserts and cereal under our Cascadian
Farm and Muir Glen trademarks.
BAKERIES AND FOODSERVICE. We market mixes and
unbaked, par-baked and fully baked frozen dough
products to retail, supermarket and wholesale bakeries
under the Pillsbury and Gold Medal trademarks. In
addition, we sell flour to bakery, foodservice and manu-
facturing customers. We also market frozen dough
products, branded baking mixes, cereals, snacks, dinner
and side dish products, refrigerated and soft-serve frozen
yogurt, and custom food items to quick serve chains and
other restaurants, business and school cafeterias,
convenience stores and vending companies.
INTERNATIONAL. Our international businesses consist
of operations and sales in Canada, Latin America, Europe
and the Asia/Pacific region. Outside the United States,
we manufacture our products in 13 countries and
02
distribute them in over 100 countries. In Canada, we
market products in many categories, including cereals,
meals, refrigerated dough products, baking products and
snacks. Outside of North America, we offer numerous
local brands in addition to such internationally recog-
nized brands as Häagen-Dazs ice cream, Old El Paso
Mexican foods, Green Giant vegetables, Pillsbury dough
products and mixes, Betty Crocker mixes and Bugles
snacks. We also sell mixes and dough products to bakery
and foodservice customers outside of the United States
and Canada. These international businesses are
managed through 27 sales and marketing offices.
For additional geographic information please see
Note Eighteen to the Consolidated Financial Statements
appearing on pages 53 through 54 in Item Eight of
this report.
FINANCIAL INFORMATION ABOUT REPORTABLE
SEGMENTS
The following tables set forth the percentage of net sales
and operating profit from each reportable segment:
Percent of Net Sales
For Fiscal Years Ended May
U.S. Retail
Bakeries and Foodservice
International
Total
Percent of Operating Profit
2005
2004
2003
69%
16
15
100%
70%
16
14
100%
71%
17
12
100%
For Fiscal Years Ended May
U.S. Retail
Bakeries and Foodservice
International
Total
2005
2004
2003
85%
7
8
100%
88%
6
6
100%
88%
8
4
100%
Our management reviews operating results to evaluate
segment performance. Operating profit for the report-
able segments excludes unallocated corporate items
(including foreign currency transaction losses of
$6 million, $2 million and less than $1 million in fiscal
2005, 2004 and 2003, respectively); interest, including
minority interest, expense; restructuring and other exit
costs; gain on divestitures; debt repurchase costs;
income taxes; and earnings from joint ventures as they
are centrally managed at the corporate level and are
excluded from the measure of segment profitability
reviewed by management. Under our supply chain
organization, our manufacturing, warehouse and distribu-
tion activities are substantially integrated across our
operations in order to maximize efficiency and produc-
tivity. As a result, fixed assets, capital expenditures for
long-lived assets, and depreciation and amortization
expenses are neither maintained nor available by
operating segment.
Financial information for our reportable business
segments is set forth in Note Eighteen to the Consoli-
dated Financial Statements appearing on pages 53
through 54 in Item Eight of this report.
JOINT VENTURES
In addition to our consolidated operations, we manufac-
ture and sell products through several joint ventures.
Domestic Joint Venture. We have a 50 percent equity
interest in 8th Continent, LLC, a joint venture formed
with DuPont to develop and market soy-based products.
This venture began marketing a line of 8th Continent
soymilk to limited markets in July 2001 and nationally in
June 2003.
International Joint Ventures. We have a 50 percent
equity interest in Cereal Partners Worldwide (CPW), a
joint venture with Nestlé S.A., that distributes cereal
products in more than 130 countries and republics. The
cereal products marketed by CPW under the umbrella
Nestlé trademark in fiscal 2005 included: Chocapic, Cini
Minis, Cookie Crisp, Corn Flakes, Crunch, Fitness, Fitness
and Fruit, Honey Nut Cheerios, Cheerios, Nesquik,
Shredded Wheat and Shreddies. CPW also markets
cereal bars in several European countries and manufac-
tures private label cereals for customers in the
United Kingdom.
We have a 50 percent interest in each of four
joint ventures for the manufacture, distribution and
marketing of Häagen-Dazs frozen ice cream products
and novelties in Japan, Korea, Thailand and the Philip-
pines. We also have a 50 percent interest in Seretram, a
joint venture with Co-op de Pau for the production of
Green Giant canned corn in France.
See Note Four to the Consolidated Financial
Statements appearing on page 36 in Item Eight of
this report.
COMPETITION
The consumer foods market is highly competitive, with
numerous manufacturers of varying sizes in the United
States and throughout the world. Our principal strategies
for competing in each of our segments include superior
product quality, innovative advertising, product promo-
tion, product innovation and price. In most product
categories, we compete not only with other widely
advertised branded products, but also with generic
products and private label products, which are generally
sold at lower prices. Internationally, we compete prima-
rily with local manufacturers, and each country includes a
unique group of competitors.
CUSTOMERS
During fiscal 2005, one customer, Wal-Mart Stores, Inc.,
accounted for approximately 16 percent of our consoli-
dated net sales and 22 percent of our sales in the U.S.
Retail segment. No other customer accounted for 10
percent or more of our consolidated net sales. The top
five customers in our U.S. Retail segment accounted for
approximately 45 percent of its fiscal 2005 net sales. For
our Bakeries and Foodservice segment, the top five
customers accounted for approximately 34 percent of its
fiscal 2005 net sales.
SEASONALITY
In general, demand for our products is evenly balanced
throughout the year. However, demand for our refriger-
ated dough, frozen baked goods and baking products is
stronger in the fourth calendar quarter. Demand for
Progresso soup and Green Giant canned and frozen
vegetables is higher during the fall and winter months.
Internationally, demand for Häagen-Dazs ice cream is
higher during the summer months and demand for
baking mix and dough products increases during winter
months. Due to the offsetting impact of these demand
trends, as well as the different seasons in the northern
and southern hemispheres, our international net sales are
generally evenly balanced throughout the year.
03
GENERAL INFORMATION
Trademarks and Patents. Trademarks and service marks
are vital to our businesses. Our products are marketed
under trademarks and service marks that are owned by
or licensed to us. The most significant trademarks and
service marks used in our businesses are set forth in
italics in the business discussions above. These marks
include the trademarks used in our international joint
ventures that are owned by or licensed to the joint
ventures. In addition, some of our products are marketed
under or in combination with trademarks that have been
licensed from others, including Yoplait yogurt, Reese’s
Puffs cereal, Hershey’s chocolate included with a variety
of products, and a variety of characters and brands used
on fruit snacks, including Sunkist, Shrek, Care Bears and
various Warner Bros. characters. U.S. trademark and
service mark registrations are generally for a term of
10 years, renewable every 10 years as long as the
trademark is used in the regular course of trade.
J. M. Smucker Company (Smucker) holds an exclusive
royalty-free license to use the Doughboy trademark and
Pillsbury brand in the dessert mix and baking mix
categories. The license is renewable without cost in
20-year increments at Smucker’s discretion.
Given our focus on developing and marketing innova-
tive, proprietary products, we consider the collective
rights under our various patents, which expire from time
to time, a valuable asset, but we do not believe that our
businesses are materially dependent upon any single
patent or group of related patents.
Raw Materials and Supplies. The principal raw materials
that we use are grains, sugar, dairy products, vegetables,
fruits, meats, vegetable oils, other agricultural products,
plastic and paper packaging materials, operating
supplies and energy. We have some long-term fixed
price contracts, but the majority of our raw materials are
purchased on the open market. We believe that we will
be able to obtain an adequate supply of needed
ingredients and packaging materials. Occasionally and
where possible, we make advance purchases of items
significant to our business in order to ensure continuity
of operations. Our objective is to procure materials
meeting both our quality standards and our production
needs at the lowest total cost to us. Our strategy is to
buy these materials at price levels that allow a targeted
profit margin. Since commodities generally represent the
largest variable cost in manufacturing our products, to
04
the extent possible, we hedge the risk associated with
adverse price movements using exchange-traded futures
and options, forward cash contracts and over-the-counter
derivatives. These tools enable us to manage the related
commodity price risk over periods of time that exceed
the period of time in which the physical commodity is
available. See also Note Seven to the Consolidated
Financial Statements appearing on pages 38 through 40
in Item Eight of this report and the “Market Risk
Management” section of Management’s Discussion and
Analysis of Financial Condition and Results of Operations
appearing on pages 22 through 23 in Item Seven of
this report.
Capital Expenditures. During the fiscal year ended
May 29, 2005, our aggregate capital expenditures for
fixed assets and intangibles amounted to $434 million.
We expect to spend approximately $450 million for
capital projects in fiscal 2006, primarily for fixed assets
to support further growth and increase supply
chain productivity.
Research and Development. Major research and
development facilities are located at the Riverside
Technical Center in Minneapolis, Minnesota and the
James Ford Bell Technical Center in Golden Valley
(suburban Minneapolis), Minnesota. Our research and
development resources are focused on new product
development, product improvement, process design and
improvement, packaging and exploratory research in
new business areas. Research and development
expenditures amounted to $168 million in fiscal 2005,
$158 million in fiscal 2004 and $149 million in fiscal 2003.
Employees. At May 29, 2005, we had approximately
27,800 full- and part-time employees.
Food Quality and Safety Regulation. The manufacture
and sale of consumer food products is highly regulated.
In the United States, our activities are subject to regula-
tion by various government agencies, including the
Food and Drug Administration, United States Depart-
ment of Agriculture, Federal Trade Commission,
Department of Commerce and Environmental Protection
Agency, as well as various state and local agencies. Our
business is also regulated by similar agencies outside of
the United States.
Environmental Matters. As of June 2005, we were
involved with the following active cleanup sites associ-
ated with the alleged release or threatened release of
hazardous substances or wastes:
Site
Chemical of Concern
Central Steel Drum,
Newark, NJ
East Hennepin,
Minneapolis, MN
GBF/Pittsburgh,
Antioch, CA
King’s Road Landfill,
Toledo, OH
Kipp, KS
Northside Sanitary Landfill,
Zionsville, IN
Operating Industries,
Los Angeles, CA
PET,
St. Louis, MO
Sauget Landfill,
Sauget, IL
(cid:127)
No single hazardous material
specified
Trichloroethylene
No single hazardous material
specified
No single hazardous material
specified
Carbon tetrachloride
No single hazardous material
specified
No single hazardous material
specified
Tetrachloroethylene
No single hazardous material
specified
Shafer Metal Recycling,
Minneapolis, MN
Lead
Safer Textiles,
Moonachie, NJ
Stuckey’s,
Doolittle, MO
Tetrachloroethylene
Petroleum fuel products
These matters involve several different actions,
including litigation initiated by governmental authorities
and/or private parties, administrative proceedings
commenced by regulatory agencies, and demand letters
by regulatory agencies and/or private parties. Of the 12
matters in the table above, we are a party to current
litigation related to one cleanup site:
(cid:127) West Coast Home Builders, Inc. v. Ashland Inc.,
et al. involves a claim for an unspecified amount of
damages for the diminished value of property
adjacent to a State of California superfund site. The
cleanup of the site is covered by an existing settle-
ment agreement between the State of California
and a group of the potentially responsible parties,
including us. The complaint was filed last year
naming numerous parties including us, but we have
not yet been served. In addition, the potentially
responsible parties have an insurance policy that
covers the costs of cleanup in excess of amounts
already paid, including third party claims related to
the site. The insurer is defending, under a reservation of
rights, its insureds that have been named and served. We
believe the claims are covered by the insurance policy
and that even if we are served we do not have any
financial exposure as a result of this litigation.
SPPI-Sommerville Inc., et al v. TRC Companies, Inc.,
et al. involves a claim for an unspecified amount of
damages for the diminished value of another parcel
of property adjacent to the same State of California
superfund site as the West Coast Home Builders
claim. This claim has been filed with the court but
has not yet been served on us. As with the West
Coast Home Builders claim, the potentially respon-
sible parties have an insurance policy that covers the
costs of cleanup in excess of amounts already paid,
including third party claims related to the site. The
insurer is defending, under a reservation of rights, its
insureds that have been named and served. We
believe the claims are covered by the insurance
policy and that even if we are served we
do not have any financial exposure as a result of
this litigation.
We recognize that our potential exposure with respect
to any of these sites may be joint and several, but have
concluded that our probable aggregate exposure is not
material. This conclusion is based upon, among other
things, our payments and/or accruals with respect to
each site; the number, ranking and financial strength of
other potentially responsible parties identified at each of
the sites; the status of the proceedings, including various
settlement agreements, consent decrees or court orders;
allocations of volumetric waste contributions and
allocations of relative responsibility among potentially
responsible parties developed by regulatory agencies
and by private parties; remediation cost estimates
prepared by governmental authorities or private tech-
nical consultants; and our historical experience in
negotiating and settling disputes with respect to
similar sites.
Our operations are subject to the Clean Air Act, Clean
Water Act, Resource Conservation and Recovery Act,
Comprehensive Environmental Response, Compensation
and Liability Act, and the Federal Insecticide, Fungicide
05
and Rodenticide Act, and all similar state environmental
laws applicable to the jurisdictions in which we operate.
Based on current facts and circumstances, we believe
that neither the results of our environmental proceedings
nor our compliance in general with environmental laws or
regulations will have a material adverse effect upon our
capital expenditures, earnings or competitive position.
EXECUTIVE OFFICERS OF THE REGISTRANT
The section below summarizes our executive officers,
together with their ages and business experience:
Y. Marc Belton, age 46, is Senior Vice President, World-
wide Health, Brand and New Business Development.
Mr. Belton joined General Mills in 1983 and has held
various positions throughout General Mills, including
President of Snacks Unlimited from 1994 to 1997, New
Ventures from 1997 to 1999 and Big G from 1999 to 2002.
From 2002 to May 2005, Mr. Belton was a Senior Vice
President of General Mills with oversight responsibility
for Yoplait, General Mills Canada and New Business
Development. Mr. Belton was elected a Vice President of
General Mills in 1991, a Senior Vice President in 1994 and
to his current position in May 2005. Mr. Belton is a
director of Navistar International Corporation.
Randy G. Darcy, age 54, is Executive Vice President,
Worldwide Operations and Technology. Mr. Darcy joined
General Mills in 1987, was named Vice President,
Director of Manufacturing, Technology and Operations in
1989, served as Senior Vice President, Supply Chain from
1994 to 2003 and Senior Vice President, Chief Technical
Officer with responsibilities for Supply Chain, Research
and Development, and Quality and Regulatory Opera-
tions from 2003 to 2005. He was named to his present
position in May 2005. Mr. Darcy was employed by Procter
& Gamble from 1973 to 1987, serving in a variety of
management positions.
Rory A. M. Delaney, age 60, is Senior Vice President,
Strategic Technology Development. Mr. Delaney joined
General Mills in this position in 2001 from The Pillsbury
Company where he spent a total of eight years, last
serving as Senior Vice President of Technology, respon-
sible for the development and application of food
technologies for Pillsbury’s global operations. Prior to
joining The Pillsbury Company, Mr. Delaney spent
18 years with PepsiCo, last serving as Senior Vice
President of Technology for Frito-Lay North America.
06
James A. Lawrence, age 52, is Executive Vice President,
Chief Financial Officer and International. Mr. Lawrence
joined General Mills as Chief Financial Officer in 1998
from Northwest Airlines where he was Executive Vice
President, Chief Financial Officer. Prior to joining North-
west Airlines in 1996, he was at Pepsi-Cola International,
serving initially as Executive Vice President and subse-
quently as President and Chief Executive Officer for its
operations in Asia, the Middle East and Africa.
Mr. Lawrence is a director of Avnet, Inc.
Siri S. Marshall, age 57, is Senior Vice President, General
Counsel, Chief Governance and Compliance Officer and
Secretary. Ms. Marshall joined General Mills in 1994 as
Senior Vice President, General Counsel and Secretary
from Avon Products, Inc. where she spent 15 years, last
serving as Senior Vice President, General Counsel
and Secretary.
Michael A. Peel, age 55, is Senior Vice President,
Human Resources and Corporate Services. Mr. Peel
joined General Mills in this position in 1991 from PepsiCo
where he spent 14 years, last serving as Senior Vice
President, Human Resources, responsible for PepsiCo
Worldwide Foods. Mr. Peel is a director of Select
Comfort Corporation.
Kendall J. Powell, age 51, is Executive Vice President
and Chief Operating Officer, U.S. Retail. Mr. Powell
joined General Mills in 1979 and held various positions
before becoming Vice President, Marketing Director of
Cereal Partners Worldwide in 1990. He was President of
Yoplait in 1996, named President of the Big G division in
1997 and appointed Senior Vice President of General
Mills in 1998. From 1999 to 2004, he was Chief Executive
Officer of Cereal Partners Worldwide and was elected
Executive Vice President of General Mills in 2004 with
responsibilities for our Meals, Pillsbury USA, Baking
Products and Bakeries and Foodservice divisions.
Mr. Powell was named to his present position in
May 2005.
Jeffrey J. Rotsch, age 55, is Executive Vice President,
Worldwide Sales and Channel Development. Mr. Rotsch
joined General Mills in 1974 and served as the President
of several divisions, including Betty Crocker and Big G
cereals. He served as Senior Vice President from 1993 to
2005 and as President, Consumer Foods Sales, from 1997
to 2005. Mr. Rotsch was named to his present position in
May 2005.
Stephen W. Sanger, age 59, has been Chairman of the
Board and Chief Executive Officer of General Mills since
1995. Mr. Sanger joined General Mills in 1974 and served
as the head of several business units, including Yoplait
USA and Big G cereals. He was elected a Senior Vice
President in 1989, an Executive Vice President in 1991,
Vice Chairman in 1992 and President in 1993. He is a
director of Target Corporation and Wells Fargo
& Company.
Christina L. Shea, age 52, is Senior Vice President,
External Relations and President, General Mills Founda-
tion. Ms. Shea joined General Mills in 1977 and has held
various positions in the Big G, Yoplait/Colombo, Gold
Medal, Snacks and Betty Crocker divisions. From 1994 to
1999, she was President of the Betty Crocker division and
was named a Senior Vice President of General Mills in
1998. She became President of General Mills Community
Action and the General Mills Foundation in 2002 and was
named to her current position in May 2005.
Kenneth L. Thome, age 57, is Senior Vice President,
Financial Operations. Mr. Thome joined General Mills in
1969 and was named Vice President, Controller for
Convenience and International Foods Group in 1985,
Vice President, Controller for International Foods in 1989,
Vice President, Director of Information Systems in 1991
and was elected to his present position in 1993.
AVAILABLE INFORMATION
Availability of Reports. We are a reporting company
under the Securities Exchange Act of 1934, as amended
(the 1934 Act), and file reports, proxy statements and
other information with the Securities and Exchange
Commission (the SEC). The public may read and copy
any of our filings at the SEC’s Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549. You may
obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
Because we make filings to the SEC electronically, you
may access this information at the SEC’s internet website:
www.sec.gov. This site contains reports, proxies and
information statements and other information regarding
issuers that file electronically with the SEC.
Website Access. Our website address is
www.generalmills.com. We make available, free of charge
at the “Investors” portion of this website, annual reports
on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the
1934 Act as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the
SEC. Reports of beneficial ownership filed pursuant to
Section 16(a) of the 1934 Act are also available on
our website.
CAUTIONARY STATEMENT RELEVANT TO
FORWARD-LOOKING INFORMATION FOR THE
PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
This report contains or incorporates by reference
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are
based on our management’s current expectations and
assumptions. We and our representatives also may from
time to time make written or oral forward-looking
statements, including statements contained in our filings
with the SEC and in our reports to stockholders.
The words or phrases “will likely result,” “are expected
to,” “will continue,” “is anticipated,” “estimate,”
“project” or similar expressions identify “forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties that could cause
actual results to differ materially from potential results
discussed in such statements. We wish to caution you not
to place undue reliance on any such forward-looking
statements, which speak only as of the date made.
In connection with the “safe harbor” provisions of the
Private Securities Litigation Reform Act of 1995, we are
identifying important factors that could affect our
financial performance and could cause our actual results
for future periods to differ materially from any opinions
or statements expressed with respect to future periods in
any current statements.
Our future results could be affected by a variety of
factors, such as:
(cid:127)
(cid:127)
competitive dynamics in the consumer foods
industry and the markets for our products,
including new product introductions, adver-
tising activities, pricing actions and promotional
activities of our competitors;
actions of competitors other than as described
above;
07
Item 2 Properties
We own our principal executive offices and main
research facilities, which are located in the Minneapolis,
Minnesota metropolitan area. We operate numerous
manufacturing facilities and maintain many sales and
administrative offices and warehouses, mainly in the
United States. Other facilities are operated in Canada
and elsewhere around the world.
As of May 2005, we operated 60 facilities for the
production of a wide variety of food products. Of these
plants, 35 are located in the United States, eight in Asia,
seven in Canada and Mexico, five in Europe, four in Latin
America and one in South Africa. The following table lists
the locations of our principal North American production
facilities, all of which are owned by us:
Irapuato, Mexico
(cid:127)
Trenton, Ontario
(cid:127)
Lodi, California
(cid:127)
Carson, California
(cid:127)
Covington, Georgia
(cid:127)
Cedar Rapids, Iowa
(cid:127)
(cid:127)
Belvidere, Illinois
(cid:127) West Chicago, Illinois
New Albany, Indiana
(cid:127)
Reed City, Michigan
(cid:127)
Chanhassen, Minnesota
(cid:127)
Hannibal, Missouri
(cid:127)
Joplin, Missouri
(cid:127)
Vineland, New Jersey
(cid:127)
Albuquerque, New Mexico
(cid:127)
Buffalo, New York
(cid:127)
(cid:127) Martel, Ohio
(cid:127) Wellston, Ohio
(cid:127) Murfreesboro, Tennessee
(cid:127) Milwaukee, Wisconsin
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
(cid:127)
economic conditions, including changes in
inflation rates, interest rates or tax rates;
product development and innovation;
consumer acceptance of new products and
product improvements;
consumer reaction to pricing actions and
changes in promotion levels;
acquisitions or dispositions of businesses
or assets;
changes in capital structure;
changes in laws and regulations, including
changes in accounting standards and labeling
and advertising regulations;
changes in customer demand for our products;
effectiveness of advertising, marketing and
promotional programs;
changes in consumer behavior, trends and
preferences, including weight loss trends;
consumer perception of health-related issues,
including obesity;
changes in purchasing and inventory levels of
significant customers;
fluctuations in the cost and availability of supply
chain resources, including raw materials,
packaging and energy;
benefit plan expenses due to changes in plan
asset values and discount rates used to
determine plan liabilities;
foreign economic conditions, including
currency rate fluctuations; and
political unrest in foreign markets and
economic uncertainty due to terrorism or war.
We undertake no obligation to publicly revise any
forward-looking statements to reflect future events
or circumstances.
Our debt securities are rated by rating organizations.
You should note that a security rating is not a recommen-
dation to buy, sell or hold securities, that it is subject to
revision or withdrawal at any time by the assigning rating
agency and that each rating should be evaluated
independently of any other rating.
08
We own flour mills at eight locations: Avon, Iowa;
Buffalo, New York; Great Falls, Montana; Kansas City,
Missouri; Minneapolis, Minnesota (2); Vallejo, California
(not currently operating); and Vernon, California. We
operate seven terminal grain elevators (in Minnesota and
Wisconsin), and have country grain elevators in seven
locations (primarily in Idaho), plus additional seasonal
elevators (primarily in Idaho).
We also own or lease warehouse space aggregating
approximately 12,100,000 square feet, of which approxi-
mately 9,500,000 square feet are leased. We lease
a number of sales and administrative offices in the
United States, Canada and elsewhere around the world,
totaling approximately 2,900,000 square feet.
Item 3 Legal Proceedings
We are the subject of various pending or threatened
legal actions in the ordinary course of our business. All
such matters are subject to many uncertainties and
outcomes that are not predictable with assurance. In our
management’s opinion, there were no claims or litigation
pending as of May 29, 2005, that are reasonably likely to
have a material adverse effect on our consolidated
financial position or results of operations. See the
information contained under the section entitled
“Environmental Matters,” on pages 5 and 6 of this
report, for a discussion of environmental matters in which
we are involved.
