2014 ANNUAL REPORT
General Mills
PUTTING THE CONSUMER
Our Fiscal 2014 Financial Highlights
In millions, except per share and
return on capital data
52 weeks ended
May 25, 2014
52 weeks ended
May 26, 2013
Net Sales
$ 17,910
$ 17,774
Adjusted Segment Operating Profit*
$ 3,154
$ 3,223
Net Earnings Attributable to General Mills
$ 1,824
$ 1,855
Diluted Earnings per Share (EPS)
$ 2.83
$ 2.79
Change
+ 1%
− 2%
− 2%
+ 1%
Adjusted Diluted EPS, Excluding
Certain Items Affecting Comparability*
$ 2.82
$ 2.72
+ 4%
Return on Average Total Capital*
11.6%
12.0%
−40 basis pts.
Average Diluted Shares Outstanding
646
666
Dividends per Share
$ 1.55
$ 1.32
− 3%
+ 17%
N ET SA LE S
Dollars in millions
A DJ USTE D S E G M E NT O PE R ATI N G PRO F IT *
Dollars in millions
2010
201 1
2012
2013
2014
14,636
14,880
16,658
17,774
17,910
2010
201 1
2012
2013
2014
2,854
2,946
3,012
3,223
3,154
A DJ USTE D D I LUTE D E A R N I N G S
PE R S H A R E *
Dollars
D I V I D E N DS PE R S H A R E
Dollars
2010
201 1
2012
2013
2014
2.31
2.48
2.56
2.72
2.82
2010
201 1
2012
2013
2014
0.96
1.12
1.22
1.32
1.55
*See page 87 for discussion of non-GAAP measures.
Putting the
Consumer First
At General Mills, our key strategy for
growing our worldwide food businesses
is to Put the Consumer First. We work to
connect with consumers and develop deep
insight into what they like to eat, where
they shop for food, and how they approach
cooking today. From product development
to manufacturing to distribution,
marketing and sales, our focus is on
meeting consumers’ evolving preferences
and needs for high-quality, nutritious,
convenient and great-tasting food.
14%
14%
14%
14%
15%
15%
15%
15%
18%
18%
18%
18%
19%
19%
19%
19%
22%
22%
22%
22%
14%
14%
14%
14%
31%
31%
31%
31%
15%
15%
15%
15%
General Mills at a Glance
3%
3%
3%
3%
12%
12%
12%
12%
22%
22%
22%
22%
17%
17%
17%
17%
17%
17%
17%
17%
U.S. RETAIL
Net Sales by Division
$10.6 Billion
22% Big G Cereals
17% Baking Products
17% Snacks
15% Frozen Foods
14% Meals
12% Yoplait USA
3% Small Planet Foods
INTERNATIONAL
Net Sales by Region
$5.4 Billion
41%
41%
41%
41%
41% Europe*
22% Canada
19% Latin America
18% Asia/Pacifi c**
*Includes Australia and New Zealand
**Includes the Middle East and Africa
CONVENIENCE STORES
AND FOODSERVICE
Net Sales by Brand Type
$1.9 Billion
55%
55%
55%
55%
55% Branded to Foodservice
Operators
31% Branded to Consumers
14% Unbranded
85%
85%
85%
85%
JOINT VENTURES
Net Sales by Joint Venture
(not consolidated,
proportionate share)
$1.3 Billion
85% Cereal Partners
Worldwide (CPW)
15% Häagen-Dazs
Japan (HDJ)
20 14 ANNUA L REPORT
1
To Our
Shareholders
K E N P OW E LL
Chairman and Chief Executive Offi cer
Our plans for the fi scal year ended May 25, 2014, called for sales and
earnings growth consistent with our long-term business model, and increased
cash returns to our shareholders. We made good progress building our
worldwide food businesses in both developed and emerging markets.
And we returned more than $2.7 billion in cash to shareholders through
a 17 percent dividend increase and signifi cant share repurchases.
But sales and profi t results fell short of our targets.
Fiscal 2014 net sales increased 1 percent to $17.9 billion,
including three incremental months of contribution from the
Yoki Alimentos (Brazil) and Yoplait Canada businesses added
during the previous year. Gross margin declined in 2014, as
increased promotional spending generated less volume than
planned and international operations became a larger part of
overall business mix. Adjusted segment operating profi t was
2 percent lower for the year. On the bottom line, fi scal 2014
net earnings attributable to General Mills totaled $1.8 billion
and diluted earnings per share (EPS) totaled $2.83. Adjusted
diluted EPS, which excludes certain items aff ecting compara-
bility, grew 4 percent to $2.82.
The operating environment for food manufacturers in 2014
was characterized by slow rates of sales growth in developed
markets, with better trends in the world’s emerging markets.
In our core market — the United States — retail food and bev-
erage industry sales grew just 1.5 percent across channels
tracked by Nielsen. This compares to 3.5 percent average
industry sales growth over the past fi ve years. Input costs
were a headwind for most food companies during the year;
in our case, input costs were up 4 percent.
Net sales for our U.S. Retail operating segment essentially
matched year-ago results at $10.6 billion. Our Snacks divi-
sion, Small Planet Foods (which markets organic and natural
products), and our Big G Cereals division led U.S. Retail sales
performance for the year. New products launched during
2014 contributed more than 5 percent of annual shipment
volume. Yoplait Greek 100 calorie yogurt, Fiber One snack
bars, Vanilla Chex gluten-free cereal, Old El Paso frozen
entrees and Nature Valley Protein granola made particularly
strong contributions to annual sales growth. Our brands held
or gained dollar market share in categories representing
nearly two-thirds of our retail sales in Nielsen-measured
outlets. Operating profi t for the U.S. Retail segment totaled
$2.3 billion, down 3 percent.
2 GENERAL MILL S
U. S . R ETA I L M A R K ET S H A R E TR E N DS
Dollars in billions, fiscal 2014
I NTE R N ATI O N A L PE R FO R M A N C E BY
G E O G R A PH I C R E G I O N
Dollars in millions, fiscal 2014
Category
Retail Sales
Our Dollar
Share
$ 3.2
$ 2.1
$ 1.0
$ 1.9
$ 2.7
$ 4.3
$ 9.0
$ 2.0
$ 1.8
$ 2.4
$ 7.2
41.3%
24.4%
47.7%
39.5%
17.4%
9.1%
31.0%
70.0%
39.7%
16.3%
24.1%
Share
Change vs.
Prior Year
+ 3.8 pts.
+ 1.0
+0.9
+0.7
+0.5
+0.5
+0.3
0.0
-0.9
-1.8
-2.3
Category
Grain Snacks
Frozen Hot Snacks
Fruit Snacks
Ready-to-serve Soup
Mexican Products*
Frozen Pizza
Ready-to-eat Cereal
Refrigerated Baked Goods
Dessert Mixes
Dry Packaged Dinners
Yogurt
*Excludes snack aisle
Source: Nielsen Expanded All Outlets
Our Convenience Stores and Foodservice segment
competes primarily in U.S. channels for food eaten away
from home. In 2014, net sales for this segment totaled
$1.9 billion, 2 percent below prior-year results. Operating
profit of $307 million also was down 2 percent. Over the last
several years, we have been re-shaping this business port-
folio to focus on six key platforms: cereal, snacks, yogurt,
mixes, biscuits and frozen breakfast items. These priority
businesses, which account for more than two-thirds of the
segment’s operating profit, posted combined sales growth
of 4 percent for the year.
Net sales for our International segment grew 4 percent in
2014 to $5.4 billion. Adjusted operating profit, which excludes
the effects of Venezuelan currency devaluation, also grew
4 percent to $535 million. Foreign exchange translation
reduced these reported sales and earnings growth rates; on
a constant-currency basis, International sales grew 8 percent
and adjusted operating profit rose 10 percent. Net sales for
our Latin American region crossed the $1 billion threshold,
with strong growth on the base business and a full year of
Yoki operations included in 2014. And sales in the Asia/
Pacific region grew 9 percent on a constant-currency basis,
powered by another year of double-digit sales growth in
Greater China.
Net Sales
% Growth in
Constant Currency*
Europe
Canada
Latin America
Asia/Pacific
Total International Segment
$ 2,189
$ 1,195
$ 1,020
$ 982
$ 5,386
*See page 87 for discussion of non-GAAP measures.
-4%
+5%
+38%
+9%
+8%
Beyond these three operating segments, General Mills
holds 50-percent non-consolidated interests in two joint
ventures outside North America. Together, Cereal Partners
Worldwide (CPW) and Häagen-Dazs Japan (HDJ) contributed
$90 million in after-tax earnings in 2014. This was 9 percent
below prior-year results, reflecting higher consumer marketing
investment by CPW and negative foreign currency exchange
effects for HDJ.
General Mills has a strong track record of returning cash to
shareholders and, by any measure, 2014 was a banner year
in this regard. We returned more than $2.7 billion in cash
to our equity holders through dividends of $1.55 per share
and share repurchases that reduced our average number of
diluted shares outstanding by 3 percent. We most recently
increased the quarterly dividend for General Mills common
stock effective with the May 2014 payment. The current annu-
alized rate of $1.64 per share represents a yield of roughly
3 percent at recent market prices for General Mills stock.
General Mills and its predecessor firm have paid shareholder
dividends without interruption or reduction for 115 years.
TOTA L S H A R E H O LD E R R ETU R N S
Stock price appreciation plus reinvested dividends,
percent growth
F I SC A L 20 14
GIS
GIS
S&P 500 Index
S&P 500 Index
S&P Packaged
S&P Packaged
Foods Index
Foods Index
L A ST F I V E F I SC A L Y E A R S
Compound annual growth
GIS
GIS
S&P 500 Index
S&P 500 Index
S&P Packaged
S&P Packaged
Foods Index
Foods Index
Source: Bloomberg
13%
13%
12%
12%
18%
18%
18%
18%
20%
20%
20%
20%
20 14 ANNUAL REPORT
3
Our Business Portfolio Is a Strategic Advantage
2%
5%
10%
20%
The combination of consistent earnings per share growth,
which drives stock price appreciation over time, plus an
attractive dividend yield has resulted in double-digit returns
to General Mills shareholders over virtually any extended
time period. In fiscal 2014, total return to General Mills share-
holders through stock price appreciation and dividends was
13 percent. Over the last five years, the compound annual
return to holders of GIS stock was 20 percent, outpacing the
S&P 500 Index. We remain committed to delivering superior
returns to our shareholders in the years ahead.
10%
5%
17%
Accelerating Topline Growth in 2015
15%
16%
FISCAL 2014
Net Sales by Platform
$19.2 Billion*
20% Ready-to-eat Cereal
17% Snacks
16% Yogurt
15% Convenient Meals
5% Super-premium Ice Cream
10% Dough
10% Baking Aisle Products
5% Vegetables
2% Other
* Non-GAAP measure. Includes $17.9 billion consolidated net sales plus
$1.1 billion proportionate share of CPW (cereal) net sales plus $0.2 billion
proportionate share of HDJ (ice cream) net sales.
Our Five Global Categories Are Large and Growing
Category
Ready-to-eat Cereal
Ice Cream
Yogurt
Ready Meals
Sweet & Savory Snacks
*Projected 5-year compound rate
Source: Euromonitor, calendar 2013
2013 Retail
Sales in Billions
Projected
Growth*
$ 28
$ 77
$ 80
$ 91
$ 305
5%
7%
9%
5%
6%
4 GENERAL MILL S
As we turn to our 2015 fiscal year, our number one priority
is to accelerate our net sales growth. And our key strat-
egy for doing that is to focus more tightly than ever on our
consumers — what they like to eat, where they like to shop,
and how they approach cooking today. In particular, we are
focused on four key demographic groups: the rising wave
of middle-class consumers in emerging markets; adults 55
and older; the Millennial generation; and U.S. multicultural
consumers. You can read more about what makes these
consumer groups so compelling to us on the following pages
of this report.
Our business portfolio will help us to grow with these key
consumer groups. Today, more than 70 percent of our
worldwide sales are concentrated in five categories that are
sharply on trend with consumers’ demand for great-tasting,
nutritious and convenient foods:
• Ready-to-eat cereal is our biggest business, generating
roughly $4 billion in net sales worldwide — that’s including
our share of CPW sales.
• Snacks is now our second-largest product category, gener-
ating more than $3.2 billion in worldwide net sales.
• Yogurt became a global business for us in fiscal 2012
with the acquisition of a controlling interest in the Yoplait
parent company. Today, our yogurt brands generate nearly
$3 billion in net sales.
• We’ve got a terrific assortment of convenient meal choices
for busy consumers across the globe — these products
account for $2.8 billion in net sales.
• And we market the world’s best-loved ice cream brand —
Häagen-Dazs. This business generated nearly $1 billion in
net sales last year, including our share of the joint venture
in Japan.
• We also hold leading brand positions in select categories
in the U.S. market — most notably baking products in the
dessert aisle and the refrigerated case.
Consumers around the world are generating strong retail
sales for our priority categories. The table at left shows
A Selection of Products
That Generated Good
Growth in Fiscal 2014
Euromonitor’s estimation of category size and projected
growth rate. As you can see, these categories are large, and
each one is projected to grow at a mid- or high-single-digit
rate in the years ahead. We see strong opportunities to grow
net sales for our brands in these categories.
We also see strong opportunities to increase the profi tability
of our worldwide food businesses. Supply chain savings from
our ongoing Holistic Margin Management (HMM) program
are expected to exceed $400 million in 2015. We anticipate
these savings will off set input cost infl ation, which we esti-
mate at 3 percent for the new year.
Beyond HMM, we have started work on several new cost-
reduction initiatives designed to boost our effi ciency and
sharpen focus behind our key growth strategies. A formal
review of our North American manufacturing and distribution
network is designed to streamline operations and identify
potential capacity reductions. We also have initiated eff orts
focused on further reducing overhead costs. Together, these
new cost-reduction eff orts are targeted to generate savings
of $40 million pretax in fi scal 2015, with additional savings
expected in fi scal 2016.
General Mills Long-term Growth Model
Growth Factor
Net Sales
Segment Operating Profi t
Adjusted Diluted Earnings per Share
Dividend Yield
Total Return to Shareholders
Compound Annual Growth Target
Low single-digit
Mid single-digit
High single-digit
2 to 3 percent
Double-digit
Our 2015 plans call for constant-currency sales and earnings
growth consistent with our long-term model. And we expect
our operations to generate strong cash fl ows again this year
that will fund our fi xed asset investment needs, increased
shareholder dividends and ongoing share repurchases. We
are energized by our growth plans for the new year.
General Mills People Are the Key to our Success
Our company’s strong track record and exciting future pros-
pects are a refl ection of the talent and ambition of General
Mills’ 43,000 people around the world. It’s a privilege for me
to work with this team every day on your behalf.
Two members of our senior leadership team retired during
fi scal 2014. Ian Friendly and Christi Strauss made important
and lasting contributions to General Mills, and we thank
them for their many years of dedicated service. We also
thank Bill Esrey, who is retiring from our board of directors
this September following 25 years of distinguished service.
In closing, I’d like to thank you for your investment in General
Mills. We appreciate your confi dence in our business, and
we look forward to reporting on our continuing growth.
Kendall J. Powell
Chairman and Chief Executive Offi cer
August 1, 2014
20 14 ANNUA L REPORT
5
Convenient and Great-tasting
WANCHAI FERRY FOODS
The Wanchai Ferry brand
posted another year of double-
digit sales growth in China in
2014. These frozen dumplings
and dim sum are a convenient
way to prepare traditional
Chinese favorites. In 2014,
we introduced a translucent
version of tangyuan with great
success. We’re innovating
to provide new fl avors and
forms of tangyuan in 2015.
HÄAGEN-DAZS ICE CREAM
Häagen-Dazs super-premium
ice cream is now available in
more than 50 cities across
China. Sales for this “aff ordable
luxury” grew 14 percent on
a constant-currency basis
in 2014 as we opened more
than 80 new shops in select
Chinese markets. Our plans
call for more store openings
and an increased presence in
grocery outlets with new fl avor
varieties coming in 2015.
YOKI IN BRAZIL
Our sales in Latin America
crossed the $1 billion mark
in 2014, led by double-digit,
constant-currency growth
in Brazil. The Yoki portfolio
includes snacks, meals and
now dessert mixes — all great-
tasting and easy-to-prepare
options for busy Brazilian
families. We see many
opportunities ahead to drive
growth through innovation
on the well-established
Yoki brand.
CEREAL PARTNERS
WORLDWIDE
Cereal Partners Worldwide
(CPW) is the cereal category
leader in many emerging
markets around the world,
including Indonesia, Malaysia
and the Philippines. Fitness
is CPW’s largest brand,
targeting consumers focused
on nutrition and weight
management. In Latin America,
product improvements on our
kid-oriented cereals make
them lower in sugar with the
same great taste.
General Mills Net Sales in Greater China*
Constant currency, dollars in millions, percent growth
2010
201 1
2012
2013
2014
15%
19%
22%
9%
12%
* Estimated net sales converting local currency data at a fi xed
exchange rate.
Our net sales in Greater China grew
12 percent on a constant-currency basis in
fi scal 2014, reaching more than $700 million.
We’ve been growing our business in China
at a double-digit compound rate over the
past four years, and expect this pace to
continue in this rapidly expanding market.
6 GENERAL MILL S
Reaching Consumers
in Emerging Markets
The middle class is growing in emerging
markets around the world, including
Brazil, Indonesia, India and China. In these
markets combined, the number of middle-
class households is projected to grow by
nearly 200 million from 2010 to 2020.
As their disposable income grows,
families in emerging markets are seeking
out more packaged foods to complement
their increasingly busy lifestyles. We’re
customizing our products to meet
the local tastes of consumers in many
YOKI IS ON THE BALL
In conjunction with the world’s
premier soccer tournament
held in Brazil this year, Yoki
introduced limited-edition,
world-inspired fl avors of
popcorn, potato chips and
peanuts. German mustard
popcorn or American bacon
peanuts, anyone?
markets worldwide.
20 14 ANNUA L REPORT
7
Tasty Options for
Older Adults
Adults ages 55 and older make up
25 percent of the U.S. population
today, and will grow to 30 percent
of U.S. consumers by 2020.
These consumers are label readers.
They look for simple ingredients in
foods that meet a specifi c health need
or contribute to a healthy lifestyle.
They also appreciate smaller package
sizes for two-person households.
Our portfolio of great-tasting, nutritious
foods is well-positioned to meet the
needs of this large consumer group.
Senior living and healthcare facilities
represent a growing foodservice channel.
Our whole grain cereals and Yoplait
yogurt are great fi ts for this channel.
8 GENERAL MILL S
Calorie Light, Nutrient Dense Foods
PROTEIN CEREALS
Some consumers fi nd that protein-rich foods keep them feeling
full longer, and they’re interested in low-fat protein options.
In 2014, we introduced Nature Valley Protein granola and it was
a big hit; we’re adding two new varieties in 2015. And we recently
launched Cheerios Protein with 11 grams of protein per serving
with milk — it’s a great-tasting way to fi ll up.
PROGRESSO SOUP
Progresso ready-to-serve soup is a convenient meal,
perfect for smaller households. Our market share of the
nearly $2 billion U.S. ready-to-serve soup category grew to
39 percent in 2014, led in part by new varieties of our
Light and Rich & Hearty lines. In 2015, we are introducing
Progresso Chili in chicken and beef varieties.
YOPLAIT CALIN
Our yogurt businesses in France and the UK posted
sales and market share growth in 2014, driven in part by
Yoplait Calin. This calcium-rich yogurt helps promote
bone strength. We’ve added even more calcium with
Yoplait Calin +, available in select European markets.
Big G Cereal Net Sales
Dollars in billions
U.S. Cereal Consumption per Capita by Age
Index: Overall U.S. population eatings per capita = 100
2007
2008
2009
2010
201 1
2012
2013
2014
1.9
2.0
2.2
2.4
2.3
2.4
2.3
2.3
Under 13
Ages 13–34
Ages 35–54
Ages 55+
126
96
84
103
Source: National Panel Diary, National Eating Trends, three years
ended February 2014
20 14 ANNUA L REPORT
9
Simple Ingredients, Bold Flavors
OLD EL PASO
In the U.S. Mexican aisle, retail
sales for Old El Paso products
grew 4 percent in fi scal 2014
as we emphasized the fresh
aspect of our easy-to-prepare
meal kits. This summer, we
introduced a zesty Nacho
Cheese taco shell, perfect for
Millennial families looking for a
quick meal with bold fl avor.
SNACKS PURE
AND SIMPLE
Lärabar snacks are made with
simple, non-GMO ingredients.
Retail sales for these bars have
been growing at a double-digit
pace in traditional grocery
stores and natural and organic
outlets combined. And this
brand is paving the way in new
retail channels, as 7 percent of
Lärabar sales are generated
through online grocery sites.
SNACKS ON THE GO
Net sales for our snacks
in convenience stores
have grown at a 9 percent
compound rate over the
past fi ve years. In 2014,
we launched Chex chips
in zesty fl avors like Wasabi
and Jalapeño Cheddar.
In 2015, we’ll introduce
Totino’s pizza chips, another
great-tasting snack choice
for grab-and-go convenience
store customers.
GREEK YOGURT
In the U.S., we’re growing
our share of the Greek
yogurt segment behind
some great-tasting products.
And Liberté is a leading
Greek yogurt in Canada.
Yoplait also launched a
Greek yogurt variety in France
and the UK, as consumers
there are starting to show
an appetite for these thicker
and tasty yogurts.
60
MARKETS
Old El Paso dinner kits are
a family dinner favorite
around the world. Their fresh
appeal and ethnic fl avor have
generated solid sales growth
over the past fi ve years.
Old El Paso Global Net Sales Growth*
Constant currency, dollars in millions,
percent growth
2010
2011
2012
2013
2014
6%
3%
5%
5%
5%
* Estimated net sales converting local
currency data at a fi xed exchange rate.
10 GENERAL MILL S
Appealing to the
Tastes of Millennials
At nearly 80 million strong, consumers ages
20 to 37 represent a quarter of the U.S.
population. This generation is now forming
households and starting families. By 2020,
two out of every three U.S. moms of kids
under age 14 will be a Millennial.
Millennials like to cook, experiment
with unique fl avors and enjoy a variety
of ethnic tastes. They use social media
to discover new foods and share ideas,
whether it’s a new cuisine or a favorite recipe.
And they value convenient preparation to
complement their busy lifestyles.
Lucky Charms cereal turned 50 this year, and
it’s still going strong. Retail sales for this whole
grain oats cereal, sprinkled with marshmallows,
grew 3 percent in fi scal 2014, with adults
accounting for nearly half of consumption.
20 14 ANNUA L REPORT
11
More than half of Yoplait Original yogurt is
consumed in households with young kids.
Our advertising reminds families that Yoplait
yogurt makes a great, fun-time snack,
a key message that drove renewed growth
for Yoplait Original yogurt in 2014.
Growing with
U.S. Multicultural
Consumers
Today, multicultural consumers represent
one-third of the U.S. population — and by
2060, it’s projected that more than half
the U.S. population will be non-Caucasian,
with Hispanics leading that growth.
Nearly 15 percent of U.S. family households
currently are Hispanic. Like many busy
families, they’re looking for foods that
off er good nutrition, quality, convenience
and great taste. We have a broad array of
products to meet their needs. And we’re
promoting our brands in outlets where
Hispanic consumers shop, with advertising
messages that connect with this growing
consumer demographic.
12 GENERAL MILL S
Reaching Multicultural Families
CINNAMON TOAST CRUNCH
Retail sales for Cinnamon Toast Crunch increased 5 percent in fi scal 2014,
with multicultural consumers leading that growth. We’ll build on this good
momentum by promoting the brand through social media, on Spanish-
language TV, and on TV shows popular with multicultural audiences.
YOPLAIT GO - GURT
Yoplait is “para todos los gustos” — to everyone’s liking — especially to
Hispanic kids, who eat more Yoplait yogurt per capita than the general
population. Yoplait is the leading brand in the kid yogurt segment.
In 2015, Go-GURT low-fat strawberry yogurt, made exclusively
for McDonald’s®, will be an option with each Happy Meal® in more
than 14,000 McDonald’s® restaurants across the U.S.
NATURE VALLEY SNACKS
Nature Valley grain snacks are available in 80 markets around the world.
Retail sales for this brand grew at a double-digit pace in 2014 in the U.S. alone.
We continue to off er new varieties, including new Frutería fruit and grain bars,
designed to appeal to the tastes of Hispanic consumers.
TOTINO’S PIZZA ROLLS
In fi scal 2014, we brought spicy fl avors like Jalapeño Popper and
Buff alo Chicken to our Totino’s rolls, contributing to 4 percent retail
sales growth for our hot snacks business. We expect the momentum to
continue into 2015 as we promote the Totino’s brand on Hispanic TV,
radio and through digital marketing outlets.
Qué Rica Vida
“Qué Rica Vida” — What a Rich Life — is our Hispanic marketing
platform. We’re reaching more consumers by leveraging
digital media. Through our website and Facebook® page, we
provide recipes, meal suggestions and nutritional information
for Hispanic moms across the U.S.
5MILLION
Visitors per year to
QueRicaVida.com
20 14 ANNUAL REPORT
13
Putting the
Consumer
First with
Holistic Margin
Management
If our consumers don’t value a product feature or a packaging
component, we are fi nding a way to reduce or eliminate that
expense, and redeploy the savings. This is a core principle
of Holistic Margin Management (HMM), our company-wide
initiative to use productivity savings, mix management and
price realization to off set input cost infl ation, protect margins,
and generate funds to reinvest in sales-generating activities.
Increased sales allow us to further invest in our business,
fueling a virtuous cycle of growth.
Protecting Margins
Our HMM eff orts apply across all parts of our company.
What started as an initiative in the U.S. is now fully embraced
throughout General Mills, including our International busi-
ness and our joint ventures. We’ve found ways to reduce
the amount of packaging used for many of our products.
This lowers raw material costs and transportation costs, as
less packaging means less weight to ship. We’ve reduced
energy costs as we’ve determined the optimal manufactur-
ing run cycles for various cereal products. And at one of our
mills, we burn the oat hulls that are a byproduct of the milling
process as an alternative source of energy for that facility.
Internationally, we’ve found cost synergies as we combine
dairy purchasing for our international Yoplait yogurt and
Häagen-Dazs ice cream. And we’re bringing HMM to our
H M M COST SAV I N G S
Supply Chain
TH E V I RTUOUS CYC LE O F H M M
HMM
Initiatives
$4 Billion
Fiscal 2010–2020
Cumulative Goal
$2 Billion
Fiscal 2010–2014
Cumulative Savings
Topline
Growth
Brand
Building &
Innovation
14 GENERAL MILL S
I N PUT COST I N F L ATI O N
Percent change
2009
2010
201 1
2012
2013
2014
-3%
4%
3%
4%
9%
10%
Includes raw materials, energy, labor expense, carrier rates, and
storage and handling.
G ROS S M A RG I N
Percent of net sales
2009
2010
201 1
2012
2013
2014
Net sales less cost of sales.
35.6%
39.6%
40.0%
36.3%
36.1%
35.6%
Reinvesting to Fuel Growth
After offsetting input cost inflation, we reinvest funds
generated by HMM into our businesses. Our advertising
and media investment has grown by 19 percent from 2009
levels to $870 million worldwide in fiscal 2014. Traditional
media, such as TV, remains a key part of our advertising
budget. But more and more consumers are going online
to shop, share ideas and interact with each other. So we’ve
been increasing our spending on digital outlets such as
websites and social media. These vehicles allow us to
customize our message to specific consumer groups and
have one-on-one dialogues with individual consumers.
We’ve also been increasing our investment in research and
development. Product news drives net sales growth, so in
2015 we’re introducing a strong slate of new items in markets
around the world. We’re also improving the health profile of
many of our existing products by adding ingredients like pro-
tein, fiber and whole grains, and reducing ingredients such as
sodium and sugar, to meet the desires of our consumers.
HMM remains vital to how we operate every day. As our
horizons grow, we see great opportunities ahead to continue
to reap the benefits of HMM, which has become an integral
part of our company’s culture.
Yoki business, re-engineering production, packaging and
scheduling to develop a more cost-efficient, high- performing
manufacturing facility, while maintaining high-quality,
affordable products to meet consumer demand. We also
partner with suppliers and customers to find ways to reduce
inventories and associated costs. Through efforts like these,
we’ve achieved $2 billion in cumulative savings from supply
chain HMM in the past five fiscal years, and we remain on
track to reach our goal of a cumulative $4 billion in supply
chain HMM savings for the decade ending in fiscal 2020.
With our HMM initiatives, we have been able to offset input
cost inflation that has been averaging 4 to 5 percent per
year. This has helped us hold our gross margin relatively
steady over the past several years, a challenging time for
many food manufacturers given the volatility of input costs
from year to year. Our HMM efforts also have generated
environmental benefits and have advanced our sustainability
initiatives. Since 2005, when we first implemented HMM,
we have reduced our energy and water usage rates, and
we also have improved the amount of recycled content
and recyclability of our packaging.
A DV E RTI S I N G A N D M E D I A E X PE N S E
Dollars in millions
2009
2010
201 1
2012
2013
2014
732
908
844
914
895
870
CU M U L ATI V E H E A LTH M ETR I C AC H I E V E M E NT
Percent of U.S. retail volume improved
2009
2010
201 1
2012
2013
2014
45%
60%
64%
68%
73%
76%
Products are counted only one time, even if improved more than once.
20 14 ANNUA L REPORT
15
Board of Directors
As of August 1, 2014
Bradbury H. Anderson 2, 5
Retired Chief Executive Officer
and Vice Chairman,
Best Buy Co., Inc.
(electronics retailer)
R. Kerry Clark 3, 4*
Retired Chairman and Chief
Executive Officer,
Cardinal Health, Inc.
(medical services and supplies)
Henrietta H. Fore
Chairman of the Board
and Chief Executive Officer,
Holsman International
(manufacturing, consulting
and investment services)
Raymond V. Gilmartin 1, 2
Retired Chairman, President
and Chief Executive Officer,
Merck & Company, Inc.
(pharmaceuticals)
Paul Danos 3, 5
Dean, Tuck School of Business and
Laurence F. Whittemore Professor
of Business Administration,
Dartmouth College
William T. Esrey 1, 3, †
Chairman Emeritus,
Sprint Nextel Corporation
(telecommunications systems)
Judith Richards Hope 2, 4
Retired Professor of Law,
Georgetown University Law Center
Heidi G. Miller 1*, 3
Retired President,
JPMorgan International,
JPMorgan Chase & Co.
(banking and financial services)
Hilda Ochoa-Brillembourg 1, 5
Founder, Chief Executive Officer
and Chairman of the Board,
Strategic Investment Group
(investment management)
Robert L. Ryan 1, 3*
Retired Senior Vice President
and Chief Financial Officer,
Medtronic, Inc.
(medical technology)
Steve Odland 2, 4
President and Chief Executive
Officer, Committee for Economic
Development (public policy) and
Former Chairman of the Board
and Chief Executive Officer, Office
Depot, Inc. (office products retailer)
Kendall J. Powell
Chairman of the Board and
Chief Executive Officer,
General Mills, Inc.