On October 15, 2003, we announced that the SEC had
issued a formal request for information concerning our
sales practices and related accounting. On February 3,
2004, we announced that the Staff of the SEC had issued
a Wells notice reflecting the Staff’s intention to recom-
mend that the SEC bring a civil action against us, our
Chief Executive Officer and our Chief Financial Officer.
On June 2, 2005, we announced that the SEC’s Staff had
decided to terminate its investigation of our sales
practices and related accounting. The SEC’s Staff notified
us that it had decided not to recommend an enforce-
ment action against us, our Chief Executive Officer or our
Chief Financial Officer.
Item 4 Submission of Matters to
a Vote of Security Holders
No matters require disclosure here.
09
PART II
Item 5 Market for Registrant’s
Common Equity and
Related Stockholder
Matters
Our common stock is listed on the New York Stock
Exchange. On July 15, 2005, there were approximately
36,065 record holders of our common stock. Information
regarding the market prices for our common stock and
dividend payments for the two most recent fiscal years is
set forth in Note Twenty to the Consolidated Financial
Statements on page 55 in Item Eight of this report.
Information regarding restrictions on our ability to pay
dividends in certain situations is set forth in Note Nine to
the Consolidated Financial Statements on pages 42 and
43 in Item Eight of this report.
The following table sets forth information with respect
to shares of our common stock that we purchased during
the three fiscal months ended May 29, 2005.
Item 6 Selected Financial Data
Total
Number
of Shares
Purchased(a)
Average
Price Paid
Per Share
Total Number
of Shares
Purchased as
Part of a
Publicly
Announced
Program
Maximum
Number
of Shares
that may yet
be Purchased
Under the
Program(b)
49,067
$49.83
80,223
$48.90
—
—
—
—
34,915
164,205
$49.36
$49.28
—
—
— 37,391,653
Period
February 28,
2005 through
April 3, 2005
April 4, 2005
through
May 1, 2005
May 2, 2005
through
May 29, 2005
Total
(a)
(b)
The total number of shares purchased includes: (i) 88,400
shares purchased from the ESOP fund of our 401(k) savings
plan, (ii) 55,000 shares purchased by the trust for our 401(k)
savings plan and (iii) 20,805 shares of restricted stock
withheld for the payment of withholding taxes upon vesting
of restricted stock.
On February 21, 2000, we announced that our Board of
Directors approved a program to repurchase General Mills
common stock, with a maximum of 170 million shares to be
held in our treasury. The Board did not specify an expiration
date for the program.
The following table sets forth selected financial data for each of the fiscal years in the five-year period ended
May 29, 2005.
In Millions, Except Per Share Data
Fiscal Year Ended
Earnings per share — basic
Earnings per share — diluted
Net sales
Net earnings
Total assets
Long-term debt, excluding current portion
Stockholders’ equity
Dividends per share
$
May 29,
2005
3.34
3.08
11,244
1,240
18,066
4,255
5,676
1.24
$
May 30,
2004
2.82
2.60
11,070
1,055
18,448
7,410
5,248
1.10
$
May 25,
2003
2.49
2.35
10,506
917
18,227
7,516
4,175
1.10
$
May 26,
2002
1.38
1.34
7,949
458
16,540
5,591
3,576
1.10
May 27,
2001
$ 2.34
2.28
5,450
665
5,091
2,221
52
1.10
Diluted earnings per share for fiscal 2004 and 2003 have been restated for the adoption of EITF Issue 04-8.
All sales-related and selling, general and administrative information prior to fiscal 2002 has been restated for the adoption of EITF
Issue 01-09.
Our acquisition of Pillsbury on October 31, 2001, significantly affected our financial condition and results of operations beginning in
fiscal 2002.
10
Item 7 Management’s Discussion and Analysis of Financial Condition
and Results of Operations
EXECUTIVE OVERVIEW
We are a global consumer foods company. We develop
differentiated food products and market these value-
added products under unique brand names. We
work continuously on product innovation to improve our
established brands and to create new products that meet
consumers’ evolving needs and preferences. In addition,
we build the equity of our brands over time with strong
consumer-directed marketing and innovative merchan-
dising. We believe our brand-building strategy is the key
to winning and sustaining leading share positions in
markets around the globe.
Our businesses are organized into three segments.
Our U.S. Retail segment accounted for approximately
69 percent of our fiscal 2005 net sales, and reflects
business with a wide variety of grocery stores; specialty
stores; drug, dollar and discount chains; and mass
merchandisers operating throughout the United States.
Our major product categories in this business segment
are: ready-to-eat cereals, meals, refrigerated and frozen
dough products, baking products, snacks, yogurt and
organic foods. Our Bakeries and Foodservice segment
generated approximately 16 percent of fiscal 2005 net
sales. This business segment consists of products
marketed to retail and wholesale bakeries, to commercial
and noncommercial foodservice distributors and opera-
tors, and to convenience stores throughout the United
States and Canada. The remaining 15 percent of our
fiscal 2005 net sales was generated by our consolidated
International businesses. These include a retail business
in Canada that largely mirrors our U.S. retail product mix,
along with retail and foodservice businesses competing
in key markets in Europe, Latin America and the
Asia/Pacific region. In addition to these consolidated
operations, we participate in several joint ventures. We
record our proportionate share of after-tax earnings or
losses from these ventures.
Our fundamental business goal is to generate superior
returns for our stockholders over the long term by
delivering growth in sales and earnings while improving
return on capital, coupled with an attractive dividend
yield. In the most recent fiscal year, General Mills’ total
return to stockholders was 11 percent, while the S&P 500
Index returned 9 percent; from fiscal 2000 to 2005,
General Mills’ total return to stockholders averaged
7 percent while the S&P 500 Index posted a negative
1 percent average annual return over this period.
For the fiscal year ended May 29, 2005, our net sales
grew 2 percent and diluted earnings per share grew
18 percent including the benefit of gains on divestitures.
Details of our financial results are provided in the
“Results of Operations” section below. Our cash flow in
2005 was strong, enabling us to increase our dividend
payments, continue to make significant fixed asset
investments to support future growth and productivity,
and reduce our total debt by $2.0 billion.
Results for fiscal 2005 were limited by two principal
factors. First, higher commodity costs led to a reduction
in our gross margin. Second, we increased list and/or
targeted promoted prices in several categories in order
to partially offset the higher commodity costs. In some
instances, price gaps developed versus competitors, and
we subsequently increased trade promotion costs in
order to remain competitive. This was particularly true for
promoted prices in the cereal category, where the price
gap led to reduced volume and profit for the Big G
cereal division. However, slight profit growth in our
Bakeries and Foodservice segment was encouraging, as
was the continued success of our international
expansion plans.
As we begin fiscal 2006, we are encouraged by the
momentum in several of our key businesses. Sustaining
that momentum and restoring growth in our U.S. cereal
business will be key to achieving our targeted results in
2006. In addition, we must renew good earnings growth
in our Bakeries and Foodservice segment. We face
several challenges that will hinder earnings growth in the
year ahead. Commodity prices continue to rise, although
not as quickly as they did in 2005, and energy costs and
our salary and benefit expense are expected to be
higher. These increasing costs will negatively impact our
margins; therefore, in order for our plan to be successful
we must restore growth in our margin rate. To offset the
increasing costs and grow margins, our plans call for
continued realization of price increases we announced in
fiscal 2005 combined with productivity savings through
supply chain and administrative cost-saving efforts.
We believe the key driver of our success in 2006 will be
operating profit growth, which will be driven by product
innovation and net sales growth. Our business plans
include new product activity and innovations that
respond to consumers’ interest in health and nutrition,
convenience and new flavor varieties.
11
RESULTS OF OPERATIONS — 2005 VS. 2004
Our net sales for fiscal 2005 were $11.2 billion, an
increase of 2 percent for the year compared to sales in
fiscal 2004. Excluding the effect of the 53rd week in 2004,
net sales increased 3 percent. The components of net
sales growth are shown in the following table:
Components of Net Sales Growth
Fiscal 2005 vs. Fiscal 2004
Unit Volume Growth:
52 vs. 52-week Basis (as if fiscal 2004 contained
+2 pts
52 weeks)
Absence of 53rd week
Price/Product Mix/Foreign Currency Exchange
Trade and Coupon Promotion Expense
Net Sales Growth
–1 pt
+4 pts
–3 pts
+2%
The unit volume growth in fiscal 2005 contributed
approximately $17 million in gross margin improvement
(net sales less cost of sales) over fiscal 2004. However,
overall gross margin decreased by $77 million, primarily
due to increased cost of sales driven primarily by
approximately $170 million in commodity cost increases.
As a result, gross margin as a percent of net sales
decreased 130 basis points versus fiscal 2004 to 39
percent in fiscal 2005.
Selling, general and administrative costs decreased by
$25 million from fiscal 2004 to fiscal 2005, primarily driven
by four factors: a $54 million decrease in consumer
marketing expense, a $37 million increase in distribution
costs, a $32 million increase in unallocated corporate
items and a $34 million decrease in merger-related costs.
These merger-related costs were items related to the
planning and execution of the integration of Pillsbury.
Net interest expense decreased 10 percent from
$508 million in fiscal 2004 to $455 million in fiscal 2005,
primarily due to reduction of debt levels. Interest
expense includes preferred distributions paid on subsid-
iary minority interests. We have in place a net amount of
interest rate swaps that convert $645 million of fixed-rate
debt to floating rates. Taking into account the effect of
our interest rate swaps, the average interest rate on our
total outstanding debt and subsidiary minority interests
was 5.4 percent.
Restructuring and other exit costs were $84 million in
fiscal 2005. These charges were primarily associated with
the supply chain initiatives to further increase asset
utilization and reduce manufacturing and sourcing costs.
12
The actions included plant closures and production
realignment resulting in asset write-downs, severance
and related costs. Our fiscal 2004 results included
restructuring and other exit costs of $26 million.
We recorded a gain of $499 million on two divestitures
in fiscal 2005. On February 28, 2005, Snack Ventures
Europe (SVE), our snacks joint venture with PepsiCo, Inc.,
was terminated and our 40.5 percent interest was
redeemed. On April 4, 2005, we sold our Lloyd’s
barbecue business to Hormel Foods Corporation.
We received $799 million in cash proceeds from these
dispositions and the proceeds were used to
repurchase debt. In fiscal 2005, we earned $28 million
after tax from SVE and Lloyd’s.
We incurred $137 million in debt repurchase costs in
fiscal 2005 resulting from the repurchase of $760 million
in aggregate principal amount of our outstanding 6%
Notes due in 2012. The costs consisted of $73 million of
noncash interest rate swap losses reclassified from
Accumulated Other Comprehensive Income, $59 million
of purchase premium and $5 million of non-cash
unamortized cost of issuance expense.
In fiscal 2005 our effective income tax rate increased to
36.6 percent, driven primarily by the tax impacts of our
fiscal 2005 divestitures. The higher book tax expense
related to the fiscal 2005 divestitures did not result in
the payment of significant cash taxes. Our effective
income tax rate was 35 percent in fiscal 2004. We expect
our effective tax rate in fiscal 2006 to be approximately
35.5 percent.
After-tax earnings from joint venture operations grew
20 percent to reach $89 million in fiscal 2005, compared
with $74 million reported a year earlier. This increase was
primarily due to unit volume gains by our continuing
joint ventures. As of May 29, 2005, we were a 50 percent
partner in several joint ventures. Our international joint
ventures include Cereal Partners Worldwide (CPW), our
joint venture with Nestlé, and Häagen-Dazs joint
ventures in Asia. 8th Continent is our domestic joint
venture with DuPont to develop and market soy
beverages. On February 28, 2005, we announced the
redemption of our 40.5 percent share of SVE as
described above.
Our results of operations reflect the adoption of
Emerging Issues Task Force Issue No. 04–8 (EITF 04–8),
“The Effect of Contingently Convertible Debt on Diluted
Earnings per Share.” The effect of EITF 04-8 reduced our
fiscal 2005 diluted earnings per share by $0.19, and
reduced previously reported diluted earnings per share
by $0.15 and $0.08 for fiscal 2004 and 2003, respectively,
related to our contingently convertible debt issued
in 2002.
Average diluted shares outstanding were 409 million in
fiscal 2005, down 1 percent from 413 million in fiscal 2004
as the repurchase of 17 million shares from Diageo was
partially offset by stock option exercises.
Net income increased to $1.24 billion in fiscal 2005,
from $1.06 billion in 2004. Earnings per diluted share of
$3.08 in 2005 were up 18 percent from $2.60 in 2004
primarily due to the redemption of our SVE interest, the
sale of Lloyd’s and the reduction in interest expense.
OPERATING SEGMENT RESULTS
U.S. Retail Segment
Net sales for our U.S. Retail operations totaled
$7.78 billion in fiscal 2005, compared to $7.76 billion in
fiscal 2004. The components of the change in net sales
are shown in the following table:
Components of U.S. Retail Change in Net Sales
Fiscal 2005 vs. Fiscal 2004
Unit Volume Growth:
52 vs. 52-week Basis (as if fiscal 2004 contained
+3 pts
52 weeks)
Absence of 53rd week
Price/Product Mix
Trade and Coupon Promotion Expense
Change in Net Sales
–2 pts
+2 pts
–3 pts
Flat
Unit volume grew 1 percent versus fiscal 2004.
Excluding the prior year’s extra week, unit volume grew
3 percent. All of our U.S. Retail divisions with the excep-
tion of Big G cereals experienced volume growth for
the year:
U.S. Retail Unit Volume Growth
Fiscal 2005 vs. Fiscal 2004
Yoplait
Snacks
Baking Products
Meals
Pillsbury USA
Big G Cereals
Total U.S. Retail
52 vs. 52-week Basis (as if fiscal 2004 contained 52 weeks)
+11%
+2
+1
+1
+1
–5
+1%
+3%
Big G cereal volume fell 5 percent in fiscal 2005, with
contributions from new products including reduced-
sugar versions of Cinnamon Toast Crunch, Trix and
Cocoa Puffs more than offset by the loss of volume
associated with the increases in list and/or promoted
prices. Yoplait yogurt volume increased 11 percent with
continued growth from established cup yogurt lines.
Snacks division volume was up 2 percent, led by the
introduction of new Nature Valley granola bar products.
Meals division unit volume rose 1 percent with growth in
our Progresso, Hamburger Helper and Old El Paso
businesses. Unit volume growth of 1 percent for Pillsbury
USA reflected gains for refrigerated cookies and bread
and Totino’s pizza and hot snacks. Baking Products
division unit volume was up 1 percent behind growth in
mass merchandising channels.
13
Retail dollar sales for our major brands grew 2 percent
Bakeries and Foodservice Segment
overall on a 52 versus 52-week basis as measured by
ACNielsen including panel projections for Wal-Mart:
General Mills
Retail Dollar Sales Growth (52 vs. 52-week Basis)
Fiscal 2005 vs. Fiscal 2004
Composite Retail Sales
Major Product Lines:
Ready-to-serve Soup
Refrigerated Yogurt
Dessert Mixes
Refrigerated Dough
Grain Snacks
Dry Dinners
Ready-to-eat Cereals
Fruit Snacks
Source: ACNielsen including panel projections for Wal-Mart
+2%
+12%
+8
+6
+5
+3
+2
–2
–3
The unit volume growth in fiscal 2005 contributed
approximately $13 million in gross margin improvement
over fiscal 2004, but overall gross margin decreased by
$144 million. Cost of sales increased by $161 million,
driven primarily by commodity cost increases, and net
pricing realization (defined as the impact of list and
promoted price increases net of increases in trade
promotion costs) did not contribute to offset those
increased costs. Gross margin as a percent of net sales
decreased 200 basis points versus fiscal 2004 to 43
percent in fiscal 2005.
Selling, general and administrative costs decreased by
$54 million, primarily due to decreases in consumer
marketing spending.
Operating profits declined to $1.72 billion, down from
$1.81 billion in fiscal 2004.
Net sales for our Bakeries and Foodservice operations
decreased slightly to $1.74 billion in fiscal 2005
compared to $1.76 billion in fiscal 2004. The components
of the change in net sales are shown in the
following table:
Components of Bakeries and Foodservice
Change in Net Sales
Fiscal 2005 vs. Fiscal 2004
Unit Volume Growth:
52 vs. 52-week Basis (as if fiscal 2004 contained
–3 pts
52 weeks)
Absence of 53rd week
Price/Product Mix
Trade and Coupon Promotion Expense
Change in Net Sales
–2 pts
+4 pts
Flat
–1%
Unit volume was down 5 percent, or down 3 percent
on a comparable 52-week basis, reflecting softness in
shipments to our foodservice distributors and bakery
customers that was partially offset by growth in sales to
convenience stores. Unit volume by major customer
category was:
Bakeries and Foodservice Unit Volume Growth
Fiscal 2005 vs. Fiscal 2004
Convenience Stores/Vending
Wholesale/In-store Bakery
Distributors/Restaurants
Total Bakeries and Foodservice
52 vs. 52-week Basis (as if fiscal 2004 contained 52 weeks)
+17%
–6
–9
–5%
–3%
The unit volume decline in fiscal 2005 reduced gross
margin by approximately $22 million compared to fiscal
2004. However, overall gross margin increased by
$5 million as an increase in cost of sales was offset by
positive net pricing realization. Gross margin as a percent
of net sales increased slightly versus fiscal 2004 to 26
percent in fiscal 2005.
Selling, general and administrative costs increased by
only $3 million.
Operating profits increased from $132 million in fiscal
2004 to $134 million in fiscal 2005.
14
International Segment
Net sales for our International operations totaled
$1.72 billion in fiscal 2005 compared to $1.55 billion in
2004. The components of net sales growth are shown in
the following table:
Components of International Net Sales Growth
Fiscal 2005 vs. Fiscal 2004
cost of sales) associated with restructuring and other
exit activities. Fiscal 2004 expense was $17 million,
including merger-related costs of $34 million. The
primary factors accounting for the remaining variance
were severance costs of $21 million in fiscal 2005 that
were not associated with restructuring and other exit
activities, and an increase of $9 million in stock-based
compensation expense.
Unit Volume Growth:
JOINT VENTURES
52 vs. 52-week Basis (as if fiscal 2004 contained
+6 pts
52 weeks)
Absence of 53rd week
Price/Product Mix
Foreign Currency Exchange
Trade and Coupon Promotion Expense
Net Sales Growth
–1 pt
+3 pts
+6 pts
–3 pts
+11%
Unit volume grew 5 percent for the year and compa-
rable 52-week volume was up 6 percent. International
unit volume growth was driven by 12 percent growth in
the Asia/Pacific region:
International Unit Volume Growth
Fiscal 2005 vs. Fiscal 2004
Asia/Pacific
Latin America
Canada
Europe
Consolidated International
52 vs. 52-week Basis (as if fiscal 2004 contained 52 weeks)
+12%
+8
+2
+1
+5%
+6%
Using constant exchange rates to translate compo-
nents of earnings, the unit volume increase in fiscal 2005
improved gross margin by approximately $27 million;
overall gross margin increased by $52 million, as net
price realization more than offset increases in cost of
sales; gross margin as a percent of sales improved to 35
percent; selling, general and administrative costs
increased $10 million; and operating profit increased
$42 million, or 35 percent over fiscal 2004.
Operating profits including the favorable effects of
foreign currency rate changes grew to $171 million,
44 percent above last year’s $119 million.
UNALLOCATED CORPORATE ITEMS
Unallocated corporate items were $32 million in expense
in fiscal 2005, including $18 million in costs (classified as
Our share of after-tax joint venture earnings increased
from $74 million in fiscal 2004 to $89 million in fiscal 2005,
primarily due to unit volume gains in our continuing
ventures, as follows:
Joint Ventures Unit Volume Growth
Fiscal 2005 vs. Fiscal 2004
CPW
Häagen-Dazs
8th Continent
Ongoing Joint Ventures
+4%
+3
+29
+4%
Our interest in SVE was redeemed in February 2005,
and therefore is excluded from the table above.
Our joint ventures do not share our fiscal year, and
therefore did not have the benefit of a 53rd week in
fiscal 2004.
RESULTS OF OPERATIONS — 2004 VS. 2003
Net earnings for the 53-week fiscal 2004 were $1.06
billion, up 15 percent from fiscal 2003. Diluted earnings
per share were $2.60 compared to $2.35 in fiscal 2003, as
adjusted for the effects of EITF 04-8. Annual net sales
rose 5 percent, to $11.1 billion, driven by a 3 percent
increase in worldwide unit volume and a 2 percent
increase in net price realization, including foreign
exchange. Excluding the effect of the 53rd week, net
sales increased 4 percent. This performance reflected
improvement in our U.S. Retail and International
segments, but was constrained by economic and
internal factors limiting growth in our Bakeries and
Foodservice segment.
U.S. Retail unit volume grew 4 percent in fiscal 2004, or
2 percent excluding the 53rd week. All of our U.S. Retail
divisions experienced volume growth, fueled by an
increase in product and marketing innovation. Net sales
15
for these operations totaled $7.76 billion in fiscal 2004,
compared to $7.41 billion in fiscal 2003. Operating profits
totaled $1.81 billion, up 3 percent from $1.75 billion in
the prior year.
Bakeries and Foodservice results in fiscal 2004
included a unit volume decline of 3 percent, or 4 percent
excluding the extra week, reflecting softness in our
bakery business and elimination of low-margin product
lines. Net sales fell slightly to $1.76 billion in fiscal 2004
compared to $1.80 billion in fiscal 2003, while operating
profit declined 15 percent from $156 million in fiscal 2003
to $132 million in fiscal 2004.
International unit volume increased 5 percent in fiscal
2004, or 4 percent excluding the extra week, driven by
growth in the Asia/Pacific region, Canada and Europe.
Net sales totaled $1.55 billion in fiscal 2004 compared
to $1.30 billion in 2003, and operating profits grew to
$119 million, up 31 percent from the prior year’s
$91 million total.
Unallocated corporate items decreased from $76
million in fiscal 2003 to $17 million in fiscal 2004, primarily
driven by a $36 million decrease in merger-related costs
as the integration of Pillsbury was completed during
the year.
Our share of after-tax joint venture earnings increased
from $61 million in fiscal 2003 to $74 million in fiscal 2004,
primarily due to unit volume gains.
IMPACT OF INFLATION
It is our view that changes in the general rate of inflation
have not had a significant effect on profitability over the
three most recent years other than as noted above
related to commodities. We attempt to minimize the
effects of inflation through appropriate planning and
operating practices. Our risk management practices are
discussed in the “Market Risk Management”
section below.
CASH FLOWS
Sources and uses of cash in the past three years are
shown in the following table. Over the most recent
three-year period, General Mills’ operations have
generated $4.8 billion in cash. In fiscal 2005, cash flow
from operations totaled over $1.7 billion. That was up
from the previous year due primarily to the change in
16
current assets and liabilities included in cash flows from
operations providing $258 million cash in 2005 versus
using $186 million cash in 2004. The fiscal 2005 source of
cash was due primarily to an increase in accrued taxes as
the result of receiving cash benefits from the utilization of
capital losses for tax purposes. The fiscal 2004 use of
cash was primarily due to lower accrued liabilities,
payments against integration and restructuring liabilities,
and changes in accrued taxes.
Cash Sources (Uses)
In Millions, Fiscal Year
From continuing operations
Purchases of land, buildings and
2005
$ 1,711
2004
$ 1,461
2003
$ 1,631
equipment, net
(390)
(592)
(697)
Investments in businesses,
intangibles and affiliates, net
Change in marketable securities
Proceeds from disposition of
businesses
Other investing activities, net
Decrease in outstanding debt,
net
Proceeds from minority
investors
Common stock issued
Treasury stock purchases
Dividends paid
Other financing activities, net
Increase (Decrease) in Cash and
64
32
799
(9)
(2)
122
—
2
(261)
(6)
—
(54)
(2,170)
(695)
(616)
835
195
(771)
(461)
(13)
—
192
(24)
(413)
(3)
148
96
(29)
(406)
(78)
Cash Equivalents
$ (178)
$
48
$ (272)
In fiscal 2005, capital investment for land, buildings,
equipment and intangibles decreased to $434 million
from $653 million in fiscal 2004. We expect capital
expenditures of approximately $450 million in fiscal 2006.