Michael D. Rose 2*, 4
Retired Chairman of the Board,
First Horizon National Corporation
(banking and financial services)
Dorothy A. Terrell 4, 5*
Managing Partner,
FirstCap Advisors
(venture capital)
Board Committees
1 Audit
2 Compensation
3 Finance
4 Corporate Governance
5 Public Responsibility
* Denotes Committee Chair
† Retiring from the board
September 2014
Senior Management
As of August 1, 2014
Peter C. Erickson
Executive Vice President,
Innovation, Technology and Quality
Olivier Faujour
Vice President;
President, Yoplait International
Kimberly A. Nelson
Senior Vice President, External
Relations; President,
General Mills Foundation
Elizabeth M. Nordlie
Vice President;
President, Small Planet Foods
Kendall J. Powell
Chairman of the Board and
Chief Executive Officer
Bethany C. Quam
Vice President;
President, Convenience Stores
and Foodservice
Jeffrey L. Harmening
Executive Vice President;
Chief Operating Officer,
U.S. Retail
David P. Homer
Senior Vice President;
Chief Executive Officer,
Cereal Partners Worldwide
Christina Law
Vice President;
President, Asia, Middle East
and Africa
Luis Gabriel Merizalde †
Senior Vice President;
President, Europe,
Australia and New Zealand
Michele S. Meyer
Senior Vice President;
President, Meals
Donal L. Mulligan
Executive Vice President;
Chief Financial Officer
James H. Murphy
Senior Vice President;
President, Big G Cereals
Jonathon J. Nudi
Senior Vice President;
President, Europe,
Australia and New Zealand
Rebecca L. O’Grady
Vice President;
President, Häagen-Dazs
Strategic Business Unit
Shawn P. O’Grady
Senior Vice President;
President, Sales and
Channel Development
Christopher D. O’Leary
Executive Vice President;
Chief Operating Officer,
International
Roderick A. Palmore ††
Executive Vice President;
General Counsel;
Chief Compliance and Risk
Management Officer and Secretary
Marie C. Pillai
Vice President; Treasurer and
Chief Investment Officer
Ann W. H. Simonds
Senior Vice President;
President, Baking
Anton V. Vincent
Vice President;
President, Snacks
Sean N. Walker
Senior Vice President;
President, Latin America
Kristen S. Wenker
Senior Vice President,
Investor Relations
Jacqueline R. Williams-Roll
Senior Vice President,
Human Resources Operations
Keith A. Woodward
Senior Vice President,
Financial Operations
Jerald A. Young
Vice President, Controller
†Retiring September 2014
††Retiring February 2015
†††Retiring March 2015
Mark W. Addicks
Senior Vice President;
Chief Marketing Officer
Richard C. Allendorf
Senior Vice President;
Deputy General Counsel
Y. Marc Belton †††
Executive Vice President,
Global Strategy, Growth and
Marketing Innovation
Gary Chu
Senior Vice President;
President, Greater China
Juliana L. Chugg
Senior Vice President;
President, Frozen Foods
John R. Church
Executive Vice President,
Supply Chain
David V. Clark
Vice President;
President, Yoplait USA
Michael L. Davis †
Executive Vice President,
Global Human Resources
David E. Dudick Sr.
Senior Vice President;
President, General Mills Canada
16 GENERAL MILL S
Financial Review
Contents
Financial Condition and Uses of Cash
Selected Financial Data
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
Reports of Management and Independent Registered
Public Accounting Firm
Consolidated Financial Statements
Notes to Consolidated Financial Statements
1 Basis of Presentation and Reclassifications
2 Summary of Significant Accounting Policies
3 Acquisitions and Divestitures
4 Restructuring, Impairment, and Other Exit Costs
5 Investments in Joint Ventures
6 Goodwill and Other Intangible Assets
7 Financial Instruments, Risk Management Activities, and Fair Values
8 Debt
9 Redeemable and Noncontrolling Interests
10 Stockholders’ Equity
11 Stock Plans
12 Earnings per Share
13 Retirement Benefits and Postemployment Benefits
14 Income Taxes
15 Leases, Other Commitments, and Contingencies
16 Business Segment and Geographic Information
17 Supplemental Information
18 Quarterly Data
Glossary
Non-GAAP Measures
Total Return to Stockholders
18
20
21
41
43
48
48
51
52
53
54
55
63
64
65
67
70
70
78
80
80
82
84
85
87
91
20 14 ANNUAL REPORT 17
Financial Condition and Uses of Cash
General Mills financial condition today is strong. Our
key financial ratios are the best they’ve been since we
completed the transformative Pillsbury acquisition in
November 2001. Our operating cash flow to debt and
fixed charge coverage ratios are both roughly 3 times
stronger in 2014 than they were in 2002. Debt to
EBITDA is now 2.5 times, well below the level of 6.8
times reached the year of the Pillsbury transaction. Our
improving financial condition has been well-chronicled
by the debt rating agencies. For example, Moody’s rates
our debt at A3 today, two levels above the Baa2 rating
they assigned to our debt back in 2002.
Our businesses have a long history of strong cash gen-
eration. Over the past five years ending in fiscal 2014,
net cash from operations has grown at a 7 percent com-
pound rate, and we generated a cumulative $11.6 billion
of operating cash flow during that time.
Our first priority for this cash is investment in the
growth opportunities and cost-savings projects we’ve
identified across our businesses. On average, our annual
fixed asset investment represents just under 4 percent
of net sales. Our plans call for roughly $700 million in
capital expenditures in fiscal 2015. Key growth projects
include increased snack bar capacity in the U.S., our new
yogurt plant in China, and new manufacturing systems
to support high-potential 2016 product innovation.
BA L A N C E S H E ET STR E N GTH
Operating Cash Flow to Debt
Fixed Charge Coverage
Debt/EBITDA*
* See page 87 for discussion of non-GAAP measures.
2002 data not restated for current classification.
2002
10%
2.5x
6.8x
2014
29%
8.0x
2.5x
C A S H F LOW F RO M O PE R ATI O N S
Dollars in millions
2009
2010
201 1
2012
2013
2014
1,837
2,185
1,531
2,407
2,926
2,541
F I X E D A S S ET I N V E STM E NT
Percent of net sales
2009
2010
201 1
2012
2013
2014
3.9%
4.4%
4.4%
4.1%
3.4%
3.7%
F I SC A L 20 1 5 F I X E D A S S ET PL A N
Percent of $700 million estimated investment
21%
38%
41%
41% Essential Maintenance
38% Growth Capacity
21% Cost Savings
18 GENERAL MILL S
2014 ANN UAL REPORT 19
General Mills has a strong tradition of returning cash to
shareholders through dividends and share repurchases.
Cash dividends to shareholders totaled nearly $1 billion
in 2014, almost 70 percent more than the level of divi-
dends paid five years ago. In March 2014, our board of
directors approved an 8 percent increase in the quarterly
dividend rate effective with the May 2014 payment. The
current annualized dividend rate of $1.64 represents a
yield of 3 percent at recent market prices for General
Mills stock. General Mills and its predecessor firm have
paid regular dividends without interruption or reduction
for 115 years, and our goal is to continue increasing divi-
dends over time in line with our earnings growth.
For consistent growth businesses like ours, where
annual earnings increases typically translate into stock
price appreciation, share buybacks create value. Since
2010, our share repurchase activity has lowered aver-
age diluted shares outstanding by roughly 1 percent a
year. That’s despite pauses in our buyback program to
fund the strategic acquisitions of Yoplait International
and Yoki.
Fiscal 2014 was a year of strong repurchase activity
– we reduced our average diluted share count by 20 mil-
lion. In 2015, we expect a further 3 to 4 percent reduc-
tion in the average share count. Some of that reduction
is already in-hand, due to the timing of our repurchases
in 2014.
Net income growth and disciplined use of cash are the
drivers of increasing returns on average total capital
(ROC). General Mills ROC has declined in recent years,
due primarily to the acquisitions of Yoplait and Yoki. Our
plans for 2015 call for improved ROC, powered by earn-
ings growth and continued prudent capital management.
D I V I D E N DS PA I D
Dollars in millions
2009
2010
201 1
2012
2013
2014
580
644
729
800
868
983
G ROS S S H A R E R E PU RC H A S E S
Dollars in millions
2010
201 1
2012
2013
2014
692
313
1,164
1,045
1,745
R ETU R N O N AV E R AG E TOTA L C A PITA L*
Percent
2010
201 1
2012
2013
2014
13.9%
13.7%
12.7%
12.0%
11.6%
* See page 87 for discussion of non-GAAP measures.
18 GENER AL MILLS
20 14 ANNUAL REPORT 19
Selected Financial Data
The following table sets forth selected financial data for each of the fiscal years in the five-year period ended
May 25, 2014:
In Millions, Except Per Share Data, Percentages and Ratios
2014
2013
2012
2011
2010
Fiscal Year
Operating data:
Net sales
Gross margin (a)
Selling, general, and administrative expenses
Total segment operating profit
excluding Venezuela currency devaluation (b)
Divestiture (gain)
$ 17,909.6
$ 17,774.1
$ 16,657.9 $ 14,880.2 $ 14,635.6
6,369.8
6,423.9
6,044.7
5,953.5
5,800.2
3,474.3
3,552.3
3,380.7
3,192.0
3,162.7
3,153.9
3,222.9
3,011.6
2,945.6
2,854.5
(65.5)
—
—
(17.4)
—
Net earnings attributable to General Mills
1,824.4
1,855.2
1,567.3
1,798.3
1,530.5
Advertising and media expense
Research and development expense
Average shares outstanding:
Diluted
Earnings per share:
869.5
243.6
895.0
237.9
913.7
245.4
843.7
235.0
908.5
218.3
645.7
665.6
666.7
664.8
683.3
Diluted
$
Diluted, excluding certain items affecting comparability (b) $
2.83
2.82
$
$
2.79
2.72
$
$
2.35 $
2.70 $
2.56 $
2.48 $
2.24
2.31
Operating ratios:
Gross margin as a percentage of net sales
Selling, general, and administrative expenses as a
35.6%
36.1%
36.3%
40.0%
39.6%
percentage of net sales
19.4%
20.0%
20.3%
21.5%
21.6%
Total segment operating profit excluding Venezuela
currency devaluation as a percentage of net sales (b)
Effective income tax rate
Return on average total capital (a) (b)
17.6%
33.3%
11.6%
18.1%
29.2%
12.0%
18.1%
32.1%
12.7%
19.8%
29.7%
13.7%
19.5%
35.0%
13.9%
Balance sheet data:
Land, buildings, and equipment
Total assets
Long-term debt, excluding current portion
Total debt (a)
Cash flow data:
Net cash provided by operating activities
Capital expenditures
Fixed charge coverage ratio (a)
Operating cash flow to debt ratio (a)
Share data:
Low stock price
High stock price
Closing stock price
Cash dividends per common share
$ 3,941.9
$ 3,878.1
$ 3,652.7 $ 3,345.9 $ 3,127.7
23,145.7
22,658.0
21,096.8
18,674.5
17,678.9
6,423.5
5,926.1
6,161.9
5,542.5
5,268.5
8,785.8
7,969.1
7,429.6
6,885.1
6,425.9
$ 2,541.0
$ 2,926.0
$ 2,407.2 $ 1,531.1 $ 2,185.1
663.5
8.04
28.9%
613.9
7.62
36.7%
675.9
6.26
648.8
7.03
649.9
6.42
32.4%
22.2%
34.0%
$
46.86
$ 37.55
$
34.95 $
33.57 $
25.59
54.40
53.81
1.55
50.93
48.98
1.32
41.05
39.08
1.22
34,500
39.95
39.29
1.12
35,000
36.96
35.62
0.96
33,000
Number of full- and part-time employees
43,000
41,000
(a) See Glossary on page 85 of this report for definition.
(b) See Non-GAAP Measures on page 87 of this report for our discussion of this measure not defined by generally accepted accounting principles.
20 GENERA L MILL S
2014 ANNUAL REPORT 21
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
EXECUTIVE OVERVIEW
We are a global consumer foods company. We develop
distinctive value-added food products and market them
under unique brand names. We work continuously to
improve our established products and to create new
products that meet consumers’ evolving needs and pref-
erences. In addition, we build the equity of our brands
over time with strong consumer-directed marketing,
innovative new products, and effective merchandis-
ing. We believe our brand-building strategy is the key
to winning and sustaining leading share positions in
markets around the globe.
Our fundamental financial goal is to generate supe-
rior returns for our stockholders over the long term. We
believe that increases in net sales, segment operating
profit, earnings per share (EPS), and return on average
total capital are the key drivers of financial performance
for our business.
Our specific growth objectives are to consistently deliver:
• low single-digit annual growth in net sales;
• mid single-digit annual growth in total segment oper-
ating profit excluding Venezuela currency devaluation;
• high single-digit annual growth in diluted EPS
excluding certain items affecting comparability; and
• improvement in return on average total capital.
We believe that this financial performance, coupled
with an attractive dividend yield, should result in long-
term value creation for stockholders. We return a sub-
stantial amount of cash to stockholders through share
repurchases and dividends.
Fiscal 2014 was a challenging year, as developed mar-
kets continued to experience weak consumer trends and
quite low category growth. The cereal category in devel-
oped markets was soft and the global yogurt category
was impacted by significant dairy inflation. For the fiscal
year ended May 25, 2014, our net sales grew 1 percent
and total segment operating profit excluding Venezuela
currency devaluation of $3,154 million declined 2 per-
cent from $3,223 million last year. Our return on aver-
age total capital declined by 40 basis points, as fiscal
2014 earnings did not grow in line with our capital base.
Diluted EPS grew 1 percent and diluted EPS excluding
certain items affecting comparability increased 4 per-
cent (See the “Non-GAAP Measures” section on page 87
for discussion of total segment operating profit exclud-
ing Venezuela currency devaluation, diluted EPS exclud-
ing certain items affecting comparability and return on
average total capital, which are not defined by gener-
ally accepted accounting principles (GAAP)). Net cash
provided by operations totaled $2.5 billion in fiscal 2014,
enabling us to increase our annual dividend payments
per share by 17 percent from fiscal 2013. We also made
significant capital investments totaling $664 million in
fiscal 2014 and repurchased $1.7 billion of shares of com-
mon stock.
We achieved the following related to our key operating
objectives for fiscal 2014:
• We delivered a strong line-up of consumer marketing,
merchandising, and innovation to support our leading
brands and continued to build our global platforms in
markets around the world.
• We returned $2.7 billion to stockholders in fiscal 2014,
including a 17 percent dividend increase and 47 per-
cent more shares of common stock repurchased that
resulted in a 3 percent net reduction in average shares
outstanding.
• While we exercised good administrative cost control,
executed strong holistic margin management (HMM)
efforts, increased share repurchases and had favorable
interest expense, net sales and segment operating profit
excluding Venezuela currency devaluation performance
were below our targets. We achieved 1 percent growth in
net sales, primarily contributions from new businesses
added in fiscal 2013. Total segment operating profit
excluding Venezuela currency devaluation declined 2 per-
cent and diluted EPS excluding certain items affecting
comparability increased 4 percent.
Details of our financial results are provided in the
“Fiscal 2014 Consolidated Results of Operations” section
below.
In fiscal 2015, we expect to generate constant currency
growth consistent with our long-term model, including
the effects of a 53 week year:
• We are targeting mid single-digit growth in constant
currency net sales, primarily driven by volume growth
and a 53rd week, with double-digit growth in emerg-
ing markets and low single-digit growth in developed
markets.
20 GE NERA L MILLS
20 14 ANNUAL REPORT 21
• We expect to grow share in the U.S. cereal category
through significant product innovation, build on our
improving performance in the U.S. yogurt category,
and continue our strong growth in the snack category
around the world.
• We are targeting mid single-digit growth in total con-
stant currency segment operating profit in fiscal 2015.
We continue to view our HMM discipline of cost savings
and mix management as a competitive advantage. Cost
of sales HMM is expected to offset anticipated input
cost inflation of 3 percent.
• We are targeting high single-digit growth in constant
currency diluted EPS excluding certain items affecting
comparability.
• We expect to deliver strong cash returns to stockhold-
ers in fiscal 2015, including annualized dividends per
share of $1.64 and share repurchases that are expected
to result in a net reduction in shares outstanding of at
least 3 percent.
• Our businesses generate strong levels of cash flows,
and we will use some of this cash to reinvest in our
business. Our fiscal 2015 plans call for approximately
$730 million of expenditures for capital projects.
from the mark-to-market valuation of certain commod-
ity positions and grain inventories, and restructuring
charges related to our fiscal 2012 productivity and cost
savings plan. Fiscal 2013 results include the effects from
various discrete tax items, the impact of Venezuela cur-
rency devaluation, restructuring charges related to our
fiscal 2012 productivity and cost savings plan, integra-
tion costs resulting from the acquisition of Yoki, and
gains from the mark-to-market valuation of certain
commodity positions and grain inventories. Diluted EPS
excluding these items affecting comparability totaled
$2.82 in fiscal 2014, up 4 percent from $2.72 in fiscal
2013 (see the “Non-GAAP Measures” section on page 87
for a description of our use of this measure and our dis-
cussion of the items affecting comparability).
The components of net sales growth are shown in the
following table:
Components of Net Sales Growth
Contributions from volume growth (a)
Net price realization and mix
Fiscal 2014
vs. 2013
1 pt
1 pt
(1) pt
1 pt
Certain terms used throughout this report are defined
Foreign currency exchange
in a glossary on page 85 and 86 of this report.
Net sales growth
FISCAL 2014 CONSOLIDATED RESULTS OF
OPERATIONS
Our consolidated results for fiscal 2014 include one addi-
tional quarter of operating activity from the acquisition of
Yoki Alimentos S.A. (Yoki) in Brazil, one additional quarter
of operating activity from the assumption of the Canadian
Yoplait franchise license, and three additional quarters
of operating activity from the acquisition of Immaculate
Baking Company in the United States. Collectively, these
items are referred to as “new businesses” in comparing
our fiscal 2014 results to fiscal 2013.
Fiscal 2014 net sales grew 1 percent to $17,910 mil-
lion including 1 percentage point of growth contributed
by new businesses. Excluding new businesses, net sales
grew 1 percent, offset by 1 percentage point of unfa-
vorable foreign currency exchange. In fiscal 2014, net
earnings attributable to General Mills were $1,824 mil-
lion, down 2 percent from $1,855 million in fiscal 2013,
and we reported diluted EPS of $2.83 in fiscal 2014, up
1 percent from $2.79 in fiscal 2013. Fiscal 2014 results
include a gain on the divestiture of certain grain eleva-
tors, the impact of Venezuela currency devaluation, gains
(a) Measured in tons based on the stated weight of our product shipments.
Net sales grew 1 percent in fiscal 2014 driven by an 1
percentage point increase in contributions from volume
growth, including 2 percentage points of contribution
from volume growth due to new businesses. Favorable net
price realization and mix contributed 1 percentage point
of growth, and unfavorable foreign currency exchange
decreased net sales growth by 1 percentage point.
Cost of sales increased $190 million in fiscal 2014
to $11,540 million. Higher volume drove an $115 mil-
lion increase in cost of sales. Product mix also drove
an $130 million increase in cost of sales. In fiscal 2014,
we recorded a $49 million net decrease in cost of sales
related to mark-to-market valuation of certain commod-
ity positions and grain inventories as described in Note
7 to the Consolidated Financial Statements on page 55
of this report, compared to a net decrease of $4 million
in fiscal 2013. We also recorded a $23 million foreign
exchange loss in fiscal 2014 related to the Venezuela cur-
rency devaluation compared to a $16 million loss in fis-
cal 2013. In fiscal 2013, we also recorded a $17 million
non-recurring expense related to the assumption of the
Canadian Yoplait franchise license.
22 GENERAL MILL S
2014 ANNUAL REPORT 23
Gross margin declined 1 percent in fiscal 2014 versus
fiscal 2013. Gross margin as a percent of net sales of 36
percent was relatively flat compared to fiscal 2013.
Selling, general and administrative (SG&A) expenses
decreased $78 million in fiscal 2014 versus fiscal 2013.
The decrease in SG&A expenses was primarily driven by
a 3 percent decrease in advertising and media expense,
a smaller contribution to the General Mills Foundation,
a decrease in incentive compensation expense and lower
pension expense compared to fiscal 2013. In fiscal 2014,
we recorded a $39 million charge related to Venezuela
currency devaluation compared to a $9 million charge in
fiscal 2013. In addition, we recorded $12 million of inte-
gration costs in fiscal 2013 related to our acquisition of
Yoki. SG&A expenses as a percent of net sales decreased
1 percent compared to fiscal 2013.
Restructuring, impairment, and other exit costs
totaled $4 million in fiscal 2014. The restructuring charge
related to a productivity and cost savings plan approved
in the fourth quarter of fiscal 2012. These restructuring
actions were completed in fiscal 2014. In fiscal 2014, we
paid $22 million in cash related to restructuring actions.
During fiscal 2014, we recorded a divestiture gain of
$66 million related to the sale of certain grain elevators
in our U.S. Retail segment. There were no divestitures in
fiscal 2013.
Interest, net for fiscal 2014 totaled $302 million, $15
million lower than fiscal 2013. The average interest rate
decreased 41 basis points, including the effect of the mix
of debt, generating a $31 million decrease in net interest.
Average interest bearing instruments increased $367
million, generating a $16 million increase in net interest.
Our consolidated effective tax rate for fiscal 2014 was
33.3 percent compared to 29.2 percent in fiscal 2013.
The 4.1 percentage point increase was primarily related
to the restructuring of our General Mills Cereals, LLC
(GMC) subsidiary during the first quarter of 2013 which
resulted in a $63 million decrease to deferred income tax
liabilities related to the tax basis of the investment in
GMC and certain distributed assets, with a correspond-
ing non-cash reduction to income taxes. During fiscal
2013, we also recorded a $34 million discrete decrease
in income tax expense and an increase in our deferred
tax assets related to certain actions taken to restore
part of the tax benefits associated with Medicare Part
D subsidies which had previously been reduced in fiscal
2010 with the enactment of the Patient Protection and
Affordable Care Act, as amended by the Health Care and
Education Reconciliation Act of 2010. Our fiscal 2013 tax
expense also includes a $12 million charge associated
with the liquidation of a corporate investment.
After-tax earnings from joint ventures for fiscal 2014
decreased to $90 million compared to $99 million in
fiscal 2013 primarily driven by increased consumer
spending at Cereal Partners Worldwide (CPW) and
unfavorable foreign currency exchange from Häagen-
Dazs Japan, Inc. (HDJ).
The change in net sales for each joint venture is set
forth in the following table:
Joint Venture Change in Net Sales
As Reported
Fiscal 2014
vs. 2013
Constant Currency Basis
Fiscal 2014
vs. 2013
CPW
HDJ
Joint Ventures
(1)%
(8)
(2)%
Flat
9%
2%
In fiscal 2014, CPW net sales declined by 1 percent-
age point due to unfavorable foreign currency exchange.
Contribution from volume growth was flat compared to
fiscal 2013. In fiscal 2014, net sales for HDJ decreased
8 percentage points from fiscal 2013 as 11 percentage
points of contributions from volume growth was offset
by 17 percentage points of net sales decline from unfa-
vorable foreign currency exchange and 2 percentage
points of net sales decline attributable to unfavorable net
price realization and mix.
Average diluted shares outstanding decreased by
20 million in fiscal 2014 from fiscal 2013 due primar-
ily to the repurchase of 36 million shares, partially
offset by the issuance of 7 million shares related to
stock compensation plans.
FISCAL 2014 CONSOLIDATED BALANCE
SHEET ANALYSIS
Cash and cash equivalents increased $126 million from
fiscal 2013.
Receivables increased $37 million from fiscal 2013 pri-
marily driven by timing of sales.
Inventories increased $14 million from fiscal 2013.
Prepaid expenses and other current assets decreased
$29 million from fiscal 2013, mainly due to a decrease in
other receivables related to the liquidation of a corporate
investment.
Land, buildings, and equipment increased $64 million
from fiscal 2013, as $664 million of capital expenditures
22 GENERA L MILLS
20 14 ANNUAL REPORT 23
were partially offset by depreciation expense of $585
million.
Goodwill and other intangible assets increased
$27 million from fiscal 2013, primarily due to foreign
exchange.
Other assets increased $302 million from fiscal 2013,
primarily related to favorable investment returns on
pension plan assets.
Accounts payable increased $188 million from fiscal
2013, primarily due to the extension of payment terms.
Notes payable and long-term debt, including current
portion, increased $817 million from fiscal 2013 primar-
ily due to $228 million of net long-term debt issuances
and $573 million of net commercial paper issuances.
The current and noncurrent portions of net deferred
income taxes liability increased $331 million from fis-
cal 2013 primarily as a result of changes in the funded
status of our defined benefit postretirement plans which
were recognized through accumulated other compre-
hensive income (AOCI).
Other current liabilities decreased $378 million from
fiscal 2013, primarily driven by dividends declared in the
fourth quarter of fiscal 2013 that were paid in the first
quarter of fiscal 2014.
Other liabilities decreased $310 million from fiscal
2013, primarily driven by a decrease in pension, postem-
ployment, and postretirement liabilities.
Redeemable interest increased $17 million from
fiscal 2013.
Retained earnings increased $1,085 million from fiscal
2013, reflecting fiscal 2014 net earnings of $1,824 mil-
lion less dividends declared of $740 million. Treasury
stock increased $1,532 million from fiscal 2013, due to
$1,775 million of share repurchases, partially offset by
$243 million related to stock-based compensation plans.
Additional paid in capital increased $65 million from
fiscal 2013, including $30 million related to the settle-
ment of an accelerated share repurchase agreement.
AOCI decreased by $245 million from fiscal 2013.
Noncontrolling interests increased $14 million in
fiscal 2014.
FISCAL 2013 CONSOLIDATED RESULTS OF
OPERATIONS
Our consolidated results for fiscal 2013 include three
quarters of operating activity from the acquisitions
of Yoki in Brazil and Food Should Taste Good in the
United States, and the assumption of the Canadian
Yoplait franchise license (Yoplait Canada), four quarters
of results for Yoplait Ireland and Parampara Foods in
India, and two quarters of results for Immaculate Baking
Company in the United States. Also included in the
first quarter of fiscal 2013 are two additional months of
results from the acquisition of Yoplait S.A.S. Collectively,
these items are referred to as “new businesses” in com-
paring our fiscal 2013 results to fiscal 2012.
Fiscal 2013 net sales grew 7 percent to $17,774 mil-
lion. In fiscal 2013, net earnings attributable to General
Mills were $1,855 million, up 18 percent from $1,567
million in fiscal 2012, and we reported diluted EPS of
$2.79 in fiscal 2013, up 19 percent from $2.35 in fiscal
2012. Fiscal 2013 results include the effects from vari-
ous discrete tax items, the impact of Venezuela currency
devaluation, restructuring charges related to our fiscal
2012 productivity and cost savings plan, integration
costs resulting from the acquisition of Yoki, and gains
from the mark-to-market valuation of certain commod-
ity positions and grain inventories. Fiscal 2012 results
include losses from the mark-to-market valuation of cer-
tain commodity positions and grain inventories, restruc-
turing charges related to our 2012 productivity and cost
savings plan, and integration costs resulting from the
acquisitions of Yoplait S.A.S. and Yoplait Marques S.A.S.
Diluted EPS excluding these items affecting comparabil-
ity totaled $2.72 in fiscal 2013, up 6 percent from $2.56
in fiscal 2012 (see the “Non-GAAP Measures” section on
page 87 for a description of our use of this measure and
our discussion of the items affecting comparability).
The components of net sales growth are shown in the
following table:
Components of Net Sales Growth
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Net sales growth
Fiscal 2013
vs. 2012
9 pts
(1) pt
(1) pt
7 pts
(a) Measured in tons based on the stated weight of our product shipments.
Net sales grew 7 percent in fiscal 2013, including 6
percentage points of growth contributed by new busi-
nesses, primarily Yoki, Yoplait S.A.S., and Yoplait Canada.
Excluding the impact of new businesses, net sales grew 2
percent, partially offset by 1 percentage point of unfavor-
able foreign currency exchange. Contributions from vol-
ume growth increased net sales by 9 percentage points,
including 8 percentage points of contribution from volume
24 GENERA L MILL S
2014 ANN UAL REPORT 25
growth due to new businesses. Unfavorable net price
realization and mix decreased net sales growth by 1 per-
centage point and unfavorable foreign currency exchange
decreased net sales growth by 1 percentage point.
Cost of sales increased $737 million in fiscal 2013
to $11,350 million. Higher volume drove a $982 million
increase in cost of sales. We also recorded a $17 mil-
lion non-recurring expense related to the assumption of
the Canadian Yoplait franchise license and a $16 mil-
lion charge related to Venezuela currency devaluation
in fiscal 2013. These increases were partially offset by
a $170 million decrease in cost of sales attributable to
product mix. In fiscal 2013, we recorded a $4 million net
decrease in cost of sales related to mark-to-market valu-
ation of certain commodity positions and grain invento-
ries as described in Note 7 to the Consolidated Financial
Statements on page 55 of this report, compared to a net
increase of $104 million in fiscal 2012.
Gross margin grew 6 percent in fiscal 2013 versus fis-
cal 2012. Gross margin as a percent of net sales of 36
percent was relatively flat compared to fiscal 2012.
SG&A expenses were up $172 million in fiscal 2013
versus fiscal 2012. The increase in SG&A expenses
was primarily driven by the addition of new busi-
nesses and an increase in pension expense. In addition,
we recorded a $9 million foreign exchange loss result-
ing from the remeasurement of assets and liabilities of
our Venezuelan subsidiary following the devaluation of
the bolivar in fiscal 2013. Excluding these items, SG&A
expenses decreased compared to fiscal 2012, including
a 2 percent decrease in advertising and media expense.
SG&A expenses as a percent of net sales were flat com-
pared to fiscal 2012.
Restructuring, impairment, and other exit costs
totaled $20 million in fiscal 2013. In fiscal 2013, we
recorded a $19 million restructuring charge related to
a productivity and cost savings plan approved in the
fourth quarter of fiscal 2012, consisting of $11 million
of employee severance expense and other exit costs of
$8 million. All of our operating segments were affected
by these actions including $16 million related to our
International segment, $2 million related to our U.S.
Retail segment, and $1 million related to our Convenience
Stores and Foodservice segment. In addition, we recorded
$1 million of charges associated with other previously
announced restructuring actions. In fiscal 2013, we paid
$80 million in cash related to restructuring actions. In
fiscal 2012, we recorded a $102 million restructuring
charge related to the productivity and cost savings plan
approved in the fourth quarter of fiscal 2012.
Interest, net for fiscal 2013 totaled $317 million, $35
million lower than fiscal 2012. The average interest rate
decreased 60 basis points, including the effect of the mix
of debt, generating a $43 million decrease in net inter-
est. Average interest bearing instruments increased $167
million, primarily from an increase in incremental bor-
rowing to fund the acquisition of Yoki, generating an $8
million increase in net interest.
Our consolidated effective tax rate for fiscal 2013 was
29.2 percent compared to 32.1 percent in fiscal 2012.
The 2.9 percentage point decrease was primarily related
to the restructuring of our GMC subsidiary during the
first quarter of fiscal 2013 which resulted in a $63 mil-
lion decrease to deferred income tax liabilities related
to the tax basis of the investment in GMC and certain
distributed assets, with a corresponding discrete non-
cash reduction to income taxes. During fiscal 2013, we
also recorded a $34 million discrete decrease in income
tax expense and an increase in our deferred tax assets
related to certain actions taken to restore part of the
tax benefits associated with Medicare Part D subsidies
which had previously been reduced in fiscal 2010 with
the enactment of the Patient Protection and Affordable
Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010. Our fiscal 2013 tax expense
also includes a $12 million charge associated with the
liquidation of a corporate investment.
After-tax earnings from joint ventures for fiscal 2013
increased to $99 million compared to $88 million in fis-
cal 2012 primarily due to higher tax rates in fiscal 2012
as a result of discrete tax items and higher operating
profit offset by unfavorable foreign currency exchange in
fiscal 2013.
The change in net sales for each joint venture is set
forth in the following table:
Joint Venture Change in Net Sales
As Reported
Fiscal 2013
vs. 2012
Constant Currency Basis
Fiscal 2013
vs. 2012
CPW
HDJ
Joint Ventures
(1)%
(2)
(1)%
2%
5
3%
In fiscal 2013, CPW net sales declined by 1 percentage
point as 2 percentage points of net sales growth from
favorable net price realization and mix were offset by 3
24 GENER AL MI LLS
20 14 ANNUAL REPORT 25
percentage points of net sales decline from unfavorable
foreign currency exchange. Contribution from volume
growth was flat compared to fiscal 2012. In fiscal 2013,
net sales for HDJ decreased 2 percentage points from fis-
cal 2012 as 6 percentage points of net sales growth from
volume contribution was offset by 7 percentage points
of net sales decline from unfavorable foreign currency
exchange and 1 percentage point of net sales decline
attributable to unfavorable net price realization and mix.
Average diluted shares outstanding decreased by 1
million in fiscal 2013 from fiscal 2012, due primarily to
the repurchase of 24 million shares.
RESULTS OF SEGMENT OPERATIONS
Our businesses are organized into three operating seg-
ments: U.S. Retail; International; and Convenience Stores
and Foodservice.
The following tables provide the dollar amount and percentage of net sales and operating profit from each seg-
ment for fiscal years 2014, 2013, and 2012:
Net Sales
In Millions
U.S. Retail
International
Convenience Stores and Foodservice
Total
Segment Operating Profit
U.S. Retail
International
Convenience Stores and Foodservice
Total
2014
Fiscal Year
2013
2012
Dollars
Percent
of Total
Dollars
Percent
of Total
Dollars
Percent
of Total
$10,604.9
59%
$10,614.9
60%
$10,480.2
5,385.9
1,918.8
30
11
5,200.2
1,959.0
29
11
4,194.3
1,983.4
63%
25
12
$17,909.6
100%
$17,774.1
100%
$16,657.9
100%
$2,311.5
75%
$2,392.9
472.9
307.3
15
10
490.2
314.6
75%
15
10
$2,295.3
429.6
286.7
76%
14
10
$3,091.7
100%
$3,197.7
100%
$3,011.6
100%
Segment operating profit excludes unallocated corpo-
rate items, gain on divestitures, and restructuring, impair-
ment, and other exit costs because these items affecting
operating profit are centrally managed at the corporate
level and are excluded from the measure of segment
profitability reviewed by our executive management.
from volume growth and net price realization and mix
were flat compared to fiscal 2013.
In fiscal 2013, net sales for this segment totaled $10.6
billion, up 1 percent from fiscal 2012 due to contributions
from volume growth. Net price realization and mix was
flat compared to fiscal 2012.
U.S. Retail Segment Our U.S. Retail segment reflects
business with a wide variety of grocery stores, mass
merchandisers, membership stores, natural food chains,
and drug, dollar and discount chains operating through-
out the United States. Our product categories in this
business segment include ready-to-eat cereals, refriger-
ated yogurt, soup, meal kits, shelf stable and frozen veg-
etables, refrigerated and frozen dough products, dessert
and baking mixes, frozen pizza and pizza snacks, grain,
fruit and savory snacks, and a wide variety of organic
products including granola bars, cereal, and soup.
In fiscal 2014, net sales for our U.S. Retail segment were
$10.6 billion, flat compared to fiscal 2013. Contributions
Components of U.S. Retail Net Sales Growth
Fiscal 2014
vs. 2013
Fiscal 2013
vs. 2012
Contributions from volume growth (a)
Net price realization and mix
Net sales growth
Flat
Flat
Flat
1pt
Flat
1pt
(a) Measured in tons based on the stated weight of our product shipments.
26 GENERA L MILLS
2014 ANNUAL REPORT 27
Net sales for our U.S. retail divisions are shown in the
tables below:
U.S. Retail Net Sales by Division
In Millions
Big G
Fiscal Year
2014
2013
2012
$ 2,345.4
$ 2,340.8 $ 2,387.9
Baking Products
1,831.7
1,845.7
1,792.8
Snacks
Frozen Foods
Meals
Yoplait
1,823.8
1,717.2
1,578.6
1,525.5
1,549.6
1,601.0
1,418.8
1,481.0
1,452.8
1,311.9
1,352.6
1,418.5
Small Planet Foods and other
347.8
328.0
248.6
Total
$10,604.9
$10,614.9 $10,480.2
U.S. Retail Net Sales Percentage
Change by Division
Big G
Baking Products
Snacks
Frozen Foods
Meals
Yoplait
Small Planet Foods
Total
Fiscal 2014
vs. 2013
Fiscal 2013
vs. 2012
Flat
(1)%
6
(2)
(4)
(3)
6
Flat
(2)%
3
9
(3)
2
(5)
35
1%
Fiscal 2014 U.S. Retail segment net sales were flat
compared to fiscal 2013 as net sales growth in Snacks
and Small Planet Foods was offset by declines in Meals,
Yoplait, Frozen Foods, and Baking Products divisions.
Big G division net sales growth was flat compared to fis-
cal 2013.
The 1 percentage point increase in the fiscal 2013 U.S.
Retail segment net sales was driven by the Snacks, Small
Planet Foods, Baking Products, and Meals divisions, par-
tially offset by declines in the Yoplait, Frozen Foods, and
Big G divisions.
Segment operating profit of $2.3 billion in fiscal 2014
declined $81 million, or 3 percent, from fiscal 2013. The
decrease reflects higher trade spending, partially offset by
a 1 percent reduction in advertising and media expense.
Segment operating profit of $2.4 billion in fiscal 2013
improved $98 million, or 4 percent, from fiscal 2012. The
increase was primarily driven by a 5 percent reduction
in advertising and media expense, favorable net price
realization and mix, and higher volume, partially offset
by an increase in input costs.
International Segment Our International segment con-
sists of retail and foodservice businesses outside of the
United States. Our product categories include ready-to-
eat cereals, shelf stable and frozen vegetables, meal kits,
refrigerated and frozen dough products, dessert and bak-
ing mixes, frozen pizza snacks, refrigerated yogurt, grain
and fruit snacks, and super-premium ice cream and fro-
zen desserts. We also sell super-premium ice cream and
frozen desserts directly to consumers through owned
retail shops. Our International segment also includes
products manufactured in the United States for export,
mainly to Caribbean and Latin American markets, as
well as products we manufacture for sale to our inter-
national joint ventures. Revenues from export activities
and franchise fees are reported in the region or country
where the end customer is located.
As part of a long-term plan to conform the fiscal year
ends of all our operations, we have changed the report-
ing period of certain countries within our International
segment from an April fiscal year end to a May fiscal
year end to match our fiscal calendar. Accordingly, in
the year of change, our results include 13 months of
results from the affected operations compared to 12
months in previous and future fiscal years. In fiscal 2013,
we changed the reporting period for our operations in
Europe and Australia. In fiscal 2012, we changed the
reporting period for our operations in China. The impact
of these changes was not material to the fiscal 2013 or
fiscal 2012 International segment results of operations.
Net sales for our International segment were up 4 per-
cent in fiscal 2014 compared to fiscal 2013, to $5,386
million, including 5 percentage points of growth from
new businesses, primarily Yoki and Yoplait Canada. The
growth in fiscal 2014 included 5 percentage points of
contributions from volume growth, including 7 percent-
age points resulting from new businesses, and 3 per-
centage points of favorable net price realization and mix,
partially offset by 4 percentage points of unfavorable for-
eign currency exchange.
Net sales totaled $5,200 million in fiscal 2013, up 24
percent from $4,194 million in fiscal 2012. The growth in
fiscal 2013 was driven by 21 percentage points from new
businesses, primarily Yoki, Yoplait S.A.S., and Yoplait
Canada. Excluding the impact of new businesses, net
sales growth was up 3 percent. Volume contributed 34
percentage points of net sales growth, including 32 per-
centage points resulting from new businesses, partially
offset by 6 percentage points of unfavorable net price
realization and mix and 4 percentage points of unfavor-
able foreign currency exchange.
20 14 ANNUAL REPORT 27
26 GENE RAL MI LLS
Components of International Net Sales Growth
Fiscal 2014
vs. 2013
Fiscal 2013
vs. 2012
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Net sales growth
5 pts
3 pts
(4) pts
4 pts
34 pts
(6) pts
(4) pt
24 pts
(a) Measured in tons based on the stated weight of our product shipments.
Net sales for our International segment by geographic
region are shown in the following tables:
International Net Sales by Geographic Region
In Millions
Europe (a)
Canada
Asia/Pacific (b)
Latin America
Total
Fiscal Year
2014
2013
2012
$2,188.8
$2,214.6 $1,988.5
1,195.3
1,210.5
981.8
899.1
990.9
810.1
1,020.0
876.0
404.8
$5,385.9
$5,200.2 $4,194.3
(a) Fiscal 2013 net sales for the Europe region include an additional month
of results.
(b) Fiscal 2012 net sales for the Asia/Pacific region include an additional
month of results.
International Change in Net Sales by Geographic Region
Percentage Change in
Net Sales as Reported
Percentage Change in
Net Sales on Constant
Currency Basis (a)
Fiscal 2014
vs. 2013
Fiscal 2013
vs. 2012
Fiscal 2014 Fiscal 2013
vs. 2012
vs. 2013
Europe (b)
Canada
Asia/Pacific
Latin America
Total (b)
(1)%
11%
(4)%
(1)
9
16
4%
22
11
116
24%
5
9
38
8%
15%
22
11
139
28%
(a) See the “Non-GAAP Measures” section on page 87 for our use of this
measure.
(b) Fiscal 2013 percentage change in net sales as reported for the Europe
region includes 4 percentage points of growth due to an additional month
of results. The impact to fiscal 2013 net sales growth for the International
segment was not material.
The 4 percentage point increase in the International
segment fiscal 2014 net sales was driven by growth in
the Latin America and Asia/Pacific regions, partially off-
set by declines in the Europe and Canada regions. On a
constant currency basis, International segment net sales
grew 8 percent, with 38 percent growth in the Latin
America region, 9 percent growth in the Asia/Pacific
region, and 5 percent growth in the Canada region, par-
tially offset by 4 percent decline in the Europe region.
The 24 percentage point increase in the International
segment fiscal 2013 net sales was driven by growth
across all regions. On a constant currency basis,
International segment net sales grew 28 percent, with
139 percent growth in the Latin America region, 15 per-
cent growth in the Europe region, 22 percent growth in
the Canada region, and 11 percent growth in the Asia/
Pacific region.
Segment operating profit for fiscal 2014 declined
4 percent to $473 million from $490 million in fiscal
2013, primarily driven by unfavorable foreign currency
exchange including a $62 million charge related to
Venezuela currency devaluation in fiscal 2014 and higher
input costs, partially offset by volume growth, favorable
net price realization and mix, and an additional quar-
ter of results from the Yoki acquisition. In addition we
recorded a $17 million non-recurring expense related to
the assumption of the Canadian Yoplait franchise license
and a $25 million charge related to Venezuela currency
devaluation in fiscal 2013. International segment operat-
ing profit excluding the impact of Venezuela currency
devaluation was $535 million in fiscal 2014, an increase
of 4 percent compared to $515 million in fiscal 2013 (see
the “Non-GAAP Measure” section on page 87 for our use
of this measure).
Segment operating profit for fiscal 2013 grew 14 per-
cent to $490 million from $430 million in fiscal 2012,
primarily driven by volume growth, the Yoki acquisition,
and a full year of activity from Yoplait S.A.S., partially
offset by unfavorable foreign currency exchange, includ-
ing a $25 million charge related to Venezuela currency
devaluation. International segment operating profit
excluding the impact of Venezuela currency devaluation
was $515 million in fiscal 2013, a 20 percent increase
compared to $430 million in fiscal 2012 (see the “Non-
GAAP Measure” section on page 87 for our use of this
measure).
Venezuela is a highly inflationary economy and as
such, we remeasure the value of the assets and liabilities
of our Venezuelan subsidiary based on the exchange rate
at which we expect to remit dividends in U.S. dollars.
In February 2013, the Venezuelan government devalued
the bolivar by resetting the official exchange rate. The
effect of the devaluation in fiscal 2013 was a $25 mil-
lion foreign exchange loss in segment operating profit
resulting from the remeasurement of assets and liabili-
ties of our Venezuelan subsidiary. On February 19, 2014,
28 GENERAL MILL S
2014 ANN UAL REPORT 29
the Venezuelan government established a new foreign
exchange market mechanism (“SICAD 2”) and has indi-
cated that this will be the market through which U.S.
dollars will be obtained for the remittance of dividends.
This market has significantly higher foreign exchange
rates than those available through the other foreign
exchange mechanisms. In the fourth quarter of fiscal
2014, we recorded a $62 million foreign exchange loss
in the International segment operating profit resulting
from the remeasurement of assets and liabilities of our
Venezuelan subsidiary at the SICAD 2 rate of 50.0 boli-
vars per U.S. dollar. We have been able to access U.S.
dollars through the SICAD 2 market. Our Venezuela
operations represent less than 1 percent of our consoli-
dated assets, liabilities, net sales, and segment operating
profit. As of May 25, 2014, we had $3 million of non-U.S.
dollar cash balances in Venezuela.
Convenience Stores and Foodservice Segment In
the first quarter of fiscal 2014, we changed the name
of our Bakeries and Foodservice operating segment to
Convenience Stores and Foodservice. The businesses in
this segment were unchanged. Our major product cat-
egories are ready-to-eat cereals, snacks, refrigerated
yogurt, unbaked and fully baked frozen dough prod-
ucts, baking mixes, and flour. Many products we sell
are branded to the consumer and nearly all are branded
to our customers. We sell to distributors and opera-
tors in many customer channels including foodservice,
convenience stores, vending, and supermarket bakeries.
Substantially all of this segment’s operations are located
in the United States.
For fiscal 2014, net sales for our Convenience Stores
and Foodservice segment decreased 2 percent to $1,919
million primarily driven by an 1 percentage point
decrease in contributions from volume growth and 1
percentage point of unfavorable net price realization and
mix. Volume declines were driven by the loss of busi-
ness with a major customer as well as the impact of
inclement weather, as fiscal 2014 had a sharp increase
in weather-related events such as school and business
closings. Unfavorable net price realization and mix were
driven by commodity index priced items.
For fiscal 2013, net sales for our Convenience Stores
and Foodservice segment decreased 1 percent to $1,959
million due to a 1 percentage point decrease in contribu-
tions from volume growth. Net price realization and mix
was flat compared to fiscal 2012 as gains from favorable
product mix were offset by declines in commodity index
priced items.
Components of Convenience Stores and Foodservice Net
Sales Growth
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Net sales growth
Fiscal 2014
vs. 2013
Fiscal 2013
vs. 2012
(1) pt
(1) pt
NM
(2) pts
(1) pt
Flat
NM
(1) pt
(a) Measured in tons based on the stated weight of our product shipments.
Net sales for our Convenience Stores and Foodservice
segment are shown in the following table:
Convenience Stores and Foodservice Net Sales
In Millions
Total
2014
2013
2012
$ 1,918.8
$ 1,959.0
$ 1,983.4
Fiscal Year
In fiscal 2014, segment operating profit was $307 mil-
lion, down 2 percent from $315 million in fiscal 2013. The
decrease was primarily driven by volume declines, unfa-
vorable net price realization, and investments to protect
and grow the business.
In fiscal 2013, segment operating profit was $315
million, up 10 percent from $287 million in fiscal 2012.
The increase was primarily driven by favorable product
mix, lower manufacturing and input costs, and reduced
administrative costs.
Unallocated Corporate Items Unallocated corporate items
include corporate overhead expenses, variances to planned
domestic employee benefits and incentives, contributions
to the General Mills Foundation, and other items that
are not part of our measurement of segment operating
performance. This includes gains and losses from mark-
to-market valuation of certain commodity positions until
passed back to our operating segments in accordance
with our policy as discussed in Note 2 of the Consolidated
Financial Statements on page 48 of this report.
For fiscal 2014, unallocated corporate expense totaled
$196 million compared to $326 million last year. In fiscal
2014 we recorded a $49 million net decrease in expense
related to mark-to-market valuation of certain commod-
ity positions and grain inventories, compared to a $4
million net decrease in expense last year. Compensation
28 GENERAL MI LL S
20 14 ANNUAL REPORT 29
and benefit expenses decreased $59 million and the con-
tribution to the General Mills Foundation decreased in
fiscal 2014 compared to fiscal 2013. In fiscal 2013, we
also recorded $12 million of integration costs related to
the acquisition of Yoki.
Unallocated corporate expense totaled $326 million
in fiscal 2013 compared to $348 million in fiscal 2012.
In fiscal 2013, we recorded a $4 million net decrease in
expense related to mark-to-market valuation of certain
commodity positions and grain inventories, compared to
a $104 million net increase in expense in fiscal 2012.
Pension expense increased $40 million in fiscal 2013
compared to fiscal 2012. In fiscal 2013, we also recorded
$12 million of integration costs related to the acquisition
of Yoki.
IMPACT OF INFLATION
We have experienced significant input cost volatility for
several years. Our gross margin performance in fiscal
2014 reflects the impact of 4 percent input cost inflation,
primarily on commodities inputs. We expect input cost
inflation of 3 percent in fiscal 2015. We attempt to mini-
mize the effects of inflation through HMM, planning,
and operating practices. Our risk management practices
are discussed on page 40 of this report.
The Patient Protection and Affordable Care Act,
as amended by the Health Care and Education
Reconciliation Act of 2010 (collectively, the Act) was
signed into law in March 2010. The Act codifies health
care reforms with staggered effective dates from 2010
to 2018. Many provisions in the Act require the issu-
ance of additional guidance from various government
agencies. Because the Act does not take effect fully until
future years, the Act did not have a material impact
on our fiscal 2014, 2013, or 2012 results of operations.
Estimates of the future impacts of several of the Act’s
provisions are incorporated into our postretirement
benefit liability. The Act may also impact our future
health care benefit related expenses. Given the complex-
ity of the Act, the extended time period over which the
reforms will be implemented, and the unknown impact
of future regulatory guidance, the full impact of the Act
on future periods will not be known until those regula-
tions are adopted.
LIQUIDITY
The primary source of our liquidity is cash flow from
operations. Over the most recent three-year period, our
operations have generated $7.9 billion in cash. A sub-
stantial portion of this operating cash flow has been
returned to stockholders through share repurchases and
dividends. We also use cash from operations to fund
our capital expenditures and acquisitions. We typically
use a combination of cash, notes payable, and long-term
debt to finance significant acquisitions and major capital
expansions.
As of May 25, 2014, we had $840 million of cash and
cash equivalents held in foreign jurisdictions which will
be used to fund foreign operations and acquisitions.
There is currently no need to repatriate these funds in
order to meet domestic funding obligations or scheduled
cash distributions. If we choose to repatriate cash held
in foreign jurisdictions, we intend to do so only in a tax-
neutral manner.
Cash Flows from Operations
In Millions
2014
2013
2012
Fiscal Year
Net earnings, including
earnings attributable
to redeemable and
noncontrolling interests
$ 1,861.3 $ 1,892.5 $ 1,589.1
Depreciation and amortization
585.4
588.0
541.5
After-tax earnings
from joint ventures
(89.6)
(98.8)
(88.2)
Distributions of earnings
from joint ventures
90.5
115.7
68.0
Stock-based compensation
108.5
100.4
108.3
Deferred income taxes
172.5
81.8
149.4
Tax benefit on exercised options
(69.3)
(103.0)
(63.1)
Pension and other postretirement
benefit plan contributions
(49.7)
(223.2)
(222.2)
Pension and other postretirement
benefit plan costs
Divestiture (gain)
Restructuring, impairment,
124.1
131.2
(65.5)
—
77.8
—
and other exit costs
(18.8)
(60.2)
97.8
Changes in current assets
and liabilities, excluding the
effects of acquisitions
(32.2)
471.1
243.8
Other, net
Net cash provided by
(76.2)
30.5
(95.0)
operating activities
$ 2,541.0 $ 2,926.0 $ 2,407.2
30 GENERAL MIL LS
2014 ANNUAL REPORT 31
In fiscal 2014, our operations generated $2.5 billion of
cash compared to $2.9 billion in fiscal 2013. The $385
million decrease is primarily due a $503 million change
in current assets and liabilities. The change in current
assets and liabilities is primarily driven by a $403 million
change in other current liabilities largely due to changes
in trade promotion and income tax accruals, and a $107
million change in inventory. In addition, in fiscal 2013
we made a $200 million voluntary contribution to our
principal domestic pension plans.
We strive to grow core working capital at or below
the rate of growth in our net sales. For fiscal 2014, core
working capital decreased 9 percent, compared to net
sales growth of 1 percent, primarily due to an increase
in accounts payable. In fiscal 2013, core working capi-
tal decreased 5 percent, compared to net sales growth
of 7 percent, and in fiscal 2012, core working capital
decreased 7 percent, compared to net sales growth of
12 percent.
In fiscal 2013, our operations generated $2.9 billion
of cash compared to $2.4 billion in fiscal 2012. The
$519 million increase is primarily due to a $303 million
increase in net earnings and $227 million from changes
in current assets and liabilities. Other current liabili-
ties accounted for $336 million of the increase in cur-
rent assets and liabilities due to trade and tax accruals,
and accounts payable accounted for $252 million of the
increase partly as the result of the extension of payment
terms. These were partially offset by a $214 million
change in prepaid expenses and other current assets
primarily due to changes in derivative receivables and
changes in other receivables related to the liquidation
of a corporate investment, and a $126 million change
in inventory largely driven by a lower level of inventory
reduction activity compared to fiscal 2012. In both fiscal
2013 and fiscal 2012, we made a $200 million voluntary
contribution to our principal domestic pension plans. In
addition, we paid $80 million in cash related to restruc-
turing actions in fiscal 2013.
Cash Flows from Investing Activities
In Millions
2014
2013
2012
Fiscal Year
Purchases of land, buildings,
and equipment
Acquisitions,
$ (663.5) $ (613.9) $ (675.9)
net of cash acquired
—
(898.0) (1,050.1)
Investments in affiliates, net
(54.9)
(40.4)
(22.2)
Proceeds from disposal of land,
buildings, and equipment
6.6
24.2
Proceeds from divestiture
Exchangeable note
Other, net
Net cash used by
121.6
29.3
(0.9)
—
16.2
(3.5)
2.2
—
(131.6)
6.8
investing activities
$ (561.8) $(1,515.4) $(1,870.8)
In fiscal 2014, cash used by investing activities
decreased by $954 million from fiscal 2013. We invested
$664 million in land, buildings, and equipment in fis-
cal 2014, $50 million more than the same period last
year. We made $55 million of investments in affiliates,
primarily CPW, in fiscal 2014. In the fourth quarter of
fiscal 2014 we sold certain grain elevators for approxi-
mately $122 million in cash, subject to a working capi-
tal adjustment. In addition we received $29 million in
payments from Sodiaal International (Sodiaal) in fiscal
2014 against the $132 million exchangeable note we pur-
chased in 2012.
In fiscal 2013, cash used by investing activities
decreased by $355 million from fiscal 2012. In fiscal
2013, we acquired Yoki, a privately held food company
headquartered in Sao Bernardo do Campo, Brazil, for an
aggregate purchase price of $940 million, comprised of
$820 million of cash, net of $31 million of cash acquired,
and $120 million of non-cash consideration for debt
assumed. We invested $614 million in land, buildings,
and equipment in fiscal 2013, $62 million less than the
same period in fiscal 2012. In addition, we received $16
million in payments from Sodiaal in fiscal 2013 against
the $132 million exchangeable note.
We expect capital expenditures to be approximately
$730 million in fiscal 2015. These expenditures will sup-
port initiatives that are expected to fuel International
growth, increase manufacturing capacity for Snacks, and
continue HMM initiatives throughout the supply chain.
30 GENER AL MI LLS
20 14 ANNUAL REPORT 31
unrelated financial institution for shares which were
settled in the first quarter of fiscal 2014. During fiscal
2012, we repurchased 8 million shares of our common
stock for an aggregate purchase price of $313 million.
Dividends paid in fiscal 2014 totaled $983 million, or
$1.55 per share, a 17 percent per share increase from fis-
cal 2013. Dividends paid in fiscal 2013 totaled $868 mil-
lion, or $1.32 per share, an 8 percent per share increase
from fiscal 2012 dividends of $1.22 per share. On March
11, 2014, our Board of Directors approved a dividend
increase, effective with the May 1, 2014 payment, to an
annual rate of $1.64 per share, a 6 percent increase from
the rate paid in fiscal 2014.
Selected Cash Flows from Joint Ventures
Selected cash flows from our joint ventures are set
forth in the following table:
Inflow (Outflow), in Millions
2014
2013
2012
Advances to joint ventures, net
$ (54.9)
$ (36.7)
$ (22.2)
Dividends received
90.5
115.7
68.0
Fiscal Year
CAPITAL RESOURCES
Total capital consisted of the following:
In Millions
Notes payable
May 25, 2014
May 26, 2013
$ 1,111.7 $
599.7
Current portion of long-term debt
1,250.6
1,443.3
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
6,423.5
5,926.1
8,785.8
7,969.1
984.1
470.6
967.5
456.3
6,534.8
6,672.2
$16,775.3
$16,065.1
Cash Flows from Financing Activities
Fiscal Year
In Millions
2014
2013
2012
Change in notes payable
$ 572.9 $
(44.5) $ 227.9
Issuance of long-term debt
1,673.0
1,001.1
1,390.5
Payment of long-term debt
(1,444.8)
(542.3)
(1,450.1)
Proceeds from common stock
issued on exercised options
108.1
300.8
Tax benefit on exercised options
69.3
103.0
233.5
63.1
Purchases of common
stock for treasury
(1,745.3) (1,044.9)
(313.0)
Dividends paid
(983.3)
(867.6)
(800.1)
Addition of noncontrolling interest
17.6
—
—
Distributions to noncontrolling
and redeemable interest holders (77.4)
(39.2)
(5.2)
Other, net
Net cash used by
(14.2)
(6.6)
(13.2)
financing activities
$ (1,824.1) $ (1,140.2) $ (666.6)
Net cash used by financing activities increased by
$684 million in fiscal 2014. We had $387 million more
net debt issuances in fiscal 2014 than the same period
a year ago. For more information on our debt issuances,
please refer to Note 8 to the Consolidated Financial
Statements on page 63 of this report.
During fiscal 2014, we received $108 million in pro-
ceeds from common stock issued on exercised options
compared to $301 million in fiscal 2013, a decrease of
$193 million. During fiscal 2012, we received $234 mil-
lion in proceeds from common stock issued on exercised
options.
In June 2010, our Board of Directors authorized the
repurchase of up to 100 million shares of our common
stock. The Board terminated this authorization in May
2014 and approved a new authorization for the repur-
chase of up to 100 million shares of our common stock.
Purchases under the authorization can be made in the
open market or in privately negotiated transactions,
including the use of call options and other derivative
instruments, Rule 10b5-1 trading plans, and accelerated
repurchase programs. The authorization has no specified
termination date.
During fiscal 2014, we paid $1,745 million to repur-
chase 36 million shares of our common stock. During
fiscal 2013, we repurchased 24 million shares of our
common stock for an aggregate purchase price of $1,015
million, including 6 million shares with a fair value of
$270 million purchased as part of an accelerated share
repurchase (ASR) agreement. Under the terms of this
agreement, we also paid an additional $30 million to the
32 GENERAL MILL S
2014 ANNUAL REPORT 33
The following table details the fee-paid committed and
uncommitted credit lines we had available as of May 25,
2014:
In Billions
Credit facility expiring:
April 2017
May 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and
Facility
Amount
Borrowed
Amount
$1.7
1.0
2.7
0.4
$ —
—
—
0.1
uncommitted credit facilities
$3.1
$0.1
To ensure availability of funds, we maintain bank
credit lines sufficient to cover our outstanding short-
term borrowings. Commercial paper is a continuing
source of short-term financing. We have commercial
paper programs available to us in the United States and
Europe. We also have uncommitted and asset-backed
credit lines that support our foreign operations. The
credit facilities contain several covenants, including a
requirement to maintain a fixed charge coverage ratio of
at least 2.5 times.
Certain of our long-term debt agreements, our credit
facilities, and our noncontrolling interests contain
restrictive covenants. As of May 25, 2014, we were in
compliance with all of these covenants.
We have $1,251 million of long-term debt maturing
in the next 12 months that is classified as current. We
believe that cash flows from operations, together with
available short- and long-term debt financing, will be
adequate to meet our liquidity and capital needs for at
least the next 12 months.
As of May 25, 2014, our total debt, including the
impact of derivative instruments designated as hedges,
was 71 percent in fixed-rate and 29 percent in floating-
rate instruments, compared to 73 percent in fixed-rate
and 27 percent in floating-rate instruments on May
26, 2013. The change in the fixed-rate and floating-rate
percentages was driven by increased commercial paper
issuances.
Growth in return on average total capital is one of
our key performance measures (see the “Non-GAAP
Measures” section on page 87 for our discussion of this
measure, which is not defined by GAAP). Return on
average total capital decreased from 12.0 percent in fis-
cal 2013 to 11.6 percent in fiscal 2014, as fiscal 2014 earn-
ings did not grow in line with our capital base. We also
believe that our fixed charge coverage ratio and the ratio
of operating cash flow to debt are important measures of
our financial strength. Our fixed charge coverage ratio in
fiscal 2014 was 8.04 compared to 7.62 in fiscal 2013. The
measure increased from fiscal 2013 as earnings before
income taxes and after-tax earnings from joint ventures
increased by $120 million and fixed charges decreased
by $10 million, driven primarily by lower interest. Our
operating cash flow to debt ratio decreased 7.8 percent-
age points to 28.9 percent in fiscal 2014, driven by an
increase in total debt.