Dividends in 2005 totaled $1.24 per share, a payout of
40 percent of diluted earnings per share, or 48 percent of
diluted earnings per share excluding the net gain from
divestitures and debt repurchases. Our board of directors
announced a 6 percent dividend increase to an annual
rate of $1.32 per share, effective with the dividend
payable on August 1, 2005.
The decrease in outstanding debt in fiscal 2005
includes the results of debt repurchases. On March 23,
2005, we commenced a cash tender offer for our
outstanding 6% Notes due in 2012. The tender offer
resulted in the purchase of $500 million principal amount
of the Notes. Subsequent to the expiration of the tender
offer, we purchased an additional $260 million principal
amount of the Notes in the open market. The aggregate
purchases resulted in the debt repurchase costs
described earlier in the “Results of Operations – 2005 vs.
2004” section.
In May 2002, a wholly owned subsidiary of General
Mills sold 150,000 Class A preferred membership
interests in General Mills Cereals LLC (GMC) to an
unrelated third-party investor in exchange for $150
million. On October 8, 2004, a wholly owned subsidiary
of General Mills sold 835,000 Series B-1 preferred
membership interests in GMC in exchange for $835
million. Currently, all interests in GMC, other than the
aforementioned interests, but including all managing
member interests, are held by wholly owned subsidiaries
of General Mills. We used $750 million of the proceeds
from the sale of GMC Series B-1 interests to purchase
approximately 17 million shares of our common stock
from Diageo plc at $45.20 per share in October 2004.
This share repurchase was made in conjunction with
Diageo’s sale of approximately 33 million additional
shares of General Mills common stock in an underwritten
public offering. Following these transactions, Diageo and
its affiliates held approximately 29 million shares of
General Mills common stock.
Concurrently in October 2004, Lehman Brothers
Holdings Inc. issued $750 million of notes, which are
mandatorily exchangeable for General Mills common
stock. In connection with the issuance of those notes, an
affiliate of Lehman Brothers entered into a forward
purchase contract with General Mills, under which we are
obligated to deliver to such affiliate between approxi-
mately 14 million and 17 million shares of General Mills
common stock, subject to adjustment under certain
circumstances. These shares will generally be deliverable
by us in October 2007, in exchange for $750 million in
cash or, in certain circumstances, securities of an affiliate
of Lehman Brothers. We recorded a $43 million fee for
this forward purchase contract as an adjustment to
stockholders’ equity.
With respect to the holders of minority interests in
GMC, the Series B-1 interests will be exchanged for
shares of our perpetual preferred stock upon the
occurrence of certain events, including a decrease in our
long-term debt rating below either Ba3 as rated by
Moody’s or BB- as rated by Standard & Poor’s or Fitch,
Inc., or a failure to pay a quarterly dividend on our
common stock. In addition, if GMC fails to make certain
required distributions, we will be restricted from paying
any dividend (other than dividends in the form of shares
of common stock) or other distributions on shares of our
common stock, and may not repurchase or redeem
shares of our common stock, until such distributions are
paid. The Class A interests have the right to request the
dissolution and liquidation of GMC upon the occurrence
of certain events, including the bankruptcy of GMC or its
subsidiaries, failure to deliver the preferred distributions,
failure to comply with portfolio requirements, breaches
of certain covenants, lowering of our senior debt rating
below either Baa3 by Moody’s or BBB by Standard &
Poor’s, and a failed attempt to remarket the Class A
interests as a result of a breach of GMC’s obligations to
assist in such remarketing. In the event of a liquidation of
GMC, each member of GMC would receive the amount
of its then capital account balance. The managing
member may avoid liquidation in most circumstances by
exercising an option to purchase the Class A interests.
An election to purchase the preferred membership
interests could impact our liquidity by requiring us to
refinance the purchase price.
Our board of directors has authorized the repurchase
from time to time of shares of our common stock subject
to a maximum of 170 million shares held in our treasury.
We did not repurchase a significant number of our shares
on the open market in fiscal 2005. With the completion
of our $2 billion debt reduction plan in fiscal 2005, we
intend to resume open-market share repurchases in
fiscal 2006.
FINANCIAL CONDITION
Our total debt was $6.2 billion as of May 29, 2005, a
decrease of $2.0 billion from May 30, 2004. We also
consider our leases and deferred income taxes related to
tax leases as part of our debt structure, and include them
in our measurement of “adjusted debt plus certain
minority interests,” as shown in the table below. In fiscal
2005, our adjusted debt plus certain minority interests
declined by $1.7 billion, to $6.7 billion, and our stock-
holders’ equity grew to $5.7 billion. The market value of
our stockholders’ equity increased as well, as an increase
in share price was partially offset by a decrease in shares
outstanding. As of May 29, 2005, our equity market
capitalization was $18.3 billion, based on a price of
$49.68 per share and 369 million basic shares
17
outstanding. Our total market capitalization, including
adjusted debt, minority interests and equity capital, was
$25.8 billion as of May 29, 2005, down slightly from the
total as of May 30, 2004.
Capital Structure
In Millions
Notes payable
Current portion of long-term debt 1
Long-term debt
Total debt
Debt adjustments:
Deferred income taxes — tax leases
Leases — debt equivalent
Certain cash and cash equivalents
Marketable investments, at cost
Adjusted debt
Certain minority interests 2
Adjusted debt plus certain minority
interests
Other minority interests 2
Stockholders’ equity
Total Capital
$
May 29,
2005
299
1,638
4,255
6,192
64
672
(511)
(24)
6,393
300
$
May 30,
2004
583
233
7,410
8,226
66
600
(699)
(54)
8,139
299
6,693
833
5,676
$13,202
8,438
—
5,248
$13,686
1
2
Includes zero coupon convertible debentures due in 2022 as
the result of put provisions exercisable in October 2005.
The Class A interests in GMC and Series A interests in
General Mills Capital, Inc. (GM Capital) are included in
adjusted debt plus certain minority interests, whereas the
Series B-1 interests of GMC are excluded since they are
exchangeable for equity in certain circumstances.
18
At the end of fiscal 2005, approximately 68 percent of
our adjusted debt plus certain minority interests was
long-term. This includes classifying the zero coupon
convertible debentures as short-term due to put provi-
sions exercisable in October 2005.
We consider our leases and deferred income taxes
related to tax leases as part of our fixed-rate obligations.
The following table, when reviewed in conjunction with
the capital structure table, shows the composition of
our debt structure including the impact of using deriva-
tive instruments.
Debt Structure
In Millions
Floating-rate
Fixed-rate
Leases — debt equivalent
Deferred income taxes
— tax leases
Adjusted Debt Plus
May 29, 2005
May 30, 2004
$ 838
5,119
672
13% $1,169
6,603
76
600
10
14%
78
7
64
1
66
1
Certain Minority Interests
$6,693
100% $8,438
100%
Commercial paper is a continuing source of short-term
financing. We can issue commercial paper in the United
States, Canada and Europe, through a program estab-
lished in fiscal 1999. Our commercial paper borrowings
are supported by $1.85 billion in committed credit lines.
Currently, we have no outstanding borrowings under
these credit lines. The following table details the
fee-paid credit lines we had available as of May 29, 2005.
Committed Credit Facilities
Core Facilities
Total Credit Facilities
Amount
$0.75 billion
$1.10 billion
$1.85 billion
Expiration
January 2009
January 2006
On June 23, 2004, we filed a Universal Shelf Registra-
tion Statement (the Shelf) with the SEC covering the sale
of up to $5.9 billion of debt securities, common stock,
preference stock, depository shares, securities warrants,
purchase contracts, purchase units and units (all
described in the Shelf). In addition, the Shelf covered the
resale of approximately 50 million shares of our common
stock owned by an affiliate of Diageo plc, which was
completed in October 2004 as described in the “Cash
Flows” section above. The SEC declared the Shelf
effective on September 20, 2004. As of May 29, 2005,
approximately $5.1 billion remained available under the
Shelf for future use.
We believe that two important measures of financial
strength are the ratios of fixed charge coverage and cash
flows from operations to adjusted debt plus certain
minority interests. Our fixed charge coverage in fiscal
2005 was 4.7 times compared to 3.8 times in fiscal 2004,
and cash flows from operations to adjusted debt plus
certain minority interests increased to 26 percent. We
expect to pay down between $100 and $200 million of
adjusted debt plus certain minority interests in fiscal
2006. Our goal is to return to a mid single-A rating for
our long-term debt, and to the top tier short-term rating,
that we held prior to our announcement of the Pillsbury
acquisition. Currently, Standard and Poor’s Corporation
has ratings of BBB+ on our publicly held long-term debt
and A-2 on our commercial paper. Moody’s Investors
Services, Inc. has ratings of Baa2 for our long-term debt
and P-2 for our commercial paper. Fitch Ratings, Inc.
rates our long-term debt BBB+ and our commercial
paper F-2. Dominion Bond Rating Service in Canada
currently rates General Mills as A-low.
OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS
It is not our general business practice to enter into
off-balance sheet arrangements nor is it our policy to
issue guarantees to third parties. We have, however,
issued guarantees of approximately $168 million for the
debt and other obligations of unconsolidated affiliates,
primarily CPW. In addition, off-balance sheet arrange-
ments are generally limited to the future payments under
noncancelable operating leases, which totaled approxi-
mately $462 million at May 29, 2005.
The following table summarizes our future estimated
cash payments under existing contractual obligations,
including payments due by period. The majority of the
purchase obligations represent commitments for
projected raw material and packaging needs to be
utilized in the normal course of business and for
consumer-directed marketing commitments that support
our brands. The fair value of our interest rate swaps was
$221 million at May 29, 2005, based on interest rates as
of that date. Future changes in interest rates will impact
the amount of cash ultimately paid or received to settle
those liabilities in the future. Other long-term obligations
primarily consist of income taxes, accrued compensation
and benefits, miscellaneous liabilities and minority
interests. We are unable to estimate the timing of the
payments for these items. We do not have significant
statutory or contractual funding requirements for our
defined-benefit retirement and other postretirement
benefit plans. Further information on these plans,
including our expected contributions for fiscal 2006, is
set forth in Note Fourteen to the Consolidated Financial
Statements appearing on pages 47 through 51 in Item
Eight of this report.
In Millions,
Payments Due
by Fiscal Year
Long-term
debt 1
Operating
leases
Purchase
obligations
Total
1
Total
2006
2007-08
2009-10
2011
and
Thereafter
$5,893
$1,638
$2,523
$187
$1,545
462
92
150
108
112
1,906
$8,261
1,577
$3,307
192
$2,865
74
$369
63
$1,720
Includes current portion. The zero coupon convertible
debentures are included in the 2006 estimated payments as
the result of put provisions exercisable in October 2005.
If holders of the zero coupon convertible debentures
exercise their rights to require us to repurchase the notes
in October 2005, we intend to refinance that obligation
using sources of financing discussed previously.
CRITICAL ACCOUNTING POLICIES
For a complete description of our significant accounting
policies, please see Note One to the Consolidated
Financial Statements appearing on pages 31 through 34
in Item Eight of this report. Our critical accounting
policies are those that have meaningful impact on the
reporting of our financial condition and results, and that
may require significant management judgment and
estimates. These policies include our accounting for
trade and consumer promotion activities; asset impair-
ments; income taxes; and pension and postretirement
liabilities.
Trade and Consumer Promotion Activities
We report sales net of certain coupon and trade promo-
tion costs. The trade promotion costs include payments
to customers to perform merchandising activities on our
behalf, such as advertising or in-store displays, discounts
19
to our list prices to lower retail shelf prices, and
payments to gain distribution of new products.
The amount and timing of expense recognition for
trade and consumer promotion activities involve
management judgment related to estimated participa-
tion and performance levels. The vast majority of
year-end liabilities associated with these activities are
resolved within the following fiscal year and therefore do
not require highly uncertain long-term estimates. For
interim reporting, we estimate the annual trade promo-
tion expense and recognize pro rata period expense
generally in proportion to revenue, adjusted for esti-
mated year-to-date expenditures if greater than the pro
rata amount. Certain trade and consumer promotion
expenses are recorded as reductions of net sales.
Promotional funds for our retail businesses are initially
established at the beginning of each year, and paid out
over the course of the year based on the customer’s
performance of agreed-upon merchandising activity.
During the year, additional funds may also be used in
response to competitive activities, as a result of changes
in the mix of our marketing support, or to help achieve
interim unit volume targets.
We set annual sales objectives and interim targets as a
regular practice to manage our business. Our sales
employees are salaried, and are eligible for annual cash
incentives based on performance against objectives
including goals for unit volume and the trade promotion
cost per unit required to achieve the unit volume goal.
Our sales employees have discretion to plan and adjust
the timing of merchandising activity over the course of
the year, and they also have some discretion to adjust
the level of trade promotion funding applied to a
particular event.
Our unit volume in the last week of each quarter is
consistently higher than the average for the preceding
weeks of the quarter. In comparison to the average daily
shipments in the first 12 weeks of a quarter, the final
week of each quarter has approximately two to four days’
worth of incremental shipments (based on a five-day
week), reflecting increased promotional activity at the
end of the quarter. This increased activity includes
promotions to assure that our customers have sufficient
inventory on hand to support major marketing events or
increased seasonal demand early in the next quarter, as
well as promotions intended to help achieve interim unit
volume targets. This increased sales activity results in
shipments that are in direct response to orders from
20
customers or authorized pursuant to prearranged
inventory-management agreements, and accordingly are
recognized as revenue within that quarter. The two to
four day range of increased unit volume in the last week
of each quarter has been generally consistent from
quarter to quarter over the last three years, except that
in the third quarter of fiscal 2005, we were slightly
below the two to four day range, primarily as actions to
raise promoted prices on Big G cereals resulted in
declines in promoted volume. If incremental shipments
had been within the two to four day range, our reported
U.S. Retail volume growth for the quarter would have
remained unchanged.
As part of our effort to assess the results of our
promotional activities, we regularly estimate the amount
of “retailer inventory” in the system — defined as
product that we have shipped to our customers that has
not yet been purchased from our customers by the
end-consumer. While it is not possible for us to measure
the absolute level of inventory, we are able to estimate
the change that occurs each month by comparing our
shipments to retail customers with their sales to
end-consumers as reported by ACNielsen. Our estimate
indicates inventory levels peak in November when
retailers have increased inventories to meet seasonal
demand for products like refrigerated dough and
ready-to-serve soup. This seasonal trend is generally
consistent from year to year, even as retailers have taken
actions to reduce their ongoing inventory levels.
We also assess the effectiveness of our promotional
activities by evaluating the end-consumer purchases of
our products subsequent to the reporting period. If, due
to quarter-end promotions or other reasons, our
customers purchase more product in any reporting
period than end-consumer demand will require in future
periods, then our sales level in future reporting periods
would be adversely affected.
As part of our ongoing evaluation of sales, we also
monitor customer returns. We generally do not allow a
right of return on our products. However, on a limited
case-by-case basis with prior approval, we may allow
customers to return products in saleable condition for
redistribution to other customers or outlets. These
returns are recorded as reductions of net sales in the
period of the return. Monthly returns are consistently
below 1 percent of sales, and have averaged approxi-
mately 0.5 percent of total monthly shipments over the
last three years.
Asset Impairments
We are required to evaluate our long-lived assets,
including goodwill, for impairment and write down the
value of any assets when they are determined to be
impaired. Evaluating the impairment of long-lived assets
involves management judgment in estimating the fair
values and future cash flows related to these assets.
Although the predictability of long-term cash flows may
be uncertain, our evaluations indicate fair values for our
long-lived assets and goodwill that are significantly in
excess of stated book values. Therefore, we believe the
risk of unrecognized impairment is low.
Income Taxes
Income tax expense involves management judgment as
to the ultimate resolution of any tax issues. Historically,
our assessments of the ultimate resolution of tax issues
have been reasonably accurate. The current open tax
issues are not dissimilar in size or substance from
historical items, except for the accounting for losses
recorded as part of the Pillsbury transaction. The finaliza-
tion of the tax benefits related to these losses would be
accounted for as a reduction of goodwill.
Pension Accounting
The accounting for pension and other postretirement
liabilities requires the estimation of several critical
factors. Key assumptions that determine this liability and
related income or expense include the discount rate and
expected rate of return on plan assets.
Our discount rate assumption is determined annually
based on the interest rate for long-term high-quality
corporate bonds using yields for maturities that match
the expected benefit obligations. The discount rate used
to determine the pension and other postretirement
obligations as of the balance sheet date is the rate in
effect as of that measurement date. That same discount
rate also is used to determine pension and other
postretirement expense for the following fiscal year.
Our expected rate of return on plan assets is deter-
mined by our asset allocation, our historical long-term
investment performance, our estimate of future long-
term returns by asset class (using input from our
actuaries, investment services and investment managers),
and long-term inflation assumptions. Our historical
investment performance compound annual growth rates
are 18%, 7%, 11%, 11%, 12% and 13% for the 1, 5, 10, 15,
20 and 30 year periods ended May 29, 2005.
In addition to our assumptions about the discount rate
and the expected rate of return on plan assets, we base
our determination of pension expense or income on a
market-related valuation of assets which reduces year-to-
year volatility in accordance with SFAS No. 87,
“Employers’ Accounting for Pensions.” This market-
related valuation recognizes investment gains or losses
over a five-year period from the year in which they occur.
Investment gains or losses for this purpose are the
difference between the expected return calculated using
the market-related value of assets and the actual return
based on the market-related value of assets. Since the
market-related value of assets recognizes gains or losses
over a five-year period, the future value of assets will be
impacted as previously deferred gains or losses are
recorded. As of May 29, 2005, we had cumulative
unrecognized actuarial net losses of approximately
$993 million on our pension plans and $393 million on
our postretirement plans, primarily as the result of
decreases in our discount rate assumptions. These
unrecognized actuarial net losses will result in decreases
in our future pension income and increases in postretire-
ment expense since they currently exceed the corridors
defined by SFAS No. 87 and SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other
Than Pensions.”
In fiscal 2005, we recorded net pension and postretire-
ment expense of $6 million compared to $5 million in
fiscal 2004. The discount rates used in our pension and
other postretirement assumptions were 6.0 percent for
the obligation as of May 25, 2003 and for our fiscal 2004
income and expense, and 6.65 percent for the obligation
as of May 30, 2004 and for our fiscal 2005 income and
expense. For fiscal 2004 and 2005, we assumed a rate of
return of 9.6 percent on our pension plan assets and our
other postretirement plan assets.
For our fiscal 2006 pension and other postretirement
income and expense estimate, we have reduced the
discount rate to 5.55 percent for our pension liabilities
and 5.50 percent for our postretirement liabilities, based
on interest rates as of May 29, 2005. The expected rate
of return on plan assets remains 9.6 percent. Actual
future net pension and postretirement income or
expense will depend on investment performance,
21
changes in future discount rates and various other factors
related to the populations participating in our pension
and postretirement plans.
Lowering the expected long-term rate of return on
assets by 50 basis points would increase our net pension
and postretirement expense for fiscal 2006 by approxi-
mately $18 million. Lowering the discount rate by
50 basis points would increase our net pension and
postretirement expense for fiscal 2006 by approximately
$24 million.
NEW ACCOUNTING RULES
The FASB issued SFAS No. 123(R), “Share-Based
Payment,” in December 2004, which will require the cost
of employee compensation paid with equity instruments
to be measured based on grant-date fair values and
recognized over the vesting period. In April 2005, the
Securities and Exchange Commission announced the
adoption of a new rule that amends the compliance
dates for SFAS No. 123(R). The new rule allows compa-
nies to implement SFAS No. 123(R) at the beginning of
their fiscal year that begins after June 15, 2005. Under
the new rule, SFAS No. 123(R) will become effective for
us in the first quarter of fiscal 2007. We are still evalu-
ating the impact of adopting SFAS 123(R) on our
consolidated financial statements.
In November 2004, the FASB issued SFAS No. 151,
“Inventory Costs – An Amendment of ARB No. 43,
Chapter 4.” SFAS No. 151 clarifies the accounting for
abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). SFAS
No. 151 is effective for the fiscal year beginning after
June 15, 2005, and is effective for us in fiscal 2007. We do
not expect SFAS No. 151 to have a material impact on
our results of operations or financial condition.
In December 2004, the FASB issued SFAS No. 153,
“Exchanges of Nonmonetary Assets – An Amendment of
APB Opinion No. 29.” SFAS No. 153 eliminates the
exception from fair value measurement for nonmonetary
exchanges of similar productive assets and replaces it
with an exception for exchanges that do not have
commercial substance. SFAS No. 153 is effective for the
first fiscal period beginning after June 15, 2005, and is
effective for us in the second quarter of fiscal 2006. We
do not expect SFAS No. 153 to have a material impact
on our results of operations or financial condition.
22
In December 2004, the FASB issued Staff Position No.
109-2, “Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004,” (FSP No. 109-2).
FSP No. 109-2 provides guidance with respect to
recording the potential impact of the repatriation
provisions of the American Jobs Creation Act of 2004
(the Jobs Act) on income tax expense and deferred tax
liability. FSP No. 109-2 includes a one year reduced tax
rate on repatriation of foreign earnings and a phased-in
tax deduction provided for qualifying domestic produc-
tion activities. We are currently evaluating the impact of
repatriation provisions as Treasury guidance is provided.
However, the range of reasonably possible amounts of
unremitted earnings that is being considered for repatri-
ation in fiscal year 2006 is between $0 and $60 million
with the respective income tax impact ranging from $0 to
$3 million based on a 5.25 percent tax rate.
In March 2005, the FASB issued FASB Interpretation
No. 47, ″Accounting for Conditional Asset Retirement
Obligations,″ (FIN 47). FIN 47 requires that liabilities be
recognized for the fair value of a legal obligation to
perform asset retirement activities that are conditional on
a future event if the amount can be reasonably esti-
mated. We will adopt FIN 47 at the end of fiscal 2006
and do not expect it to have a material impact on our
results of operations or financial condition.
MARKET RISK MANAGEMENT
We are exposed to market risk stemming from changes
in interest rates, foreign exchange rates and commodity
prices. Changes in these factors could cause fluctuations
in our earnings and cash flows. In the normal course of
business, we actively manage our exposure to these
market risks by entering into various hedging transac-
tions, authorized under company policies that place clear
controls on these activities. The counterparties in these
transactions are highly rated institutions. Our hedging
transactions include (but are not limited to) the use of a
variety of derivative financial instruments.
Interest Rates We manage our debt structure and our
interest rate risk through the use of fixed- and floating-
rate debt and derivatives. We use interest rate swaps to
hedge our exposure to interest rate changes, and also to
reduce volatility of our financing costs. Generally under
these swaps, we agree with a counterparty to exchange
the difference between fixed-rate and floating-rate
interest amounts based on an agreed notional principal
amount. Our primary exposure is to U.S. interest rates.
As of May 29, 2005, we had $7.0 billion of aggregate
notional principal amounts (the principal amount on
which the fixed or floating interest rate is calculated)
outstanding, including amounts that neutralize exposure
through offsetting swaps. See Note Seven to the
Consolidated Financial Statements appearing on pages
38 through 40 in Item Eight of this report.
Foreign Currency Rates Foreign currency fluctuations
can affect our net investments and earnings denomi-
nated in foreign currencies. We primarily use foreign
currency forward contracts and option contracts to
selectively hedge our cash flow exposure to changes in
exchange rates. These contracts function as hedges,
since they change in value inversely to the change
created in the underlying exposure as foreign exchange
rates fluctuate. Our primary exchange rate exposures are
with the Canadian dollar, the euro, the Australian dollar,
the Mexican peso and the British pound against the
U.S. dollar.
Commodities Certain commodities used in the produc-
tion and distribution of our products are exposed to
market price risks. We manage this market risk through
an integrated set of financial instruments, including
purchase orders, noncancelable contracts, futures
contracts, futures options and swaps. Our primary
commodity price exposures are to grains, vegetables,
dairy products, sugar, vegetable oils, meats, fruits, other
agricultural products, packaging materials and
energy costs.
Value at Risk These estimates are intended to measure
the maximum potential fair value General Mills could
lose in one day from adverse changes in market interest
rates, foreign exchange rates or commodity prices, under
normal market conditions. A Monte Carlo (VAR) method-
ology was used to quantify the market risk for our
exposures. The models assumed normal market condi-
tions and used a 95 percent confidence level.
The VAR calculation used historical interest rates,
foreign exchange rates and commodity prices from the
past year to estimate the potential volatility and correla-
tion of these rates in the future. The market data were
drawn from the RiskMetricsTM data set. The calculations
are not intended to represent actual losses in fair value
that we expect to incur. Further, since the hedging
instrument (the derivative) inversely correlates with the
underlying exposure, we would expect that any loss or
gain in the fair value of our derivatives would be gener-
ally offset by an increase or decrease in the fair value of
the underlying exposures. The positions included in the
calculations were: debt; investments; interest rate swaps;
foreign exchange forwards; and commodity swaps,
futures and options. The calculations do not include
the underlying foreign exchange and commodities-
related positions that are hedged by these market-risk-
sensitive instruments.
The table below presents the estimated maximum
potential one-day loss in fair value for our interest rate,
foreign currency and commodity market-risk-sensitive
instruments outstanding on May 29, 2005. The amounts
were calculated using the VAR methodology
described above.
In Millions
Interest rate instruments
Foreign currency instruments
Commodity instruments
Fair Value Impact
May 29,
2005
$18
1
1
Average
during
2005
$23
2
2
May 30,
2004
$31
3
5
Item 7A Quantitative and
Qualitative Disclosures
About Market Risk
See the information in the “Market Risk Management”
subsection of Management’s Discussion and Analysis of
Financial Condition and Results of Operations set forth
on pages 22 through 23 in Item Seven of this report.
23
Item 8 Financial Statements and Supplementary Data
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
The management of General Mills, Inc. is responsible
for establishing and maintaining adequate internal
control over financial reporting, as such term is defined
in Rule 13a-15(f) under the Exchange Act. The Company’s
internal control system was designed to provide reason-
able assurance to the Company’s management and
Board of Directors regarding the preparation and fair
presentation of published financial statements. Under the
supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial
Officer, we conducted an assessment of the effectiveness
of our internal control over financial reporting as of
May 29, 2005. In making this assessment, management
used the criteria set forth by the Committee of Spon-
soring Organizations of the Treadway Commission
(COSO) in Internal Control—Integrated Framework.
Based on our assessment using the criteria set forth by
COSO in Internal Control—Integrated Framework,
management concluded that our internal control over
financial reporting was effective as of May 29, 2005.
KPMG LLP, an independent registered public
accounting firm, has issued an audit report on manage-
ment’s assessment of the Company’s internal control over
financial reporting.
S. W. Sanger
Chairman of the Board
and
Chief Executive Officer
July 28, 2005
J. A. Lawrence
Executive Vice President,
Chief Financial Officer
and International
24
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM REGARDING INTERNAL
CONTROL OVER FINANCIAL REPORTING
The Board of Directors and Stockholders
General Mills, Inc.:
We have audited management’s assessment, included
in the accompanying Management’s Report on Internal
Control over Financial Reporting, that General Mills, Inc.
and subsidiaries maintained effective internal control
over financial reporting as of May 29, 2005, based on
criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
General Mills’ management is responsible for main-
taining effective internal control over financial reporting
and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to
express an opinion on management’s assessment and an
opinion on the effectiveness of the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assur-
ance about whether effective internal control over
financial reporting was maintained in all material
respects. Our audit included obtaining an understanding
of internal control over financial reporting, evaluating
management’s assessment, testing and evaluating the
design and operating effectiveness of internal control,
and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is
a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes
in accordance with generally accepted accounting
principles. A company’s internal control over financial
reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting princi-
ples, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3)
provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstate-
ments. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in
conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, management’s assessment that General
Mills maintained effective internal control over financial
reporting as of May 29, 2005, is fairly stated, in all
material respects, based on criteria established in
Internal Control—Integrated Framework issued by
COSO. Also, in our opinion, General Mills maintained, in
all material respects, effective internal control over
financial reporting as of May 29, 2005, based on criteria
established in Internal Control—Integrated Framework
issued by COSO.
We also have audited, in accordance with the stan-
dards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of
General Mills, Inc. and subsidiaries as of May 29, 2005
and May 30, 2004, and the related consolidated state-
ments of earnings, stockholders’ equity and
comprehensive income, and cash flows, for each of the
fiscal years in the three-year period ended May 29, 2005,
and our report dated July 28, 2005 expressed an unquali-
fied opinion on those consolidated financial statements.
Minneapolis, Minnesota
July 28, 2005
REPORT OF MANAGEMENT RESPONSIBILITIES
The management of General Mills, Inc. is responsible
for the fairness and accuracy of the consolidated financial
statements. The statements have been prepared in
accordance with accounting principles that are generally
accepted in the United States, using management’s best
estimates and judgments where appropriate. The
financial information throughout this Annual Report on
Form 10-K is consistent with our consolidated
financial statements.
Management has established a system of internal
controls that provides reasonable assurance that assets
are adequately safeguarded and transactions are
recorded accurately in all material respects, in accor-
dance with management’s authorization. We maintain a
strong audit program that independently evaluates the
adequacy and effectiveness of internal controls. Our
internal controls provide for appropriate separation of
duties and responsibilities, and there are documented
policies regarding use of our assets and proper financial
reporting. These formally stated and regularly communi-
cated policies demand highly ethical conduct from
all employees.
The Audit Committee of the Board of Directors meets
regularly with management, internal auditors and our
independent auditors to review internal control, auditing
and financial reporting matters. The independent
auditors, internal auditors and employees have full and
free access to the Audit Committee at any time.
The Audit Committee reviewed and approved the
Company’s annual financial statements and recom-
mended to the full Board of Directors that they be
included in the Annual Report. The Audit Committee
also recommended to the Board of Directors that the
independent auditors be reappointed for fiscal 2006,
subject to ratification by the stockholders at the
annual meeting.
S. W. Sanger
Chairman of the Board
and
Chief Executive Officer
July 28, 2005
J. A. Lawrence
Executive Vice President,
Chief Financial Officer
and International
25
Board (United States), the effectiveness of General Mills’
internal control over financial reporting as of May 29,
2005, based on criteria established in Internal
Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated July 28, 2005
expressed an unqualified opinion on management’s
assessment of, and the effective operation of, internal
control over financial reporting.
Minneapolis, Minnesota
July 28, 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM ON THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED FINANCIAL
STATEMENT SCHEDULE
The Board of Directors and Stockholders
General Mills, Inc.:
We have audited the accompanying consolidated
balance sheets of General Mills, Inc. and subsidiaries as
of May 29, 2005 and May 30, 2004, and the related
consolidated statements of earnings, stockholders’
equity and comprehensive income, and cash flows for
each of the fiscal years in the three-year period ended
May 29, 2005. In connection with our audits of the
consolidated financial statements we also have audited
the accompanying financial statement schedule. These
consolidated financial statements and financial statement
schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion
on these consolidated financial statements and financial
statement schedule based on our audits.
We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assur-
ance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of General Mills, Inc. and subsid-
iaries as of May 29, 2005 and May 30, 2004, and the
results of their operations and their cash flows for each of
the fiscal years in the three-year period ended May 29,
2005 in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the accompa-
nying financial statement schedule, when considered in
relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects,
the information set forth therein.
We also have audited, in accordance with the stan-
dards of the Public Company Accounting Oversight
26
General Mills, Inc. and Subsidiaries
Consolidated Statements of Earnings
In Millions, Except Per Share Data,
Fiscal Year Ended
Net Sales
Costs and Expenses:
Cost of sales
Selling, general and administrative
Interest, including minority interest, net
Restructuring and other exit costs
Divestitures (gain)
Debt repurchase costs
Total Costs and Expenses
Earnings before Income Taxes and Earnings from Joint Ventures
Income Taxes
Earnings from Joint Ventures
Net Earnings
Earnings per Share – Basic
Earnings per Share – Diluted
See accompanying notes to consolidated financial statements.
May 29, 2005
$11,244
May 30, 2004
$11,070
May 25, 2003
$10,506
6,834
2,418
455
84
(499)
137
9,429
1,815
664
89
$ 1,240
$
$
3.34
3.08
6,584
2,443
508
26
–
–
9,561
1,509
528
74
$ 1,055
$
$
2.82
2.60
6,109
2,472
547
62
–
–
9,190
1,316
460
61
917
2.49
2.35
$
$
$
27
General Mills, Inc. and Subsidiaries
Consolidated Balance Sheets
In Millions
ASSETS
Current Assets:
Cash and cash equivalents
Receivables, less allowance for doubtful accounts of $19 in 2005 and $19 in 2004
Inventories
Prepaid expenses and other current assets
Deferred income taxes
Total Current Assets
Land, Buildings and Equipment at cost, net
Goodwill
Other Intangible Assets
Other Assets
Total Assets
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable
Current portion of long-term debt
Notes payable
Other current liabilities
Total Current Liabilities
Long-term Debt
Deferred Income Taxes
Other Liabilities
Total Liabilities
Minority Interests
Stockholders’ Equity:
Cumulative preference stock, none issued
Common stock, 502 shares issued
Retained earnings
Common stock in treasury, at cost, shares of 133 in 2005 and 123 in 2004
Unearned compensation
Accumulated other comprehensive income (loss)
Total Stockholders’ Equity
May 29, 2005
May 30, 2004
$
573
1,034
1,037
203
208
3,055
3,007
6,684
3,636
1,684
$18,066
$ 1,136
1,638
299
1,111
4,184
4,255
1,851
967
11,257
1,133
–
5,741
4,501
(4,460)
(114)
8
5,676
$
751
1,010
1,063
222
169
3,215
3,111
6,684
3,641
1,797
$18,448
$ 1,110
233
583
831
2,757
7,410
1,773
961
12,901
299
–
5,680
3,722
(3,921)
(89)
(144)
5,248
Total Liabilities and Equity
See accompanying notes to consolidated financial statements.
$18,066
$18,448
28
General Mills, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity
and Comprehensive Income
In Millions, Except Per Share Data
Balance at May 26, 2002
Comprehensive Income:
Net earnings
Other comprehensive income, net of tax:
Net change on hedge derivatives
Net change on securities
Foreign currency translation
Minimum pension liability adjustment
Other comprehensive income
Total comprehensive income
Cash dividends declared ($1.10 per share)
Stock compensation plans (includes income tax
benefits of $21)
Shares purchased
Put and call option premiums/settlements, net
Unearned compensation related to restricted
stock awards
Earned compensation and other
Balance at May 25, 2003
Comprehensive Income:
Net earnings
Other comprehensive income, net of tax:
Net change on hedge derivatives
Net change on securities
Foreign currency translation
Minimum pension liability adjustment
Other comprehensive income
Total comprehensive income
Cash dividends declared ($1.10 per share)
Stock compensation plans (includes income tax
benefits of $5)
Shares purchased
Unearned compensation related to restricted
stock awards
Earned compensation and other
Balance at May 30, 2004
Comprehensive Income:
Net earnings
Other comprehensive income, net of tax:
Net change on hedge derivatives
Foreign currency translation
Minimum pension liability adjustment
Other comprehensive income
Total comprehensive income
Cash dividends declared ($1.24 per share)
Stock compensation plans (includes income tax
benefits of $62)
Shares purchased
Forward purchase contract fees
Unearned compensation related to restricted
stock awards
$.10 Par Value Common Stock
(One Billion Shares Authorized)
Issued
Treasury
Shares
502
Amount
$5,733
Shares
(135)
Amount
$(4,292)
Retained
Earnings
$2,568
Unearned
Compensation
$ (57)
917
(406)
–
–
25
(74)
4
(1)
118
(29)
Accumulated
Other
Compre-
hensive
Income
(Loss)
$(376)
(4)
(5)
98
(55)
34
Total
$3,576
917
(4)
(5)
98
(55)
34
951
(406)
143
(29)
(74)
502
$5,684
(132)
$(4,203)
$3,079
(11)
25
$ (43)
(11)
25
$4,175
$(342)
1,055
(412)
101
(10)
75
32
198
1,055
101
(10)
75
32
198
1,253
(412)
302
(24)
–
(4)
10
(1)
306
(24)
502
$5,680
(123)
$(3,921)
$3,722
(77)
31
$ (89)
(77)
31
$5,248
$(144)
1,240
(461)
99
75
(22)
152
1,240
99
75
(22)
152
1,392
(461)
336
(771)
(43)
–
–
104
(43)
7
(17)
232
(771)
(133)
$(4,460)
$4,501
(66)
41
$(114)
(66)
41
$5,676
$
8
29
Earned compensation and other
Balance at May 29, 2005
See accompanying notes to consolidated financial statements.
502
$5,741
General Mills, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
In Millions
Fiscal Year Ended
Cash Flows – Operating Activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating
May 29, 2005
May 30, 2004
May 25, 2003
$ 1,240
$ 1,055
$
917
activities:
Depreciation and amortization
Deferred income taxes
Changes in current assets and liabilities
Tax benefit on exercised options
Pension and other postretirement activity
Restructuring and other exit costs
Divestitures (gain)
Debt repurchase costs
Other, net
Net Cash Provided by Operating Activities
Cash Flows – Investing Activities:
Purchases of land, buildings and equipment
Investments in businesses, intangibles and affiliates, net of investment
returns and dividends
Purchases of marketable securities
Proceeds from sale of marketable securities
Proceeds from disposal of land, buildings and equipment
Proceeds from disposition of businesses
Other, net
Net Cash Provided (Used) by Investing Activities
Cash Flows – Financing Activities:
Change in notes payable
Issuance of long-term debt
Payment of long-term debt
Proceeds from minority interest investors
Common stock issued
Purchases of common stock for treasury
Dividends paid
Other, net
Net Cash Used by Financing Activities
Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents – Beginning of Year
Cash and Cash Equivalents – End of Year
Cash Flow from Changes in Current Assets and Liabilities:
Receivables
Inventories
Prepaid expenses and other current assets
Accounts payable
Other current liabilities
Changes in Current Assets and Liabilities
See accompanying notes to consolidated financial statements.
30
443
9
258
62
(70)
84
(499)
137
47
1,711
(414)
64
(1)
33
24
799
(9)
496
(1,057)
2
(1,115)
835
195
(771)
(461)
(13)
(2,385)
(178)
751
573
$
$
(9)
30
9
(19)
247
399
109
(186)
63
(21)
26
–
–
16
1,461
(628)
(2)
(7)
129
36
–
2
(470)
(1,023)
576
(248)
–
192
(24)
(413)
(3)
(943)
48
703
751
$
$
(22)
24
(15)
(161)
(12)
365
27
246
21
(56)
62
–
–
49
1,631
(711)
(261)
(63)
57
14
–
(54)
(1,018)
(2,330)
2,048
(334)
148
96
(29)
(406)
(78)
(885)
(272)
975
703
$
$
31
(20)
(28)
61
202
$
258
$ (186)
$
246
General Mills, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant
Accounting Policies
Preparing our consolidated financial statements in
conformity with accounting principles generally accepted
in the United States requires us to make estimates and
assumptions that affect reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from our estimates.
(A) Principles of Consolidation Our consolidated
financial statements include parent company operations
and majority-owned subsidiaries as well as our invest-
ment in and share of net earnings or losses of 20- to
50-percent-owned companies, which are recorded on an
equity basis. At May 29, 2005, we had invested in one
variable interest entity; however, we are not its primary
beneficiary and therefore do not consolidate it.
Our fiscal year ends on the last Sunday in May. Fiscal
years 2005 and 2003 each consisted of 52 weeks and
fiscal 2004 consisted of 53 weeks. Our wholly owned
international operations, with the exception of Canada
and our export operations, are reported for the
12 calendar months ended April 30.
(B) Land, Buildings, Equipment and Depreciation Build-
ings and equipment are recorded at historical cost and
depreciated over estimated useful lives, primarily using
the straight-line method. Ordinary maintenance and
repairs are charged to operating costs. Buildings are
usually depreciated over 40 to 50 years, and equipment
is depreciated over three to 15 years. Accelerated
depreciation methods generally are used for income tax
purposes. When an item is sold or retired, the accounts
are relieved of its cost and related accumulated
depreciation; the resulting gains and losses, if any,
are recognized.
(C) Inventories Inventories except grain are valued at the
lower of cost or market. As discussed in Note Seven,
grain inventories are valued at market. We generally use
the LIFO method of valuing inventory because we
believe that it is a better match with current revenues.
However, FIFO is used for most foreign operations,
where LIFO is not recognized for statutory purposes.
(D) Intangible Assets Goodwill represents the difference
between the purchase prices of acquired companies and
the related fair values of net assets acquired and
accounted for by the purchase method of accounting.
We capitalize the costs of software internally developed
or externally purchased for internal use. The costs of
patents, copyrights and other amortizable intangible
assets are amortized evenly over their estimated
useful lives, generally three to 10 years.
(E) Recoverability of Long-Lived Assets We review
long-lived assets, including identifiable intangibles and
goodwill, for impairment annually or whenever events or
changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. We use
undiscounted cash flows when assessing our property
and equipment for recoverability. We use discounted
cash flow models for our annual goodwill and identifiable
intangible impairment analysis. An asset is deemed
impaired and is written down to its fair value if
estimated related future cash flows are less than its
carrying amount.
(F) Foreign Currency Translation For most of our foreign
operations, local currencies are considered the functional
currency. Assets and liabilities are translated using
exchange rates in effect at the balance sheet date.
Results of operations are translated using the average
exchange rates during the period. Translation effects are
classified within Accumulated Other Comprehensive
Income in Stockholders’ Equity.
(G) Derivative Financial Instruments We use derivatives
primarily to hedge our exposure to changes in foreign
exchange rates, interest rates and commodity prices. All
derivatives are recognized on the balance sheet at fair
value based on quoted market prices and are recorded
in either current or noncurrent assets or liabilities based
on their maturity. Changes in the fair values of derivatives
are recorded in earnings or other comprehensive
income, based on whether the instrument is designated
as a hedge transaction and, if so, the type of hedge
transaction. Gains or losses on derivative instruments
reported in other comprehensive income are reclassified
to earnings in the period the hedged item affects
earnings. If the underlying hedged transaction ceases to
exist, any associated amounts reported in other compre-
hensive income are reclassified to earnings at that time.
Any ineffectiveness is recognized in earnings in the
current period. See Note Seven for additional informa-
tion related to our derivatives.
31
(H) Revenue Recognition We recognize sales upon
shipment to our customers. Reported sales are net of
certain coupon, trade promotion and other costs.
Coupons are expensed when distributed based on
estimated redemptions. Trade promotions are expensed
based on estimated participation and performance levels
for offered programs. We generally do not allow a right
of return. However, on a limited case-by-case basis with
prior approval, we may allow customers to return product
in saleable condition for redistribution to other
customers or outlets. These returns are recorded as
reductions of net sales in the period of the return.
(I) Shipping and Handling Shipping costs associated
with the distribution of finished product to our customers
are recorded as selling, general and administrative
expense and are recognized when the related finished
product is shipped to the customer.
(J) Research and Development All expenditures for
research and development are charged against earnings
in the year incurred.
(K) Advertising Production Costs We expense the
production costs of advertising the first time that the
advertising takes place.
(L) Stock-Based Compensation We use the intrinsic
value method for measuring the cost of compensation
paid in our common stock. This method defines our cost
as the excess of the stock’s market value at the time of
the grant over the amount that the employee is required
to pay. Our stock option plans require that the employ-
ee’s payment (i.e., exercise price) be the market value as
of the grant date.
The following table illustrates the pro forma effect on
net earnings and earnings per share if we had applied
the fair value recognition provisions of Statement of
Financial Accounting Standard (SFAS) No. 123,
“Accounting for Stock-Based Compensation,” to
stock-based employee compensation.
32
In Millions, Except Per Share Data, Fiscal Year
Net earnings, as reported
2005
$1,240
2004
$1,055
2003
$ 917
Add: Stock-based employee
compensation expense included in
reported net earnings, net of related
tax effects
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects
Pro forma net earnings
Earnings per share:
Basic – as reported
Basic – pro forma
Diluted – as reported
Diluted – pro forma
24
17
13
(62)
$1,202
(67)
$1,005
(68)
$ 862
$ 3.34
$ 3.24
$ 2.82
$ 2.68
$ 3.08
$ 2.99
$ 2.60
$ 2.49
$2.49
$2.34
$2.35
$2.22
These amounts reflect the expensing of share awards
made to retirement-eligible employees over the
expected vesting period of the award. SFAS 123(R), when
adopted, will require the expensing of future awards over
the period to retirement eligibility, if less than the vesting
period. See Note One (O). Future share-based compen-
sation amounts may differ from the pro forma amounts
presented based on that change as well as any changes
in the number of options granted or their fair values.
The weighted average fair values at grant date of the
options granted in fiscal 2005, 2004 and 2003 were
estimated as $8.32, $8.54 and $8.24, respectively, using
the Black-Scholes option-pricing model with the
following weighted average assumptions:
Fiscal Year
Risk-free interest rate
Expected life
Expected volatility
Expected dividend growth rate
2005
4.0%
7 years
21%
10%
2004
3.9%
7 years
21%
10%
2003
3.8%
7 years
21%
9%
The Black-Scholes model requires the input of certain
key assumptions and does not give effect to restrictions
that are placed on employee stock options.
(M) Earnings per Share Basic Earnings per Share (EPS) is
computed by dividing net earnings by the weighted
average number of common shares outstanding. Diluted
EPS includes the effect of all dilutive potential common
shares, primarily related to the effect of the contingent
issuance of shares under our outstanding zero coupon
convertible debentures and in-the-money stock options.
See Note Twelve – Earnings Per Share.
(N) Cash and Cash Equivalents We consider all invest-
ments purchased with an original maturity of three
months or less to be cash equivalents.
(O) New Accounting Standards Effective the first quarter
of fiscal 2003, we adopted SFAS No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets.”
The adoption of SFAS No. 144 did not have a material
impact on our consolidated financial statements.
In November 2002, the Financial Accounting Standards
Board (FASB) issued FASB Interpretation No. 45 (FIN 45),
“Guarantor’s Accounting and Disclosure Requirements
for Guarantees of Indebtedness of Others.” FIN 45
elaborates on the disclosure requirements of guarantees,
as well as requiring the recording of certain guarantees
issued or modified after December 31, 2002. The
adoption of FIN 45 did not have a material impact on our
consolidated financial statements (see Note Seventeen).
In July 2002, the FASB issued SFAS No. 146,
“Accounting for Costs Associated with Exit or Disposal
Activities.” SFAS No. 146 requires companies to recog-
nize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commit-
ment to an exit or disposal plan. The adoption of this
Standard affected the timing of the recognition of exit or
disposal costs for disposal activities initiated after
December 31, 2002.
In December 2002, the FASB issued SFAS No. 148,
“Accounting for Stock-Based Compensation – Transition
and Disclosure.” SFAS No. 148 amends the disclosure
about the effects on reported net income of an entity’s
accounting policy decisions with respect to stock-based
employee compensation, as reflected in Note One (L) to
the consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150,
“Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” SFAS No.
150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics
of both liabilities and equity. SFAS No. 150 was effective
for financial instruments entered into or modified after
May 31, 2003, and otherwise was effective at the begin-
ning of the first interim period beginning after June 15,
2003. SFAS No. 150 was implemented in our second
quarter of fiscal 2004 and did not have an effect on our
consolidated financial statements.