We have a 51 percent controlling interest in Yoplait
S.A.S. and a 50 percent interest in Yoplait Marques
S.A.S. and Liberté Marques S.a.r.l. Sodiaal holds the
remaining interests in each of these entities. We con-
solidate these entities into our consolidated financial
statements. We record Sodiaal’s 50 percent interest in
Yoplait Marques S.A.S. and Liberté Marques S.a.r.l. as
noncontrolling interests, and their 49 percent inter-
est in Yoplait S.A.S. as a redeemable interest on our
Consolidated Balance Sheets. These euro- and Canadian
dollar-denominated interests are reported in U.S. dollars
on our Consolidated Balance Sheets. Sodiaal has the
ability to put a limited portion of its redeemable inter-
est to us at fair value once per year up to a maximum
remaining term of 6 years. As of May 25, 2014, the
redemption value of the redeemable interest was $984
million which approximates its fair value.
During the first quarter of fiscal 2013, in conjunction
with the consent of the Class A investor, we restructured
General Mills Cereals, LLC (GMC) through the distribu-
tion of its manufacturing assets, stock, inventory, cash
and certain intellectual property to a wholly owned sub-
sidiary. GMC retained the remaining intellectual prop-
erty. Immediately following the restructuring, the Class
A Interests of GMC were sold by the then current holder
to another unrelated third-party investor.
The third-party holder of the GMC Class A Interests
receives quarterly preferred distributions from available
net income based on the application of a floating pre-
ferred return rate, currently equal to the sum of three-
month LIBOR plus 110 basis points, to the holder’s capital
account balance established in the most recent mark-
to-market valuation (currently $252 million). The pre-
ferred return rate is adjusted every three years through a
negotiated agreement with the Class A Interest holder or
through a remarketing auction.
The holder of the Class A Interests may initiate a liq-
uidation of GMC under certain circumstances, including,
32 GE NERA L MILLS
20 14 ANNUAL REPORT 33
without limitation, the bankruptcy of GMC or its sub-
sidiaries, GMC’s failure to deliver the preferred distribu-
tions on the Class A Interests, GMC’s failure to comply
with portfolio requirements, breaches of certain cove-
nants, 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. In the
event of a liquidation of GMC, each member of GMC will
receive the amount of its then current capital account
balance. We may avoid liquidation by exercising our
option to purchase the Class A Interests.
We may exercise our option to purchase the Class A
Interests for consideration equal to the then current
capital account value, plus any unpaid preferred return
and the prescribed make-whole amount. If we purchase
these interests, any change in the unrelated third-party
investor’s capital account from its original value will be
charged directly to retained earnings and will increase
or decrease the net earnings used to calculate EPS in
that period.
OFF-BALANCE SHEET ARRANGEMENTS AND
CONTRACTUAL OBLIGATIONS
As of May 25, 2014, we have issued guarantees and com-
fort letters of $341 million for the debt and other obliga-
tions of consolidated subsidiaries, and guarantees and
comfort letters of $284 million for the debt and other
obligations of non-consolidated affiliates, mainly CPW.
In addition, off-balance sheet arrangements are gener-
ally limited to the future payments under non-cancelable
operating leases, which totaled $388 million as of May
25, 2014.
As of May 25, 2014, we had invested in five variable
interest entities (VIEs). None of our VIEs are material to
our results of operations, financial condition, or liquidity
as of and for the year ended May 25, 2014.
Our defined benefit plans in the United States are
subject to the requirements of the Pension Protection
Act (PPA). The PPA revised the basis and methodology
for determining defined benefit plan minimum funding
requirements as well as maximum contributions to and
benefits paid from tax-qualified plans. The PPA may ulti-
mately require us to make additional contributions to
our domestic plans. We do not expect to be required to
make any contributions in fiscal 2015.
The following table summarizes our future estimated
cash payments under existing contractual obligations,
including payments due by period:
In Millions
Total
Payments Due by Fiscal Year
2020 and
2015 2016 - 17 2018 - 19 Thereafter
Long-term debt (a)
$ 7,681.0 $1,249.5 $2,000.0 $1,250.0 $3,181.5
Accrued interest
92.5
92.5
—
—
—
Operating leases (b)
388.5
93.9 130.2
76.1
88.3
Capital leases
1.0
Purchase obligations (c) 2,830.4 2,203.6 446.8
1.5
2.5
—
—
95.2
84.8
Total contractual
obligations
10,994.9 3,641.0 2,578.0 1,421.3 3,354.6
Other long-term
obligations (d)
1,520.9
—
—
—
—
Total long-term
obligations
$12,515.8 $3,641.0 $2,578.0 $1,421.3 $3,354.6
(a) Amounts represent the expected cash payments of our long-term debt
and do not include $2 million for capital leases or $9 million for net
unamortized bond premiums and discounts and fair value adjustments.
(b) Operating leases represents the minimum rental commitments under
non-cancelable operating leases.
(c) The majority of the purchase obligations represent commitments for raw
material and packaging to be utilized in the normal course of business
and for consumer marketing spending commitments that support our
brands. For purposes of this table, arrangements are considered purchase
obligations if a contract specifies all significant terms, including fixed or
minimum quantities to be purchased, a pricing structure, and approxi-
mate timing of the transaction. Most arrangements are cancelable with-
out a significant penalty and with short notice (usually 30 days). Any
amounts reflected on the Consolidated Balance Sheets as accounts pay-
able and accrued liabilities are excluded from the table above.
(d) The fair value of our foreign exchange, equity, commodity, and grain
derivative contracts with a payable position to the counterparty was $28
million as of May 25, 2014, based on fair market values as of that date.
Future changes in market values will impact the amount of cash ulti-
mately paid or received to settle those instruments in the future. Other
long-term obligations mainly consist of liabilities for accrued compensa-
tion and benefits, including the underfunded status of certain of our
defined benefit pension, other postretirement benefit, and postemploy-
ment plans, and miscellaneous liabilities. We expect to pay $21 million
of benefits from our unfunded postemployment benefit plans and $14
million of deferred compensation in fiscal 2015. We are unable to reliably
estimate the amount of these payments beyond fiscal 2015. As of May 25,
2014, our total liability for uncertain tax positions and accrued interest
and penalties was $193 million.
SIGNIFICANT ACCOUNTING ESTIMATES
For a complete description of our significant account-
ing policies, see Note 2 to the Consolidated Financial
Statements on page 48 of this report. Our significant
accounting estimates are those that have a meaning-
ful impact on the reporting of our financial condition
and results of operations. These estimates include our
accounting for promotional expenditures, valuation of
long-lived assets, intangible assets, redeemable interest,
stock-based compensation, income taxes, and defined
34 GENERAL MILLS
2014 ANNUAL REPORT 35
benefit pension, other postretirement, and postemploy-
ment benefits.
Promotional Expenditures Our promotional activi-
ties are conducted through our customers and directly
or indirectly with end consumers. These activities
include: payments to customers to perform merchan-
dising activities on our behalf, such as advertising or
in-store displays; discounts to our list prices to lower
retail shelf prices; payments to gain distribution of new
products; coupons, contests, and other incentives; and
media and advertising expenditures. The recognition of
these costs requires estimation of customer participa-
tion and performance levels. These estimates are made
based on the forecasted customer sales, the timing and
forecasted costs of promotional activities, and other fac-
tors. Differences between estimated expenses and actual
costs are recognized as a change in management esti-
mate in a subsequent period. Our accrued trade, coupon,
and consumer marketing liabilities were $578 million as
of May 25, 2014, and $635 million as of May 26, 2013.
Because our total promotional expenditures (including
amounts classified as a reduction of revenues) are sig-
nificant, if our estimates are inaccurate we would have
to make adjustments in subsequent periods that could
have a material effect on our results of operations.
Valuation of Long-Lived Assets We estimate the useful
lives of long-lived assets and make estimates concern-
ing undiscounted cash flows to review for impairment
whenever events or changes in circumstances indicate
that the carrying amount of an asset (or asset group)
may not be recoverable. Fair value is measured using
discounted cash flows or independent appraisals, as
appropriate.
Intangible Assets Goodwill and other indefinite lived
intangible assets are not subject to amortization and are
tested for impairment annually and whenever events
or changes in circumstances indicate that impairment
may have occurred. Our estimates of fair value for
goodwill impairment testing are determined based on a
discounted cash flow model. We use inputs from our
long-range planning process to determine growth rates
for sales and profits. We also make estimates of discount
rates, perpetuity growth assumptions, market compara-
bles, and other factors.
We evaluate the useful lives of our other intangible
assets, mainly brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
requires significant judgments and assumptions regard-
ing the future effects of obsolescence, demand, compe-
tition, other economic factors (such as the stability of
the industry, known technological advances, legislative
action that results in an uncertain or changing regula-
tory environment, and expected changes in distribution
channels), the level of required maintenance expendi-
tures, and the expected lives of other related groups of
assets. Intangible assets that are deemed to have definite
lives are amortized on a straight-line basis, over their
useful lives, generally ranging from 4 to 30 years. Our
estimate of the fair value of our brand assets is based on
a discounted cash flow model using inputs which include
projected revenues from our long-range plan, assumed
royalty rates that could be payable if we did not own the
brands, and a discount rate.
As of May 25, 2014, we had $13.1 billion of good-
will and indefinite-lived intangible assets. Our Europe
and Yoplait U.S. reporting units and Uncle Toby’s and
Mountain High brands have experienced declining busi-
ness performance and we will continue to monitor these
businesses. While we currently believe that the fair value
of each intangible exceeds its carrying value and that
those intangibles so classified will contribute indefi-
nitely to our cash flows, materially different assumptions
regarding future performance of our businesses or a dif-
ferent weighted-average cost of capital could result in
significant impairment losses and amortization expense.
We performed our fiscal 2014 assessment of our intan-
gible assets as of November 25, 2013. As of our annual
assessment date, there was no impairment of any of our
intangible assets as their related fair values were sub-
stantially in excess of the carrying values, except for the
Uncle Toby’s brand, which had a fair value 8 percent
greater than its carrying value of $63 million. In addi-
tion, our Mountain High brand had a fair value 23 per-
cent greater than its carrying value of $35 million.
Redeemable Interest During the third quarter of fis-
cal 2014, we adjusted the redemption value of Sodiaal’s
redeemable interest in Yoplait S.A.S. based on a dis-
counted cash flow model. The significant assumptions
used to estimate the redemption value include projected
revenue growth and profitability from our long-range
plan, capital spending, depreciation and taxes, foreign
currency rates, and a discount rate. As of May 25, 2014,
the redemption value of the redeemable interest was
$984 million.
34 GENERAL MI LLS
20 14 ANNUAL REPORT 35
Stock-based Compensation The valuation of stock
options is a significant accounting estimate that requires
us to use judgments and assumptions that are likely
to have a material impact on our financial statements.
Annually, we make predictive assumptions regarding
future stock price volatility, employee exercise behavior,
dividend yield, and the forfeiture rate. For more infor-
mation on these assumptions, please refer to Note 11
to the Consolidated Financial Statements on page 67 of
this report.
The estimated fair values of stock options granted
and the assumptions used for the Black-Scholes option-
pricing model were as follows:
Fiscal Year
2014
2013
2012
Estimated fair values of
stock options granted
$ 6.03
$ 3.65
$ 5.88
Assumptions:
Risk-free interest rate
2.6%
1.6%
2.9%
Expected term
Expected volatility
Dividend yield
9.0 years 9.0 years 8.5 years
17.4%
17.3%
17.6%
3.1%
3.5%
3.3%
The risk-free interest rate for periods during the
expected term of the options is based on the U.S.
Treasury zero-coupon yield curve in effect at the time of
grant. An increase in the expected term by 1 year, leav-
ing all other assumptions constant, would increase the
grant date fair value by 2 percent. If all other assump-
tions are held constant, a one percentage point increase
in our fiscal 2014 volatility assumption would increase
the grant date fair value of our fiscal 2014 option awards
by 7 percent.
To the extent that actual outcomes differ from our
assumptions, we are not required to true up grant-
date fair value-based expense to final intrinsic values.
However, these differences can impact the classifica-
tion of cash tax benefits realized upon exercise of stock
options, as explained in the following two paragraphs.
Furthermore, historical data has a significant bearing on
our forward-looking assumptions. Significant variances
between actual and predicted experience could lead to
prospective revisions in our assumptions, which could
then significantly impact the year-over-year comparabil-
ity of stock-based compensation expense.
Any corporate income tax benefit realized upon exer-
cise or vesting of an award in excess of that previously
recognized in earnings (referred to as a windfall tax ben-
efit) is presented in the Consolidated Statements of Cash
36 GENERAL MI L LS
Flows as a financing cash flow. The actual impact on
future years’ financing cash flows will depend, in part,
on the volume of employee stock option exercises dur-
ing a particular year and the relationship between the
exercise-date market value of the underlying stock and
the original grant-date fair value previously determined
for financial reporting purposes.
Realized windfall tax benefits are credited to addi-
tional paid-in capital within the Consolidated Balance
Sheets. Realized shortfall tax benefits (amounts which
are less than that previously recognized in earnings) are
first offset against the cumulative balance of windfall
tax benefits, if any, and then charged directly to income
tax expense, potentially resulting in volatility in our
consolidated effective income tax rate. We calculated a
cumulative amount of windfall tax benefits for the pur-
pose of accounting for future shortfall tax benefits and
currently have sufficient cumulative windfall tax ben-
efits to absorb projected arising shortfalls, such that we
do not currently expect future earnings to be affected by
this provision. However, as employee stock option exer-
cise behavior is not within our control, it is possible that
materially different reported results could occur if differ-
ent assumptions or conditions were to prevail.
Income Taxes We apply a more-likely-than-not threshold
to the recognition and derecognition of uncertain tax
positions. Accordingly, we recognize the amount of tax
benefit that has a greater than 50 percent likelihood
of being ultimately realized upon settlement. Future
changes in judgment related to the expected ultimate
resolution of uncertain tax positions will affect earnings
in the quarter of such change. For more information on
income taxes, please refer to Note 14 to the Consolidated
Financial Statements on page 78 of this report.
Defined Benefit Pension, Other Postretirement Benefit,
and Postemployment Benefit Plans We have defined
benefit pension plans covering most employees in the
United States, Canada, France, and the United Kingdom.
We also sponsor plans that provide health care benefits
to the majority of our retirees in the United States,
Canada, and Brazil. Under certain circumstances, we
also provide accruable benefits to former or inactive
employees in the United States, Canada, and Mexico, and
members of our Board of Directors, including severance
and certain other benefits payable upon death. Please
refer to Note 13 to the Consolidated Financial Statements
on page 70 of this report for a description of our defined
2014 ANNUAL REPORT 37
benefit pension, other postretirement benefit, and
postemployment benefit plans.
We recognize benefits provided during retirement or
following employment over the plan participants’ active
working lives. Accordingly, we make various assump-
tions to predict and measure costs and obligations
many years prior to the settlement of our obligations.
Assumptions that require significant management judg-
ment and have a material impact on the measurement of
our net periodic benefit expense or income and accumu-
lated benefit obligations include the long-term rates of
return on plan assets, the interest rates used to discount
the obligations for our benefit plans, and the health care
cost trend rates.
Expected Rate of Return on Plan Assets Our expected
rate of return on plan assets is determined by our asset
allocation, our historical long-term investment perfor-
mance, our estimate of future long-term returns by
asset class (using input from our actuaries, investment
services, and investment managers), and long-term infla-
tion assumptions. We review this assumption annually
for each plan, however, our annual investment perfor-
mance for one particular year does not, by itself, signifi-
cantly influence our evaluation.
Our historical investment returns (compound annual
growth rates) for our United States defined benefit pen-
sion and other postretirement benefit plan assets were
15.3 percent, 13.9 percent, 9.2 percent, 8.4 percent, and
9.9 percent for the 1, 5, 10, 15, and 20 year periods ended
May 25, 2014.
On a weighted-average basis, the expected rate of
return for all defined benefit plans was 8.53 percent for
fiscal 2014, 8.53 percent for fiscal 2013, and 9.52 percent
for fiscal 2012.
Lowering the expected long-term rate of return on
assets by 100 basis points would increase our net pen-
sion and postretirement expense by $59 million for fiscal
2015. A market-related valuation basis is used to reduce
year-to-year expense volatility. The market-related valu-
ation recognizes certain 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 dif-
ference between the expected return calculated using
the market-related value of assets and the actual return
based on the market-related value of assets. Our outside
actuaries perform these calculations as part of our deter-
mination of annual expense or income.
Discount Rates Our discount rate assumptions are
determined annually as of the last day of our fiscal year
for our defined benefit pension, other postretirement
benefit, and postemployment benefit plan obligations.
We work with our outside actuaries to determine the
timing and amount of expected future cash outflows to
plan participants and, using the Aa Above Median corpo-
rate bond yield, to develop a forward interest rate curve,
including a margin to that index based on our credit
risk. This forward interest rate curve is applied to our
expected future cash outflows to determine our discount
rate assumptions.
Our weighted-average discount rates were as follows:
Defined
Other
Benefit Postretirement Postemployment
Benefit
Benefit
Pension
Plans
Plans
Plans
Obligations as of
May 25, 2014, and
fiscal 2015 expense
4.54%
4.51%
3.82%
Obligations as of
May 26, 2013, and
fiscal 2014 expense
Fiscal 2013 expense
4.54%
4.85%
4.50%
4.70%
3.70%
3.86%
Lowering the discount rates by 100 basis points would
increase our net defined benefit pension, other postretire-
ment benefit, and postemployment benefit plan expense
for fiscal 2015 by approximately $96 million. All obliga-
tion-related experience gains and losses are amortized
using a straight-line method over the average remaining
service period of active plan participants.
Health Care Cost Trend Rates We review our health
care cost trend rates annually. Our review is based on
data we collect about our health care claims experience
and information provided by our actuaries. This infor-
mation includes recent plan experience, plan design,
overall industry experience and projections, and assump-
tions used by other similar organizations. Our initial
health care cost trend rate is adjusted as necessary to
remain consistent with this review, recent experiences,
and short-term expectations. Our initial health care cost
trend rate assumption is 7.3 percent for retirees age 65
and over and 6.5 percent for retirees under age 65 at the
end of fiscal 2014. Rates are graded down annually until
the ultimate trend rate of 5.0 percent is reached in 2025
for all retirees. The trend rates are applicable for calcula-
tions only if the retirees’ benefits increase as a result of
36 GENERAL MILLS
20 14 ANNUAL REPORT 37
health care inflation. The ultimate trend rate is adjusted
annually, as necessary, to approximate the current eco-
nomic view on the rate of long-term inflation plus an
appropriate health care cost premium. Assumed trend
rates for health care costs have an important effect on
the amounts reported for the other postretirement ben-
efit plans.
A one percentage point change in the health care cost
trend rate would have the following effects:
In Millions
One
One
Percentage Percentage
Point
Decrease
Point
Increase
Effect on the aggregate of the service and
interest cost components in fiscal 2015
$ 4.7
$ (3.9)
Effect on the other postretirement
accumulated benefit obligation as of
May 25, 2014
82.7
(73.2)
Any arising health care claims cost-related experience
gain or loss is recognized in the calculation of expected
future claims. Once recognized, experience gains and
losses are amortized using a straight-line method over
15 years, resulting in at least the minimum amortization
required being recorded.
Financial Statement Impact In fiscal 2014, we recorded
net defined benefit pension, other postretirement ben-
efit, and postemployment benefit plan expense of $140
million compared to $159 million of expense in fiscal
2013 and $106 million of expense in fiscal 2012. As of
May 25, 2014, we had cumulative unrecognized actuarial
net losses of $1.4 billion on our defined benefit pension
plans and $80 million on our postretirement and pos-
temployment benefit plans, mainly as the result of liabil-
ity increases from lower interest rates, partially offset
by recent increases in the values of plan assets. These
unrecognized actuarial net losses will result in increases
in our future pension expense and increases in postre-
tirement expense since they currently exceed the cor-
ridors defined by GAAP.
We use the 2014 IRS Static Mortality Table projected
forward to our plans’ measurement dates to calculate
the year-end defined benefit pension, other postretire-
ment benefit, and postemployment benefit obligations
and annual expense.
Actual future net defined benefit pension, other post-
retirement benefit, and postemployment benefit plan
income or expense will depend on investment perfor-
mance, changes in future discount rates, changes in
health care cost trend rates, and other factors related to
the populations participating in these plans.
RECENTLY ISSUED ACCOUNTING
PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board
issued new accounting requirements for the recognition
of revenue from contracts with customers. The require-
ments of the new standard are effective for annual
reporting periods beginning after December 15, 2016,
and interim periods within those annual periods, which
for us is the first quarter of fiscal 2018. We do not expect
this guidance to have a material impact on our results of
operations or financial position.
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 for-
ward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 that are
based on our current expectations and assumptions. We
also may make written or oral forward-looking state-
ments, 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,” “plan,”
“project,” or similar expressions identify “forward-looking
statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are sub-
ject to certain risks and uncertainties that could cause
actual results to differ materially from historical results
and those currently anticipated or projected. We wish
to caution you not to place undue reliance on any such
forward-looking statements.
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
in future periods to differ materially from any current
opinions or statements.
Our future results could be affected by a variety
of factors, such as: competitive dynamics in the con-
sumer foods industry and the markets for our products,
including new product introductions, advertising activi-
ties, pricing actions, and promotional activities of our
38 GENERAL MIL LS
2014 ANNUAL REPORT 39
competitors; economic conditions, including changes
in inflation rates, interest rates, tax rates, or the avail-
ability of capital; 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 the legal and regulatory environment, includ-
ing labeling and advertising regulations and litigation;
impairments in the carrying value of goodwill, other
intangible assets, or other long-lived assets, or changes
in the useful lives of other intangible assets; changes
in accounting standards and the impact of significant
accounting estimates; product quality and safety issues,
including recalls and product liability; changes in con-
sumer demand for our products; effectiveness of adver-
tising, marketing, and promotional programs; changes
in consumer behavior, trends, and preferences, includ-
ing weight loss trends; consumer perception of health-
related issues, including obesity; consolidation in the
retail environment; 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; disruptions or ineffi-
ciencies in the supply chain; volatility in the market value
of derivatives used to manage price risk for certain com-
modities; benefit plan expenses due to changes in plan
asset values and discount rates used to determine plan
liabilities; failure or breach of our information technology
systems; foreign economic conditions, including currency
rate fluctuations; and political unrest in foreign markets
and economic uncertainty due to terrorism or war.
You should also consider the risk factors that we iden-
tify in Item 1A of our 2014 Form 10-K which could also
affect our future results.
We undertake no obligation to publicly revise any
forward-looking statements to reflect events or circum-
stances after the date of those statements or to reflect
the occurrence of anticipated or unanticipated events.
38 GENERAL MILLS
20 14 ANNUAL REPORT 39
Quantitative and Qualitative
61waps;�ds;
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
generally offset by an increase or decrease in the fair
value of the underlying exposure. The positions included
in the calculations were: debt; investments; interest rate
swaps; foreign exchange forwards; commodity swaps,
futures and options; and equity instruments. The calcu-
lations do not include the underlying foreign exchange
and commodities or equity-related positions that are off-
set by these market-risk-sensitive instruments.
The table below presents the estimated maximum
potential VAR arising from a one-day loss in fair value
for our interest rate, foreign currency, commodity, and
equity market-risk-sensitive instruments outstanding as
of May 25, 2014, and May 26, 2013, and the average fair
value impact during the year ended May 25, 2014.
In Millions
Interest rate instruments
Foreign currency instruments
Commodity instruments
Equity instruments
Fair Value Impact
May 25,
2014
$32.7
7.2
3.0
1.1
Average
During
Fiscal 2014
May 26,
2013
$29.5
$21.5
7.1
3.2
0.8
3.5
5.4
0.7
We are exposed to market risk stemming from changes
in interest and foreign exchange rates and commodity
and equity 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 transactions, authorized under established
policies that place clear controls on these activities.
The counterparties in these transactions are generally
highly rated institutions. We establish credit limits for
each counterparty. Our hedging transactions include
but are not limited to a variety of derivative financial
instruments. For information on interest rate, foreign
exchange, commodity price, and equity instrument
risk, please see Note 7 to the Consolidated Financial
Statements on page 55 of this report.
VALUE AT RISK
The estimates in the table below are intended to mea-
sure the maximum potential fair value we could lose in
one day from adverse changes in market interest rates,
foreign exchange rates, commodity prices, and equity
prices under normal market conditions. A Monte Carlo
value-at-risk (VAR) methodology was used to quantify
the market risk for our exposures. The models assumed
normal market conditions and used a 95 percent confi-
dence level.
The VAR calculation used historical interest and for-
eign exchange rates, and commodity and equity prices
from the past year to estimate the potential volatility
and correlation of these rates in the future. The market
data were drawn from the RiskMetrics™ data set. The
calculations are not intended to represent actual losses
40 GENERAL MILLS
2014 ANN UAL REPORT 41
the assessed risk. Our audits also included performing
such other procedures as we considered necessary in
the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
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 pur-
poses 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 reason-
able detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) pro-
vide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial state-
ments in accordance with generally accepted account-
ing principles, and that receipts and expenditures of the
company are being made only in accordance with autho-
rizations of management and directors of the company;
and (3) provide reasonable assurance regarding preven-
tion 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 mis-
statements. Also, projections of any evaluation of effec-
tiveness 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, 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 25, 2014 and May 26, 2013, and the
results of their operations and their cash flows for each
of the fiscal years in the three-year period ended May
25, 2014, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the accom-
panying financial statement schedule, when considered
in relation to the basic consolidated financial state-
ments taken as a whole, presents fairly, in all material
respects, the information set forth therein. Also in our
opinion, General Mills, Inc. maintained, in all material
respects, effective internal control over financial report-
ing as of May 25, 2014, based on criteria established in
Internal Control – Integrated Framework (1992) issued
by the Committee of Sponsoring Organizations of the
Treadway Commission.
Minneapolis, Minnesota
July 3, 2014
42 GENERA L MILL S
2014 ANNUAL REPORT PB
Consolidated Statements of Earnings
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions, Except per Share Data
Net sales
Cost of sales
Selling, general, and administrative expenses
Divestiture (gain)
Restructuring, impairment, and other exit costs
Operating profit
Interest, net
Fiscal Year
2014
2013
2012
$ 17,909.6
$ 17,774.1
$ 16,657.9
11,539.8
11,350.2
10,613.2
3,474.3
3,552.3
3,380.7
(65.5)
3.6
—
19.8
—
101.6
2,957.4
2,851.8
2,562.4
302.4
316.9
351.9
Earnings before income taxes and after-tax earnings from joint ventures
2,655.0
2,534.9
2,210.5
Income taxes
After-tax earnings from joint ventures
Net earnings, including earnings attributable to redeemable and noncontrolling interests
Net earnings attributable to redeemable and noncontrolling interests
Net earnings attributable to General Mills
Earnings per share - basic
Earnings per share - diluted
Dividends per share
See accompanying notes to consolidated financial statements.
883.3
89.6
1,861.3
36.9
741.2
98.8
1,892.5
37.3
709.6
88.2
1,589.1
21.8
$ 1,824.4
$ 1,855.2
$ 1,567.3
$
$
$
2.90
2.83
1.55
$
$
$
2.86
2.79
$
$
1.32 $
2.42
2.35
1.22
20 14 ANNUAL REPORT 43
Consolidated Statements of
Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
Other comprehensive income (loss), net of tax:
Foreign currency translation
Net actuarial gain (loss)
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives
Amortization of losses and prior service costs
Other comprehensive income (loss), net of tax
Total comprehensive income
Comprehensive income (loss) attributable to redeemable
and noncontrolling interests
Comprehensive income attributable to General Mills
See accompanying notes to consolidated financial statements.
Fiscal Year
2014
2013
2012
$ 1,861.3
$ 1,892.5
$ 1,589.1
(11.3)
206.0
0.3
5.0
(4.6)
107.6
303.0
0.8
45.0
0.8
24.6
12.2
98.8
182.2
2,164.3
2,074.7
(420.1)
(504.6)
(0.2)
(53.4)
11.5
81.7
(885.1)
704.0
94.9
61.1
(130.4)
$ 2,069.4
$ 2,013.6
$
834.4
44 GENERAL MILL S
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions, Except Par Value
ASSETS
Current assets:
Cash and cash equivalents
Receivables
Inventories
Deferred income taxes
Prepaid expenses and other current assets
Total current assets
Land, buildings, and equipment
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
Redeemable interest
Stockholders’ equity:
Common stock, 754.6 shares issued, $0.10 par value
Additional paid-in capital
Retained earnings
Common stock in treasury, at cost, shares of 142.3 and 113.8
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
May 25, 2014 May 26,2013
$
867.3 $
741.4
1,483.6
1,446.4
1,559.4
1,545.5
74.1
409.1
128.0
437.6
4,393.5
4,298.9
3,941.9
3,878.1
8,650.5
8,622.2
5,014.3
5,015.1
1,145.5
843.7
$ 23,145.7 $ 22,658.0
$ 1,611.3 $ 1,423.2
1,250.6
1,443.3
1,111.7
599.7
1,449.9
1,827.7
5,423.5
5,293.9
6,423.5
5,926.1
1,666.0
1,389.1
1,643.2
1,952.9
15,156.2
14,562.0
984.1
967.5
75.5
75.5
1,231.8
1,166.6
11,787.2
10,702.6
(5,219.4)
(3,687.2)
(1,340.3)
(1,585.3)
6,534.8
6,672.2
470.6
456.3
7,005.4
7,128.5
$ 23,145.7 $ 22,658.0
20 14 ANNUAL REPORT 45
Consolidated Statements of Total Equity
and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
$.10 Par Value Common Stock
(One Billion Shares Authorized)
Issued
Treasury
Par
Shares Amount
Additional
Paid-In
Capital
754.6
$75.5 $1,319.8
Shares
Amount
Accumulated
Other
Retained Comprehensive Noncontrolling
Interests
Earnings
Income (Loss)
Total Redeemable
Interest
Equity
(109.8) $(3,210.3) $ 9,191.3
1,567.3
$(1,010.8)
(732.9)
$246.7 $6,612.2
790.1
(44.3)
$ (86.1)
(8.3)
(313.0)
(800.1)
3.2
12.0
346.3
(93.4)
108.3
(29.5)
(800.1)
(313.0)
349.5
(93.4)
108.3
263.8
263.8
904.4
(29.5)
29.5
(5.2)
(5.2)
754.6
75.5
1,308.4 (106.1)
(3,177.0)
9,958.5
(1,743.7)
461.0 6,882.7
847.8
1,855.2
158.4
18.3 2,031.9
42.8
(1,111.1)
(30.0)
(24.2) (1,014.9)
(38.6)
16.5
504.7
(80.5)
100.4
(93.1)
754.6
75.5
1,166.6 (113.8)
(3,687.2) 10,702.6
(1,585.3)
(1,111.1)
(1,044.9)
466.1
(80.5)
100.4
(93.1)
93.1
(23.0)
(23.0)
456.3 7,128.5
(16.2)
967.5
1,824.4
245.0
24.9 2,094.3
70.0
(739.8)
30.0
(35.6) (1,775.3)
13.8
7.1
243.1
(91.3)
108.5
4.2
(739.8)
(1,745.3)
256.9
(91.3)
108.5
17.6
4.2
17.6
(4.2)
(28.2)
(28.2)
(49.2)
In Millions, Except per Share Data
Balance as of May 29, 2011
Total comprehensive income (loss)
Cash dividends declared
($1.22 per share)
Shares purchased
Stock compensation plans (includes
income tax benefits of $63.1)
Unearned compensation related
to restricted stock unit awards
Stock-based compensation
Addition of redeemable and
noncontrolling interest from
acquisitions
Increase in redemption
value of redeemable
interest
Distributions to noncontrolling
interest holders
Balance as of May 27, 2012
Total comprehensive
income
Cash dividends declared
($1.70 per share)
Shares purchased
Stock compensation plans (includes
income tax benefits of $103.0)
Unearned compensation related
to restricted stock unit awards
Stock-based compensation
Increase in redemption
value of redeemable
interest
Distributions to noncontrolling
interest holders
Balance as of May 26, 2013
Total comprehensive
income
Cash dividends declared
($1.17 per share)
Shares purchased
Stock compensation plans (includes
income tax benefits of $69.3)
Unearned compensation related
to restricted stock unit awards
Stock-based compensation
Decrease in redemption
value of redeemable
interest
Addition of noncontrolling interest
Distributions to redeemable and
noncontrolling interest holders
Balance as of May 25, 2014
754.6
$75.5 $1,231.8 (142.3) $(5,219.4) $11,787.2
$(1,340.3)
$470.6 $7,005.4
$984.1
See accompanying notes to consolidated financial statements.