In January 2003, the FASB issued FASB Interpretation
No. 46, “Consolidation of Variable Interest Entities,”
(FIN 46), as amended by FIN 46(R) in December 2003.
FIN 46(R) requires that the primary beneficiary of a
variable interest entity consolidate the variable interest
entity in its financial statements. FIN 46(R) was imple-
mented in our fourth quarter of fiscal 2004 and did
not have an effect on our consolidated
financial statements.
In December 2003, the FASB revised SFAS No. 132,
“Employers’ Disclosures about Pensions and Other
Postretirement Benefits.” The revision to SFAS No. 132
requires additional disclosures for pension and other
postretirement benefits plans, which are presented in
Note Fourteen – Retirement and Other Postretirement
Benefit Plans.
The Medicare Prescription Drug Improvement and
Modernization Act of 2003 (Act) was signed into law on
December 8, 2003. The Act introduced a federal subsidy
to sponsors of retiree health care benefit plans that
provide a prescription drug benefit that is at least
actuarially equivalent to Medicare. FASB Staff Position
106-2 (FSP 106-2) provides accounting guidance related
to the Act. We adopted FSP 106-2 at the beginning of
our fourth quarter of fiscal 2004 and it did not have a
material effect on our consolidated financial statements.
See Note Fourteen – Retirement and Other
Postretirement Benefit Plans.
The FASB ratified in October 2004, the Emerging
Issues Task Force Issue No. 04-8, “The Effect of Contin-
gently Convertible Debt on Diluted Earnings per Share,”
(EITF 04-8). EITF 04-8 was effective for us in the third
quarter of fiscal 2005. See Note Twelve – Earnings per
Share for discussion and impact on diluted shares and
diluted earnings per share.
The FASB issued SFAS No. 123(R), “Share-Based
Payment,” in December 2004, which will require the cost
of employee compensation paid with equity instruments
to be measured based on grant-date fair values and
recognized over the vesting period. In April 2005, the
Securities and Exchange Commission announced the
adoption of a new rule that amends the compliance
dates for SFAS No. 123(R). The new rule allows compa-
nies to implement SFAS No. 123(R) at the beginning of
their fiscal year that begins after June 15, 2005. Under
the new rule, SFAS No. 123(R) will become effective for
us in the first quarter of fiscal 2007. An illustration of the
33
impact on the Company using a Black-Scholes method-
ology is presented in the “Stock-based Compensation
Expense for Stock Options” section of Note One (L).
We have not yet determined whether we will use
Black-Scholes in our final adoption of SFAS 123(R).
In December 2004, the FASB issued Staff Position
No. 109-2, “Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004,” (FSP No. 109-2).
FSP No. 109-2 provides guidance with respect to
recording the potential impact of the repatriation
provisions of the American Jobs Creation Act of 2004
(the Jobs Act) on income tax expense and deferred tax
liability. FSP No. 109-2 includes a one-year reduced tax
rate on repatriation of foreign earnings and a phased-in
tax deduction provided for qualifying domestic produc-
tion activities. See Note Sixteen – Income Taxes.
2. Divestitures
On February 28, 2005, Snack Ventures Europe, our snacks
joint venture with PepsiCo, Inc., was terminated and our
40.5 percent interest was redeemed. On April 4, 2005, we
sold our Lloyd’s barbecue business to Hormel Foods
Corporation. We received $799 million in cash proceeds
from these dispositions and recorded $499 million in
gains in fiscal 2005.
3. Restructuring and Other Exit Costs
In fiscal 2005, we recorded restructuring and other exit
costs of $84 million pursuant to approved plans,
consisting of: $74 million of charges associated with fiscal
2005 supply chain initiatives; $3 million of charges
associated with Bakeries and Foodservice severance
charges resulting from fiscal 2004 decisions; and
$7 million of charges associated with restructuring
actions prior to fiscal 2005. The charges from the fiscal
2005 initiatives included severance and pension and
postretirement curtailment costs of $14 million for 551
employees being terminated, $20 million to write off
assets, $30 million for the write-down of assets to their
net realizable value, and $10 million of other exit costs.
The carrying value of the assets written down was
$36 million. Net realizable value was determined by
independent market analysis.
The fiscal 2005 initiatives were undertaken to further
increase asset utilization and reduce manufacturing and
34
sourcing costs, resulting in decisions regarding plant
closures and production realignment. The actions
included decisions to: close our flour milling plant in
Vallejo, California, affecting 43 employees; close our
par-baked bread plant in Medley, Florida, affecting
42 employees; relocate bread production from our
Swedesboro, New Jersey plant, affecting 110 employees;
relocate a portion of our cereal production from
Cincinnati, Ohio, affecting 45 employees; close our
snacks foods plant in Iowa City, Iowa, affecting 83
employees; close our dry mix production at Trenton,
Ontario, affecting 53 employees; and relocate our frozen
baked goods line from our plant in Chelsea, Massachu-
setts to another facility, affecting 175 jobs.
These fiscal 2005 supply chain actions are also
resulting in certain associated expenses, primarily
resulting from adjustments to the depreciable life of the
assets necessary to reflect the shortened asset lives
which now coincide with the final production dates at the
Cincinnati and Iowa City plants. These associated
expenses are being recorded as cost of sales. The fiscal
2005 expense recorded in cost of sales was $18 million.
In fiscal 2004, we recorded restructuring and other exit
costs of $26 million pursuant to approved plans. These
costs included: a severance charge for 142 employees
being terminated as a result of a plant closure in the
Netherlands; costs related to a plant closure in Brazil
including a severance charge for 201 employees; costs
for the closure of our tomato canning facility in Atwater,
California, including severance costs for 47 employees;
adjustments of costs associated with previously
announced closures of manufacturing facilities; and a
severance charge for 132 employees, related primarily to
actions in our Bakeries and Foodservice organization.
The carrying value of the assets written down was
$3 million.
In fiscal 2003, we recorded restructuring and other exit
costs totaling $62 million pursuant to approved plans.
These costs consisted of charges associated with the
closure of our St. Charles, Illinois plant, expenses
relating to exiting production at former Pillsbury
facilities being closed, and flour mill, grain and other
restructuring/closing charges. These fiscal 2003 costs
include severance related to 264 St. Charles plant
employees and the write-down of $31 million of produc-
tion assets, primarily the St. Charles facility. The carrying
value of the assets written down was $36 million. At
May 29, 2005, we had disposed of all of these assets.
The analysis of our restructuring and other exit costs activity is as follows:
In Millions
Severance
Asset Write-down
Pension and
Postretirement
Curtailment Cost
Other
Total
Supply Chain Restructuring Activities
Reserve balance at May 26, 2002
2003 Charges
Utilized in 2003
Reserve balance at May 25, 2003
2004 Charges
Utilized in 2004
Reserve balance at May 30, 2004
2005 Charges
Utilized in 2005
Reserve Balance at May 29, 2005
Sales, Bakeries and Foodservice, and
Headquarters Severance
Reserve balance at May 26, 2002
2003 Charges
Utilized in 2003
Reserve balance at May 25, 2003
2004 Charges
Utilized in 2004
Reserve balance at May 30, 2004
2005 Charges
Utilized in 2005
Reserve Balance at May 29, 2005
International Restructurings
2004 Charges
Utilized in 2004
Reserve balance at May 30, 2004
2005 Charges
Utilized in 2005
Reserve Balance at May 29, 2005
Consolidated
Reserve balance at May 26, 2002
2003 Charges
Utilized in 2003
Reserve balance at May 25, 2003
2004 Charges
Utilized in 2004
Reserve balance at May 30, 2004
2005 Charges
Utilized in 2005
Reserve Balance at May 29, 2005
$ 24
8
(29)
3
2
(5)
–
10
(5)
$ 5
$ 30
2
(25)
7
7
(6)
8
2
(7)
$ 3
$ 7
(2)
5
–
(4)
$ 1
$ 54
10
(54)
10
16
(13)
13
12
(16)
$ 9
$ 51
31
(66)
16
3
(18)
1
50
(51)
$ –
$ –
–
–
–
–
–
–
–
–
$ –
$ 1
–
1
1
(2)
$ –
$ 51
31
(66)
16
4
(18)
2
51
(53)
$ –
$ –
5
(5)
–
–
–
–
4
(4)
$ –
$ –
–
–
–
–
–
–
–
–
$ –
$ –
–
–
–
–
$ –
$ –
5
(5)
–
–
–
–
4
(4)
$ –
$ 2
16
(7)
11
5
(9)
7
13
(12)
$ 8
$ –
–
–
–
1
–
1
1
(2)
$ –
$ –
–
–
3
(2)
$ 1
$ 2
16
(7)
11
6
(9)
8
17
(16)
$ 9
$ 77
60
(107)
30
10
(32)
8
77
(72)
$ 13
$ 30
2
(25)
7
8
(6)
9
3
(9)
3
$
$
$
8
(2)
6
4
(8)
2
$ 107
62
(132)
37
26
(40)
23
84
(89)
$ 18
35
ended March 31. The Häagen-Dazs and Seretram joint
ventures are reported as of and for the 12 months ended
April 30. The 8th Continent information is consistent
with our May year-end. The SVE information is
consistent with our May year-end for fiscal 2003 and
2004, and SVE operating results for fiscal 2005 are
included up through the termination date of the
joint venture.
Combined Financial Information – Joint Ventures
100 Percent Basis
In Millions, Fiscal Year
Net Sales
Net Sales less
Cost of Sales
Earnings before Income Taxes
Earnings after Income Taxes
In Millions, Fiscal Year Ended
Current Assets
Noncurrent Assets
Current Liabilities
Noncurrent Liabilities
2005
$2,652
2004
$2,625
2003
$2,159
952
178
125
1,184
231
184
2005
$604
612
695
7
1,180
205
153
2004
$852
972
865
14
4. Investments in Joint Ventures
We have a 50 percent equity interest in Cereal Partners
Worldwide (CPW), a joint venture with Nestlé that
manufactures and markets ready-to-eat cereals outside
the United States and Canada. We have guaranteed 50
percent of CPW’s debt. See Note Seventeen – Leases
and Other Commitments. We have a 50 percent equity
interest in 8th Continent, LLC, a domestic joint venture
with DuPont to develop and market soy foods and
beverages. We have 50 percent interests in the following
joint ventures for the manufacture, distribution and
marketing of Häagen-Dazs frozen ice cream
products and novelties: Häagen-Dazs Japan K.K.,
Häagen-Dazs Korea Company Limited, Häagen-Dazs
Distributors (Thailand) Company Limited, and
Häagen-Dazs Marketing & Distribution (Philippines) Inc.
We also have a 50 percent interest in Seretram, a joint
venture with Co-op de Pau for the production of Green
Giant canned corn in France.
On February 28, 2005, our 40.5 percent ownership
interest in the Snack Ventures Europe (SVE) joint venture
was redeemed for $750 million. The redemption ended
the European snack joint venture between General Mills
and PepsiCo, Inc. See Note Two – Divestitures.
The joint ventures are reflected in our consolidated
financial statements on the equity basis of accounting.
We record our share of the earnings or losses of these
joint ventures. We also receive royalty income from
certain joint ventures, incur various expenses (primarily
research and development) and record the tax impact of
certain joint venture operations that are structured
as partnerships.
Our cumulative investment in these joint ventures
(including our share of earnings and losses) was
$223 million, $434 million and $372 million at the end
of fiscal 2005, 2004 and 2003, respectively. We made
aggregate investments in the joint ventures of
$15 million, $31 million and $17 million in fiscal 2005,
2004 and 2003, respectively. We received aggregate
dividends from the joint ventures of $83 million,
$60 million and $95 million in fiscal 2005, 2004 and
2003, respectively.
Summary combined financial information for the joint
ventures on a 100 percent basis follows. Since we record
our share of CPW results on a two-month lag, CPW
information is included as of and for the 12 months
36
5. Goodwill and Intangible Assets
The components of goodwill and other intangible assets
are as follows:
In Millions
Goodwill
Other Intangible Assets:
Intangible assets not subject to
amortization
Brands
Pension intangible
Intangible assets not subject to
amortization
Intangible assets subject to
amortization, primarily capitalized
software
Less accumulated amortization
Intangible assets subject to
amortization
Total Other Intangible Assets
Total Goodwill and Other Intangible
May 29,
2005
$ 6,684
May 30,
2004
$ 6,684
3,516
3
3,516
6
3,519
3,522
221
(104)
117
3,636
197
(78)
119
3,641
Assets
$10,320
$10,325
The changes in the carrying amount of goodwill for
fiscal 2003, 2004 and 2005 are as follows:
In Millions
Balance at May 26, 2002
Activity including translation
Allocation to segments
Balance at May 25, 2003
Activity including translation
Balance at May 30, 2004
Activity including translation
Balance at May 29, 2005
U.S. Retail
$ 745
–
4,279
5,024
–
5,024
(22)
$5,002
Bakeries and
Foodservice
59
$
–
1,146
1,205
–
1,205
(4)
$1,201
$
International
–
10
411
421
34
455
26
$481
Pillsbury
Unallocated
Excess
Purchase Price
$ 7,669
(1,833)
(5,836)
–
–
–
–
–
$
Total
$ 8,473
(1,823)
–
6,650
34
6,684
–
$ 6,684
The Pillsbury acquisition valuation and purchase price
allocation was recorded in fiscal 2002 and 2003. The
activity during fiscal 2003 primarily reflects the allocation
of the purchase price to brand intangibles, net of tax,
and the contingent value rights payment to Diageo
related to the Pillsbury acquisition. Future purchase price
adjustments to goodwill may occur upon the resolution
of certain income tax accounting matters. See
Note Sixteen – Income Taxes.
Intangible asset amortization expense was $28 million,
$23 million and $18 million for fiscal 2005, 2004 and 2003,
respectively. Estimated amortization expense for the next
five fiscal years (in millions) is as follows: $27 in 2006, $22
in 2007, $17 in 2008, $14 in 2009 and $14 in 2010.
37
6. Inventories
The components of inventories are as follows:
In Millions
Raw materials, work in process and
supplies
Finished goods
Grain
Reserve for LIFO valuation method
Total Inventories
May 29,
2005
May 30,
2004
$ 214
795
73
(45)
$1,037
$ 234
793
77
(41)
$1,063
At May 29, 2005, and May 30, 2004, respectively,
inventories of $758 million and $765 million were valued
at LIFO. Results of operations were not materially
affected by a liquidation of LIFO inventory. The differ-
ence between replacement cost and the stated LIFO
inventory value is not materially different from the
reserve for LIFO valuation method.
7. Financial Instruments and Risk
Management Activities
Financial Instruments The carrying values of cash and
cash equivalents, receivables, accounts payable and
notes payable approximate fair value. Marketable
securities are carried at fair value. As of May 29, 2005, a
comparison of cost and market values of our marketable
securities (which are debt and equity securities) was
as follows:
In Millions
Held to maturity:
Debt securities
Equity securities
Total
Available for sale:
Debt securities
Equity securities
Total
Cost
$ –
2
$ 2
$17
4
$21
Market
Value
Gross
Gain
Gross
Loss
$ –
2
$ 2
$17
5
$22
$ –
–
$ –
$ –
1
$ 1
$ –
–
$ –
$ –
–
$ –
Earnings include realized gains from sales of available-
for-sale marketable securities of $2 million, $20 million
and $14 million in fiscal 2005, 2004 and 2003, respec-
tively. Gains and losses are determined by specific
identification. The aggregate unrealized gains and losses
on available-for-sale securities, net of tax effects, are
classified in Accumulated Other Comprehensive Income
38
within Stockholders’ Equity. At May 29, 2005, we owned
one marketable security with a fair market value less than
cost. The fair market value of this security was less than
$0.1 million below its cost.
Scheduled maturities of our marketable securities are
as follows:
In Millions
Under one year
(current)
From 1 to 3 years
From 4 to 7 years
Over 7 years
Equity securities
Totals
Held to Maturity
Available for Sale
Cost
$ –
–
–
–
2
$ 2
Market
Value
$ –
–
–
–
2
$ 2
Cost
$ –
6
3
8
4
$21
Market
Value
$ –
6
3
8
5
$22
Cash, cash equivalents and marketable securities
totaling $63 million and $142 million were pledged as
collateral as of May 29, 2005 and May 30, 2004, respec-
tively. These assets are primarily pledged as collateral for
certain derivative contracts.
The fair value of long-term debt, including the current
portion, was $6,074 million and $7,926 million at May 29,
2005 and May 30, 2004, respectively. The fair value of
long-term debt is estimated using discounted cash flows
based on our current incremental borrowing rates for
similar types of instruments.
Risk Management Activities As a part of our ongoing
business operations, we are exposed to market risks such
as changes in interest rates, foreign currency exchange
rates, and commodity prices. To manage these risks, we
may enter into various derivative transactions (e.g.,
futures, options, and swaps) pursuant to established
company policies.
Interest Rate Risk – We are exposed to interest rate
volatility with regard to existing variable-rate debt and
planned future issuances of fixed-rate debt. We use
interest rate swaps, including forward-starting swaps, to
reduce interest rate volatility and to achieve a desired
proportion of variable versus fixed-rate debt, based on
current and projected market conditions.
Variable Interest Rate Exposures – Except as discussed
below, variable-to-fixed interest rate swaps are
accounted for as cash flow hedges, with effectiveness
assessed based on either the hypothetical derivative
method or changes in the present value of interest
payments on the underlying debt. The amount of hedge
ineffectiveness was less than $1 million in fiscal 2005,
2004 and 2003.
When we issue fixed-rate debt, any corresponding
forward-starting interest rate swaps are dedesignated as
hedges and the amount related to those swaps within
Accumulated Other Comprehensive Income is reclassi-
fied into earnings over the life of the associated fixed-
rate debt.
Fixed Interest Rate Exposures – Fixed-to-variable
interest rate swaps are accounted for as fair value
hedges with effectiveness assessed based on changes in
the fair value of the underlying debt, using incremental
borrowing rates currently available on loans with similar
terms and maturities. Effective gains and losses on these
derivatives and the underlying hedged items are
recorded as interest expense.
In anticipation of the Pillsbury acquisition and other
financing needs, we entered into pay fixed interest rate
swap contracts during fiscal 2001 and fiscal 2002 totaling
$7.1 billion to lock in our interest payments on the
associated debt. During fiscal 2004, $750 million of these
swaps matured. In fiscal 2005, $2 billion of these swaps
matured. At May 29, 2005, we still owned $3.15 billion of
Pillsbury-related pay fixed swaps that were previously
neutralized with offsetting pay floating swaps in fiscal
2002. At May 29, 2005, $500 million of our pay floating
interest rate swaps were designated as a fair value hedge
of our 2.625% notes due October 2006.
The following table summarizes the notional amounts
and weighted average interest rates of our interest rate
swaps. As discussed above, we have neutralized all of
our pay fixed swaps with pay floating swaps; however, we
cannot present them on a net basis in the following table
because the offsetting occurred with different counter-
parties. Average variable rates are based on rates as of
the end of the reporting period.
In Millions
Pay floating swaps –
notional amount
Average receive rate
Average pay rate
Pay fixed swaps –
notional amount
Average receive rate
Average pay rate
May 29, 2005
May 30, 2004
Asset
Liability
Asset
Liability
–
–
–
–
–
–
$3,810
4.8%
3.1%
$3,150
3.1%
6.9%
–
–
–
–
–
–
$5,071
4.2%
1.1%
$5,150
1.1%
6.4%
The swap contracts mature at various dates from
2006 to 2014, as shown below.
In Millions
Maturity Date
2006
2007
2008
2009
2010
Beyond 2010
Total
Pay
Floating
25
$
1,923
22
20
20
1,800
$3,810
$
Pay
Fixed
–
1,400
–
–
—
1,750
$3,150
Foreign Exchange Transaction Risk – We are
exposed to fluctuations in foreign currency cash flows
related primarily to third-party purchases, intercompany
product shipments, and intercompany loans. Forward
contracts of generally less than 12 months duration are
used to hedge some of these risks. Hedge effectiveness
is assessed based on changes in forward rates. The
amount of hedge ineffectiveness was $1 million or less in
fiscal 2005, 2004 and 2003.
Commodity Price Risk – We are exposed to price
fluctuations primarily as a result of anticipated purchases
of ingredient and packaging materials. We use a combi-
nation of long cash positions with suppliers, exchange-
traded futures and option contracts and over-the-counter
hedging mechanisms to reduce price fluctuations in a
desired percentage of forecasted purchases over a
period of generally less than one year. Except as
discussed below, commodity derivatives are accounted
for as cash flow hedges, with effectiveness assessed
based on changes in futures prices. The amount of
hedge ineffectiveness was $1 million or less in fiscal 2005,
2004 and 2003. Losses of $2 million were reclassified into
earnings as a result of the discontinuance of commodity
cash flow hedges in fiscal 2003.
39
Other Risk Management Activities – We enter into
certain derivative contracts in accordance with our risk
management strategy that do not meet the criteria for
hedge accounting, including our grain merchandising
operation, certain foreign currency derivatives, and
offsetting interest rate swaps as discussed above. Even
though they may not qualify as hedges, these derivatives
have the economic impact of largely mitigating the
associated risks. These derivatives were not acquired for
trading purposes and are recorded at fair value with
changes in fair value recognized in earnings each period.
We use a grain merchandising operation to provide us
efficient access to and more informed knowledge of
various commodities markets. This operation uses futures
and options to hedge its net inventory position to
minimize market exposure. As of May 29, 2005, our grain
merchandising operation had futures and options
contracts that essentially hedged its net inventory
position. None of the contracts extended beyond May
2006. All futures contracts and futures options are
exchange-based instruments with ready liquidity and
determinable market values. Neither results of opera-
tions nor the year-end positions of our grain
merchandising operation were material to our
overall results.
Unrealized losses from cash flow hedges recorded in
Accumulated Other Comprehensive Income as of
May 29, 2005, totaled $122 million, primarily related to
interest rate swaps we entered into in contemplation of
future borrowings and other financing requirements
(primarily related to the Pillsbury acquisition), which are
being reclassified into interest expense over the life of
the interest rate hedge as long as there continue to be
interest payments on the associated debt. The estimated
net amount of the existing gains and losses in Accumu-
lated Other Comprehensive Income as of May 29, 2005,
that is expected to be reclassified into earnings within
the next twelve months is $36 million in expense. See
Note Eight – Debt for the impact of these reclassifica-
tions on interest expense.
Concentrations of Credit Risk We enter into interest
rate, foreign exchange, and certain commodity deriva-
tives with a diversified group of highly rated
counterparties. We continually monitor our positions and
the credit ratings of the counterparties involved and, by
policy, limit the amount of credit exposure to any one
party. These transactions may expose us to potential
40
losses due to the credit risk of nonperformance by these
counterparties; however, we have not incurred a material
loss nor are losses anticipated. We also enter into
commodity futures transactions through various regu-
lated exchanges.
8. Debt
Notes Payable The components of notes payable and
their respective weighted average interest rates at the
end of the periods were as follows:
May 29, 2005
May 30, 2004
In Millions
U.S. commercial paper
Canadian commercial
paper
Euro commercial paper
Financial institutions
Amounts reclassified to
long-term debt
Total Notes Payable
Notes
Payable
$ 125
–
–
174
–
$ 299
Weighted
Average
Interest
Notes
Rate
Payable
3.1% $ 441
Weighted
Average
Interest
Rate
1.2%
–
–
7.2
159
499
234
–
(750)
5.5% $ 583
2.1
2.1
6.7
–
2.6%
To ensure availability of funds, we maintain bank credit
lines sufficient to cover our outstanding short-term
borrowings. As of May 29, 2005, we had $1.85 billion in
committed lines and $301 million in uncommitted lines.
Our committed lines consist of a $750 million credit
facility expiring in January 2009 and a $1.1 billion facility
expiring in January 2006. These revolving credit agree-
ments provide us with the ability to refinance short-term
borrowings on a long-term basis; accordingly, a portion
of our notes payable had been reclassified to long-term
debt as of May 30, 2004.