46 GENERAL MIL LS
Consolidated Statements of Cash Flows
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions
Cash Flows - Operating Activities
Net earnings, including earnings attributable to redeemable and noncontrolling interests
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
After-tax earnings from joint ventures
Distributions of earnings from joint ventures
Stock-based compensation
Deferred income taxes
Tax benefit on exercised options
Pension and other postretirement benefit plan contributions
Pension and other postretirement benefit plan costs
Divestiture (gain)
Restructuring, impairment, and other exit costs
Changes in current assets and liabilities, excluding the effects of acquisitions
Other, net
Net cash provided by operating activities
Cash Flows - Investing Activities
Purchases of land, buildings, and equipment
Acquisitions, net of cash acquired
Investments in affiliates, net
Proceeds from disposal of land, buildings, and equipment
Proceeds from divestiture
Exchangeable note
Other, net
Net cash used by investing activities
Cash Flows - Financing Activities
Change in notes payable
Issuance of long-term debt
Payment of long-term debt
Proceeds from common stock issued on exercised options
Tax benefit on exercised options
Purchases of common stock for treasury
Dividends paid
Addition of noncontrolling interest
Distributions to noncontrolling and redeemable interest holders
Other, net
Net cash used by financing activities
Effect of exchange rate changes on cash and cash equivalents
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, excluding the effects of acquisitions:
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.
Fiscal Year
2014
2013
2012
$ 1,861.3
$ 1,892.5
$ 1,589.1
585.4
(89.6)
90.5
108.5
172.5
(69.3)
(49.7)
124.1
(65.5)
(18.8)
(32.2)
(76.2)
2,541.0
(663.5)
—
(54.9)
6.6
121.6
29.3
(0.9)
(561.8)
572.9
1,673.0
(1,444.8)
108.1
69.3
(1,745.3)
(983.3)
17.6
(77.4)
(14.2)
(1,824.1)
(29.2)
125.9
741.4
867.3
$
$
(41.0)
(88.3)
10.5
191.5
(104.9)
(32.2)
$
588.0
(98.8)
115.7
100.4
81.8
(103.0)
(223.2)
131.2
—
(60.2)
471.1
30.5
2,926.0
(613.9)
(898.0)
(40.4)
24.2
—
16.2
(3.5)
(1,515.4)
(44.5)
1,001.1
(542.3)
300.8
103.0
(1,044.9)
(867.6)
—
(39.2)
(6.6)
(1,140.2)
(0.2)
270.2
471.2
741.4
$
$
(44.6)
18.7
(64.3)
263.6
297.7
$ 471.1
541.5
(88.2)
68.0
108.3
149.4
(63.1)
(222.2)
77.8
—
97.8
243.8
(95.0)
2,407.2
(675.9)
(1,050.1)
(22.2)
2.2
—
(131.6)
6.8
(1,870.8)
227.9
1,390.5
(1,450.1)
233.5
63.1
(313.0)
(800.1)
—
(5.2)
(13.2)
(666.6)
(18.2)
(148.4)
619.6
$ 471.2
(24.2)
$
144.5
149.4
12.1
(38.0)
$ 243.8
20 14 ANNUAL REPORT 47
Notes to Consolidated Financial Statements
GENERAL MILLS, INC. AND SUBSIDIARIES
NOTE 1. BASIS OF PRESENTATION AND
RECLASSIFICATIONS
Basis of Presentation Our Consolidated Financial
Statements include the accounts of General Mills,
Inc. and all subsidiaries in which we have a control-
ling financial interest. Intercompany transactions and
accounts, including any noncontrolling and redeemable
interests’ share of those transactions, are eliminated in
consolidation.
Our fiscal year ends on the last Sunday in May. Fiscal
years 2014, 2013 and 2012 each consisted of 52 weeks.
Change in Reporting Period As part of a long-term plan
to conform the fiscal year ends of all our operations, we
have changed the reporting period of certain countries
within our International segment from an April fiscal
year end to a May fiscal year end to match our fiscal
calendar. Accordingly, in the year of change, our results
include 13 months of results from the affected opera-
tions compared to 12 months in previous fiscal years.
We changed the reporting period for our operations in
Europe and Australia in fiscal 2013, and we changed
the reporting period for our operations in China in fis-
cal 2012. The impact of these changes was not material
to our consolidated results of operations and, therefore,
we did not restate prior period financial statements for
comparability. Our Yoplait S.A.S., Yoplait Marques S.A.S.,
Yoki Alimentos S.A. (Yoki), and India businesses remain
on an April fiscal year end.
Certain reclassifications to our previously reported
financial information have been made to conform to the
current period presentation.
NOTE 2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Inventories outside of the United States are generally
valued at the lower of cost, using the first-in, first-out
(FIFO) method, or market.
Shipping costs associated with the distribution of fin-
ished product to our customers are recorded as cost of
sales, and are recognized when the related finished prod-
uct is shipped to and accepted by the customer.
Land, Buildings, Equipment, and Depreciation Land
is recorded at historical cost. Buildings and equipment,
including capitalized interest and internal engineer-
ing costs, are recorded at cost and depreciated over
estimated useful lives, primarily using the straight-line
method. Ordinary maintenance and repairs are charged
to cost of sales. Buildings are usually depreciated over 40
to 50 years, and equipment, furniture, and software are
usually depreciated over 3 to 10 years. Fully depreciated
assets are retained in buildings and equipment until dis-
posal. When an item is sold or retired, the accounts are
relieved of its cost and related accumulated depreciation
and the resulting gains and losses, if any, are recognized
in earnings. As of May 25, 2014, assets held for sale were
insignificant.
Long-lived assets are reviewed for impairment when-
ever events or changes in circumstances indicate that
the carrying amount of an asset (or asset group) may
not be recoverable. An impairment loss would be recog-
nized when estimated undiscounted future cash flows
from the operation and disposition of the asset group
are less than the carrying amount of the asset group.
Asset groups have identifiable cash flows and are largely
independent of other asset groups. Measurement of an
impairment loss would be based on the excess of the car-
rying amount of the asset group over its fair value. Fair
value is measured using a discounted cash flow model or
independent appraisals, as appropriate.
Cash and Cash Equivalents We consider all invest-
ments purchased with an original maturity of three
months or less to be cash equivalents.
Inventories All inventories in the United States other
than grain are valued at the lower of cost, using the
last-in, first-out (LIFO) method, or market. Grain inven-
tories and all related cash contracts and derivatives are
valued at market with all net changes in value recorded
in earnings currently.
Goodwill and Other Intangible Assets Goodwill is not
subject to amortization and is tested for impairment
annually and whenever events or changes in circum-
stances indicate that impairment may have occurred.
Impairment testing is performed for each of our report-
ing units. We compare the carrying value of a report-
ing unit, including goodwill, to the fair value of the unit.
Carrying value is based on the assets and liabilities asso-
ciated with the operations of that reporting unit, which
often requires allocation of shared or corporate items
48 GENERA L MIL L S
2014 ANNUAL REPORT 49
among reporting units. If the carrying amount of a
reporting unit exceeds its fair value, we revalue all assets
and liabilities of the reporting unit, excluding goodwill,
to determine if the fair value of the net assets is greater
than the net assets including goodwill. If the fair value
of the net assets is less than the carrying amount of
net assets including goodwill, impairment has occurred.
Our estimates of fair value are determined based on a
discounted cash flow model. Growth rates for sales and
profits are determined using inputs from our long-range
planning process. We also make estimates of discount
rates, perpetuity growth assumptions, market compa-
rables, and other factors.
We evaluate the useful lives of our other intangible
assets, mainly brands, to determine if they are finite or
indefinite-lived. Reaching a determination on useful life
requires significant judgments and assumptions regard-
ing the future effects of obsolescence, demand, compe-
tition, other economic factors (such as the stability of
the industry, known technological advances, legislative
action that results in an uncertain or changing regula-
tory environment, and expected changes in distribution
channels), the level of required maintenance expendi-
tures, and the expected lives of other related groups of
assets. Intangible assets that are deemed to have definite
lives are amortized on a straight-line basis, over their
useful lives, generally ranging from 4 to 30 years.
Our indefinite-lived intangible assets, mainly intan-
gible assets primarily associated with the Pillsbury,
Totino’s, Progresso, Green Giant, Yoplait, Old El Paso,
Yoki, and Häagen-Dazs brands, are also tested for
impairment annually and whenever events or changes
in circumstances indicate that their carrying value may
not be recoverable. Our estimate of the fair value of the
brands is based on a discounted cash flow model using
inputs which included projected revenues from our long-
range plan, assumed royalty rates that could be payable
if we did not own the brands, and a discount rate.
Our finite-lived intangible assets, primarily acquired
franchise agreements and customer relationships, are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an
asset may not be recoverable. An impairment loss would
be recognized when estimated undiscounted future cash
flows from the operation and disposition of the asset
are less than the carrying amount of the asset. Assets
generally have identifiable cash flows and are largely
independent of other assets. Measurement of an impair-
ment loss would be based on the excess of the carrying
amount of the asset over its fair value. Fair value is mea-
sured using a discounted cash flow model or other simi-
lar valuation model, as appropriate.
Investments in Joint Ventures Our investments in
companies over which we have the ability to exercise
significant influence are stated at cost plus our share
of undistributed earnings or losses. We receive roy-
alty income from certain joint ventures, incur various
expenses (primarily research and development), and
record the tax impact of certain joint venture opera-
tions that are structured as partnerships. In addition, we
make advances to our joint ventures in the form of loans
or capital investments. We also sell certain raw materi-
als, semi-finished goods, and finished goods to the joint
ventures, generally at market prices.
In addition, we assess our investments in our joint
ventures if we have reason to believe an impairment
may have occurred including, but not limited to, ongo-
ing operating losses, projected decreases in earnings,
increases in the weighted average cost of capital or sig-
nificant business disruptions. The significant assump-
tions used to estimate fair value include revenue growth
and profitability, royalty rates, capital spending, depre-
ciation and taxes, foreign currency exchange rates, and
a discount rate. By their nature, these projections and
assumptions are uncertain. If we were to determine the
current fair value of our investment was less than the
carrying value of the investment, then we would assess
if the shortfall was of a temporary or permanent nature
and write down the investment to its fair value if we
concluded the impairment is other than temporary.
Redeemable Interest We have a 51 percent controlling
interest in Yoplait S.A.S., a consolidated entity. Sodiaal
International (Sodiaal) holds the remaining 49 percent
interest in Yoplait S.A.S. Sodiaal has the ability to put
a limited portion of its redeemable interest to us at fair
value once per year up to a maximum remaining term of
6 years. This put option requires us to classify Sodiaal’s
interest as a redeemable interest outside of equity on
our Consolidated Balance Sheets for as long as the put
is exercisable by Sodiaal. When the put is no longer
exercisable, the redeemable interest will be reclassified
to noncontrolling interests on our Consolidated Balance
Sheets. We adjust the value of the redeemable interest
through additional paid-in capital on our Consolidated
Balance Sheets quarterly to the redeemable interest’s
redemption value, which approximates its fair value.
48 GENER AL MILLS
20 14 ANNUAL REPORT 49
During the third quarter of fiscal 2014, we adjusted the
redeemable interest’s redemption value based on a dis-
counted cash flow model. The significant assumptions
used to estimate the redemption value include projected
revenue growth and profitability from our long-range
plan, capital spending, depreciation, taxes, foreign cur-
rency rates, and a discount rate.
Revenue Recognition We recognize sales revenue when
the shipment is accepted by our customer. Sales include
shipping and handling charges billed to the customer
and are reported net of consumer coupon redemp-
tion, trade promotion and other costs, including esti-
mated allowances for returns, unsalable product, and
prompt pay discounts. Sales, use, value-added, and other
excise taxes are not recognized in revenue. Coupons are
recorded when distributed, based on estimated redemp-
tion rates. Trade promotions are recorded based on esti-
mated participation and performance levels for offered
programs at the time of sale. We generally do not
allow a right of return. However, on a limited case-by-
case basis with prior approval, we may allow custom-
ers to return product. In limited circumstances, product
returned in saleable condition is resold to other custom-
ers or outlets. Receivables from customers generally do
not bear interest. Terms and collection patterns vary
around the world and by channel. The allowance for
doubtful accounts represents our estimate of probable
non-payments and credit losses in our existing receiv-
ables, as determined based on a review of past due bal-
ances and other specific account data. Account balances
are written off against the allowance when we deem the
amount is uncollectible.
Environmental Environmental costs relating to exist-
ing conditions caused by past operations that do not
contribute to current or future revenues are expensed.
Liabilities for anticipated remediation costs are recorded
on an undiscounted basis when they are probable and
reasonably estimable, generally no later than the com-
pletion of feasibility studies or our commitment to a
plan of action.
Advertising Production Costs We expense the produc-
tion costs of advertising the first time that the advertis-
ing takes place.
Research and Development All expenditures for
research and development (R&D) are charged against
earnings in the year incurred. R&D includes expenditures
for new product and manufacturing process innovation,
and the annual expenditures are comprised primarily of
internal salaries, wages, consulting, and other supplies
attributable to time spent on R&D activities. Other costs
include depreciation and maintenance of research facili-
ties, including assets at facilities that are engaged in pilot
plant activities.
Foreign Currency Translation For all significant foreign
operations, the functional currency is the local currency.
Assets and liabilities of these operations are translated
at the period-end exchange rates. Income statement
accounts are translated using the average exchange rates
prevailing during the year. Translation adjustments are
reflected within accumulated other comprehensive loss
(AOCI) in stockholders’ equity. Gains and losses from for-
eign currency transactions are included in net earnings
for the period, except for gains and losses on investments
in subsidiaries for which settlement is not planned for
the foreseeable future and foreign exchange gains and
losses on instruments designated as net investment
hedges. These gains and losses are recorded in AOCI.
Derivative Instruments All derivatives are recognized
on the Consolidated Balance Sheets at fair value based
on quoted market prices or our estimate of their fair
value, 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 net earnings
or other comprehensive income, based on whether the
instrument is designated and effective as a hedge trans-
action and, if so, the type of hedge transaction. Gains or
losses on derivative instruments reported in AOCI 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 AOCI
are reclassified to earnings at that time. Any ineffective-
ness is recognized in earnings in the current period.
Stock-based Compensation We generally measure com-
pensation expense for grants of restricted stock units
using the value of a share of our stock on the date of
grant. We estimate the value of stock option grants using
a Black-Scholes valuation model. Stock compensation is
recognized straight line over the vesting period. Our stock
compensation expense is recorded in selling, general and
50 GENERAL MI L LS
2014 ANN UAL REPORT 51
administrative (SG&A) expenses and cost of sales in the
Consolidated Statements of Earnings and allocated to
each reportable segment in our segment results.
stock-based compensation, income taxes, and defined
benefit pension, postretirement and postemployment
benefits. Actual results could differ from our estimates.
NOTE 3. ACQUISITIONS AND DIVESTITURES
During the fourth quarter of fiscal 2014, we sold certain
grain elevators in our U.S. Retail segment for $121.6 mil-
lion in cash, subject to a working capital adjustment,
and recorded a pre-tax gain of $65.5 million.
On August 1, 2012, we acquired Yoki, a privately held
food company headquartered in Sao Bernardo do Campo,
Brazil, for an aggregate purchase price of $939.8 million,
including $88.8 million of non-cash consideration for
net debt assumed. Yoki operates in several food catego-
ries, including snacks, convenient meals, basic foods, and
seasonings. We consolidated Yoki into our Consolidated
Balance Sheets and recorded goodwill of $363.0 million.
Indefinite lived intangible assets acquired include brands
of $253.0 million. Finite lived intangible assets acquired
primarily include customer relationships of $17.5 mil-
lion. The pro forma effects of this acquisition were not
material.
Certain equity-based compensation plans contain pro-
visions that accelerate vesting of awards upon retire-
ment, termination, or death of eligible employees and
directors. We consider a stock-based award to be vested
when the employee’s retention of the award is no longer
contingent on providing subsequent service. Accordingly,
the related compensation cost is recognized immediately
for awards granted to retirement-eligible individuals or
over the period from the grant date to the date retire-
ment eligibility is achieved, if less than the stated vest-
ing period.
We report the benefits of tax deductions in excess of
recognized compensation cost as a financing cash flow,
thereby reducing net operating cash flows and increas-
ing net financing cash flows.
Defined Benefit Pension, Other Postretirement Benefit,
and Postemployment Benefit Plans We sponsor several
domestic and foreign defined benefit plans to provide
pension, health care, and other welfare benefits to retired
employees. Under certain circumstances, we also provide
accruable benefits to former or inactive employees in the
United States and Canada and members of our Board of
Directors, including severance and certain other benefits
payable upon death. We recognize an obligation for any
of these benefits that vest or accumulate with service.
Postemployment benefits that do not vest or accumulate
with service (such as severance based solely on annual
pay rather than years of service) are charged to expense
when incurred. Our postemployment benefit plans are
unfunded.
We recognize the underfunded or overfunded status
of a defined benefit pension plan as an asset or liability
and recognize changes in the funded status in the year
in which the changes occur through AOCI.
Use of Estimates 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. These estimates include our
accounting for promotional expenditures, valuation of
long-lived assets, intangible assets, redeemable interest,
50 GENERAL MILLS
20 14 ANNUAL REPORT 51
costs of $8.0 million. In fiscal 2013, we paid $79.9 million
in cash related to restructuring actions.
In fiscal 2012, we recorded restructuring, impairment,
and other exit costs pursuant to approved plans as
follows:
Expense, in Millions
Productivity and cost savings plan
Charges associated with restructuring actions
previously announced
Total
$100.6
1.0
$101.6
In fiscal 2012, we recorded a $100.6 million restruc-
turing charge related to a productivity and cost savings
plan approved in the fourth quarter of fiscal 2012. The
plan was designed to improve organizational effective-
ness and focus on key growth strategies, and included
organizational changes to strengthen business align-
ment and actions to accelerate administrative efficiencies
across all of our operating segments and support func-
tions. In connection with this initiative, we eliminated
approximately 850 positions globally. The restructuring
charge consisted of $87.6 million of employee severance
expense and a non-cash charge of $13.0 million related
to the write-off of certain long-lived assets in our U.S.
Retail segment. All of our operating segments and sup-
port functions were affected by these actions including
$69.9 million related to our U.S. Retail segment, $12.2 mil-
lion related to our Convenience Stores and Foodservice
segment, $9.5 million related to our International seg-
ment, and $9.0 million related to our administrative
functions. In fiscal 2012, we paid $3.8 million in cash
related to restructuring actions taken in fiscal 2012 and
previous years.
NOTE 4. RESTRUCTURING, IMPAIRMENT, AND
OTHER EXIT COSTS
We view our restructuring activities as actions that help
us meet our long-term growth targets. Activities we
undertake must meet internal rate of return and net
present value targets. Each restructuring action nor-
mally takes one to two years to complete. At completion
(or as each major stage is completed in the case of multi-
year programs), the project begins to deliver cash sav-
ings and/or reduced depreciation. These activities result
in various restructuring costs, including asset write-offs,
exit charges including severance, contract termination
fees, and decommissioning and other costs. Depreciation
associated with restructured assets, as used in the con-
text of our disclosures regarding restructuring activity,
refers to the increase in depreciation expense caused by
shortening the useful life or updating the salvage value
of depreciable fixed assets to coincide with the end of
production under an approved restructuring plan. Any
impairment of the asset is recognized immediately in the
period the plan is approved.
In fiscal 2014, we recorded restructuring, impairment,
and other exit costs pursuant to approved plans as
follows:
Expense, in Millions
Charges associated with restructuring actions
previously announced
Total
$3.6
$3.6
In fiscal 2014, the restructuring charge related to a
productivity and cost savings plan approved in the
fourth quarter of fiscal 2012. These restructuring actions
were completed in fiscal 2014. In fiscal 2014, we paid
$22.4 million in cash related to restructuring actions.
In fiscal 2013, we recorded restructuring, impairment,
and other exit costs pursuant to approved plans as
follows:
Expense, in Millions
Charges associated with restructuring actions
previously announced
Total
$19.8
$19.8
In fiscal 2013, the restructuring charge was primarily
related to a productivity and cost savings plan approved
in the fourth quarter of fiscal 2012, consisting of $10.6
million of employee severance expense and other exit
52 GENERA L MILLS
2014 ANNUAL REPORT 53
The roll forward of our restructuring and other exit
cost reserves, included in other current liabilities, is as
follows:
In Millions
Reserve balance as of
Contract
Severance Termination
Other
Exit
Costs
Total
May 29, 2011
$ 1.7
$ 5.5 $ — $ 7.2
2012 charges, including
foreign currency translation 82.4
—
— 82.4
Utilized in 2012
(1.0)
(2.8)
0.1 (3.7)
Joint venture related balance sheet activity follows:
In Millions
Cumulative investments
Goodwill and other intangibles
Aggregate advances
May 25,
2014
May 26,
2013
$507.5
$478.5
563.2
537.2
332.0
291.5
Joint venture earnings and cash flow activity follows:
Fiscal Year
Reserve balance as of
In Millions
2014
2013
2012
May 27, 2012
83.1
2.7
0.1 85.9
2013 charges, including
foreign currency translation 10.6
—
— 10.6
Utilized in 2013
(74.2)
(2.7)
(0.1) (77.0)
Reserve balance as of
May 26, 2013
19.5
—
— 19.5
2014 charges, including
Sales to joint ventures
$12.1
$ 12.3
$10.4
Net advances
Dividends received
54.9
36.7
90.5
115.7
22.2
68.0
Summary combined financial information for the joint
ventures on a 100 percent basis follows:
foreign currency translation 6.4
Utilized in 2014
(22.4)
—
—
— 6.4
— (22.4)
In Millions
Fiscal Year
2014
2013
2012
Net sales:
CPW
HDJ
Total net sales
Gross margin
$2,107.9
$2,132.2 $2,152.6
386.9
420.5
428.9
2,494.8
2,552.7 2,581.5
1,030.3
1,057.3 1,084.1
Earnings before income taxes
219.1
260.3
250.3
Earnings after income taxes
168.8
201.6
189.0
In Millions
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
May 25,
2014
May 26,
2013
$1,031.1
$ 976.7
1,129.8
1,779.0
1,088.2
1,717.4
110.3
115.1
Reserve balance as of
May 25, 2014
$ 3.5
$
— $ — $ 3.5
The charges recognized in the roll forward of our
reserves for restructuring and other exit costs do not
include items charged directly to expense (e.g., asset
impairment charges, the gain or loss on the sale of
restructured assets, and the write-off of spare parts) and
other periodic exit costs recognized as incurred, as those
items are not reflected in our restructuring and other
exit cost reserves on our Consolidated Balance Sheets.
NOTE 5. INVESTMENTS IN JOINT VENTURES
We have a 50 percent equity interest in Cereal Partners
Worldwide (CPW), which manufactures and markets
ready-to-eat cereal products in more than 130 countries
outside the United States and Canada. CPW also markets
cereal bars in several European countries and manufac-
tures private label cereals for customers in the United
Kingdom. We have guaranteed a portion of CPW’s debt
and its pension obligation in the United Kingdom.
We also have a 50 percent equity interest in Häagen-
Dazs Japan, Inc. (HDJ). This joint venture manufactures
and markets Häagen-Dazs ice cream products and fro-
zen novelties.
Results from our CPW and HDJ joint ventures are
reported for the 12 months ended March 31.
52 GENE RAL MI LLS
20 14 ANNUAL REPORT 53
NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS
The components of goodwill and other intangible assets
are as follows:
May 25,
2014
May 26,
2013
$ 8,650.5 $ 8,622.2
In Millions
Goodwill
Other intangible assets:
Intangible assets not subject
to amortization:
Brands and other
We performed our fiscal 2014 impairment assess-
ment as of November 25, 2013, and determined there
was no impairment of goodwill for any of our reporting
units as their related fair values were substantially in
excess of their carrying values. Our Europe and Yoplait
U.S. reporting units have experienced declining business
performance. While these reporting units had significant
coverage as of the assessment date, we will continue to
monitor these businesses.
The changes in the carrying amount of other intan-
gible assets for fiscal 2012, 2013, and 2014 are as follows:
indefinite-lived intangibles
4,504.1
4,499.5
Intangible assets subject to amortization:
Franchise agreements, customer
relationships, and other
finite-lived intangibles
Less accumulated amortization
630.7
(120.5)
Intangible assets subject to amortization
510.2
602.6
(87.0)
515.6
In Millions
Balance as of
May 29, 2011
Acquisitions
Other activity,
primarily foreign
U.S.
Retail
International
Joint
Ventures
Total
$3,242.5
$ 497.9
$72.9 $3,813.3
58.2
1,050.3
— 1,108.5
Other intangible assets
5,014.3
5,015.1
currency translation
(3.7)
(204.1)
(9.1) (216.9)
Total
$13,664.8 $13,637.3
Balance as of
May 27, 2012
3,297.0
1,344.1
63.8 4,704.9
Based on the carrying value of finite-lived intangible
assets as of May 25, 2014, amortization expense for each
of the next five fiscal years is estimated to be approxi-
mately $30 million.
The changes in the carrying amount of goodwill for
fiscal 2012, 2013, and 2014 are as follows:
In Millions
U.S.
Joint
Retail International Foodservice Ventures
Convenience
Stores and
Acquisitions
Other activity,
primarily foreign
20.0
290.7
—
310.7
currency translation
(4.6)
3.4
0.7
(0.5)
Balance as of
May 26, 2013
3,312.4
1,638.2
64.5 5,015.1
Other activity,
primarily foreign
Total
currency translation
(4.9)
3.6
0.5
(0.8)
Balance as of
—
—
(65.9)
670.3
(185.0)
946.4
(119.1)
5,813.2
28.2
Balance as of
May 29, 2011 $5,142.9 $ 162.6 $921.1 $524.2 $6,750.8
Acquisitions
— 1,616.7
Other activity,
primarily foreign
currency translation —
Balance as of
May 27, 2012
Acquisitions
Other activity,
primarily foreign
currency translation
Balance as of
May 26, 2013
Divestiture
Other activity,
primarily foreign
currency translation
Balance as of
921.1 458.3 8,182.5
— 407.0
921.1 472.7 8,622.2
(12.2)
5,841.4 1,387.0
—
989.9
378.8
(12.2)
25.5
18.3
15.0
14.4
32.7
40.5
—
—
—
—
—
—
—
May 25, 2014
$3,307.5
$1,641.8
$65.0 $5,014.3
We performed our fiscal 2014 impairment assessment
as of November 25, 2013. As of our assessment date,
there was no impairment of any of our indefinite-lived
intangible assets as their related fair values were sub-
stantially in excess of the carrying values, except for the
Uncle Toby’s brand, which had a fair value 8 percent
greater than its carrying value of $63.0 million. In addi-
tion, our Mountain High brand had a fair value 23 per-
cent greater than its carrying value of $35.0 million. We
will continue to monitor these businesses.
May 25, 2014 $5,829.2 $1,402.0
$921.1 $498.2 $8,650.5
54 GENERAL MIL LS
2014 ANNUAL REPORT 55
NOTE 7. FINANCIAL INSTRUMENTS, RISK
MANAGEMENT ACTIVITIES, AND FAIR VALUES
Financial Instruments
The carrying values of cash and cash equivalents, receiv-
ables, accounts payable, other current liabilities, and
notes payable approximate fair value. Marketable secu-
rities are carried at fair value. As of May 25, 2014, and
May 26, 2013, a comparison of cost and market values of
our marketable debt and equity securities is as follows:
Cost
Market
Value
Gross
Gains
Gross
Losses
Fiscal Year
Fiscal Year Fiscal Year Fiscal Year
In Millions
2014
2013 2014 2013 2014 2013 2014 2013
Available for sale:
Debt securities $318.6 $134.0 $318.8 $134.1 $0.2 $0.1 $ — $ —
Equity securities
1.8
1.8
7.2
6.4 5.4
4.6 —
—
Total
$320.4 $135.8 $326.0 $140.5 $5.6 $4.7 $ — $ —
Earnings include no realized gains or losses from
sales of available-for-sale marketable securities. Gains
and losses are determined by specific identification.
Classification of marketable securities as current or non-
current is dependent upon our intended holding period,
the security’s maturity date, or both. The aggregate
unrealized gains and losses on available-for-sale secu-
rities, net of tax effects, are classified in AOCI within
stockholders’ equity.
Scheduled maturities of our marketable securities are
as follows:
In Millions
Available for Sale
Cost
Market
Value
Under 1 year (current)
$ 316.9
$ 317.1
From 1 to 3 years
From 4 to 7 years
Equity securities
Total
1.1
0.6
1.8
1.1
0.6
7.2
$ 320.4
$ 326.0
Marketable securities with a market value of $2.3 mil-
lion as of May 25, 2014, were pledged as collateral for
derivative contracts. As of May 25, 2014, $43.1 million
of certain accounts receivable are pledged as collateral
against a foreign uncommitted line of credit.
The fair value and carrying amounts of long-term
debt, including the current portion, were $8,188.6 million
and $7,674.1 million, respectively, as of May 25, 2014.
The fair value of long-term debt was estimated using
market quotations and discounted cash flows based
on our current incremental borrowing rates for similar
types of instruments. Long-term debt is a Level 2 liabil-
ity in the fair value hierarchy.
Risk Management Activities
As a part of our ongoing operations, we are exposed
to market risks such as changes in interest and for-
eign currency exchange rates and commodity and equity
prices. To manage these risks, we may enter into various
derivative transactions (e.g., futures, options, and swaps)
pursuant to our established policies.
Commodity Price Risk
Many commodities we use in the production and dis-
tribution of our products are exposed to market price
risks. We utilize derivatives to manage price risk for
our principal ingredients and energy costs, including
grains (oats, wheat, and corn), oils (principally soybean),
dairy products, natural gas, and diesel fuel. Our primary
objective when entering into these derivative contracts
is to achieve certainty with regard to the future price
of commodities purchased for use in our supply chain.