Long-Term Debt On March 23, 2005, we commenced a
cash tender offer for our outstanding 6% Notes due in
2012. The tender offer resulted in the purchase of
$500 million principal amount of the Notes. Subsequent
to the expiration of the tender offer, we purchased an
additional $260 million principal amount of the Notes in
the open market. The aggregate purchases resulted in
debt repurchase costs of $137 million consisting of
$73 million of noncash interest rate swap losses reclassi-
fied from Accumulated Other Comprehensive Income,
$59 million of purchase premium and $5 million of
noncash unamortized cost of issuance expense.
On September 24, 2003, we sold $500 million of 25⁄8%
fixed-rate notes due October 24, 2006. Interest on these
notes is payable semiannually on April 24 and
October 24, beginning April 24, 2004. Concurrently, we
entered into an interest rate swap for $500 million
notional amount where we receive 25⁄8% fixed interest
and pay LIBOR plus 11 basis points.
On August 11, 2003, we entered into a $75 million
five-year term (callable after two years) bank borrowing
agreement. The floating rate coupon is one month
LIBOR plus 15 basis points and interest is payable on a
monthly basis.
On November 20, 2002, we sold $350 million of 37⁄8%
fixed-rate notes and $135 million of 3.901% fixed-rate
notes due November 30, 2007. Interest for these notes is
payable semiannually on May 30 and November 30,
beginning May 30, 2003.
On October 28, 2002, we completed a private place-
ment of zero coupon convertible debentures with a face
value of approximately $2.23 billion for gross proceeds of
approximately $1.50 billion. The issue price of the
debentures was $671.65 for each $1,000 in face value,
which represents a yield to maturity of 2.00%. The
debentures cannot be called by us for three years after
issuance and will mature in 20 years. Holders of the
debentures can require us to repurchase the notes on
the third, fifth, tenth and fifteenth anniversaries of the
issuance. We have the option to pay the repurchase
price in cash or in stock. The notes are classified as
current portion of long-term debt as the result of the
associated put provisions. The debentures are convert-
ible into our common stock at a rate of 13.0259 shares
for each $1,000 debenture. This results in an initial
conversion price of approximately $51.56 per share and
represents a premium of 25 percent over the closing sale
price of $41.25 per share on October 22, 2002. The
conversion price will increase with the accretion of the
original issue discount on the debentures. Generally,
except upon the occurrence of specified events, holders
of the debentures are not entitled to exercise their
conversion rights until our stock price is greater than a
specified percentage (beginning at 125 percent and
declining by 0.25 percent each six months) of the
accreted conversion price per share. At May 29, 2005, the
conversion price was $54.29. The shares issuable upon
conversion are included in diluted earnings per share.
See Note Twelve – Earnings Per Share.
As of May 29, 2005, the amount recorded in Accumu-
lated Other Comprehensive Income associated with our
interest rate swaps ($119 million) will be reclassified to
interest expense over the remaining lives of the hedged
forecasted transaction, which mirrors the remaining life of
swap contracts (ranging from one to eight years). The
amount reclassified from Accumulated Other Compre-
hensive Income in fiscal 2005 was $161 million, of which
$88 million was recorded as interest expense and $73
million was recorded as part of the debt repurchase costs
described above. The amount expected to be reclassi-
fied from Accumulated Other Comprehensive Income to
interest expense in fiscal 2006 is $34 million.
A summary of our long-term debt is as follows:
In Millions
Zero coupon convertible debentures
yield 2.0%, $2,233 due Oct. 28, 20221
51⁄8% notes due Feb. 15, 2007
6% notes due Feb. 15, 2012
2.625% notes due Oct. 24, 2006
Medium-term notes, 4.8% to 9.1%, due
2005 to 2078
37⁄8% notes due Nov. 30, 2007
3.901% notes due Nov. 30, 2007
Zero coupon notes, yield 11.1%, $261
due Aug. 15, 2013
8.2% ESOP loan guaranty, due through
June 30, 2007
Notes payable, reclassified
7.0% notes due Sept. 15, 2004
Zero coupon notes, yield 11.7%, $54
due Aug. 15, 2004
Other, primarily due July 11, 2008
Less amounts due within one year 1
Total Long-term Debt
May 29,
2005
May 30,
2004
$ 1,579
1,500
1,240
500
$ 1,548
1,500
2,000
500
413
350
135
108
6
–
–
437
350
135
97
11
750
150
–
62
5,893
(1,638)
$ 4,255
53
112
7,643
(233)
$ 7,410
1
The zero coupon convertible debentures are included in the
current portion of long-term debt as the result of put
provisions described above.
See Note Seven – Financial Instruments and Risk
Management Activities for a description of related
interest-rate derivative instruments.
We have guaranteed the debt of the Employee Stock
Ownership Plan; therefore, the loan is reflected on our
41
consolidated balance sheets as long-term debt with a
related offset in Unearned Compensation in Stock-
holders’ Equity.
The sinking fund and principal payments due on
long-term debt based on stated contractual maturities
are (in millions) $59, $2,037, $486, $172 and $15 in fiscal
2006, 2007, 2008, 2009 and 2010, respectively. The fiscal
2006 amount is exclusive of $1 million of interest yet to
be accreted on zero coupon notes.
9. Minority Interests
In April 2002, the Company and certain of its wholly
owned subsidiaries contributed assets with an aggregate
fair market value of approximately $4 billion to another
wholly owned subsidiary, General Mills Cereals, LLC
(GMC), a limited liability company. GMC is a separate
and distinct legal entity from the Company and its
subsidiaries, and has separate assets, liabilities, busi-
nesses and operations. The contributed assets consist
primarily of manufacturing assets and intellectual
property associated with the production and retail sale of
Big G ready-to-eat cereals, Progresso soups and Old El
Paso products. In exchange for the contribution of these
assets, GMC issued the managing membership interest
and preferred membership interests to wholly owned
subsidiaries of the Company. The managing member
directs the business activities and operations of GMC
and has fiduciary responsibilities to GMC and its
members. Other than rights to vote on certain matters,
holders of the preferred membership interests have no
right to direct the management of GMC.
In May 2002, a wholly owned subsidiary of the
Company sold 150,000 Class A preferred membership
interests in GMC to an unrelated third-party investor in
exchange for $150 million. On October 8, 2004, another
wholly owned subsidiary of the Company sold 835,000
Series B-1 preferred membership interests in GMC in
exchange for $835 million. In connection with the sale of
the Series B-1 interests, GMC and its existing members
entered into a Third Amended and Restated Limited
Liability Company Agreement of GMC (the LLC Agree-
ment), setting forth, among other things, the terms of the
Series B-1 and Class A interests held by the third-party
investors and the rights of those investors. Currently, all
interests in GMC, other than the 835,000 Series B-1
interests and 150,000 Class A interests, but including all
42
managing member interests, are held by wholly owned
subsidiaries of the Company.
The Class A interests receive quarterly preferred
distributions at a floating rate equal to (i) the sum of
three-month LIBOR plus 90 basis points, divided by (ii)
0.965. The LLC Agreement requires that the rate of the
distributions on the Class A interests be adjusted by
agreement between the third-party investor holding the
Class A interests and GMC every five years, beginning in
June 2007. If GMC and the investor fail to mutually agree
on a new rate of preferred distributions, GMC must
remarket the Class A interests to set a new distribution
rate. Upon a failed remarketing, the rate over LIBOR will
be increased by 75 basis points until the next scheduled
remarketing date. GMC, through its managing member,
may elect to repurchase all of the Class A interests at any
time for an amount equal to the holder’s capital account,
plus any applicable make-whole amount. Under certain
circumstances, GMC also may be required to be
dissolved and liquidated, including, without limitation,
the bankruptcy of GMC or its subsidiaries, failure to
deliver the preferred distributions, failure to comply with
portfolio requirements, breaches of certain covenants,
lowering of our senior debt rating below either Baa3 by
Moody’s or BBB by Standard & Poor’s, and a failed
attempt to remarket the Class A interests as a result of a
breach of GMC’s obligations to assist in such
remarketing. In the event of a liquidation of GMC, each
member of GMC would receive the amount of its then
capital account balance. The managing member may
avoid liquidation in most circumstances by exercising an
option to purchase the Class A interests. An election to
purchase the preferred membership interests could
impact our liquidity by requiring us to refinance the
purchase price.
The Series B-1 interests are entitled to receive quar-
terly preferred distributions at a fixed rate of 4.5% per
year, which is scheduled to be reset to a new fixed rate
through a remarketing in October 2007. Beginning in
October 2007, the managing member of GMC may elect
to repurchase the Series B-1 interests for an amount
equal to the holder’s then current capital account
balance plus any applicable make-whole amount. GMC is
not required to purchase the Series B-1 interests.
Upon the occurrence of certain exchange events (as
described below), the Series B-1 interests will be
exchanged for shares of perpetual preferred stock of the
Company. An exchange will occur upon the senior
unsecured debt rating of the Company falling below
either Ba3 as rated by Moody’s Investors Service, Inc. or
BB- as rated by Standard & Poor’s or Fitch, Inc., a
bankruptcy or liquidation of the Company, a default on
any senior indebtedness of the Company resulting in an
acceleration of indebtedness having an outstanding
principal balance in excess of $50 million, the Company
failing to pay a dividend on its common stock in any
fiscal quarter, or certain liquidating events as set forth in
the LLC Agreement.
If GMC fails to make a required distribution to the
holders of Series B-1 interests when due, we will be
restricted from paying any dividend (other than dividends
in the form of shares of common stock) or other distribu-
tions on shares of our common or preferred stock, and
may not repurchase or redeem shares of our common or
preferred stock, until all such accrued and undistributed
distributions are paid to the holders of the Series B-1
interests. If the required distributions on the Series B-1
interests remain undistributed for six quarterly distribu-
tion periods, the managing member will form a nine-
member board of directors to manage GMC. Under
these circumstances, the holder of the Series B-1
interests will have the right to appoint one director. Upon
the payment of the required distributions, the GMC
board of directors will be dissolved. At May 29, 2005, we
have made all required distributions to the Series B-1
interests. As discussed above, upon the occurrence of
certain events the Series B-1 interests will be included in
our computation of diluted earnings per share as a
participating security.
For financial reporting purposes, the assets, liabilities,
results of operations, and cash flows of GMC are
included in our consolidated financial statements. The
third-party investors’ Class A and Series B-1 interests in
GMC are reflected as minority interests on our consoli-
dated balance sheet, and the return to the third party
investors is reflected as interest, including minority
interest, expense in the consolidated statements
of earnings.
In fiscal 2003, General Mills Capital, Inc. (GM Capital),
a wholly owned subsidiary, sold $150 million of its Series
A preferred stock to an unrelated third-party investor.
GM Capital regularly purchases our receivables. These
receivables are included in the consolidated balance
sheet and the $150 million purchase price for the Series
A preferred stock is reflected as minority interest on the
balance sheet. The proceeds from the issuance of the
preferred stock were used to reduce short-term debt.
The return to the third-party investor is reflected as
interest, including minority interest, expense in the
consolidated statements of earnings.
10. Stockholders’ Equity
Cumulative preference stock of 5 million shares, without
par value, is authorized but unissued.
We have a shareholder rights plan that entitles each
outstanding share of common stock to one right. Each
right entitles the holder to purchase one two-hundredths
of a share of cumulative preference stock (or, in certain
circumstances, common stock or other securities),
exercisable upon the occurrence of certain events. The
rights are not transferable apart from the common stock
until a person or group has acquired 20 percent or more,
or makes a tender offer for 20 percent or more, of the
common stock. Then each right will entitle the holder
(other than the acquirer) to receive, upon exercise,
common stock of either the Company or the acquiring
company having a market value equal to two times the
exercise price of the right. The initial exercise price is
$120 per right. The rights are redeemable by the Board
of Directors at any time prior to the acquisition of
20 percent or more of the outstanding common stock.
The shareholder rights plan was specifically amended so
that the Pillsbury acquisition in fiscal 2002 did not trigger
the exercisability of the rights. The rights expire on
February 1, 2006. At May 29, 2005, there were 369 million
rights issued and outstanding.
The Board of Directors has authorized the repurchase,
from time to time, of common stock for our treasury,
provided that the number of treasury shares shall not
exceed 170 million.
In October 2004, we purchased approximately
17 million shares of our common stock from Diageo plc
for $750 million, or $45.20 per share. This share repur-
chase was made in conjunction with Diageo’s sale of
approximately 33 million additional shares of our
common stock in an underwritten public offering.
Following these transactions, Diageo and its
affiliates held approximately 29 million shares of our
common stock.
Concurrently in October 2004, Lehman Brothers
Holdings Inc. issued $750 million of notes, which are
mandatorily exchangeable for shares of our common
43
stock. In connection with the issuance of those notes, an
affiliate of Lehman Brothers entered into a forward
purchase contract with us, under which we are obligated
to deliver to such affiliate between approximately 14
million and 17 million shares of our common stock,
subject to adjustment under certain circumstances.
These shares will generally be deliverable by us in
October 2007, in exchange for $750 million in cash or, in
certain circumstances, securities of an affiliate of Lehman
Brothers. We recorded a $43 million fee for this forward
purchase contract as an adjustment to
stockholders’ equity.
Through private transactions in fiscal 2003 as part of
our stock repurchase program, we issued put options for
less than 1 million shares for $1 million in premiums paid
to us. As of May 29, 2005 and May 30, 2004, no put
options remained outstanding. On October 31, 2002, we
purchased call options from Diageo plc on approxi-
mately 29 million shares that Diageo currently owns. The
premiums paid for the call options totaled $89 million.
The options are exercisable in whole or in part from time
to time, subject to certain limitations, during a three-year
period from the date of the purchase of the calls. As of
May 29, 2005, these call options for 29 million shares
remained outstanding at an exercise price of $51.56 per
share with a final exercise date of October 28, 2005.
The following table provides details of Other Compre-
hensive Income:
In Millions
Fiscal 2003
Foreign currency translation
Minimum pension liability
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Securities
Hedge derivatives
Other Comprehensive Income
Fiscal 2004
Foreign currency translation
Minimum pension liability
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Securities
Hedge derivatives
Other Comprehensive Income
Fiscal 2005
Foreign currency translation
Minimum pension liability
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Securities
Hedge derivatives
Other Comprehensive Income
Pretax
Change
Tax
(Expense)
Benefit
Other
Compre-
hensive
Income
$ 98
(88)
7
(168)
(14)
161
(4)
$
$ 75
51
5
24
(20)
136
$ 271
$ 75
(35)
2
(30)
(2)
187
$ 197
$ ––
33
(3)
63
5
(60)
$ 38
$ ––
(19)
(2)
(9)
7
(50)
$(73)
$ ––
13
(1)
11
1
(69)
$(45)
$ 98
(55)
4
(105)
(9)
101
$ 34
$ 75
32
3
15
(13)
86
$ 198
$ 75
(22)
1
(19)
(1)
118
$ 152
Except for reclassification to earnings, changes in
Other Comprehensive Income are primarily
noncash items.
44
Accumulated Other Comprehensive Income balances,
net of tax effects, were as follows:
In Millions
Foreign currency translation
adjustments
Unrealized gain (loss) from:
Securities
Hedge derivatives
Pension plan minimum liability
Accumulated Other Comprehensive
May 29,
2005
May 30,
2004
$135
$ 60
1
(76)
(52)
1
(175)
(30)
Income (Loss)
$ 8
$(144)
11. Stock Plans
We use broad-based stock plans to help ensure align-
ment with stockholders’ interests. The 2003 Stock
Compensation Plan (2003 Plan) was approved by share-
holders in September 2003, increased the use of
restricted stock and reduced our reliance on stock
options as the principal form of long-term compensation.
A total of 3,221,872 shares are available for grant under
the 2003 Plan through December 31, 2005 and the 2001
Director Plan through September 30, 2006. Shares of
restricted stock and restricted stock units may also be
granted under the Executive Incentive Plan through
September 25, 2010. Shares available for grant are
reduced by shares issued, net of shares surrendered to
us in stock-for-stock exercises. Options may be priced
only at 100 percent of the fair market value at the date of
grant. No options now outstanding have been re-priced
since the original date of grant. Options now
outstanding include some granted under the 1990, 1993,
1995, 1998 senior management and 1998 employee
option plans, under which no further rights may be
granted. All options expire within 10 years and one
month after the date of grant. The stock plans provide
for full vesting of options upon completion of specified
service periods or in the event of a change of control.
Stock subject to a restricted period and a purchase
price, if any (as determined by the Compensation
Committee of the Board of Directors), may be granted to
key employees under the 2003 Plan. Restricted stock
units, up to 50 percent of the value of an individual’s cash
incentive award, may be granted through the Executive
Incentive Plan. Certain restricted stock unit awards
require the employee to deposit personally owned
shares (on a one-for-one basis) with the Company during
the restricted period. The 2001 Director Plan allows each
nonemployee director to annually receive 1,000 restricted
stock units convertible to common stock at a date of the
director’s choosing following his or her one-year term. In
fiscal 2005, 2004 and 2003, grants of 1,497,840, 1,738,581
and 345,889 shares of restricted stock or units were made
to employees and directors with weighted average
values at grant of $46.73, $46.35 and $44.13 per share,
respectively. On May 29, 2005, a total of 4,154,993
restricted shares and units were outstanding under
all plans.
The following table contains information on stock
option activity:
Options
Exercisable
(Thousands)
30,149
Weighted Average
Exercise Price
per Share
$29.18
Balance at May 26, 2002
Granted
Exercised
Expired
Balance at May 25, 2003
37,743
$31.61
Granted
Exercised
Expired
Balance at May 30, 2004
37,191
$33.73
Granted
Exercised
Expired
Balance at May 29, 2005
36,506
$36.08
Options
Outstanding
(Thousands)
71,075
7,890
(3,492)
(1,113)
74,360
5,180
(9,316)
(1,111)
69,113
4,544
(8,334)
(1,064)
64,259
Weighted Average
Exercise Price
per Share
$36.03
43.90
29.39
43.76
$37.07
46.12
27.27
43.06
$38.97
46.94
29.27
45.78
$40.68
45
The following table provides information regarding options exercisable and outstanding as of May 29, 2005:
Range of Exercise Price
per Share
Under $30
$30 — $35
$35 — $40
$40 — $45
Over $45
Options
Exercisable
(Thousands)
2,562
15,809
7,104
10,770
261
36,506
Weighted Average
Exercise Price
per Share
$26.60
33.30
37.42
41.26
47.77
$36.08
Options
Outstanding
(Thousands)
2,562
15,809
7,105
18,190
20,593
64,259
Weighted Average
Exercise Price
per Share
$26.60
33.30
37.42
42.32
47.78
$40.68
Weighted Average
Remaining
Contractual
Life (In Years)
.74
3.60
3.25
6.19
7.80
5.53
SFAS No. 123 allows either a fair value based method
Basic and diluted earnings per share (EPS) were
or an intrinsic value based method of accounting for
stock-based compensation plans. We use the intrinsic
value based method. Stock-based compensation
expense related to restricted stock for fiscal 2005, 2004
and 2003 was $38 million, $27 million and $21 million,
respectively. Stock-based compensation expense for
stock options is not reflected in net earnings, as all
options granted under those plans had an exercise price
equal to the market value of the underlying common
stock on the date of the grant. See Note One (L) for
additional details.
12. Earnings Per Share
On October 13, 2004, the FASB ratified Emerging Issues
Task Force Issue No. 04-8, “The Effect of Contingently
Convertible Debt on Diluted Earnings per Share,” (EITF
04-8). EITF 04-8 became effective for us in the third
quarter of fiscal 2005. The adoption of EITF 04-8
increased diluted shares outstanding by 29 million shares
to give effect to shares that are contingently issuable
related to our zero coupon convertible debentures
issued in October 2002. Also, net earnings used for
earnings per share calculations were adjusted, using the
if-converted method. The effect of EITF 04-8 reduced
previously reported annual diluted earnings per share by
$0.15 and $0.08 for fiscal 2004 and 2003, respectively.
46
calculated using the following:
In Millions, Except Per Share Data,
Fiscal Year
Net earnings – as reported
Interest on contingently
convertible debentures,
after tax
Net Earnings for Diluted EPS
2005
$1,240
2004
$1,055
2003
$ 917
20
20
11
Calculation
$1,260
$1,075
$ 928
Average number of common shares
– basic EPS (a)
371
375
369
Incremental share effect from:
Stock options (b)
Restricted stock, stock rights and
other (b)
Contingently convertible
debentures (c)
Average Number of Common
Shares – Diluted EPS
8
1
8
1
9
–
29
29
17
409
413
395
Earnings per Share – Basic
Earnings per Share – Diluted
$ 3.34
$ 3.08
$ 2.82
$ 2.60
$2.49
$2.35
(a)
(b)
(c)
Computed as the weighted average of net shares
outstanding on stock-exchange trading days.
Incremental shares from stock options, restricted stock and
stock rights are computed by the “treasury stock” method.
Shares from contingently convertible debentures are
reflected using the “if-converted” method.
When we issued the zero coupon convertible deben-
tures, we simultaneously purchased call options to
purchase 29 million shares from Diageo to directly offset
the shares that are contingently issuable under the
debentures as discussed in Note Ten. Under generally
accepted accounting principles, the offsetting effect of
these call options cannot be considered when
determining the dilutive effect of the contingently
issuable shares.
We can call these debentures as early as October
2005, and we have the option to pay the repurchase
price in cash or in stock. Accordingly, the dilutive effect
on EPS also could be affected by our ability to repur-
chase the debentures in fiscal 2006.
The diluted EPS calculation does not include 9 million,
12 million and 13 million average anti-dilutive stock
options in fiscal 2005, 2004 and 2003, respectively, nor
does it include 3 million average anti-dilutive put options
in fiscal 2003. In addition, upon the occurrence of certain
events, the forward contract with Lehman Brothers will be
included in our calculation of diluted earnings per share.
See Note Ten.
13. Interest, Including Minority
Interest, Expense
The components of net interest, including minority
interest, expense are as follows:
In Millions, Fiscal Year
Interest expense
Subsidiary preferred
distributions to minority
interest holders
Capitalized interest
Interest income
Interest, Including Minority
2005
$449
2004
$529
2003
$581
39
(3)
(30)
8
(8)
(21)
8
(8)
(34)
Interest, Net
$455
$508
$547
During fiscal 2005, 2004 and 2003, we made cash
interest payments of $450 million, $497 million and
$510 million, respectively.
14. Retirement and Other Postretirement
Benefit Plans
Defined-Benefit Plans
We have defined-benefit retirement plans covering most
employees. Benefits for salaried employees are based on
length of service and final average compensation. The
hourly plans include various monthly amounts for each
year of credited service. Our funding policy is consistent
with the requirements of federal law. Our principal
retirement plan covering salaried employees has a
provision that any excess pension assets would vest in
plan participants if the plan is terminated within five
years of a change in control.
We sponsor plans that provide health-care benefits to
the majority of our retirees. The salaried health-care
benefit plan is contributory, with retiree contributions
based on years of service. We fund related trusts for
certain employees and retirees on an annual basis. The
Medicare Prescription Drug Improvement and Modern-
ization Act of 2003 (Act) was signed into law on
December 8, 2003. FASB Staff Position 106-2 (FSP 106-2)
provides accounting guidance related to the Act. We
adopted FSP 106-2 effective as of the Act’s enactment
date, December 8, 2003. The reduction in the accumu-
lated postretirement benefit obligation for the Act
subsidy related to past services was $54 million. The
effect of the subsidy on postretirement cost for fiscal
2004 was a reduction of approximately $3 million.
We use our fiscal year-end as a measurement date for
substantially all of our pension and postretirement
benefit plans.