We manage our exposures through a combination of
purchase orders, long-term contracts with suppliers,
exchange-traded futures and options, and over-the-
counter options and swaps. We offset our exposures
based on current and projected market conditions and
generally seek to acquire the inputs at as close to our
planned cost as possible.
We use derivatives to manage our exposure to changes
in commodity prices. We do not perform the assess-
ments required to achieve hedge accounting for com-
modity derivative positions. Accordingly, the changes in
the values of these derivatives are recorded currently in
cost of sales in our Consolidated Statements of Earnings.
Although we do not meet the criteria for cash flow
hedge accounting, we nonetheless believe that these
instruments are effective in achieving our objective of
providing certainty in the future price of commodities
purchased for use in our supply chain. Accordingly, for
purposes of measuring segment operating performance
these gains and losses are reported in unallocated cor-
porate items outside of segment operating results until
such time that the exposure we are managing affects
earnings. At that time we reclassify the gain or loss
from unallocated corporate items to segment operating
profit, allowing our operating segments to realize the
economic effects of the derivative without experiencing
54 GENER AL MILLS
20 14 ANNUAL REPORT 55
any resulting mark-to-market volatility, which remains
in unallocated corporate items.
interest. The amount of hedge ineffectiveness was less
than $1 million in each of fiscal 2014, 2013, and 2012.
Unallocated corporate items for fiscal 2014, 2013 and
2012 included:
In Millions
2014
2013
2012
Net loss on mark-to-market
valuation of commodity positions $ (4.9)
$ (7.6) $ (122.5)
Fiscal Year
Net loss on commodity
positions reclassified from
unallocated corporate items
to segment operating profit
51.2
13.7 35.7
Net mark-to-market revaluation
of certain grain inventories
Net mark-to-market valuation
of certain commodity positions
recognized in unallocated
2.2
(1.7) (17.4)
corporate items
$ 48.5
$ 4.4 $ (104.2)
As of May 25, 2014, the net notional value of com-
modity derivatives was $304.9 million, of which $124.1
million related to agricultural inputs and $180.8 million
related to energy inputs. These contracts relate to inputs
that generally will be utilized within the next 12 months.
Interest Rate Risk
We are exposed to interest rate volatility with regard
to future issuances of fixed-rate debt, and existing and
future issuances of floating-rate debt. Primary exposures
include U.S. Treasury rates, LIBOR, Euribor, and com-
mercial paper rates in the United States and Europe. We
use interest rate swaps, forward-starting interest rate
swaps, and treasury locks to hedge our exposure to inter-
est rate changes, to reduce the volatility of our financing
costs, and to achieve a desired proportion of fixed versus
floating-rate debt, based on current and projected mar-
ket conditions. 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 upon notional principal amount.
Floating Interest Rate Exposures — Floating-to-fixed
interest rate swaps are accounted for as cash flow
hedges, as are all hedges of forecasted issuances of debt.
Effectiveness is assessed based on either the perfectly
effective hypothetical derivative method or changes in
the present value of interest payments on the underly-
ing debt. Effective gains and losses deferred to AOCI are
reclassified into earnings over the life of the associated
debt. Ineffective gains and losses are recorded as net
Fixed Interest Rate Exposures — Fixed-to-floating
interest rate swaps are accounted for as fair value hedges
with effectiveness assessed based on changes in the fair
value of the underlying debt and derivatives, using incre-
mental borrowing rates currently available on loans with
similar terms and maturities. Ineffective gains and losses
on these derivatives and the underlying hedged items are
recorded as net interest. The amount of hedge ineffec-
tiveness was less than $1 million in each of fiscal 2014,
2013, and 2012.
In advance of planned debt financing, we entered into
$250.0 million of treasury locks with an average fixed
rate of 1.99 percent. All of these treasury locks were cash
settled for $17.9 million during the third quarter of fiscal
2014, coincident with the issuance of our $500.0 million
10-year fixed-rate notes.
During the third quarter of fiscal 2013, we entered into
swaps to convert $250.0 million of 0.875 percent fixed-
rate notes due January 29, 2016, to floating rates.
As of May 25, 2014, the pre-tax amount of cash-set-
tled interest rate hedge gain or loss remaining in AOCI
which will be reclassified to earnings over the remaining
term of the related underlying debt follows:
In Millions
Gain/(Loss)
5.2% notes due March 17, 2015
5.7% notes due February 15, 2017
5.65% notes due February 15, 2019
3.15% notes due December 15, 2021
3.65% notes due February 15, 2024
5.4% notes due June 15, 2040
4.15% notes due February 15, 2043
Net pre-tax hedge loss in AOCI
$ (0.4)
(6.0)
2.3
(74.8)
17.3
(14.5)
11.3
$ (64.8)
The following table summarizes the notional amounts
and weighted-average interest rates of our interest rate
derivatives. Average floating 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
May 25,
2014
$250.0
May 26,
2013
$550.0
0.9%
0.5%
1.1%
0.4%
Treasury locks - notional amount
$
—
$250.0
The swap contracts mature in fiscal 2016.
56 GENERAL MI L LS
2014 ANN UAL REPORT 57
The following tables reconcile the net fair values of assets and liabilities subject to offsetting arrangements that are
recorded in the Consolidated Balance Sheets to the net fair values that could be reported in the Consolidated Balance
Sheets:
May 25, 2014
Assets
Gross Amounts Not
Offset in the
Balance Sheet (e)
Liabilities
Gross Amounts Not
Offset in the
Balance Sheet (e)
Gross
Gross
Assets
Amounts of Offset in
Recognized
Instruments Received Amount (c) Liabilities
Cash
Collateral
Net
Net
the Balance Amounts of
Financial
Sheet (a) Liabilities (b) Instruments Received Amount (d)
Net
Cash
Collateral
Gross
Gross
Liabilities
Amounts of Offset in
Recognized the Balance Amounts of Financial
Net
In Millions
Assets
Sheet (a)
Assets (b)
Commodity
contracts
$ 19.1
$ —
$ 19.1 $ (3.4)
$ —
$ 15.7 $ (4.0)
$ —
$ (4.0) $ 3.4 $ —
$ (0.6)
Interest rate
contracts
Foreign
exchange
0.7
—
0.7
—
—
0.7
—
—
—
—
—
—
contracts
10.5
—
10.5
(8.0)
—
2.5
(19.1)
—
(19.1)
8.0
—
(11.1)
Total
$ 30.3
$ —
$ 30.3 $ (11.4)
$ —
$ 18.9 $ (23.1)
$ —
$ (23.1) $ 11.4 $ —
$ (11.7)
(a) Includes related collateral offset in the Consolidated Balance Sheets.
(b) Net fair value as recorded in the Consolidated Balance Sheets.
(c) Fair value of assets that could be reported net in the Consolidated Balance Sheets.
(d) Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.
(e) Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.
May 26, 2013
Assets
Gross Amounts Not
Offset in the
Balance Sheet (e)
Liabilities
Gross Amounts Not
Offset in the
Balance Sheet (e)
Gross
Gross
Assets
Amounts of Offset in
Recognized
Instruments Received Amount (c) Liabilities
Cash
Collateral
Net
Net
the Balance Amounts of
Financial
Sheet (a) Liabilities (b) Instruments Received Amount (d)
Net
Cash
Collateral
Gross
Gross
Liabilities
Amounts of Offset in
Recognized the Balance Amounts of Financial
Net
In Millions
Assets
Sheet (a)
Assets (b)
Commodity
contracts
$ 33.0 $ (19.6) $ 13.4
$ —
$ —
$ 13.4 $ (23.5)
$ 19.6
$ (3.9)
$ —
$ —
$ (3.9)
Interest rate
contracts
Foreign
exchange
10.3
—
10.3
—
—
10.3
—
—
—
—
—
contracts
22.5
—
22.5
(1.7)
—
20.8
(1.7)
—
(1.7)
1.7
—
—
—
Total
$ 65.8 $ (19.6) $ 46.2
$ (1.7)
$ —
$ 44.5 $ (25.2)
$ 19.6
$ (5.6)
$ 1.7 $ —
$ (3.9)
(a) Includes related collateral offset in the Consolidated Balance Sheets.
(b) Net fair value as recorded in the Consolidated Balance Sheets.
(c) Fair value of assets that could be reported net in the Consolidated Balance Sheets.
(d) Fair value of liabilities that could be reported net in the Consolidated Balance Sheets.
(e) Fair value of assets and liabilities reported on a gross basis in the Consolidated Balance Sheets.
56 GENER AL MILLS
20 14 ANNUAL REPORT 57
This market has significantly higher foreign exchange
rates than those available through the other foreign
exchange mechanisms. In the fourth quarter of fiscal
2014, we recorded a $62.2 million foreign exchange loss
in the International segment operating profit resulting
from the remeasurement of assets and liabilities of our
Venezuelan subsidiary at the SICAD 2 rate of 50.0 boli-
vars per U.S. dollar. We have been able to access U.S.
dollars through the SICAD 2 market. Our Venezuela
operations represent less than 1 percent of our consoli-
dated assets, liabilities, net sales, and segment operating
profit. At May 25, 2014, we had $2.6 million of non-U.S.
dollar cash balances in Venezuela.
Equity Instruments
Equity price movements affect our compensation expense
as certain investments made by our employees in our
deferred compensation plan are revalued. We use equity
swaps to manage this risk. As of May 25, 2014, the net
notional amount of our equity swaps was $104.4 million.
These swap contracts mature in fiscal 2015.
Foreign Exchange Risk
Foreign currency fluctuations affect our net investments
in foreign subsidiaries and foreign currency cash flows
related to third party purchases, intercompany loans,
product shipments, and foreign-denominated commer-
cial paper. We are also exposed to the translation of
foreign currency earnings to the U.S. dollar. Our prin-
cipal exposures are to the Australian dollar, Brazilian
real, British pound sterling, Canadian dollar, Chinese
renminbi, euro, Japanese yen, Mexican peso, and Swiss
franc. We mainly use foreign currency forward contracts
to selectively hedge our foreign currency cash flow expo-
sures. We also generally swap our foreign-denominated
commercial paper borrowings and nonfunctional cur-
rency intercompany loans back to U.S. dollars or the
functional currency of the entity with foreign exchange
exposure; the gains or losses on these derivatives offset
the foreign currency revaluation gains or losses recorded
in earnings on the associated borrowings. We generally
do not hedge more than 18 months forward.
As of May 25, 2014, the net notional value of foreign
exchange derivatives was $1,222.9 million. The amount
of hedge ineffectiveness was less than $1 million in each
of fiscal 2014, 2013, and 2012.
We also have many net investments in foreign sub-
sidiaries that are denominated in euros. We previously
hedged a portion of these net investments by issu-
ing euro-denominated commercial paper and foreign
exchange forward contracts. During the second quarter
of fiscal 2014, we entered into a net investment hedge
for a portion of our net investment in foreign opera-
tions denominated in euros by issuing €500.0 million
of euro-denominated bonds. As of May 25, 2014, we
had deferred net foreign currency transaction losses of
$104.3 million in AOCI associated with hedging activity.
Venezuela is a highly inflationary economy and as
such, we remeasure the value of the assets and liabilities
of our Venezuelan subsidiary based on the exchange rate
at which we expect to remit dividends in U.S. dollars.
In February 2013, the Venezuelan government devalued
the bolivar by resetting the official exchange rate. The
effect of the devaluation in fiscal 2013 was a $25.2 mil-
lion foreign exchange loss in segment operating profit
resulting from the remeasurement of assets and liabili-
ties of our Venezuelan subsidiary. On February 19, 2014,
the Venezuelan government established a new foreign
exchange market mechanism (“SICAD 2”) and has indi-
cated that this will be the market through which U.S.
dollars will be obtained for the remittance of dividends.
58 GENERA L MILL S
2014 ANNUAL REPORT 59
Fair Value Measurements And Financial Statement Presentation
The fair values of our assets, liabilities, and derivative positions recorded at fair value and their respective levels in
the fair value hierarchy as of May 25, 2014 and May 26, 2013, were as follows:
In Millions
Level 1 Level 2 Level 3
Total Level 1 Level 2 Level 3
Total
May 25, 2014
May 25, 2014
Fair Values of Assets
Fair Values of Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)
Foreign exchange contracts (c) (d)
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d)
Commodity contracts (c) (e)
Grain contracts (c) (e)
Total
Other assets and liabilities reported at fair value:
Marketable investments (a) (f)
Total
Total assets, liabilities, and derivative positions
$
— $ 0.7 $ — $ 0.7 $ — $
— $ — $
—
— 9.9
— 9.9 — (12.6) — (12.6)
— 10.6
— 10.6 — (12.6) — (12.6)
— 0.6
— 0.6 — (6.5) — (6.5)
11.1 8.0
— 19.1 — (4.0) — (4.0)
— 7.5
— 7.5 — (4.9) — (4.9)
11.1 16.1
— 27.2 — (15.4) — (15.4)
7.2 318.8
— 326.0 —
— —
7.2 318.8
— 326.0 —
— —
—
—
recorded at fair value
$ 18.3 $ 345.5 $ — $ 363.8 $ — $ (28.0) $ — $ (28.0)
(a) These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as
appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.
(b) Based on LIBOR and swap rates.
(c) These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss
position.
(d) Based on observable market transactions of spot currency rates and forward currency prices.
(e) Based on prices of futures exchanges and recently reported transactions in the marketplace.
(f) Based on prices of common stock and bond matrix pricing.
58 GENER AL MILLS
20 14 ANNUAL REPORT 59
In Millions
Level 1 Level 2 Level 3
Total Level 1 Level 2 Level 3 Total
May 26, 2013
May 26, 2013
Fair Values of Assets
Fair Values of Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts (a) (b)
Foreign exchange contracts (c) (d)
Total
Derivatives not designated as hedging instruments:
Foreign exchange contracts (c) (d)
Equity contracts (a) (e)
Commodity contracts (c) (e)
Grain contracts (c) (e)
Total
Other assets and liabilities reported at fair value:
Marketable investments (a) (f)
Total
Total assets, liabilities, and derivative positions
$
— $ 10.3 $ — $ 10.3 $ — $ — $ — $
—
— 15.7
— 15.7 — (1.6)
— (1.6)
— 26.0
— 26.0 — (1.6)
— (1.6)
— 6.7
— 6.7 — (0.1)
— (0.1)
—
—
—
—
— (0.2)
— (0.2)
10.3 3.1
— 13.4 — (3.9)
— (3.9)
— 7.5
— 7.5 — (30.4) — (30.4)
10.3 17.3
— 27.6 — (34.6) — (34.6)
6.4 134.1
6.4 134.1
— —
— 140.5
— 140.5 — —
—
—
—
—
recorded at fair value
$ 16.7 $ 177.4 $ — $ 194.1 $ — $ (36.2) $ — $ (36.2)
(a) These contracts and investments are recorded as prepaid expenses and other current assets, other assets, other current liabilities or other liabilities, as
appropriate, based on whether in a gain or loss position. Certain marketable investments are recorded as cash and cash equivalents.
(b) Based on LIBOR and swap rates.
(c) These contracts are recorded as prepaid expenses and other current assets or as other current liabilities, as appropriate, based on whether in a gain or loss
position.
(d) Based on observable market transactions of spot currency rates and forward currency prices.
(e) Based on prices of futures exchanges and recently reported transactions in the marketplace.
(f) Based on prices of common stock and bond matrix pricing.
We did not significantly change our valuation techniques from prior periods.
60 GENERAL MI L LS
2014 ANN UAL REPORT 61
Information related to our cash flow hedges, fair value hedges, and other derivatives not designated as hedging
instruments for the fiscal years ended May 25, 2014, and May 26, 2013, follows:
In Millions
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
Interest Rate Foreign Exchange
Contracts
Contracts
Equity
Contracts
Commodity
Contracts
Total
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Derivatives in Cash Flow Hedging Relationships:
Amount of gain recognized in other
comprehensive income (OCI) (a)
Amount of net gain (loss) reclassified from
AOCI into earnings (a) (b)
Amount of net gain (loss) recognized
$10.6 $19.1
$0.6 $16.4
$ — $ —
$ —
$ — $11.2 $ 35.5
(11.7)
(12.5) 16.4
(4.8)
—
—
—
—
4.7 (17.3)
in earnings (c)
—
— (0.1)
0.4
—
—
—
— (0.1)
0.4
Derivatives in Fair Value Hedging Relationships:
Amount of net gain recognized
in earnings (d)
Derivatives Not Designated as Hedging
Instruments:
0.2
0.8
—
—
—
-—
—
—
0.2
0.8
Amount of net gain (loss) recognized in earnings (d)
—
— (20.0) 11.6
9.8 12.0
(4.9)
(7.6) (15.1) 16.0
(a) Effective portion.
(b) Gain (loss) reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign
exchange contracts.
(c) Gain (loss) recognized in earnings is related to the ineffective portion of the hedging relationship, including SG&A expenses for foreign exchange contracts
and interest, net for interest rate contracts. No amounts were reported as a result of being excluded from the assessment of hedge effectiveness.
(d) Gain (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for
equity contracts and foreign exchange contracts.
60 GENERAL MILLS
20 14 ANNUAL REPORT 61
in our Convenience Stores and Foodservice segment
accounted for 42 percent of its fiscal 2014 net sales.
We enter into interest rate, foreign exchange, and cer-
tain commodity and equity derivatives, primarily 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 trans-
actions may expose us to potential losses due to the risk
of nonperformance by these counterparties; however,
we have not incurred a material loss. We also enter into
commodity futures transactions through various regu-
lated exchanges.
The amount of loss due to the credit risk of the coun-
terparties, should the counterparties fail to perform
according to the terms of the contracts, is $5.9 mil-
lion against which we do not hold collateral. Under the
terms of our swap agreements, some of our transactions
require collateral or other security to support financial
instruments subject to threshold levels of exposure and
counterparty credit risk. Collateral assets are either cash
or U.S. Treasury instruments and are held in a trust
account that we may access if the counterparty defaults.
We offer certain suppliers access to a third party ser-
vice that allows them to view our scheduled payments
online. The third party service also allows suppliers to
finance advances on our scheduled payments at the
sole discretion of the supplier and the third party. We
have no economic interest in these financing arrange-
ments and no direct relationship with the suppliers, the
third party, or any financial institutions concerning this
service. All of our accounts payable remain as obligations
to our suppliers as stated in our supplier agreements.
As of May 25, 2014, $285.5 million of our total accounts
payable is payable to suppliers who utilize this third
party service.
Amounts Recorded In Accumulated Other
Comprehensive Loss
As of May 25, 2014, the after-tax amounts of unrealized
gains and losses in AOCI related to hedge derivatives
follows:
In Millions
After-Tax Gain/(Loss)
Unrealized losses from interest rate cash flow hedges
$ (39.4)
Unrealized gains from foreign currency cash flow hedges
0.6
After-tax loss in AOCI related to hedge derivatives
$ (38.8)
The net amount of pre-tax gains and losses in AOCI
as of May 25, 2014, that we expect to be reclassified into
net earnings within the next 12 months is $7.4 million
of loss.
Credit-Risk-Related Contingent Features
Certain of our derivative instruments contain provisions
that require us to maintain an investment grade credit
rating on our debt from each of the major credit rating
agencies. If our debt were to fall below investment grade,
the counterparties to the derivative instruments could
request full collateralization on derivative instruments
in net liability positions. The aggregate fair value of all
derivative instruments with credit-risk-related contin-
gent features that were in a liability position on May
25, 2014, was $9.0 million. We have posted no collat-
eral under these contracts. If the credit-risk-related con-
tingent features underlying these agreements had been
triggered on May 25, 2014, we would have been required
to post $9.0 million of collateral to counterparties.
Concentrations Of Credit And Counterparty Credit Risk
During fiscal 2014, Wal-Mart Stores, Inc. and its affili-
ates (Wal-Mart) accounted for 21 percent of our consoli-
dated net sales and 30 percent of our net sales in the
U.S. Retail segment. No other customer accounted for
10 percent or more of our consolidated net sales. Wal-
Mart also represented 7 percent of our net sales in the
International segment and 7 percent of our net sales
in the Convenience Stores and Foodservice segment. As
of May 25, 2014, Wal-Mart accounted for 31 percent of
our U.S. Retail receivables, 5 percent of our International
receivables, and 9 percent of our Convenience Stores
and Foodservice receivables. The five largest customers
in our U.S. Retail segment accounted for 53 percent of
its fiscal 2014 net sales, the five largest customers in
our International segment accounted for 25 percent of
its fiscal 2014 net sales, and the five largest customers
62 GENERA L MILLS
2014 ANNUAL REPORT 63
NOTE 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 25, 2014
May 26, 2013
Weighted-
average
Interest
Rate
Notes
Payable
Weighted-
average
Interest
Rate
Notes
Payable
In Millions
U.S. commercial paper $1,007.6
0.2%
$515.5
0.2%
Financial institutions
104.1
12.1
84.2
13.0
Total
$1,111.7
1.3%
$599.7
2.0%
To ensure availability of funds, we maintain bank
credit lines sufficient to cover our outstanding short-
term borrowings. Commercial paper is a continuing
source of short-term financing. We have commercial
paper programs available to us in the United States and
Europe. We also have uncommitted and asset-backed
credit lines that support our foreign operations.
The following table details the fee-paid committed and
uncommitted credit lines we had available as of May 25,
2014:
In Billions
Credit facility expiring:
April 2017
May 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and uncommitted
Facility
Amount
Borrowed
Amount
$ 1.7
1.0
2.7
0.4
$ —
—
—
0.1
credit facilities
$ 3.1
$ 0.1
In May 2014, we entered into a $1.0 billion fee-paid
committed credit facility that is scheduled to expire in
May 2019. Concurrent with the execution of this credit
facility, we terminated our credit facility that provided
$1.0 billion of revolving credit which was scheduled to
expire in April 2015.
The credit facilities contain covenants, including a
requirement to maintain a fixed charge coverage ratio of
at least 2.5 times. We were in compliance with all credit
facility covenants as of May 25, 2014.
Long-Term Debt In May 2014, we repaid $400.0 mil-
lion of floating-rate notes and $300.0 million of 1.55
percent notes.
In January 2014, we issued $500.0 million aggregate
principal amount of 3.65 percent fixed-rate notes due
February 15, 2024 and $250.0 million aggregate princi-
pal amount of floating-rate notes due January 28, 2016.
Interest on the fixed-rate notes is payable semi-annu-
ally in arrears. The fixed-rate notes may be redeemed
in whole, or in part, at our option at any time prior
to November 15, 2023 for a specified make whole
amount and any time on or after that date at par. The
floating-rate notes bear interest equal to three-month
LIBOR plus 20 basis points, subject to quarterly reset.
Interest on the floating-rate notes is payable quarterly
in arrears. The floating-rate notes are not redeemable
prior to maturity. The fixed-rate and floating-rate notes
are senior unsecured obligations that include a change
of control repurchase provision. The net proceeds were
used for general corporate purposes and to reduce our
commercial paper borrowings.
In November 2013, we issued €500.0 million aggre-
gate principal amount of 2.1 percent fixed-rate notes
due November 16, 2020. Interest on the notes is pay-
able annually in arrears. The notes may be redeemed
in whole, or in part, at our option at any time prior
to August 16, 2020 for a specified make whole amount
and any time on or after that date at par. These notes
are senior unsecured obligations that include a change
of control repurchase provision. The net proceeds were
used for general corporate purposes and to reduce our
commercial paper borrowings.
In January 2013, we issued $250.0 million aggregate
principal amount of floating-rate notes due January 29,
2016. In October 2013, we issued an additional $250.0
million aggregate principal amount of these notes. The
notes bear interest equal to three-month LIBOR plus 30
basis points, subject to quarterly reset. Interest on the
notes is payable quarterly in arrears. The notes are not
redeemable prior to maturity. These notes are senior
unsecured obligations that include a change of control
repurchase provision. The net proceeds were used to
reduce our commercial paper borrowings.
In August 2013, we repaid $700.0 million of 5.25 per-
cent notes.
In January 2013, we issued $750.0 million aggre-
gate principal amount of fixed-rate notes. The issu-
ance consisted of $250.0 million 0.875 percent notes
due January 29, 2016 and $500.0 million 4.15 percent
notes due February 15, 2043. Interest on the fixed-rate
notes is payable semi-annually in arrears. The fixed-rate
notes due January 29, 2016 may be redeemed in whole,
62 GENE RAL MI LLS
20 14 ANNUAL REPORT 63
or in part, at our option at any time for a specified
make whole amount. The fixed-rate notes due February
15, 2043 may be redeemed in whole, or in part, at our
option at any time prior to August 15, 2042 for a speci-
fied make whole amount and any time on or after that
date at par. These notes are senior unsecured obligations
that include a change of control repurchase provision.
The net proceeds were used to reduce our commercial
paper borrowings.
In September 2012, we repaid $520.8 million of 5.65
percent notes.
Certain of our long-term debt agreements contain
restrictive covenants. As of May 25, 2014, we were in
compliance with all of these covenants.
As of May 25, 2014, the $64.8 million pre-tax loss
recorded in AOCI associated with our previously
designated interest rate swaps will be reclassified to
net interest over the remaining lives of the hedged
transactions. The amount expected to be reclassified
from AOCI to net interest in fiscal 2015 is a $10.6 million
pre-tax loss.
A summary of our long-term debt is as follows:
In Millions
May 25, 2014 May 26,2013
5.65% notes due February 15, 2019
$1,150.0
$1,150.0
5.7% notes due February 15, 2017
3.15% notes due December 15, 2021
5.2% notes due March 17, 2015
5.25% notes due August 15, 2013
2.1% notes due November 16, 2020
5.4% notes due June 15, 2040
4.15% notes due February 15, 2043
3.65% notes due February 15, 2024
1,000.0
1,000.0
750.0
—
681.5
500.0
500.0
500.0
Floating-rate notes due January 29, 2016
500.0
Floating-rate notes due May 16, 2014
—
Euribor-based floating-rate note due
December 15, 2014
1.55% notes due May 16, 2014
0.875% notes due January 29, 2016
395.3
—
250.0
Floating-rate notes due January 28, 2016
250.0
1,000.0
1,000.0
750.0
700.0
—
500.0
500.0
—
250.0
400.0
368.6
300.0
250.0
—
Medium-term notes, 0.02% to 6.4%,
due fiscal 2015 or later
Other, including capital leases
204.2
204.2
(6.9)
(3.4)
7,674.1
7,369.4
Less amount due within one year
(1,250.6)
(1,443.3)
Total long-term debt
$6,423.5
$5,926.1
Principal payments due on long-term debt in the next
five years based on stated contractual maturities, our
intent to redeem, or put rights of certain note holders
are $1,250.6 million in fiscal 2015, $1,000.6 million in fis-
cal 2016, $1,000.0 million in fiscal 2017, $100.0 million in
fiscal 2018, and $1,150.0 million in fiscal 2019.
NOTE 9. REDEEMABLE AND
NONCONTROLLING INTERESTS
Our principal redeemable and noncontrolling inter-
ests relate to our Yoplait S.A.S., Yoplait Marques S.A.S.,
Liberté Marques, S.a.r.l., and General Mills Cereals, LLC
(GMC) subsidiaries. In addition, we have seven foreign
subsidiaries that have noncontrolling interests totaling
$5.8 million as of May 25, 2014.
We have a 51 percent controlling interest in Yoplait
S.A.S. and a 50 percent interest in Yoplait Marques
S.A.S. Sodiaal holds the remaining interests in each of
the entities. On the acquisition date in fiscal 2012, we
recorded the $904.4 million fair value of Sodiaal’s 49
percent euro-denominated interest in Yoplait S.A.S. as a
redeemable interest on our Consolidated Balance Sheets.
Sodiaal has the ability to put a limited portion of its
redeemable interest to us at fair value once per year up
to a maximum remaining term of 6 years. We adjust the
value of the redeemable interest through additional paid-
in capital on our Consolidated Balance Sheets quarterly
to the redeemable interest’s redemption value, which
approximates its fair value. Yoplait S.A.S. pays dividends
annually if it meets certain financial metrics set forth
in its shareholders agreement. As of May 25, 2014, the
redemption value of the euro-denominated redeemable
interest was $984.1 million.
In addition, a subsidiary of Yoplait S.A.S. has entered
into an exclusive milk supply agreement for its European
operations with Sodiaal at market-determined prices
through July 1, 2021. Net purchases totaled $311.2 million
for fiscal 2014 and $263.5 million for fiscal 2013.
On the acquisition date in fiscal 2012, we recorded the
$263.8 million fair value of Sodiaal’s 50 percent euro-
denominated interest in Yoplait Marques S.A.S. as a non-
controlling interest on our Consolidated Balance Sheets.
Yoplait Marques S.A.S. earns a royalty stream through
a licensing agreement with Yoplait S.A.S. for the rights
to the Yoplait and related trademarks. Yoplait Marques
S.A.S. pays dividends annually based on its available cash
as of its fiscal year end.
64 GENERAL MIL LS
2014 ANNUAL REPORT PB
During the third quarter of fiscal 2014, we formed
Liberté Marques, S.a.r.l. and sold a 50 percent euro-
denominated interest in the entity to Sodiaal in exchange
for $17.6 million. We recorded Sodiaal’s 50 percent inter-
est in the entity as a noncontrolling interest on our
Consolidated Balance Sheets. Liberté Marques, S.a.r.l.
earns a royalty stream through licensing agreements
with certain Yoplait group companies for the rights to
Liberté and related trademarks. Liberté Marques, S.a.r.l.
pays dividends annually based on its available cash as of
its fiscal year end.
During fiscal 2014, we paid $71.9 million of dividends
to Sodiaal under the terms of the Yoplait S.A.S. and
Yoplait Marques S.A.S. shareholder agreements.
During the first quarter of fiscal 2013, in conjunction
with the consent of the Class A investor, we restruc-
tured GMC through the distribution of its manufactur-
ing assets, stock, inventory, cash, and certain intellectual
property to a wholly owned subsidiary. GMC retained
the remaining intellectual property. Immediately follow-
ing the restructuring, the Class A Interests of GMC were
sold by the then current holder to another unrelated
third-party investor.
The holder of the GMC Class A Interests receives quar-
terly preferred distributions from available net income
based on the application of a floating preferred return
rate, currently equal to the sum of three-month LIBOR
plus 110 basis points, to the holder’s capital account bal-
ance established in the most recent mark-to-market val-
uation (currently $251.5 million). The preferred return
rate is adjusted every three years through a negotiated
agreement with the Class A Interest holder or through a
remarketing auction.
For financial reporting purposes, the assets, liabilities,
results of operations, and cash flows of our non-wholly
owned subsidiaries are included in our Consolidated
Financial Statements. The third-party investor’s share of
the net earnings of these subsidiaries is reflected in net
earnings attributable to redeemable and noncontrolling
interests in the Consolidated Statements of Earnings.
Our noncontrolling interests contain restrictive cov-
enants. As of May 25, 2014, we were in compliance with
all of these covenants.
NOTE 10. STOCKHOLDERS’ EQUITY
Cumulative preference stock of 5.0 million shares, with-
out par value, is authorized but unissued.
On June 28, 2010, our Board of Directors authorized
the repurchase of up to 100 million shares of our com-
mon stock. The Board terminated this authorization on
May 6, 2014, and authorized the repurchase of up to 100
million shares of our common stock. Purchases under
the authorization can be made in the open market or
in privately negotiated transactions, including the use of
call options and other derivative instruments, Rule 10b5-1
trading plans, and accelerated repurchase programs. The
authorization has no specified termination date.
During fiscal 2014, we repurchased 35.6 million shares
of common stock for an aggregate purchase price of
$1,774.4 million. During fiscal 2013, we repurchased 24.2
million shares of common stock for an aggregate pur-
chase price of $1,014.9 million. During fiscal 2012, we
repurchased 8.3 million shares of common stock for an
aggregate purchase price of $313.0 million.
During the fourth quarter of fiscal 2013, we entered
into an Accelerated Share Repurchase (ASR) agreement
with an unrelated third party financial institution to
repurchase an aggregate of $300.0 million of our out-
standing common stock. Under the ASR agreement,
we paid $300.0 million to the financial institution and
received 5.5 million shares of common stock with a
fair value of $270.0 million during the fourth quarter
of 2013. We received an additional 0.6 million shares of
common stock upon completion of the ASR agreement
during the first quarter of fiscal 2014. As of May 26,
2013, we recorded this transaction as an increase in trea-
sury stock of $270.0 million, and recorded the remaining
$30.0 million as a decrease to additional paid-in capital
on our Consolidated Balance Sheets. Upon completion of
the ASR agreement in the first quarter of fiscal 2014,
we reclassified the $30.0 million to treasury stock from
additional paid-in capital on our Consolidated Balance
Sheets.
PB GE NER AL M ILLS
20 14 ANNUAL REPORT 65
The following table provides details of total comprehensive income:
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income (loss):
Foreign currency translation
Net actuarial income
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives (a)
Amortization of losses and
prior service costs (b)
Other comprehensive income
Total comprehensive income
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2014
$ 1,824.4
$ 5.8
$ 31.1
$ (71.8)
327.2
$
—
(121.2)
0.5
14.4
(0.2)
(7.0)
(71.8)
206.0
0.3
7.4
(4.7)
0.2
(4.5)
172.7
438.3
(65.1)
(193.3)
107.6
245.0
$ 2,069.4
19.1
—
—
—
—
—
19.1
$ 24.9
41.4
—
—
(2.4)
(0.1)
—
38.9
$ 70.0
(a) Gain reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign
exchange contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expense.
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive (loss):
Foreign currency translation
Net actuarial loss
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives (a)
Amortization of losses and
prior service costs (b)
Other comprehensive income
Total comprehensive income
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2013
$ 1,855.2
$ 8.0
$ 29.3
$ (19.8)
76.3
$ —
(31.3)
1.2
33.5
(0.4)
(10.4)
(19.8)
45.0
0.8
23.1
15.0
(4.5)
10.5
159.9
266.1
(61.1)
(107.7)
98.8
158.4
$ 2,013.6
10.3
—
—
—
—
—
10.3
$ 18.3
10.3
—
—
1.5
1.7
—
13.5
$ 42.8
(a) Loss reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign
exchange contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expense.
66 GENERAL MI L LS
2014 ANN UAL REPORT 67
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income (loss):
Foreign currency translation
Net actuarial gain
Other fair value changes:
Securities
Hedge derivatives
Reclassification to earnings:
Hedge derivatives (a)
Amortization of losses and
prior service costs (b)
Other comprehensive loss
Total comprehensive income (loss)
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2012
$ 1,567.3
$
6.8
$ 15.0
$ (270.3)
(813.1)
$ —
308.5
(0.3)
(80.8)
0.1
31.2
(270.3)
(504.6)
(0.2)
(49.6)
(51.1)
—
—
—
(98.7)
—
—
(3.8)
16.3
(6.2)
10.1
—
1.4
131.6
(1,016.6)
(49.9)
283.7
81.7
(732.9)
$ 834.4
—
(51.1)
$ (44.3)
—
(101.1)
$ (86.1)
(a) Loss reclassified from AOCI into earnings is reported in interest, net for interest rate swaps and in cost of sales and SG&A expenses for foreign exchange
contracts.
(b) Loss reclassified from AOCI into earnings is reported in SG&A expense.
In fiscal 2014, 2013, and 2012, except for reclassifi-
cations to earnings, changes in other comprehensive
income (loss) were primarily non-cash items.
Accumulated other comprehensive loss balances, net of
tax effects, were as follows:
In Millions
May 25, 2014 May 26, 2013
Foreign currency translation
adjustments
Unrealized gain (loss) from:
Securities
Hedge derivatives
Pension, other postretirement, and
postemployment benefits:
$
191.3
$ 263.1
2.9
2.6
(38.8)
(41.7)
Net actuarial loss
Prior service costs
(1,469.2)
(1,801.5)
(26.5)
(7.8)
Accumulated other comprehensive loss $ (1,340.3)
$ (1,585.3)
NOTE 11. STOCK PLANS
We use broad-based stock plans to help ensure that man-
agement’s interests are aligned with those of our stock-
holders. As of May 25, 2014, a total of 30.8 million shares
were available for grant in the form of stock options,
restricted stock, restricted stock units, and shares of
unrestricted stock under the 2011 Stock Compensation
Plan (2011 Plan) and the 2011 Compensation Plan for
Non-Employee Directors. The 2011 Plan also provides
for the issuance of cash-settled share-based units, stock
appreciation rights, and performance awards. Stock-
based awards now outstanding include some granted
under the 2001, 2003, 2005, 2006, 2007, and 2009 stock
plans and the Executive Incentive Plan, under which no
further awards may be granted. The stock plans provide
for accelerated vesting of awards upon retirement, ter-
mination, or death of eligible employees and directors.
Stock Options The estimated fair values of stock options
granted and the assumptions used for the Black-Scholes
option-pricing model were as follows:
Fiscal Year
2014
2013
2012
Estimated fair values of
stock options granted
$ 6.03
$ 3.65
$ 5.88
Assumptions:
Risk-free interest rate
2.6%
1.6%
2.9%
Expected term
9.0 years
9.0 years
8.5 years
Expected volatility
17.4%
17.3%
17.6%
Dividend yield
3.1%
3.5%
3.3%
66 GENER AL MILLS
20 14 ANNUAL REPORT 67
Options may be priced at 100 percent or more of the
fair market value on the date of grant, and generally
vest four years after the date of grant. Options gener-
ally expire within 10 years and one month after the date
of grant.
Information on stock option activity follows:
Weighted-
Average
Exercise
Weighted-
Average
Exercise
Exercisable Price Per Outstanding Price Per
Share
(Thousands)
(Thousands)
Options
Options
Share
Balance as of
May 29, 2011
39,221.7 $23.78
67,547.3 $ 26.82
Granted
Exercised
Forfeited or expired
Balance as of
4,069.0
37.29
(10,279.3)
24.12
(394.3)
27.88
May 27, 2012
39,564.9
25.27
60,942.7
27.96
Granted
Exercised
Forfeited or expired
Balance as of
3,407.7
38.15
(16,534.6)
23.49
(143.7)
34.06
May 26, 2013
29,290.3
27.69
47,672.1
30.22
Granted
Exercised
Forfeited or expired
Balance as of
2,789.8
48.33
(6,181.3)
24.78
(111.6)
38.74
May 25, 2014
29,452.8 $28.37
44,169.0 $ 32.10
Stock-based compensation expense related to stock
option awards was $18.2 million in fiscal 2014, $17.5 mil-
lion in fiscal 2013, and $23.9 million in fiscal 2012.
Net cash proceeds from the exercise of stock options
less shares used for minimum withholding taxes and the
intrinsic value of options exercised were as follows:
In Millions
2014
2013
2012
Fiscal Year
Net cash proceeds
Intrinsic value of
$108.1
$300.8
$233.5
options exercised
$166.6
$297.2
$156.7
The valuation of stock options is a significant account-
ing estimate that requires us to use judgments and
assumptions that are likely to have a material impact
on our financial statements. Annually, we make predic-
tive assumptions regarding future stock price volatility,
employee exercise behavior, dividend yield, and the for-
feiture rate.
We estimate the fair value of each option on the grant
date using a Black-Scholes option-pricing model, which
requires us to make predictive assumptions regarding
future stock price volatility, employee exercise behavior,
and dividend yield. We estimate our future stock price
volatility using the historical volatility over the expected
term of the option, excluding time periods of volatility
we believe a marketplace participant would exclude in
estimating our stock price volatility. We also have con-
sidered, but did not use, implied volatility in our esti-
mate, because trading activity in options on our stock,
especially those with tenors of greater than 6 months,
is insufficient to provide a reliable measure of expected
volatility.
Our expected term represents the period of time
that options granted are expected to be outstanding
based on historical data to estimate option exercises
and employee terminations within the valuation model.
Separate groups of employees have similar historical
exercise behavior and therefore were aggregated into a
single pool for valuation purposes. The weighted-average
expected term for all employee groups is presented in
the table above. The risk-free interest rate for periods
during the expected term of the options is based on the
U.S. Treasury zero-coupon yield curve in effect at the
time of grant.
Any corporate income tax benefit realized upon exer-
cise or vesting of an award in excess of that previously
recognized in earnings (referred to as a windfall tax ben-
efit) is presented in the Consolidated Statements of Cash
Flows as a financing cash flow.
Realized windfall tax benefits are credited to additional
paid-in capital within the Consolidated Balance Sheets.
Realized shortfall tax benefits (amounts which are less
than that previously recognized in earnings) are first
offset against the cumulative balance of windfall tax
benefits, if any, and then charged directly to income tax
expense, potentially resulting in volatility in our consoli-
dated effective income tax rate. We calculated a cumu-
lative memo balance of windfall tax benefits for the
purpose of accounting for future shortfall tax benefits.
68 GENERA L MILL S
2014 ANNUAL REPORT 69
Restricted Stock, Restricted Stock Units, and Cash-
Settled Share-Based Units Stock and units settled in
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 employ-
ees under the 2011 Plan. Restricted stock and restricted
stock units generally vest and become unrestricted four
years after the date of grant. Participants are entitled to
dividends on such awarded shares and units, but only
receive those amounts if the shares or units vest. The
sale or transfer of these shares and units is restricted
during the vesting period. Participants holding restricted
stock, but not restricted stock units, are entitled to vote
on matters submitted to holders of common stock for
a vote.
Information on restricted stock unit and cash-settled share-based units activity follows:
Equity Classified
Liability Classified
Share-
Settled
Units
(Thousands)
Weighted-
Average
Grant-Date
Fair Value
Share-
Settled
Units
(Thousands)
Weighted-
Average
Grant-Date
Fair Value
Cash-Settled
Share-Based
Units
(Thousands)
Weighted-
Average
Grant-Date
Fair Value
Non-vested as of May 26, 2013
Granted
Vested
Forfeited, expired, or reclassified
Non-vested as of May 25, 2014
8,042.2
2,069.8
(2,004.8)
(213.5)
7,893.7
$35.89
48.49
29.76
40.83
$40.81
388.2
74.3
(144.9)
(68.1)
$32.60
48.39
28.39
39.55
249.5
$25.67
2,287.8
$38.41
—
(1,445.5)
(19.5)
822.8
—
28.25
37.03
$36.52
Number of units granted (thousands)
Weighted average price per unit
Fiscal Year
2014
2013
2012
2,144.1
2,404.9
2,785.7
$48.49
$38.41
$37.29
68 GENER AL MILLS
20 14 ANNUAL REPORT 69
The total grant-date fair value of restricted stock unit
awards that vested during fiscal 2014 was $104.6 mil-
lion, and $134.1 million vested during fiscal 2013.
As of May 25, 2014, unrecognized compensa-
tion expense related to non-vested stock options and
restricted stock units was $117.2 million. This expense
will be recognized over 17 months, on average.
Stock-based compensation expense related to
restricted stock units and cash-settled share-based pay-
ment awards was $107.0 million for fiscal 2014, $128.9
million for fiscal 2013, and $124.3 million for fiscal 2012.
NOTE 12. EARNINGS PER SHARE
Basic and diluted EPS were calculated using the following:
In Millions, Except per Share Data
2014
2013
2012
Net earnings attributable
to General Mills
$1,824.4 $1,855.2 $1,567.3
Fiscal Year
Average number of common
shares - basic EPS
Incremental share effect from: (a)
Stock options
Restricted stock, restricted
628.6
648.6
648.1
12.3
12.0
13.9
stock units, and other
4.8
5.0
4.7
Average number of
common shares - diluted EPS
645.7
665.6
666.7
Earnings per share - basic
$ 2.90 $ 2.86 $ 2.42
Earnings per share - diluted
$ 2.83 $ 2.79 $ 2.35
(a) Incremental shares from stock options and restricted stock units are
computed by the treasury stock method. Stock options and restricted
stock units excluded from our computation of diluted EPS because they
were not dilutive were as follows:
In Millions
2014
2013
2012
Anti-dilutive stock options
and restricted stock units
1.7
0.6
5.8
Fiscal Year
NOTE 13. RETIREMENT BENEFITS AND
POSTEMPLOYMENT BENEFITS
Defined Benefit Pension Plans We have defined ben-
efit pension plans covering most employees in the
United States, Canada, France, and the United Kingdom.
Benefits for salaried employees are based on length of
service and final average compensation. Benefits for
hourly employees include various monthly amounts for
each year of credited service. Our funding policy is con-
sistent with the requirements of applicable laws. We
made no voluntary contributions to our principal U.S.
plans in fiscal 2014 and made a $200.0 million voluntary
contribution in each of fiscal 2013 and fiscal 2012. We
do not expect to be required to make any contributions
in fiscal 2015. Our principal domestic retirement plan
covering salaried employees has a provision that any
excess pension assets would be allocated to active par-
ticipants if the plan is terminated within five years of a
change in control. In fiscal 2012, we announced changes
to our U.S. defined benefit pension plans. All new sala-
ried employees hired on or after June 1, 2013 are eligible
for a new retirement program that does not include a
defined benefit pension plan. Current salaried employees
remain in the existing defined benefit pension plan with
adjustments to benefits.
Other Postretirement Benefit Plans We also sponsor
plans that provide health care benefits to the majority
of our retirees in the United States, Canada, and Brazil.
The United States salaried health care benefit plan is
contributory, with retiree contributions based on years
of service. We make decisions to fund related trusts for
certain employees and retirees on an annual basis. We
made $24.0 million in voluntary contributions to these
plans in fiscal 2014. We did not make voluntary contri-
butions to these plans in fiscal 2013.
Health Care Cost Trend Rates Assumed health care
cost trends are as follows:
Fiscal Year
2014
2013
Health care cost trend rate
for next year
6.5% and 7.3%
8.0%
Rate to which the cost trend rate is
assumed to decline (ultimate rate)
5.0%
5.2%
Year that the rate reaches the
ultimate trend rate
2025
2019
70 GENERAL MI LL S
2014 ANN UAL REPORT 71
(such as severance based solely on annual pay rather
than years of service) are charged to expense when
incurred. Our postemployment benefit plans are
unfunded.
We use our fiscal year end as the measurement date
for our defined benefit pension and other postretire-
ment benefit plans.
We review our health care cost trend rates annu-
ally. Our review is based on data we collect about our
health care claims experience and information provided
by our actuaries. This information includes recent plan
experience, plan design, overall industry experience
and projections, and assumptions used by other simi-
lar organizations. Our initial health care cost trend rate
is adjusted as necessary to remain consistent with this
review, recent experiences, and short-term expectations.
Our initial health care cost trend rate assumption is 7.3
percent for retirees age 65 and over and 6.5 percent for
retirees under age 65 at the end of fiscal 2014. Rates are
graded down annually until the ultimate trend rate of
5.0 percent is reached in 2025 for all retirees. The trend
rates are applicable for calculations only if the retirees’
benefits increase as a result of health care inflation. The
ultimate trend rate is adjusted annually, as necessary,
to approximate the current economic view on the rate
of long-term inflation plus an appropriate health care
cost premium. Assumed trend rates for health care costs
have an important effect on the amounts reported for
the other postretirement benefit plans.
A one percentage point change in the health care cost
trend rate would have the following effects:
In Millions
One
Percentage
Point
Increase
One
Percentage
Point
Decrease
Effect on the aggregate of the service and
interest cost components in fiscal 2015
$ 4.7
$ (3.9)
Effect on the other postretirement
accumulated benefit obligation as of
May 25, 2014
82.7
(73.2)
The Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation
Act of 2010 (collectively, the Act) was signed into law in
March 2010. The Act codifies health care reforms with
staggered effective dates from 2010 to 2018. Estimates of
the future impacts of several of the Act’s provisions are
incorporated into our postretirement benefit liability.
Postemployment Benefit Plans Under certain circum-
stances, we also provide accruable benefits to former
or inactive employees in the United States, Canada, and
Mexico, and members of our Board of Directors, including
severance and certain other benefits payable upon death.
We recognize an obligation for any of these benefits
that vest or accumulate with service. Postemployment
benefits that do not vest or accumulate with service
70 GENERA L MILLS
20 14 ANNUAL REPORT 71
Summarized financial information about defined benefit pension, other postretirement benefit, and postemploy-
ment benefit plans is presented below:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
In Millions
2014
2013
2014
2013
2014
2013
Change in Plan Assets:
Fair value at beginning of year
Actual return on assets
Employer contributions
Plan participant contributions
Benefits payments
Foreign currency
Fair value at end of year
Change in Projected Benefit Obligation:
$5,066.1 $ 4,353.9
$ 436.9 $ 358.8
740.2
698.7
25.6
223.1
6.7
15.2
59.1
24.1
13.5
67.9
0.1
13.0
(231.4)
(222.6)
(16.3)
(2.9)
4.6
(2.2)
—
—
$5,611.8 $ 5,066.1
$ 517.3 $ 436.9
Benefit obligation at beginning of year
$5,381.4 $ 4,991.5
$ 1,148.2 $ 1,129.0
$ 145.4 $ 141.3
Service cost
Interest cost
Plan amendment
Curtailment/other
Plan participant contributions
Medicare Part D reimbursements
Actuarial loss (gain)
Benefits payments
Foreign currency
Acquisitions
133.0
124.4
22.7
21.6
239.5
237.3
17.8
—
0.2
—
50.5
18.2
(2.9)
52.1
—
—
6.7
15.2
13.5
13.0
—
—
4.3
4.1
67.6
237.5
(119.4)
(23.0)
(231.6)
(222.8)
(59.3)
(58.9)
3.6
(1.9)
—
—
(1.0)
—
(0.1)
10.4
7.7
4.1
—
7.8
4.4
4.5
3.7
11.4
—
—
1.8
(17.2)
(0.2)
—
—
—
(10.4)
(13.6)
—
—
Projected benefit obligation at end of year
$ 5,618.0 $ 5,381.4
$ 1,074.8 $ 1,148.2
$ 145.3 $ 145.4
Plan assets less than benefit
obligation as of fiscal year end
$
(6.2) $ (315.3)
$ (557.5) $ (711.3)
$ (145.3)
$ (145.4)
The accumulated benefit obligation for all defined benefit pension plans was $5,093.1 million as of May 25, 2014,
and $4,888.8 million as of May 26, 2013.
Amounts recognized in AOCI as of May 25, 2014, and May 26, 2013, are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
Total
Fiscal Year
In Millions
2014
2013
2014
2013
2014
2013
2014
2013
Net actuarial loss
$(1,389.2) $(1,625.1)
$(70.2) $(168.2)
$ (9.8)
$ (8.2)
$(1,469.2) $(1,801.5)
Prior service (costs) credits
(26.1)
(18.5)
4.0
16.6
(4.4)
(5.9)
(26.5)
(7.8)
Amounts recorded in accumulated
other comprehensive loss
$(1,415.3) $(1,643.6)
$(66.2) $(151.6)
$(14.2)
$(14.1)
$(1,495.7) $(1,809.3)
72 GENERAL MIL L S
2014 ANNUAL REPORT 73
Plans with accumulated benefit obligations in excess of plan assets are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
In Millions
2014
2013
2014
2013
2014
2013
Projected benefit obligation
Accumulated benefit obligation
Plan assets at fair value
$433.1
$ 396.9
$
— $
—
$
— $ —
375.6
346.6
1,070.0 1,132.9
145.3
145.4
—
9.5
517.3
436.9
—
—
Components of net periodic benefit expense are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2014
2013
2012
2014
2013
2012
2014
2013
2012
$ 133.0 $ 124.4 $ 114.3
$ 22.7
$ 21.6
$ 18.0
$ 7.7
$ 7.8
$ 7.5
239.5
237.3
237.9
50.5
52.1
55.6
Expected return on plan assets
(455.6)
(428.0)
(440.3)
(34.6)
(32.1)
(35.5)
Amortization of losses
151.0
136.0
108.1
15.4
17.1
14.5
4.1
—
0.6
4.4
—
2.1
4.8
—
1.7
In Millions
Service cost
Interest cost
Amortization of prior service
costs (credits)
Other adjustments
Settlement or curtailment losses
5.6
6.2
—
—
—
—
8.6
—
—
Net expense
$ 73.5 $ 75.9 $ 28.6
$ 47.7
(3.4)
(3.4)
(3.4)
2.4
1.9
2.1
—
(2.9)
—
—
$ 55.3
—
—
$ 49.2
3.7
—
$ 18.5
11.4
—
$ 27.6
12.0
—
$ 28.1
We expect to recognize the following amounts in net periodic benefit expense in fiscal 2015:
In Millions
Amortization of losses
Amortization of prior service costs (credits)
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Postemployment
Benefit Plans
$ 141.7
7.4
$ 4.9
(1.6)
$ 0.7
2.4
Assumptions Weighted-average assumptions used to determine fiscal year-end benefit obligations are as follows:
Discount rate
Rate of salary increases
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2014
2013
2014
2013
2014
2013
4.54%
4.54%
4.51%
4.50%
3.82%
3.70%
4.44
4.44
—
—
4.44
4.44
72 GENERA L MILLS
20 14 ANNUAL REPORT 73
Weighted-average assumptions used to determine fiscal year net periodic benefit expense are as follows:
Defined Benefit
Pension Plans
Fiscal Year
Other
Postretirement
Benefit Plans
Fiscal Year
Postemployment
Benefit Plans
Fiscal Year
2014
2013
2012
2014
2013
2012
2014
2013
2012
Discount rate
4.54%
4.85%
5.45%
4.52%
4.70%
5.35%
3.70%
3.86%
4.77%
Rate of salary increases
4.44
4.44
4.92
—
—
—
4.44
4.45
4.92
Expected long-term rate of
return on plan assets
8.53
8.53
9.52
8.11
8.13
9.32
—
—
—
Discount Rates Our discount rate assumptions are
determined annually as of the last day of our fiscal year
for our defined benefit pension, other postretirement,
and postemployment benefit plan obligations. We also
use the same discount rates to determine defined ben-
efit pension, other postretirement, and postemployment
benefit plan income and expense for the following fiscal
year. We work with our outside actuaries to determine
the timing and amount of expected future cash outflows
to plan participants and, using the Aa Above Median
corporate bond yield, to develop a forward interest rate
curve, including a margin to that index based on our
credit risk. This forward interest rate curve is applied
to our expected future cash outflows to determine our
discount rate assumptions.
Fair Value of Plan Assets The fair values of our pension
and postretirement benefit plans’ assets and their respec-
tive levels in the fair value hierarchy at May 25, 2014 and
May 26, 2013, by asset category were as follows:
74 GENERAL MILL S
2014 ANN UAL REPORT 75
In Millions
Level 1
Level 2
Level 3
Total
Assets
Level 1
Level 2
Level 3
Total
Assets
May 25, 2014
May 26, 2013
Fair value measurement
of pension plan assets:
Equity (a)
Fixed income (b)
Real asset investments (c)
Other investments (d)
Cash and accruals
Total fair value measurement
$ 1,305.4 $ 793.9 $ 568.2 $ 2,667.5
$ 1,439.4 $ 828.3 $ 559.3 $ 2,827.0
586.3
1,347.7
—
1,934.0
476.6
801.0
—
1,277.6
98.2
128.3
602.9
829.4
131.1
169.1
430.4
730.6
—
—
0.3
0.3
—
180.6
—
—
180.6
169.7
60.9
—
0.3
61.2
—
169.7
of pension plan assets
$ 2,170.5 $ 2,269.9 $ 1,171.4 $ 5,611.8
$ 2,216.8 $ 1,859.3 $ 990.0 $ 5,066.1
Fair value measurement
of postretirement benefit
plan assets:
Equity (a)
Fixed income (b)
Real asset investments (c)
Other investments (d)
Cash and accruals
Fair value measurement
of postretirement benefit
$
86.6 $ 129.1 $
21.1 $ 236.8
$
93.1 $
92.0 $
20.2 $ 205.3
18.5
—
—
6.6
65.8
19.3
152.4
—
—
17.9
—
—
84.3
37.2
152.4
6.6
17.2
1.8
50.3
7.1
—
130.9
9.8
—
—
67.5
14.5
23.4
—
—
130.9
9.8
plan assets
$ 111.7 $ 366.6 $
39.0 $ 517.3
$ 121.9 $ 280.3 $
34.7 $ 436.9
(a) Primarily publicly traded common stock and private equity partnerships for purposes of total return and to maintain equity exposure consistent with policy
allocations. Investments include: United States and international equity securities, mutual funds, and equity futures valued at closing prices from national
exchanges; and commingled funds, privately held securities, and private equity partnerships valued at unit values or net asset values provided by the invest-
ment managers, which are based on the fair value of the underlying investments. Various methods are used to determine fair values and may include the
cost of the investment, most recent financing, and expected cash flows. For some of these investments, realization of the estimated fair value is dependent
upon transactions between willing sellers and buyers.
(b) Primarily government and corporate debt securities for purposes of total return and managing fixed income exposure to policy allocations. Investments
include: fixed income securities and bond futures generally valued at closing prices from national exchanges, fixed income pricing models, and independent
financial analysts; and fixed income commingled funds valued at unit values provided by the investment managers, which are based on the fair value of the
underlying investments.
(c) Publicly traded common stock and limited partnerships in the energy and real estate sectors for purposes of total return. Investments include: energy and
real estate securities generally valued at closing prices from national exchanges; and commingled funds, private securities, and limited partnerships valued
at unit values or net asset values provided by the investment managers, which are generally based on the fair value of the underlying investments.
(d) Global balanced fund of equity, fixed income, and real estate securities for purposes of meeting Canadian pension plan asset allocation policies, and insur-
ance and annuity contracts to provide a stable stream of income for retirees and to fund postretirement medical benefits. Fair values are derived from unit
values provided by the investment managers, which are generally based on the fair value of the underlying investments and contract fair values from the
providers.
74 GENER AL MILLS
20 14 ANNUAL REPORT 75
The following table is a roll forward of the Level 3 investments of our pension and postretirement benefit plans’
assets during the years ended May 25, 2014 and May 26, 2013:
In Millions
Pension benefit plan assets:
Equity
Real asset investments
Other investments
Fiscal 2014
Balance as of
May 26, 2013
Net
Transfers
Out
Net Purchases,
Sales, Issuances,
and Settlements
Net Balance as of
Gain May 25, 2014
$ 559.3
$
—
$ (59.0)
$ 67.9
$ 568.2
430.4
0.3
—
—
(25.5)
198.0
602.9
—
—
0.3
Fair value activity of level 3 pension plan assets
$ 990.0
$
—
$ (84.5)
$ 265.9
$ 1,171.4
Postretirement benefit plan assets:
Equity
Real asset investments
$ 20.2
$
—
$ (0.7)
$ 1.6
$ 21.1
14.5
(4.2)
1.4
6.2
17.9
Fair value activity of level 3 postretirement benefit plan assets
$ 34.7
$ (4.2)
$ 0.7
$ 7.8
$ 39.0
In Millions
Pension benefit plan assets:
Equity
Real asset investments
Other investments
Fiscal 2013
Balance as of
May 27, 2012
Net
Transfers
Out
Net Purchases,
Sales, Issuances,
and Settlements
Net Balance as of
Gain May 26, 2013
$ 575.4
$ (0.1)
$ (61.0)
$ 45.0
$ 559.3
361.2
0.3
—
—
48.3
20.9
430.4
—
—
0.3
Fair value activity of level 3 pension plan assets
$ 936.9
$ (0.1)
$ (12.7)
$ 65.9
$ 990.0
Postretirement benefit plan assets:
Equity
Real asset investments
$ 22.0
$
—
$ (2.3)
$ 0.5
$ 20.2
8.4
—
4.8
1.3
14.5
Fair value activity of level 3 postretirement benefit plan assets
$ 30.4
$
—
$ 2.5
$ 1.8
$
34.7
The net change in level 3 assets attributable to unre-
alized gains at May 25, 2014, was $85.3 million for our
pension plan assets, and $2.6 million for our postretire-
ment benefit plan assets.
Expected Rate of Return on Plan Assets Our expected
rate of return on plan assets is determined by our asset
allocation, our historical long-term investment perfor-
mance, our estimate of future long-term returns by asset
class (using input from our actuaries, investment ser-
vices, and investment managers), and long-term infla-
tion assumptions. We review this assumption annually
for each plan, however, our annual investment perfor-
mance for one particular year does not, by itself, sig-
nificantly influence our evaluation.
76 GENERA L MIL LS
2014 ANNUAL REPORT 77
In Millions
2015
2016
2017
2018
2019
Other
Defined
Benefit
Pension
Postretirement Medicare Postemployment
Benefit
Subsidy
Benefit Plans
Plans
Plans Gross Payments Receipts
$ 244.6
$ 60.3
$ 4.7
$ 21.0
253.8
263.4
273.5
284.3
62.8
63.7
64.2
66.5
5.2
5.5
6.0
6.4
19.3
17.9
16.8
16.0
70.5
2020-2024
1,596.6
359.6
25.5
Defined Contribution Plans The General Mills Savings
Plan is a defined contribution plan that covers domes-
tic salaried, hourly, nonunion, and certain union employ-
ees. This plan is a 401(k) savings plan that includes a
number of investment funds, including a Company stock
fund and an Employee Stock Ownership Plan (ESOP).
We sponsor another money purchase plan for certain
domestic hourly employees with net assets of $20.6 mil-
lion as of May 25, 2014, and $19.4 million as of May
26, 2013. We also sponsor defined contribution plans
in many of our foreign locations. Our total recognized
expense related to defined contribution plans was $44.8
million in fiscal 2014, $46.0 million in fiscal 2013, and
$41.8 million in fiscal 2012.
We match a percentage of employee contributions to
the General Mills Savings Plan. The Company match
is directed to investment options of the participant’s
choosing. The number of shares of our common stock
allocated to participants in the ESOP was 8.4 million as
of May 25, 2014, and 9.1 million as of May 26, 2013. The
ESOP’s only assets are our common stock and temporary
cash balances.
The Company stock fund and the ESOP held $708.2
million and $691.9 million of Company common stock as
of May 25, 2014, and May 26, 2013.