47
Obligations and Funded Status – Reconciliation of the funded status of these plans and the amounts included in the
balance sheet are as follows:
In Millions, Fiscal Year End
Fair Value of Plan Assets
Beginning fair value
Actual return on assets
Company contributions
Plan participant contributions
Benefits paid from plan assets
Ending Fair Value
Projected Benefit Obligation
Beginning obligations
Service cost
Interest cost
Plan amendment
Curtailment
Plan participant contributions
Actuarial loss (gain)
Actual benefits paid
Ending Obligations
Funded Status of Plans
Unrecognized actuarial loss
Unrecognized prior service costs (credits)
Net Amount Recognized
Amounts Recognized on Balance Sheets
Prepaid asset
Accrued liability
Intangible asset
Minimum liability adjustment in equity
Net Amount Recognized
Pension Plans
Postretirement
Benefit Plans
2005
2004
2005
2004
$2,850
486
46
1
(146)
$3,237
$2,578
62
167
1
2
1
417
(146)
$3,082
$ 155
993
43
$1,191
$1,239
(134)
3
83
$1,191
$2,541
451
5
1
(148)
$2,850
$2,765
70
160
5
–
1
(275)
(148)
$2,578
$ 272
770
48
$1,090
$1,148
(113)
6
49
$1,090
$ 219
39
20
8
(44)
$ 242
$ 826
15
53
–
2
8
116
(49)
$ 971
$(729)
393
(11)
$(347)
$
–
(347)
–
–
$(347)
$ 202
34
20
8
(45)
$ 219
$ 814
16
47
–
–
8
(12)
(47)
$ 826
$(607)
307
(13)
$(313)
$
–
(313)
–
–
$(313)
The accumulated benefit obligation for all defined-benefit plans was $2,868 million and $2,415 million at May 29, 2005
and May 30, 2004, respectively.
Plans with accumulated benefit obligations in excess of plan assets are as follows:
In Millions, Fiscal Year End
Projected benefit obligation
Accumulated benefit obligation
Plan assets at fair value
48
Pension Plans
Postretirement
Benefit Plans
2005
$293
279
144
2004
$291
282
167
2005
N/A
$971
242
2004
N/A
$826
219
Components of Costs – Components of net benefit (income) or expense each fiscal year are as follows:
In Millions, Fiscal Year
Service cost
Interest cost
Expected return on plan assets
Amortization of transition asset
Amortization of losses
Amortization of prior service costs (credits)
Settlement or curtailment losses
Net (Income) Expense
Pension Plans
Postretirement
Benefit Plans
2005
$ 62
167
(301)
–
10
6
2
$ (54)
2004
$ 70
160
(300)
–
18
5
–
$ (47)
2003
$ 46
162
(300)
(3)
2
6
5
$ (82)
2005
$ 15
53
(22)
–
14
(2)
2
$ 60
2004
$ 16
47
(22)
–
13
(2)
–
$ 52
2003
$ 12
46
(22)
–
5
(2)
1
$ 40
Assumptions – Assumptions used to determine benefit obligations are:
Fiscal Year End
Discount rate
Rate of salary increases
Pension Plans
2005
5.55%
4.4
2004
6.65%
4.4
Postretirement
Benefit Plans
2005
5.50%
–
2004
6.65%
–
Assumptions used to determine net periodic benefit costs are:
Fiscal Year
Discount rate
Expected long-term rate of return on plan assets
Rate of salary increases
2005
6.65%
9.6
4.4
Pension Plans
2004
6.00%
9.6
4.4
Postretirement
Benefit Plans
2003
7.50%
10.4
4.4
2005
6.65%
9.6
–
2004
6.00%
9.6
–
2003
7.50%
10.0
–
Assumed health care cost trend rates are as follows:
Fiscal Year End
Health care cost trend rate for next
year
Rate to which the cost trend rate is
assumed to decline (ultimate rate)
Year that the rate reaches the ultimate
2005
2004
9.0%
9.0%
5.2
5.2
trend rate
2010
2009
Assumed trend rates for health-care costs have an
important effect on the amounts reported for the
postretirement benefit plans. If the health-care cost trend
rate increased by 1 percentage point in each future year,
the aggregate of the service and interest cost compo-
nents of postretirement expense would increase for
fiscal 2005 by $6 million, and the postretirement accumu-
lated benefit obligation as of May 29, 2005, would
increase by $87 million. If the health-care cost trend rate
decreased by 1 percentage point in each future year, the
aggregate of the service and interest cost components
of postretirement expense would decrease for fiscal 2005
by $6 million, and the postretirement accumulated
benefit obligation as of May 29, 2005, would decrease by
$77 million.
Plan Assets – Our weighted-average asset allocations for
the past two fiscal years for our pension plans and our
postretirement benefit plans are as follows:
Pension Plans
Postretirement
Benefit Plans
2005
2004
2005
2004
Fiscal Year
Asset Category
U.S. equities
International equities
Private equities
Fixed income
Real assets
Total
37%
18
7
26
12
100%
38%
17
7
27
11
100%
40%
17
5
28
10
100%
The investment objective for the U.S. pension and
postretirement medical plans is to secure the benefit
38%
16
4
32
10
100%
49
obligations to participants at a reasonable cost to us.
The goal is to optimize the long-term return on plan
assets at a moderate level of risk. The pension and
postretirement portfolios are broadly diversified across
asset classes. Within asset classes, the portfolios are
further diversified across investment styles and invest-
ment organizations. For the pension and postretirement
plans, the long-term investment policy allocations are:
35 percent to U.S. equities, 15 percent to international
equities, 10 percent to private equities, 30 percent to
fixed income and 10 percent to real assets (real estate,
energy and timber). The actual allocations to these asset
classes may vary tactically around the long-term policy
allocations based on relative market valuations.
Our expected rate of return on plan assets is deter-
mined by our asset allocation, our historical long-term
investment performance, our estimate of future long-
term returns by asset class (using input from our
actuaries, investment services and investment managers),
and long-term inflation assumptions.
Contributions and Future Benefit Payments – We expect
to contribute $5 million to our pension plans and $21
million to our other postretirement benefit plans in
fiscal 2006. Estimated benefit payments, which reflect
expected future service, as appropriate, are expected to
be paid as follows:
In Millions, Fiscal Year
2006
2007
2008
2009
2010
2011 - 2015
Pension
Plans
$151
154
157
163
169
951
Postretirement
Benefit Plans
Gross
$ 54
57
60
63
65
362
Medicare
Subsidy
Receipts
$ 3
6
7
7
8
45
Certain international operations have defined-benefit
pension plans that are not presented in the tables above.
These international operations have prepaid pension
assets of less than $1 million at the end of fiscal 2005 and
2004, and they have accrued pension plan liabilities of
$7 million at the end of fiscal 2005 and $5 million as of
the end of fiscal 2004. Pension expense associated with
these plans was $6 million, $3 million and $3 million for
fiscal 2005, 2004 and 2003, respectively.
50
Defined-Contribution Plans
Our total expense related to defined-contribution plans
recognized in fiscal 2005, 2004 and 2003 was $17 million,
$20 million and $30 million, respectively. The General
Mills Savings Plan is a defined contribution plan that
covers salaried and nonunion employees. It had net
assets of $1,797 million as of May 29, 2005, and $1,668
million as of May 30, 2004. This plan is a 401(k) savings
plan that includes a number of investment funds and an
Employee Stock Ownership Plan (ESOP). The ESOP’s
only assets are our common stock and temporary cash
balances. The ESOP’s share of the total defined contribu-
tion expense was $11 million, $15 million and $26 million
in fiscal 2005, 2004 and 2003, respectively. The ESOP’s
expense is calculated by the “shares allocated” method.
The ESOP uses our common stock to convey benefits
to employees and, through increased stock ownership, to
further align employee interests with those of share-
holders. We match a percentage of employee
contributions to the ESOP with a base match plus a
variable year-end match that depends on annual
results. Employees receive our match in the form of
common stock.
The ESOP originally purchased our common stock
principally with funds borrowed from third parties (and
guaranteed by us). The ESOP shares are included in net
shares outstanding for the purposes of calculating
earnings per share. The ESOP’s third-party debt is
described in Note Eight.
We treat cash dividends paid to the ESOP the same as
other dividends. Dividends received on leveraged shares
(i.e., all shares originally purchased with the debt
proceeds) are used for debt service, while dividends
received on unleveraged shares are passed through
to participants.
Our cash contribution to the ESOP is calculated so as
to pay off enough debt to release sufficient shares to
make our match. The ESOP uses our cash contributions
to the plan, plus the dividends received on the ESOP’s
leveraged shares, to make principal and interest
payments on the ESOP’s debt. As loan payments are
made, shares become unencumbered by debt and are
committed to be allocated. The ESOP allocates shares to
individual employee accounts on the basis of the match
of employee payroll savings (contributions), plus rein-
vested dividends received on previously allocated shares.
In fiscal 2005, 2004 and 2003, the ESOP incurred interest
expense of $1 million, $1 million and $1 million, respec-
tively. The ESOP used dividends of $4 million, $5 million
and $6 million in the respective years, along with our
contributions of less than $1 million in fiscal 2005, 2004
and 2003 to make interest and principal payments.
The number of shares of our common stock in the
ESOP is summarized as follows:
Number of Shares, in Thousands
Unreleased shares
Committed to be allocated
Allocated to participants
Total Shares
15. Profit-Sharing Plan
May 29,
2005
280
–
5,334
5,614
May 30,
2004
599
5
5,438
6,042
The Executive Incentive Plan provides incentives to key
employees who have the greatest potential to contribute
to current earnings and successful future operations. All
employees at the level of vice president and above
participate in the plan. These awards are approved by
the Compensation Committee of the Board of Directors,
which consists solely of independent, outside directors.
Awards are based on performance against
pre-established goals approved by the Committee.
Profit-sharing expense was $17 million, $16 million and
$19 million in fiscal 2005, 2004 and 2003, respectively.
16. Income Taxes
The components of Earnings Before Income Taxes and
Earnings from Joint Ventures and the corresponding
income taxes thereon are as follows:
In Millions, Fiscal Year
Earnings before Income Taxes
and Earnings from Joint
Ventures:
U.S.
Foreign
Total Earnings before
Income Taxes and
Earnings from Joint
Ventures
Income taxes:
Current:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
Total Income Taxes
2005
2004
2003
$1,723
92
$1,408
101
$1,272
44
$1,815
$1,509
$1,316
$ 557
60
38
655
14
(3)
(2)
9
$ 664
$ 366
31
22
419
85
7
17
109
$ 528
$ 384
24
25
433
30
5
(8)
27
$ 460
In fiscal 2005 and 2004, we paid income taxes of
$227 million and $225 million, respectively. In fiscal 2003,
we paid income taxes of $248 million and received a
$109 million refund of fiscal 2002 tax overpayments.
The following table reconciles the U.S. statutory
income tax rate with the effective income tax rate:
Fiscal Year
U.S. statutory rate
State and local income taxes,
net of federal tax benefits
Divestitures, net
Other, net
Effective Income Tax Rate
2005
35.0%
2.0
1.8
(2.2)
36.6%
2004
35.0%
1.6
–
(1.6)
35.0%
2003
35.0%
1.5
–
(1.5)
35.0%
51
The tax effects of temporary differences that give rise
to deferred tax assets and liabilities are as follows:
In Millions
Accrued liabilities
Restructuring/disposition charges
Compensation and employee benefits
Unrealized hedge losses
Unrealized losses
Tax credit carry forwards
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Brands
Depreciation
Prepaid pension asset
Intangible assets
Tax lease transactions
Zero coupon convertible debentures
Other
Gross deferred tax liabilities
Net Deferred Tax Liability
May 29,
2005
$ 180
7
316
72
855
76
14
1,520
855
665
1,322
263
450
58
64
73
78
2,308
$1,643
May 30,
2004
$ 136
18
272
104
797
46
43
1,416
809
607
1,322
241
429
40
66
44
69
2,211
$1,604
Of the total valuation allowance, $780 million relates to
a deferred tax asset for losses recorded as part of the
Pillsbury acquisition. In the future, when tax benefits
related to these losses are finalized, the reduction in the
valuation allowance will be allocated to reduce goodwill.
The other $75 million of the valuation allowance primarily
relates to certain state and foreign operating losses. In
the future, if tax benefits are realized related to these
losses, the reduction in the valuation allowance will
reduce tax expense. At May 29, 2005, we believe it is
more likely than not that the remainder of our deferred
tax asset is realizable.
We have not recognized a deferred tax liability for
unremitted earnings of $771 million from our foreign
operations because we do not expect those earnings to
become taxable to us in the foreseeable future and
because a determination of the potential liability is not
practicable. If a portion were to be remitted, we believe
income tax credits would substantially offset any
resulting tax liability.
In December 2004, the FASB issued Staff Position
No. 109-2, “Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the
American Jobs Creation Act of 2004,” (FSP No. 109-2).
52
FSP No. 109-2 provides guidance with respect to
recording the impact of the repatriation provisions of the
American Jobs Creation Act of 2004 (the Jobs Act). The
Jobs Act includes a one-year reduced tax rate on
repatriation of foreign earnings and a phased-in tax
deduction provided for qualifying domestic production
activities. We are currently evaluating the impact of
repatriation provisions as Treasury guidance is provided.
However, the range of reasonably possible amounts of
unremitted earnings that is being considered for repatri-
ation in fiscal year 2006 is between $0 and $60 million
with the respective income tax impact ranging from $0 to
$3 million based on a 5.25 percent tax rate.
17. Leases and Other Commitments
An analysis of rent expense by property leased follows:
In Millions, Fiscal Year
Warehouse space
Equipment
Other
Total Rent Expense
2005
$ 41
30
37
$108
2004
$42
20
34
$96
2003
$30
29
29
$88
Some leases require payment of property taxes,
insurance and maintenance costs in addition to the rent
payments. Contingent and escalation rent in excess of
minimum rent payments and sublease income netted in
rent expense were insignificant.
Noncancelable future lease commitments (in millions)
are: $92 in fiscal 2006, $78 in fiscal 2007, $72 in fiscal
2008, $59 in fiscal 2009, $49 in fiscal 2010 and $112 after
fiscal 2010, with a cumulative total of $462. These future
lease commitments will be partially offset by expected
future sublease receipts of $52 million.
We are contingently liable under guarantees and
comfort letters for $168 million. The guarantees and
comfort letters are principally issued to support
borrowing arrangements, primarily for our joint ventures.
We are involved in various claims, including environ-
mental matters, arising in the ordinary course of
business. In the opinion of management, the ultimate
disposition of these matters, either individually or in
aggregate, will not have a material adverse effect on our
financial position or results of operations.
18. Business Segment and
Geographic Information
We operate exclusively in the consumer foods industry,
with multiple operating segments organized generally by
product categories.
We aggregate our operating segments into three
reportable segments: 1) U.S. Retail; 2) Bakeries and
Foodservice; and 3) International. Our U.S. Retail
segment accounted for approximately 69 percent of our
fiscal 2005 net sales, and reflects business with a wide
variety of grocery stores; specialty stores; drug, dollar
and discount chains; and mass merchandisers operating
throughout the United States. Our major product
categories in this business segment are ready-to-eat
cereals, meals, refrigerated and frozen dough products,
baking products, snacks, yogurt and organic foods. Our
Bakeries and Foodservice segment generated approxi-
mately 16 percent of fiscal 2005 net sales. This business
segment consists of products marketed to retail and
wholesale bakeries, commercial and noncommercial
foodservice distributors and operators, and convenience
stores throughout the United States and Canada. The
remaining 15 percent of our fiscal 2005 net sales was
generated by our consolidated International businesses.
These include a retail business in Canada that largely
mirrors our U.S. retail product mix, along with retail and
foodservice businesses competing in key markets in
Europe, Latin America and the Asia/Pacific region. At the
beginning of fiscal 2005, certain products were realigned
from Big G Cereals to Snacks within the U.S. Retail
segment. All prior year amounts are restated for compar-
ative purposes.
During fiscal 2005, one customer, Wal-Mart Stores, Inc.,
accounted for approximately 16 percent of our consoli-
dated net sales and 22 percent of our sales in the
U.S. Retail segment. No other customer accounted for
10 percent or more of our consolidated net sales. The
top five customers in our U.S. Retail segment accounted
for approximately 45 percent of its fiscal 2005 net sales,
and the top five customers in our Bakeries and
Foodservice segment accounted for approximately 34
percent of its fiscal 2005 net sales.
Management reviews operating results to evaluate
segment performance. Operating profit for the report-
able segments excludes unallocated corporate items
(including foreign currency transaction losses of
$6 million, $2 million and less than $1 million in fiscal
2005, 2004 and 2003, respectively); interest, including
minority interest, expense; restructuring and other exit
costs; gain on divestitures; debt repurchase costs;
income taxes; and earnings from joint ventures as they
are centrally managed at the corporate level and are
excluded from the measure of segment profitability
reviewed by management. Under our supply chain
organization, our manufacturing, warehouse and distribu-
tion activities are substantially integrated across our
operations in order to maximize efficiency and produc-
tivity. As a result, fixed assets, capital expenditures for
long-lived assets, and depreciation and amortization
expenses are neither maintained nor available by
operating segment.
The measurement of operating segment results is
generally consistent with the presentation of the consoli-
dated statements of earnings. Intercompany transactions
between reportable operating segments were not
material in the periods presented.
In Millions, Fiscal Year
Net Sales:
U.S. Retail
Bakeries and Foodservice
International
Total
Operating Profit:
U.S. Retail
Bakeries and Foodservice
International
Total
Unallocated corporate items
Interest, including minority
interest, net
Restructuring and other
exit costs
Divestitures - gain
Debt repurchase costs
Earnings before income taxes
and earnings from
joint ventures
Income taxes
Earnings from joint ventures
Net Earnings
2005
2004
2003
$ 7,779
1,740
1,725
$11,244
$ 1,719
134
171
2,024
(32)
$ 7,763
1,757
1,550
$11,070
$ 1,809
132
119
2,060
(17)
$ 7,407
1,799
1,300
$10,506
$ 1,754
156
91
2,001
(76)
(455)
(508)
(547)
(84)
499
(137)
(26)
–
–
(62)
–
–
1,815
(664)
89
$ 1,240
1,509
(528)
74
$ 1,055
1,316
(460)
61
917
$
53
The following table provides net sales information for
our primary product categories:
19. Supplemental Information
2005
2004
2003
The components of certain balance sheet accounts are
as follows:
In Millions
Land, Buildings and Equipment:
Land
Buildings
Equipment
Construction in progress
Total land, buildings
and equipment
Less accumulated depreciation
Net Land, Buildings and
May 29,
2005
May 30,
2004
$
54
1,396
3,722
296
$
53
1,290
3,419
557
5,468
(2,461)
5,319
(2,208)
Equipment
$ 3,007
$ 3,111
Other Assets:
Prepaid pension
Marketable securities, at market
Investments in and advances
to affiliates
Miscellaneous
Total Other Assets
Other Current Liabilities:
Accrued payroll
Accrued interest
Accrued taxes
Miscellaneous
Total Other Current Liabilities
Other Noncurrent Liabilities:
Interest rate swaps
Accrued compensation and benefits
Miscellaneous
Total Other Noncurrent Liabilities
$ 1,239
24
231
190
$ 1,684
$
240
167
555
149
$ 1,111
$
$
221
658
88
967
$ 1,148
30
422
197
$ 1,797
$
$
$
$
230
186
249
166
831
323
580
58
961
In Millions, Fiscal Year
Product Categories:
U.S. Retail:
Big G Cereals
Meals
Pillsbury USA
Baking Products
Snacks
Yogurt/Organic
Foods/Other
Total U.S. Retail
Bakeries and Foodservice
International:
Canada
Rest of World
Total International
Consolidated Total
$ 1,874
1,747
1,546
609
913
1,090
7,779
1,740
514
1,211
1,725
$11,244
$ 1,990
1,749
1,518
586
909
1,011
7,763
1,757
470
1,080
1,550
$11,070
$ 1,914
1,702
1,438
549
872
932
7,407
1,799
383
917
1,300
$10,506
The following table provides financial information
identified by geographic area:
In Millions, Fiscal Year
Net sales:
U.S.
Non-U.S.
Consolidated Total
Long-lived assets:
U.S.
Non-U.S.
Consolidated Total
2005
2004
2003
$ 9,447
1,797
$11,244
$ 2,621
386
$ 3,007
$ 9,441
1,629
$11,070
$ 2,772
339
$ 3,111
$ 9,144
1,362
$10,506
$ 2,713
267
$ 2,980
54
The components of certain income statement
accounts are as follows:
In Millions, Fiscal Year
Depreciation
Shipping and handling costs
(recorded in selling, general
and administrative expense)
Research and development
Advertising (including
production and
communication costs)
2005
$415
2004
$376
2003
$347
388
168
352
158
345
149
477
512
519
20. Quarterly Data (Unaudited)
Summarized quarterly data for fiscal 2005 and 2004 follows:
In Millions, Except Per Share
and Market Price Amounts
Net sales
Net sales less cost of sales
Net earnings
Net earnings per share:
Basic
Diluted
Dividends per share
Market price of common stock:
High
Low
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2005
$2,585
1,004
183
.48
.45
.310
48.15
44.72
2004
$2,518
1,044
227
.61
.56
.275
49.66
45.11
2005
$3,168
1,279
367
.99
.92
.310
47.63
43.01
2004
$3,060
1,263
308
.82
.76
.275
47.73
43.75
2005
$2,772
1,077
230
.63
.58
.310
53.89
44.96
2004
$2,703
1,065
242
.64
.60
.275
47.42
44.25
2005
$2,719
1,050
4601
1.25
1.14
.310
52.86
48.05
2004
$2,789
1,114
278
.74
.68
.275
49.17
45.00
1
Net earnings in the 2005 fourth quarter include a pretax $499 million gain from the dispositions of our 40.5% interest in SVE and the
Lloyd’s barbecue business, $137 million of pretax debt repurchase expenses and $38 million of pretax restructuring and other exit
costs. See Notes Two, Eight and Three, respectively.
55
Item 9 Changes in and
PART III
Item 10 Directors and Executive
Officers of the Registrant
The information contained in the sections entitled
“Election of Directors” and “Section 16(a) Beneficial
Ownership Reporting Compliance” contained in our
definitive Proxy Statement for our 2005 Annual Meeting
of Stockholders is incorporated herein by reference.
Information regarding our executive officers is set forth
on pages 6 through 7 in Item One of this report.
The information regarding our Audit Committee,
including the members of the Audit Committee and
audit committee financial experts, set forth in the section
entitled “Board Committees and Their Functions”
contained in our definitive Proxy Statement for our 2005
Annual Meeting of Stockholders, is incorporated herein
by reference.
We have adopted a Code of Conduct applicable to all
employees, including our principal executive officer,
principal financial officer and principal accounting officer.
A copy of the Code of Conduct is available on our
website at www.generalmills.com. We intend to post on
our website any amendments to our Code of Conduct
within two days of any such amendment and to post
waivers from our Code of Conduct for principal officers
within two days of any such waiver.
Item 11 Executive Compensation
The information contained in the sections entitled
“Executive Compensation,” “Director Compensation and
Benefits” and “Change of Control Arrangements” in our
definitive Proxy Statement for our 2005 Annual Meeting
of Stockholders is incorporated herein by reference.
Disagreements with
Accountants on
Accounting and
Financial Disclosure
No matters require disclosure here.
Item 9A Controls and Procedures
We, under the supervision and with the participation of
our management, including our Chief Executive Officer
and Chief Financial Officer, have evaluated the effective-
ness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e)
under the 1934 Act). Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer have
concluded that, as of May 29, 2005, our disclosure
controls and procedures were effective to ensure that
information required to be disclosed by us in reports that
we file or submit under the 1934 Act is recorded,
processed, summarized and reported within the time
periods specified in SEC rules and forms.
The annual report of our management on internal
control over financial reporting is provided on page 24 in
Item Eight of this report. The attestation report of KPMG
LLP, our independent registered public accounting firm,
regarding our internal control over financial reporting is
provided on pages 24 and 25 in Item Eight of this report.
There were no changes in our internal control over
financial reporting (as defined in Rule 13a-15(f) under the
1934 Act) during our fiscal quarter ended May 29, 2005,
that have materially affected, or are reasonably likely
to materially affect, our internal control over
financial reporting.
Item 9B Other Information
No matters require disclosure here.
56
Item 12 Security Ownership of
PART IV
Certain Beneficial
Owners and
Management and
Related
Stockholder Matters
The information contained in the sections entitled
“Ownership of General Mills Common Stock by Direc-
tors, Officers and Certain Beneficial Owners” and “Equity
Compensation Plan Information” in our definitive Proxy
Statement for our 2005 Annual Meeting of Stockholders
is incorporated herein by reference.
Item 13 Certain Relationships
and Related Transactions
The information set forth in the section entitled “Certain
Relationships and Related Transactions” contained in our
definitive Proxy Statement for our 2005 Annual Meeting
of Stockholders is incorporated herein by reference.
Item 14 Principal Accounting
Fees and Services
The information contained in the section entitled
“Independent Registered Public Accounting Firm Fees”
in our definitive Proxy Statement for our 2005 Annual
Meeting of Stockholders is incorporated herein
by reference.
Item 15 Exhibits and Financial
Statement Schedules
1.
Financial Statements:
The following financial statements are included
in this report under Item Eight:
Consolidated Statements of Earnings for the
Fiscal Years Ended May 29, 2005, May 30, 2004
and May 25, 2003.
Consolidated Balance Sheets at May 29, 2005
and May 30, 2004.
Consolidated Statements of Cash Flows for the
Fiscal Years Ended May 29, 2005, May 30, 2004
and May 25, 2003.
Consolidated Statements of Stockholders’
Equity and Comprehensive Income for the
Fiscal Years Ended May 29, 2005, May 30, 2004
and May 25, 2003.
Notes to Consolidated Financial Statements.
Management’s Report on Internal Control Over
Financial Reporting.
Report of Independent Registered Public
Accounting Firm Regarding Internal Control
Over Financial Reporting.
Report of Management Responsibilities.
Report of Independent Registered Public
Accounting Firm on the Consolidated
Financial Statements and Related Financial
Statement Schedule.
2.
Financial Statement Schedule:
For the Fiscal Years Ended May 29, 2005,
May 30, 2004 and May 25, 2003:
II — Valuation and Qualifying Accounts
57
3.
Exhibits:
Description
Agreement and Plan of Merger, dated as of
July 16, 2000, by and among the Registrant,
General Mills North American Businesses, Inc.,
Diageo plc and The Pillsbury Company
(incorporated herein by reference to Exhibit 10.1
to Registrant’s Report on Form 8-K filed
July 20, 2000).
First Amendment, dated as of April 12, 2001, to
Agreement and Plan of Merger, dated as of
July 16, 2000, by and among the Registrant,
General Mills North American Businesses, Inc.,
Diageo plc and The Pillsbury Company
(incorporated herein by reference to Exhibit 10.1
to Registrant’s Report on Form 8-K filed
April 13, 2001).
Second Amendment, dated as of October 31,
2001, to Agreement and Plan of Merger, dated
as of July 16, 2000, by and among the Registrant,
General Mills North American Businesses, Inc.,
Diageo plc and The Pillsbury Company
(incorporated herein by reference to Exhibit 10.1
to Registrant’s Report on Form 8-K filed
November 2, 2001).
Registrant’s Restated Certificate of Incorporation,
as amended to date (incorporated herein by
reference to Exhibit 3.1 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended
May 26, 2002).
Registrant’s By-Laws, as amended to date
(incorporated herein by reference to Exhibit 3.1
to Registrant’s Quarterly Report on Form 10-Q
for the fiscal quarter ended November 28, 2004).
Indenture, dated as of July 1, 1982, between the
Registrant and U.S. Bank Trust National
Association (f.k.a. Continental Illinois National
Bank and Trust Company of Chicago), as
amended to date, by Supplemental Indentures
Nos. 1 through 8 (incorporated herein by
reference to Exhibit 4.1 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended
May 26, 2002).
Exhibit
No.
4.2
4.3
4.4
4.5
4.6
4.7
Description
Rights Agreement, dated as of December 11,
1995, between the Registrant and Wells Fargo
Bank Minnesota, N.A. (f.k.a. Norwest Bank
Minnesota, N.A.) (incorporated herein by
reference to Exhibit 1 to Registrant’s Registration
Statement on Form 8-A filed January 2, 1996).
Amendment No. 1, dated as of July 16, 2000, to
the Rights Agreement, dated as of December 11,
1995, between the Registrant and Wells Fargo
Bank Minnesota, N.A. (f.k.a. Norwest Bank
Minnesota, N.A.) (incorporated by reference to
Exhibit 3 to Registrant’s Report on Form 8-A/A
dated July 25, 2000).
Indenture, dated as of February 1, 1996, between
the Registrant and U.S. Bank Trust National
Association (f.k.a. First Trust of Illinois, National
Association) (incorporated herein by reference to
Exhibit 4.1 to Registrant’s Registration Statement
on Form S-3 filed February 6, 1996
(File no. 333-00745)).
Indenture, dated as of September 23, 1994,
between Ralcorp Holdings, Inc. and The First
National Bank of Chicago, as supplemented to
date by the First Supplemental Indenture, dated
as of January 31, 1997, among Ralcorp Holdings,
Inc., the Registrant and The First National Bank
of Chicago (incorporated herein by reference to
Exhibit 4.4 to Registrant’s Annual Report on Form
10-K for the fiscal year ended May 26, 2002).
Indenture, dated as of October 28, 2002,
between the Registrant and BNY Midwest Trust
Company, as Trustee (incorporated herein by
reference to Exhibit 4.2 to Registrant’s Report on
Form 8-K filed November 12, 2002).
Resale Registration Rights Agreement, dated
October 28, 2002, among the Registrant, Banc of
America Securities LLC and Morgan Stanley &
Co. Incorporated, as Representatives of the
several Initial Purchasers (incorporated herein by
reference to Exhibit 4.3 to Registrant’s Report on
Form 8-K filed November 12, 2002).
Exhibit
No.
2.1
2.2
2.3
3.1
3.2
4.1
58
Exhibit
No.
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
10.1*
10.2*
Description
Call Option Agreement, dated as of October 23,
2002, by and between the Registrant and Diageo
Midwest B.V. (incorporated herein by reference
to Exhibit 4.4 to Registrant’s Report on Form 8-K
filed November 12, 2002).
Call Option Agreement, dated as of October 28,
2002, by and between the Registrant and Diageo
Midwest, B.V. (incorporated herein by reference
to Exhibit 4.5 to Registrant’s Report on Form 8-K
filed November 12, 2002).
Form of 51⁄8% Note due 2007 (incorporated
herein by reference to Exhibit 4.1 to Registrant’s
Report on Form 8-K filed February 21, 2002).
Form of 6% Note due 2012 (incorporated herein
by reference to Exhibit 4.2 to Registrant’s Report
on Form 8-K filed February 21, 2002).
Form of Zero Coupon Convertible Senior
Debenture due 2022 (incorporated herein by
reference to Exhibit 4.1 to Registrant’s Report on
Form 8-K filed November 12, 2002).
Third Amended and Restated Limited Liability
Company Agreement of General Mills Cereals,
LLC dated October 8, 2004 (incorporated herein
by reference to Exhibit 4.1 to Registrant’s
Quarterly Report on Form 10-Q for the fiscal
quarter ended November 28, 2004).
Dividend Restriction Agreement dated
October 8, 2004 between the Registrant and
Wells Fargo Bank, National Association
(incorporated herein by reference to Exhibit 4.2
to Registrant’s Quarterly Report on Form 10-Q
for the fiscal quarter ended November 28, 2004).
Amended and Restated Exchange Agreement
dated November 29, 2004 between the
Registrant and Capital Trust (incorporated herein
by reference to Exhibit 4.3 to Registrant’s
Quarterly Report on Form 10-Q for the fiscal
quarter ended November 28, 2004).
Annual Retainer for Directors.
1998 Employee Stock Plan, as amended to date
(incorporated herein by reference to Exhibit 10.3
to Registrant’s Annual Report on Form 10-K for
the fiscal year ended May 26, 2002).
10.3*
Amended and Restated Executive Incentive Plan,
as amended to date.
Exhibit
No.
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
10.14
Description
Management Continuity Agreement, as
amended to date (incorporated herein by
reference to Exhibit 10.5 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended
May 27, 2001).
Supplemental Retirement Plan, as amended to
date (incorporated herein by reference to Exhibit
10.6 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 28, 2000).
Executive Survivor Income Plan, as amended
to date.
Executive Health Plan, as amended to date
(incorporated herein by reference to Exhibit 10.1
to Registrant’s Report on Form 10-Q for the fiscal
quarter ended February 24, 2002).
Supplemental Savings Plan, as amended to date
(incorporated herein by reference to Exhibit 10.9
to Registrant’s Annual Report on Form 10-K for
the fiscal year ended May 28, 2000).
1996 Compensation Plan for Non-Employee
Directors, as amended to date (incorporated
herein by reference to Exhibit 10.10 to
Registrant’s Annual Report on Form 10-K for the
fiscal year ended May 30, 1999).
General Mills, Inc. 1995 Salary Replacement
Stock Option Plan, as amended to date
(incorporated herein by reference to Exhibit
10.11 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 28, 2000).
General Mills, Inc. Deferred Compensation Plan,
as amended to date (incorporated herein by
reference to Exhibit 10.12 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended
May 25, 2003).
Supplemental Benefits Trust Agreement, dated
February 9, 1987, as amended and restated as of
September 26, 1988.
Supplemental Benefits Trust Agreement, dated
September 26, 1988.
Agreements, dated November 29, 1989, by and
between the Registrant and Nestlé S.A.
(incorporated herein by reference to Exhibit
10.15 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 28, 2000).
59
Description
Protocol and Addendum No. 1 to Protocol of
Cereal Partners Worldwide, dated November 21,
1989 (incorporated herein by reference to Exhibit
10.16 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 27, 2001).
Addendum No. 2, dated March 16, 1993, to
Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit
10.18 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 30, 2004).
Addendum No. 3, effective as of March 15, 1993,
to Protocol of Cereal Partners Worldwide
(incorporated herein by reference to Exhibit 10.2
to Registrant’s Annual Report on Form 10-K for
the fiscal year ended May 28, 2000).
1990 Salary Replacement Stock Option Plan, as
amended to date.
Agreement, dated July 31, 1992, by and between
the Registrant and PepsiCo, Inc. (incorporated
herein by reference to Exhibit 10.19 to
Registrant’s Annual Report on Form 10-K for the
fiscal year ended May 30, 2004).
Stock Option and Long-Term Incentive Plan of
1993, as amended to date (incorporated herein
by reference to Exhibit 10.20 to Registrant’s
Annual Report on Form 10-K for the fiscal year
ended May 28, 2000).
Agreement dated October 17, 1994 by and
between the Registrant and CPC International,
Inc. (incorporated herein by reference to Exhibit
10.21 to Registrant’s Annual Report on Form 10-K
for the fiscal year ended May 28, 2000).
1998 Senior Management Stock Plan, as
amended to date (incorporated herein by
reference to Exhibit 10.22 to Registrant’s Annual
Report on Form 10-K for the fiscal year ended
May 25, 2003).
2001 Compensation Plan for Non-employee
Directors, as amended to date (incorporated
herein by reference to Exhibit 10.23 to
Registrant’s Annual Report on Form 10-K for the
fiscal year ended May 25, 2003).
Exhibit
No.
10.24
10.25
10.26
10.27
10.28*
10.29
10.30
10.31*
Description
Stockholders Agreement, dated as of
October 31, 2001, by and among the Registrant,
Diageo plc and Gramet Holdings Corp.
(incorporated herein by reference to Exhibit 10.2
to Registrant’s Report on Form 8-K filed
November 2, 2001).
First Amendment to Stockholders Agreement,
dated as of October 28, 2002, among the
Registrant, Gramet Holdings Corp. and Diageo
plc (incorporated herein by reference to Exhibit
10.1 to Registrant’s Report on Form 8-K filed
November 12, 2002).
Second Amendment to Stockholders
Agreement, dated as of June 23, 2004, among
the Registrant, Diageo plc and Diageo Atlantic
Holding B.V. (incorporated herein by reference to
Exhibit 99.2 to Registrant’s Report on Form 8-K
filed June 23, 2004).
Supplemental Marketing Agreement and Waiver,
dated as of June 23, 2004, among the Registrant,
Diageo plc and Diageo Atlantic Holding B.V.
(incorporated herein by reference to Exhibit 4.8
to Registrant’s Form S-3 Registration Statement
filed June 23, 2004 (File no. 333-116779)).
2003 Stock Compensation Plan (incorporated
herein by reference to Exhibit 4 to Registrant’s
Form S-8 Registration Statement filed
September 23, 2003 (File no. 333-109050)).
Forward Purchase Contract dated October 8,
2004 between the Registrant and Lehman
Brothers OTC Derivatives Inc. (incorporated
herein by reference to Exhibit 10.1 to Registrant’s
Quarterly Report on Form 10-Q for the fiscal
quarter ended November 28, 2004).
Joint Venture Termination Agreement between
the Registrant and PepsiCo, Inc. dated
December 13, 2004 (incorporated herein by
reference to Exhibit 10.1 to Registrant’s Current
Report on Form 8-K filed December 17, 2004).
Restricted Stock Unit Agreement between the
Registrant and Michael A. Peel dated December
13, 2004 (incorporated herein by reference to
Exhibit 10.2 to Registrant’s Current Report on
Form 8-K filed December 17, 2004).
Exhibit
No.
10.15
10.16
10.17
10.18*
10.19
10.20*
10.21
10.22*
10.23*
60
Exhibit
No.
31.1
31.2
32.1
32.2
Description
Certification of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act
of 2002.
Certification of Chief Executive Officer pursuant
to Section 906 of the Sarbanes-Oxley Act
of 2002.
Certification of Chief Financial Officer pursuant
to Section 906 of the Sarbanes-Oxley Act
of 2002.
*
Items that are management contracts or compensatory plans
or arrangements required to be filed as exhibits pursuant to
Item 15 of Form 10-K.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, copies of
certain instruments defining the rights of holders of our
long-term debt are not filed and, in lieu thereof, we
agree to furnish copies to the SEC upon request.
Exhibit
No.
10.32
10.33
10.34
10.35
10.36
Description
Five-Year Credit Agreement, dated as of
January 24, 2001, among the Registrant, The
Chase Manhattan Bank, as Administrative Agent,
and the other financial institutions party thereto
(incorporated herein by reference to Exhibit 99.2
to Registrant’s Quarterly Report on Form 10-Q
for the fiscal quarter ended February 25, 2001).
Amendment No. 1, dated as of October 31,
2001, to Five-Year Credit Agreement, dated as of
January 24, 2001, among the Registrant, The
Chase Manhattan Bank, as Administrative Agent,
and the other financial institutions party thereto
(incorporated herein by reference to Exhibit 99.3
to Registrant’s Report on Form 8-K filed
February 4, 2002).
Amendment No. 2, dated as of August 26, 2002,
to Five-Year Credit Agreement, dated as of
January 24, 2001, among the Registrant,
JPMorgan Chase Bank (successor to The Chase
Manhattan Bank), as Administrative Agent, and
the other financial institutions party thereto
(incorporated herein by reference to Exhibit 99.1
to Registrant’s Quarterly Report on Form 10-Q
for the fiscal quarter ended August 25, 2002).
Amendment No. 3, dated as of January 16, 2004,
to Five-Year Credit Agreement, dated as of
January 24, 2001, among the Registrant,
JPMorgan Chase Bank, as Administrative Agent,
and the other financial institutions party thereto
(incorporated herein by reference to Exhibit 99.1
to Registrant’s Report on Form 8-K filed
February 12, 2004).
Five-Year Credit Agreement, dated as of
January 20, 2004, among the Registrant,
JPMorgan Chase Bank, as Administrative Agent,
and the other financial institutions party thereto
(incorporated herein by reference to Exhibit 99.2
to Registrant’s Report on Form 8-K filed
February 12, 2004).
12
21
23
Computation of Ratio of Earnings to
Fixed Charges.
List of Subsidiaries of General Mills, Inc.
Consent of Independent Registered Public
Accounting Firm.
61
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: July 28, 2005
GENERAL MILLS, INC.
By: /s/ Siri S. Marshall
Siri S. Marshall
Senior Vice President, General Counsel and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Paul Danos
Paul Danos
/s/ Livio D. DeSimone
Livio D. DeSimone
/s/ William T. Esrey
William T. Esrey
Title
Director
Director
Director
/s/ Raymond V. Gilmartin
Director
Raymond V. Gilmartin
/s/ Judith Richards Hope
Director
Judith Richards Hope
/s/ Heidi G. Miller
Heidi G. Miller
Director
/s/ Hilda Ochoa-Brillembourg
Director
Hilda Ochoa-Brillembourg
/s/ Steve Odland
Steve Odland
/s/ Michael D. Rose
Michael D. Rose
/s/ Stephen W. Sanger
Stephen W. Sanger
62
Director
Director
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
Date
July 22, 2005
July 22, 2005
July 24, 2005
July 26, 2005
July 26, 2005
July 23, 2005
July 27, 2005
July 25, 2005
July 26, 2005
July 26, 2005
Signature
Title
/s/ A. Michael Spence
A. Michael Spence
/s/ Dorothy A. Terrell
Dorothy A. Terrell
/s/ James A. Lawrence
James A. Lawrence
/s/ Kenneth L. Thome
Kenneth L. Thome
Director
Director
Executive Vice President, Chief Financial Officer
and International
(Principal Financial Officer)
Senior Vice President, Financial Operations
(Principal Accounting Officer)
Date
July 22, 2005
July 27, 2005
July 21, 2005
July 26, 2005
63
General Mills, Inc. and Subsidiaries
Schedule II – Valuation and Qualifying Accounts
In Millions
Allowance for doubtful accounts:
Balance at beginning of year
Additions charged to expense
Bad debt write-offs
Other adjustments and reclassifications
Balance at end of year
Valuation allowance for deferred tax assets:
Balance at beginning of year
Additions charged to expense and deferred tax asset
Additions from acquisitions
Adjustments to acquisition amounts
Balance at end of year
Reserve for restructuring and other exit charges:
Balance at beginning of year
Additions charged to expense
Net amounts utilized for restructuring activities
Balance at end of year
Reserve for LIFO valuation:
Balance at beginning of year
Increment (decrement)
Balance at end of year
May 29,
2005
Fiscal Year Ended
May 30,
2004
May 25,
2003
$ 19
–
(2)
2
$ 19
$809
31
–
15
$855
$ 23
84
(89)
$ 18
$ 41
4
$ 45
$ 28
3
(13)
1
$ 19
$791
34
–
(16)
$809
$ 37
26
(40)
$ 23
$ 27
14
$ 41
$ 21
8
(6)
5
$ 28
$ 10
–
781
–
$ 791
$ 107
62
(132)
$ 37
$ 31
(4)
$ 27
64
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
In Millions
Earnings before Income Taxes and Earnings from
Joint Ventures
Earnings from Joint Ventures before Income Taxes
Plus: Fixed Charges (1)
Less: Capitalized Interest
Earnings Available to Cover Fixed Charges
Ratio of Earnings to Fixed Charges
Note (1)
Fixed Charges:
Interest and Minority Interest Expense, Gross
Rentals (1/3)
Total Fixed Charges
May 29,
2005
May 30,
2004
May 25,
2003
May 26,
2002
May 27,
2001
Fiscal Year Ended
$1,815
121
524
(3)
$2,457
4.69
$ 488
36
$ 524
$1,509
100
569
(8)
$2,170
3.81
$ 537
32
$ 569
$1,316
81
619
(8)
$2,008
3.24
$ 589
30
$ 619
$ 667
40
468
(3)
$1,172
2.50
$ 445
23
$ 468
$ 998
21
237
(2)
$1,254
5.29
$ 223
14
$ 237
For purposes of computing the ratio of earnings to fixed charges, earnings represent earnings before taxes and joint ventures, plus pretax
earnings or losses of joint ventures, plus fixed charges, less adjustment for capitalized interest. Fixed charges represent gross interest
expense and subsidiary preferred distributions to minority interest holders, plus one-third (the proportion deemed representative of the
interest factor) of rent expense.
We have not presented a ratio of earnings to fixed charges and preference stock dividends because we currently have no preference stock
outstanding.
65
Exhibit 31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Stephen W. Sanger, Chairman of the Board and Chief Executive Officer of General Mills, Inc., certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of General Mills, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: July 28, 2005
Stephen W. Sanger
Chairman of the Board and
Chief Executive Officer
66
Exhibit 31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, James A. Lawrence, Executive Vice President, Chief Financial Officer and International of General Mills, Inc.,
certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of General Mills, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period
in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
(a)
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
Date: July 28, 2005
James A. Lawrence
Executive Vice President,
Chief Financial Officer
and International
67
Exhibit 32.1 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
I, Stephen W. Sanger, Chairman of the Board and Chief Executive Officer of General Mills, Inc. (the “Company”),
certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
(2)
the Annual Report on Form 10-K of the Company for the fiscal year ended May 29, 2005 (the “Report”) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m or 78o(d)); and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: July 28, 2005
Stephen W. Sanger
Chairman of the Board and
Chief Executive Officer
Exhibit 32.2 Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
I, James A. Lawrence, Executive Vice President, Chief Financial Officer and International of General Mills, Inc. (the
“Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
(1)
(2)
the Annual Report on Form 10-K of the Company for the fiscal year ended May 29, 2005 (the “Report”) fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C.
78m or 78o(d)); and
the information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: July 28, 2005
James A. Lawrence
Executive Vice President,
Chief Financial Officer and International
68
Shareholder Information
General Mills
World Headquarters
Number One General Mills Boulevard
Minneapolis, MN 55426-1347
Phone: (763) 764-7600
Internet
For corporate reports and
company news, visit our Web site at
www.generalmills.com
Markets
New York Stock Exchange
Trading Symbol: GIS
Independent Auditor
KPMG LLP
4200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-3900
Phone: (612) 305-5000
Investor Inquiries
Contact the Investor Relations
department at (800) 245-5703 or
(763) 764-3202.
Transfer Agent, Registrar,
Dividend Payments and Dividend
Reinvestment Plan
Wells Fargo Bank, N.A.
161 North Concord Exchange
P.O. Box 64854
St. Paul, MN 55164-0854
Phone: (800) 670-4763 or
(651) 450-4084
E-mail: www.wellsfargo.com/
shareownerservices
Account access via Web site:
www.shareowneronline.com
Corporate Social Responsibility
Report Available
As a global leader in the food industry,
we are committed to making a differ-
ence in our consumers’ lives and in our
communities. For more information
about all aspects of our corporate citi-
zenship, see our 2005 Corporate
Social Responsibility Report available
at www.generalmills.com
Notice of Annual Meeting
The annual meeting of General Mills
shareholders will be held at 11 a.m.,
Central Daylight Time, Monday,
Sept. 26, 2005, at the Children’s
Theatre Company, 2400 Third Avenue
South, Minneapolis, Minnesota.
Electronic Access to General Mills
Proxy Statement, Annual Report
and Form 10-K
General Mills offers shareholders
access to its Proxy Statement, Annual
Report and Form 10-K online as a
convenient and cost-effective alter-
native to mailing the printed materials.
Shareholders who have access
to the Internet are encouraged to
enroll in the electronic access
program. Please go to the Web site
www.icsdelivery.com/gis and follow
the instructions to enroll. If your
General Mills shares are not regis-
tered in your name, contact your bank
or broker to enroll in this program.
H O L I D AY G I F T B OX E S
General Mills Gift Boxes are a part
of many shareholders’ December
holiday traditions. To request an order
form, call us toll free at (866) 501-8076
or write, including your name, street
address, city, state, zip code and phone
number (including area code) to:
2005 Holiday Gift Box Offer
General Mills, Inc.
P.O. Box 5006
Stacy, MN 55078-5006
Please contact us after
Oct. 1, 2005.
© 2005 General Mills, Inc.
.
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General Mills
P.O. Box 1113
Minneapolis, MN 55440-1113
(763) 764-7600
www.generalmills.com