Weighted-average asset allocations for the past two
fiscal years for our defined benefit pension and other
postretirement benefit plans are as follows:
Defined Benefit
Pension Plans
Other Postretirement
Benefit Plans
Fiscal Year
Fiscal Year
2014
2013
2014
2013
Asset category:
United States equities 25.5%
29.5%
38.4%
International equities
13.9
17.3
24.0
Private equities
Fixed income
Real assets
10.3
35.5
14.8
11.2
27.5
4.1
26.3
14.5
7.2
39.4%
21.6
4.7
28.9
5.4
Total
100.0%
100.0% 100.0%
100.0%
The investment objective for our defined benefit pen-
sion and other postretirement benefit plans is to secure
the benefit obligations to participants at a reasonable
cost to us. Our goal is to optimize the long-term return
on plan assets at a moderate level of risk. The defined
benefit pension plan and other postretirement ben-
efit plan portfolios are broadly diversified across asset
classes. Within asset classes, the portfolios are further
diversified across investment styles and investment
organizations. For the defined benefit pension plans, the
long-term investment policy allocation is: 25 percent to
equities in the United States; 15 percent to international
equities; 10 percent to private equities; 35 percent to fixed
income; and 15 percent to real assets (real estate, energy,
and timber). For other postretirement benefit plans, the
long-term investment policy allocations are: 30 percent
to equities in the United States; 20 percent to interna-
tional 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.
Contributions and Future Benefit Payments We do
not expect to be required to make contributions to our
defined benefit pension, other postretirement benefit,
and postemployment benefit plans in fiscal 2015. Actual
fiscal 2015 contributions could exceed our current projec-
tions, as influenced by our decision to undertake discre-
tionary funding of our benefit trusts and future changes
in regulatory requirements. Estimated benefit payments,
which reflect expected future service, as appropriate, are
expected to be paid from fiscal 2015 to 2024 as follows:
76 GENER AL MI LLS
20 14 ANNUAL REPORT 77
NOTE 14. INCOME TAXES
The tax effects of temporary differences that give rise
to deferred tax assets and liabilities are as follows:
The components of earnings before income taxes and
after-tax earnings from joint ventures and the corre-
sponding income taxes thereon are as follows:
In Millions
Accrued liabilities
May 25, 2014
May 26, 2013
$ 106.0
$ 154.6
Compensation and employee benefits
546.0
In Millions
2014
2013
2012
Pension
Fiscal Year
Unrealized hedges
Earnings before income
taxes and after-tax earnings
from joint ventures:
United States
Foreign
Total earnings before
Tax credit carryforwards
Stock, partnership, and
miscellaneous investments
$2,181.4 $2,051.2 $1,816.5
Capital losses
473.6
483.7
394.0
Net operating losses
Other
—
—
78.9
427.9
13.0
71.4
117.7
619.2
6.9
112.5
78.0
461.1
13.6
65.1
138.8
income taxes and after-tax
Gross deferred tax assets
1,360.9
1,649.8
earnings from joint ventures $2,655.0 $2,534.9 $2,210.5
Valuation allowance
Income taxes:
Currently payable:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
Total income taxes
Net deferred tax assets
Brands
$ 526.7 $ 493.4 $ 399.1
Fixed assets
37.8
39.5
146.3
126.5
710.8
659.4
52.0
109.1
560.2
Pension
Intangible assets
Tax lease transactions
Inventories
159.1
68.8
167.9
Stock, partnership, and
21.3
(7.9)
19.2
(6.2)
(1.3)
(17.2)
miscellaneous investments
Unrealized hedges
172.5
81.8
149.4
Other
$ 883.3 $ 741.2 $ 709.6
Gross deferred tax liabilities
Net deferred tax liability
221.6
1,139.3
1,373.4
499.4
2.0
204.2
53.1
60.6
470.7
22.8
45.0
232.8
1,417.0
1,380.4
537.4
—
168.3
55.1
52.0
456.7
—
28.2
2,731.2
2,678.1
$ 1,591.9
$ 1,261.1
The following table reconciles the United States statu-
tory income tax rate with our effective income tax rate:
Fiscal Year
2014
2013
2012
United States statutory rate
35.0%
35.0%
35.0%
State and local income taxes,
net of federal tax benefits
Foreign rate differences
1.4
(0.1)
Deferred taxes for Medicare subsidies —
GMC subsidiary restructure
Domestic manufacturing deduction
Other, net
—
(2.3)
(0.7)
1.3
(0.6)
(1.3)
(2.5)
(2.1)
(0.6)
1.4
(2.0)
—
—
(1.8)
(0.5)
Effective income tax rate
33.3%
29.2%
32.1%
We have established a valuation allowance against cer-
tain of the categories of deferred tax assets described
above as current evidence does not suggest we will real-
ize sufficient taxable income of the appropriate character
(e.g., ordinary income versus capital gain income) within
the carryforward period to allow us to realize these
deferred tax benefits.
Of the total valuation allowance of $221.6 million,
$161.2 million relates to a deferred tax asset for losses
recorded as part of the Pillsbury acquisition and $57.2
million relates to various state and foreign loss carry-
forwards. We have approximately $74 million of U.S.
foreign tax credit carryforwards for which no valuation
allowance has been recorded. As of May 25, 2014, we
believe it is more-likely-than-not that the remainder of
our deferred tax assets are realizable.
The carryforward periods on our foreign loss carryfor-
wards are as follows: $42.4 million do not expire; $7.9
million expire in fiscal 2015 and 2016; and $25.2 million
expire in fiscal 2017 and beyond.
78 GENERA L MIL LS
2014 ANN UAL REPORT 79
We have not recognized a deferred tax liability for
unremitted earnings of approximately $2.8 billion from
our foreign operations because our subsidiaries have
invested or will invest the undistributed earnings indefi-
nitely, or the earnings will be remitted in a tax-neutral
transaction. It is not practicable for us to determine
the amount of unrecognized deferred tax liabilities on
these indefinitely reinvested earnings. Deferred taxes are
recorded for earnings of our foreign operations when
we determine that such earnings are no longer indefi-
nitely reinvested.
In fiscal 2010, we recorded a non-cash income tax
charge and decrease to our deferred tax assets of $35.0
million related to a reduction of the tax deductibility of
retiree health cost to the extent of any Medicare Part
D subsidy received beginning in fiscal 2013 under the
Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act
of 2010. During fiscal 2013, we took certain actions to
restore part of the tax benefits associated with Medicare
Part D subsidies and recorded a $33.7 million discrete
decrease to income tax expense and an increase to our
deferred tax assets.
During the first quarter of fiscal 2013, in conjunction
with the consent of the Class A investor, we restruc-
tured GMC through the distribution of its manufactur-
ing assets, stock, inventory, cash, and certain intellectual
property to a wholly owned subsidiary. GMC retained
the remaining intellectual property. Immediately follow-
ing this restructuring, the Class A Interests were sold by
the then current holder to another unrelated third party
investor. As a result of these transactions, we recorded
a $63.3 million decrease to deferred income tax liabilities
related to the tax basis of the investment in GMC and
certain distributed assets, with a corresponding discrete
non-cash reduction to income taxes in fiscal 2013.
We are subject to federal income taxes in the United
States as well as various state, local, and foreign jurisdic-
tions. A number of years may elapse before an uncertain
tax position is audited and finally resolved. While it is
often difficult to predict the final outcome or the timing
of resolution of any particular uncertain tax position,
we believe that our liabilities for income taxes reflect the
most likely outcome. We adjust these liabilities, as well
as the related interest, in light of changing facts and cir-
cumstances. Settlement of any particular position would
usually require the use of cash.
The number of years with open tax audits varies
depending on the tax jurisdiction. Our major taxing
jurisdictions include the United States (federal and state)
and Canada. Various tax examinations by United States
state taxing authorities could be conducted for any open
tax year, which vary by jurisdiction, but are generally
from 3 to 5 years.
The Internal Revenue Service (IRS) is currently auditing
our federal tax returns for the fiscal 2011 and 2012 tax
years. Several state examinations are also in progress.
During fiscal 2013, the IRS concluded its field examina-
tion of our 2009 and 2010 tax years and proposed adjust-
ments related to the timing for deducting accrued bonus
expenses. The audit closure and related proposed adjust-
ments did not have a material impact on our results of
operations or financial position. The accrued bonus issue
is currently under review by the IRS Appeals Division.
We expect to make a one-time cash payment of approxi-
mately $6 million to settle this issue in fiscal 2015. As of
May 25, 2014, we have effectively settled all issues with
the IRS for fiscal years 2008 and prior.
During fiscal 2014, the Canadian Revenue Agency
(CRA) completed its review of our Canadian income tax
returns for fiscal years 2009 through 2011. Assessments
related to a prior CRA audit for fiscal years 2004 and
2005 were resolved by the U.S. and Canadian compe-
tent authority divisions during fiscal 2014. As of May
25, 2014, all issues associated with fiscal years 2004 and
2005 and 2009 through 2011 have been resolved. The
resolution did not have a material impact on our results
of operations or financial position.
We apply a more-likely-than-not threshold to the rec-
ognition and derecognition of uncertain tax positions.
Accordingly, we recognize the amount of tax benefit
that has a greater than 50 percent likelihood of being
ultimately realized upon settlement. Future changes in
judgment related to the expected ultimate resolution of
uncertain tax positions will affect earnings in the quarter
of such change.
The following table sets forth changes in our total
gross unrecognized tax benefit liabilities, excluding
accrued interest, for fiscal 2014. Approximately $87 mil-
lion of this total represents the amount that, if recog-
nized, would affect our effective income tax rate in future
periods. This amount differs from the gross unrecog-
nized tax benefits presented in the table because certain
of the liabilities below would impact deferred taxes if
recognized. We also would record a decrease in U.S. fed-
eral income taxes upon recognition of the state tax ben-
efits included therein.
78 GENERAL MI LLS
20 14 ANNUAL REPORT 79
In Millions
Fiscal Year
2014
2013
Balance, beginning of year
$216.2
$231.3
Tax positions related to current year:
Additions
26.5
38.5
Tax positions related to prior years:
Additions
Reductions
Settlements
Lapses in statutes of limitations
15.1
(94.5)
(5.4)
(7.0)
69.6
(74.0)
(39.0)
(10.2)
Balance, end of year
$150.9
$216.2
As of May 25, 2014, we expect to pay approximately
$20 million of unrecognized tax benefit liabilities and
accrued interest within the next 12 months. We are not
able to reasonably estimate the timing of future cash
flows beyond 12 months due to uncertainties in the
timing of tax audit outcomes. The remaining amount
of our unrecognized tax liability was classified in other
liabilities.
We report accrued interest and penalties related
to unrecognized tax benefit liabilities in income tax
expense. For fiscal 2014, we recognized a net benefit of
$4.6 million of tax-related net interest and penalties, and
had $42.0 million of accrued interest and penalties as
of May 25, 2014. For fiscal 2013, we recognized a net
benefit of $3.0 million of tax-related net interest and
penalties, and had $53.1 million of accrued interest and
penalties as of May 26, 2013.
NOTE 15. LEASES, OTHER COMMITMENTS,
AND CONTINGENCIES
An analysis of rent expense by type of property for
operating leases follows:
Fiscal Year
In Millions
2014
2013
2012
Warehouse space
$ 80.2
$ 82.8
$ 72.6
Equipment
Other
32.8
33.5
34.8
76.0
71.6
68.1
Total rent expense
$ 189.0
$ 187.9
$ 175.5
Some operating 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 are:
In Millions
2015
2016
2017
2018
2019
After 2019
Total noncancelable future
lease commitments
Less: interest
Operating
Leases
$ 93.9
73.4
56.8
42.4
33.7
88.3
$ 388.5
Present value of obligations under capital leases
Capital
Leases
$ 1.5
0.8
0.2
—
—
—
$ 2.5
(0.1)
$ 2.4
These future lease commitments will be partially offset
by estimated future sublease receipts of approximately
$6.0 million. Depreciation on capital leases is recorded as
depreciation expense in our results of operations.
As of May 25, 2014, we have issued guarantees and
comfort letters of $340.6 million for the debt and other
obligations of consolidated subsidiaries, and guarantees
and comfort letters of $283.8 million for the debt and
other obligations of non-consolidated affiliates, mainly
CPW. In addition, off-balance sheet arrangements are
generally limited to the future payments under non-can-
celable operating leases, which totaled $388.5 million as
of May 25, 2014.
NOTE 16. BUSINESS SEGMENT AND
GEOGRAPHIC INFORMATION
We operate in the consumer foods industry. We have
three operating segments by type of customer and geo-
graphic region as follows: U.S. Retail, 59.2 percent of
our fiscal 2014 consolidated net sales; International, 30.1
percent of our fiscal 2014 consolidated net sales; and
Convenience Stores and Foodservice, 10.7 percent of our
fiscal 2014 consolidated net sales.
Our U.S. Retail segment reflects business with a wide
variety of grocery stores, mass merchandisers, member-
ship stores, natural food chains, and drug, dollar and
discount chains operating throughout the United States.
Our product categories in this business segment include
ready-to-eat cereals, refrigerated yogurt, soup, meal
kits, shelf stable and frozen vegetables, refrigerated and
80 GENERA L MIL LS
2014 ANNUAL REPORT 81
distribution activities are substantially integrated across
our operations in order to maximize efficiency and pro-
ductivity. As a result, fixed assets and depreciation and
amortization expenses are neither maintained nor avail-
able by operating segment.
Our operating segment results were as follows:
In Millions
Net sales:
U.S. Retail
Fiscal Year
2014
2013
2012
$ 10,604.9 $ 10,614.9 $ 10,480.2
International
5,385.9 5,200.2 4,194.3
Convenience Stores
and Foodservice
1,918.8 1,959.0 1,983.4
Total
Operating profit:
U.S. Retail
International
Convenience Stores
$ 17,909.6 $ 17,774.1 $ 16,657.9
$ 2,311.5 $ 2,392.9 $ 2,295.3
472.9 490.2
429.6
and Foodservice
307.3 314.6 286.7
Total segment operating profit 3,091.7 3,197.7 3,011.6
Unallocated corporate items
196.2 326.1 347.6
Divestiture (gain)
(65.5)
—
—
Restructuring, impairment,
and other exit costs
3.6
19.8 101.6
Operating profit
$ 2,957.4 $ 2,851.8 $ 2,562.4
Net sales by class of similar products were as follows:
In Millions
Net sales:
Snacks
Yogurt
Cereal
Fiscal Year
2014
2013
2012
$ 3,232.5 $ 3,024.0 $ 2,649.6
2,964.7 2,908.4 2,595.7
2,860.1 2,889.2 2,935.2
Convenient meals
2,844.2 2,802.9 2,611.8
Baking mixes and ingredients 1,996.4 1,999.5 1,902.9
Dough
Vegetables
1,890.2 1,944.7 1,925.5
1,014.7 1,089.5 1,082.5
Super-premium ice cream
756.6 717.1
664.6
Other
Total
350.2 398.8
290.1
$ 17,909.6 $ 17,774.1 $ 16,657.9
frozen dough products, dessert and baking mixes, frozen
pizza and pizza snacks, grain, fruit and savory snacks,
and a wide variety of organic products including granola
bars, cereal, and soup.
Our International segment consists of retail and food-
service businesses outside of the United States. Our
product categories include ready-to-eat cereals, shelf
stable and frozen vegetables, meal kits, refrigerated and
frozen dough products, dessert and baking mixes, fro-
zen pizza snacks, refrigerated yogurt, grain and fruit
snacks, and super-premium ice cream and frozen des-
serts. We also sell super-premium ice cream and fro-
zen desserts directly to consumers through owned retail
shops. Our International segment also includes products
manufactured in the United States for export, mainly to
Caribbean and Latin American markets, as well as prod-
ucts we manufacture for sale to our international joint
ventures. Revenues from export activities and franchise
fees are reported in the region or country where the end
customer is located.
In the first quarter of fiscal 2014, we changed the
name of our Bakeries and Foodservice operating segment
to Convenience Stores and Foodservice. The businesses
in this segment were unchanged. Our major product
categories are ready-to-eat cereals, snacks, refrigerated
yogurt, unbaked and fully baked frozen dough prod-
ucts, baking mixes, and flour. Many products we sell
are branded to the consumer and nearly all are branded
to our customers. We sell to distributors and opera-
tors in many customer channels including foodservice,
convenience stores, vending, and supermarket bakeries.
Substantially all of this segment’s operations are located
in the United States.
Operating profit for these segments excludes unal-
located corporate items and restructuring, impairment,
and other exit costs. Unallocated corporate items include
corporate overhead expenses, variances to planned
domestic employee benefits and incentives, contribu-
tions to the General Mills Foundation, and other items
that are not part of our measurement of segment oper-
ating performance. These include gains and losses aris-
ing from the revaluation of certain grain inventories
and gains and losses from mark-to-market valuation of
certain commodity positions until passed back to our
operating segments. These items affecting operating
profit are centrally managed at the corporate level and
are excluded from the measure of segment profitability
reviewed by executive management. Under our supply
chain organization, our manufacturing, warehouse, and
80 GENERAL MILLS
20 14 ANNUAL REPORT 81
The following table provides financial information by
geographic area:
In Millions
Prepaid expenses and other current assets:
In Millions
Net sales:
Fiscal Year
2014
2013
2012
Other receivables
Prepaid expenses
Derivative receivables,
United States
$12,523.0 $ 12,573.1 $12,462.1
primarily commodity-related
Non-United States
5,386.6
5,201.0 4,195.8
Total
$17,909.6 $ 17,774.1 $16,657.9
Grain contracts
Miscellaneous
Total
In Millions
Cash and cash equivalents:
United States
Non-United States
Total
In Millions
Land, buildings, and equipment:
United States
Non-United States
Total
May 25, May 26,
2013
2014
$ 27.2
$ 26.9
840.1
714.5
$ 867.3
$ 741.4
May 25, May 26,
2013
2014
In Millions
Land, buildings, and equipment:
Land
Buildings
Buildings under capital lease
Equipment
Equipment under capital lease
Capitalized software
$ 2,756.6 $ 2,752.7
Construction in progress
NOTE 17. SUPPLEMENTAL INFORMATION
The components of certain Consolidated Balance Sheet
accounts are as follows:
Total
In Millions
Other assets:
Investments in and advances
In Millions
Receivables:
May 25, May 26,
2013
2014
to joint ventures
Pension assets
Exchangeable note with related party
From customers
$ 1,504.6 $ 1,466.3
Less allowance for doubtful accounts
(21.0)
(19.9)
Life insurance
Miscellaneous
Total
In Millions
Inventories:
$ 1,483.6 $ 1,446.4
Total
May 25, May 26,
2013
2014
In Millions
Other current liabilities:
May 25,
2014
May 26,
2013
$ 153.9 $ 193.1
187.2
168.6
33.3
7.5
27.2
47.6
7.5
20.8
$ 409.1 $ 437.6
May 25,
2014
May 26,
2013
$ 106.9 $ 101.2
2,228.4
2,168.3
0.3
0.3
5,979.7
5,731.1
9.0
9.0
468.0
427.9
600.8
495.1
(5,451.2)
(5,054.8)
$ 3,941.9 $ 3,878.1
May 25,
2014
May 26,
2013
$ 507.5 $ 478.5
432.2
131.8
68.2
25.8
88.8
24.4
111.8
120.2
$ 1,145.5 $ 843.7
May 25,
2014
May 26,
2013
1,185.3 1,125.4
Total land, buildings, and equipment
9,393.1
8,932.9
$ 3,941.9 $ 3,878.1
Less accumulated depreciation
Raw materials and packaging
$ 419.0 $ 403.0
Accrued trade and consumer promotions $ 578.2 $ 635.3
Finished goods
Grain
Excess of FIFO over LIFO cost (a)
Total
1,260.2 1,228.7
97.1 135.6
(216.9) (221.8)
$ 1,559.4 $ 1,545.5
(a) Inventories of $904.2 million as of May 25, 2014, and $897.8 million as of
May 26, 2013, were valued at LIFO.
Accrued payroll
Dividends payable
Accrued taxes
Accrued interest, including
interest rate swaps
Grain contracts
Restructuring and other exit costs reserve
Derivative payable
Miscellaneous
Total
390.1
417.3
33.5
279.6
63.1
88.0
92.5
4.8
3.5
23.1
91.2
30.0
19.5
4.1
261.1
262.7
$ 1,449.9 $ 1,827.7
82 GENERAL MILL S
2014 ANN UAL REPORT 83
May 25,
2014
May 26,
2013
In Millions
Other noncurrent liabilities:
Accrued compensation and benefits,
including obligations for underfunded
other postretirement benefit and
postemployment benefit plans
$1,341.9 $1,560.2
Accrued taxes
Miscellaneous
Total
195.6
277.1
105.7
115.6
$1,643.2 $1,952.9
Certain Consolidated Statements of Earnings amounts
are as follows:
In Millions
2014
2013
2012
Depreciation and amortization
$585.4
$588.0
$541.5
Research and development expense 243.6
237.9
245.4
Fiscal Year
Advertising and media expense
(including production and
communication costs)
869.5
895.0
913.7
The components of interest, net are as follows:
Expense (Income), in Millions
2014
2013
2012
Fiscal Year
Interest expense
Capitalized interest
Interest income
Interest, net
$323.4
$333.8
$370.7
(4.9)
(16.1)
(4.3)
(12.6)
(8.9)
(9.9)
$302.4
$316.9 $351.9
Certain Consolidated Statements of Cash Flows
amounts are as follows:
In Millions
2014
2013
2012
Cash interest payments
$288.3
$293.0
$344.3
Cash paid for income taxes
757.2
569.4
590.6
Fiscal Year
82 GENERAL MI LL S
20 14 ANNUAL REPORT 83
NOTE 18. QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for fiscal 2014 and fiscal 2013 follows:
In Millions, Except Per Share Amounts
2014
2013
2014
2013
2014
2013
2014
2013
First Quarter
Fiscal Year
Second Quarter
Fiscal Year
Third Quarter
Fiscal Year
Fourth Quarter
Fiscal Year
Net sales
Gross margin
Net earnings attributable
to General Mills
EPS:
Basic
Diluted
Dividends per share
Market price of common stock:
High
Low
$4,372.7 $4,051.0
$4,875.7 $4,881.8
$4,377.4 $4,430.6
$4,283.8 $4,410.7
1,613.0 1,628.3
1,761.7 1,742.3
1,512.7 1,522.7
1,482.4 1,530.6
459.3
548.9
549.9
541.6
410.6
398.4
404.6
366.3
$ 0.71 $ 0.84
$ 0.87 $ 0.84
$ 0.66 $ 0.61
$ 0.66 $ 0.57
$
$
0.70 $ 0.82
$ 0.84 $ 0.82
$ 0.64 $ 0.60
$ 0.65 $ 0.55
0.38 $ 0.33
$ 0.38 $ 0.33
$ 0.38 $ 0.33
$ 0.41 $ 0.33
$ 52.73 $ 39.13
$ 51.53 $ 40.77
$ 51.50 $ 45.67
$ 54.40 $ 50.93
$ 47.08 $ 37.55
$ 47.41 $ 38.89
$ 46.86 $ 40.06
$ 49.66 $ 45.42
During the fourth quarter of fiscal 2014, we sold certain grain elevators in our U.S. Retail segment and recorded a
pre-tax gain of $65.5 million and recorded a $10.0 million insurance receivable for a fraud-related asset loss incurred
in the second quarter of fiscal 2014.
84 GENERA L MIL L S
2014 ANNUAL REPORT 85
Glossary
AOCI. Accumulated other comprehensive income (loss).
Average total capital. Notes payable, long-term debt
including current portion, redeemable interest, noncon-
trolling interests, and stockholders’ equity excluding
AOCI, and certain after-tax earnings adjustments are
used to calculate return on average total capital. The
average is calculated using the average of the beginning
of fiscal year and end of fiscal year Consolidated Balance
Sheet amounts for these line items.
Constant currency. Financial results translated to U.S.
dollars using constant foreign currency exchange rates
based on the rates in effect for the comparable prior-
year period. To present this information, current period
results for entities reporting in currencies other than
United States dollars are translated into United States
dollars at the average exchange rates in effect during
the corresponding period of the prior fiscal year, rather
than the actual average exchange rates in effect during
the current fiscal year. Therefore, the foreign currency
impact is equal to current year results in local currencies
multiplied by the change in the average foreign currency
exchange rate between the current fiscal period and the
corresponding period of the prior fiscal year.
Core working capital. Accounts receivable plus inven-
tories less accounts payable, all as of the last day of our
fiscal year.
Depreciation associated with restructured assets.
The increase in depreciation expense caused by updat-
ing the salvage value and shortening the useful life of
depreciable fixed assets to coincide with the end of pro-
duction under an approved restructuring plan, but only
if impairment is not present.
Derivatives. Financial instruments such as futures,
swaps, options, and forward contracts that we use to
manage our risk arising from changes in commodity
prices, interest rates, foreign exchange rates, and stock
prices.
Euribor. European Interbank Offered Rate.
Fair value hierarchy. For purposes of fair value mea-
surement, we categorize assets and liabilities into one of
three levels based on the assumptions (inputs) used in
valuing the asset or liability. Level 1 provides the most
reliable measure of fair value, while Level 3 generally
requires significant management judgment. The three
levels are defined as follows:
Level 1: Unadjusted quoted prices in active markets for
identical assets or liabilities.
Level 2: Observable inputs other than quoted prices
included in Level 1, such as quoted prices for
similar assets or liabilities in active markets or
quoted prices for identical assets or liabilities
in inactive markets.
Level 3: Unobservable inputs reflecting management’s
assumptions about the inputs used in pricing
the asset or liability.
Fixed charge coverage ratio. The sum of earnings
before income taxes and fixed charges (before tax),
divided by the sum of the fixed charges (before tax) and
interest.
Generally Accepted Accounting Principles (GAAP).
Guidelines, procedures, and practices that we are
required to use in recording and reporting accounting
information in our financial statements.
Goodwill. The difference between the purchase price
of acquired companies plus the fair value of any non-
controlling and redeemable interests and the related fair
values of net assets acquired.
Gross margin. Net sales less cost of sales.
Hedge accounting. Accounting for qualifying hedges
that allows changes in a hedging instrument’s fair value
to offset corresponding changes in the hedged item in
the same reporting period. Hedge accounting is permit-
ted for certain hedging instruments and hedged items
only if the hedging relationship is highly effective, and
only prospectively from the date a hedging relationship
is formally documented.
84 GENER AL MILLS
20 14 ANNUAL REPORT 85
Interest bearing instruments. Notes payable, long-
term debt, including current portion, cash and cash
equivalents, and certain interest bearing investments
classified within prepaid expenses and other current
assets and other assets.
LIBOR. London Interbank Offered Rate.
Mark-to-market. The act of determining a value for
financial instruments, commodity contracts, and related
assets or liabilities based on the current market price
for that item.
Net mark-to-market valuation of certain commodity
positions. Realized and unrealized gains and losses on
derivative contracts that will be allocated to segment
operating profit when the exposure we are hedging
affects earnings.
Net price realization. The impact of list and pro-
moted price changes, net of trade and other price pro-
motion costs.
New businesses. Our consolidated results for fiscal
2014 include one additional quarter of operating activity
from the acquisitions of Yoki Alimentos S.A. in Brazil
(second quarter of fiscal 2013) and the assumption of
the Canadian Yoplait franchise license (second quarter
of 2013). Our consolidated results for 2014 also include
three additional quarters of operating activity from the
acquisition of Immaculate Baking Company in the United
States (third quarter of fiscal 2013). Our consolidated
results for fiscal 2013 include operating activity from
the acquisitions of Yoki Alimentos, Yoplait Ireland (first
quarter of fiscal 2013), Food Should Taste Good in the
United States (fourth quarter of fiscal 2012), Parampara
Foods in India (first quarter of fiscal 2013), Immaculate
Baking Company, and the assumption of the Canadian
Yoplait franchise license. Also included in the first quar-
ter of fiscal 2013 are two additional months of results
from the acquisition of Yoplait S.A.S. (first quarter of
fiscal 2012). Collectively, these items are referred to as
“new businesses” in comparing our fiscal 2014 results to
fiscal 2013 and fiscal 2013 results to fiscal 2012.
OCI. Other comprehensive income (loss).
Operating cash flow to debt ratio. Net cash provided
by operating activities, divided by the sum of notes pay-
able and long-term debt, including the current portion.
Redeemable interest. Interest of subsidiaries held by a
third party that can be redeemed outside of our control
and therefore cannot be classified as a noncontrolling
interest in equity.
Reporting unit. An operating segment or a business
one level below an operating segment.
Return on average total capital. Net earnings attrib-
utable to General Mills, excluding after-tax net interest,
and adjusted for certain items affecting year-over-year
comparability, divided by average total capital.
Segment operating profit margin. Segment operating
profit divided by net sales for the segment.
Supply chain input costs. Costs incurred to produce
and deliver product, including costs for ingredients
and conversion, inventory management, logistics, and
warehousing.
Total debt. Notes payable and long-term debt, includ-
ing current portion.
Transaction gains and losses. The impact on our
Consolidated Financial Statements of foreign exchange
rate changes arising from specific transactions.
Translation adjustments. The impact of the conver-
sion of our foreign affiliates’ financial statements to U.S.
dollars for the purpose of consolidating our financial
statements.
Variable interest entities (VIEs). A legal structure
that is used for business purposes that either (1) does
not have equity investors that have voting rights and
share in all the entity’s profits and losses or (2) has
equity investors that do not provide sufficient financial
resources to support the entity’s activities.
Working capital. Current assets and current liabilities,
Noncontrolling interests. Interests of subsidiaries
all as of the last day of our fiscal year.
held by third parties.
Notional principal amount. The principal amount on
which fixed-rate or floating-rate interest payments are
calculated.
86 GENERA L MILL S
2014 ANNUAL REPORT PB
Non-GAAP Measures
This report includes measures of financial performance
that are not defined by generally accepted accounting
principles (GAAP). For each of these non-GAAP finan-
cial measures, we are providing below a reconciliation of
the differences between the non-GAAP measure and the
most directly comparable GAAP measure. These non-
GAAP measures are used in reporting to our executive
management and/or as a component of the board of
director’s measurement of our performance for incentive
compensation purposes. We believe that these measures
provide useful information to investors. These non-
GAAP measures should be viewed in additional to, and
not in lieu of, the comparable GAAP measure.
TOTAL SEGMENT OPERATING PROFIT EXCLUDING THE IMPACT OF VENEZUELA CURRENCY DEVALUATION
In Millions
Operating profit:
U.S. Retail
International, excluding Venezuela currency devaluation
Convenience Stores and Foodservice
Total segment operating profit excluding
Venezuela currency devaluation
Unallocated corporate items
Divestiture (gain)
Restructuring, impairment, and other exit costs
Venezuela currency devaluation
Operating profit
2014
2013
2012
2011
2010
Fiscal Year
$ 2,311.5 $ 2,392.9 $ 2,295.3 $ 2,348.0 $ 2,385.1
535.1
307.3
515.4
314.6
429.6
286.7
291.4
306.3
206.1
263.3
3,153.9
3,222.9
3,011.6
2,945.7
2,854.5
196.2
(65.5)
3.6
62.2
326.1
347.6
184.1
202.9
—
19.8
25.2
—
101.6
—
(17.4)
4.4
—
—
31.4
14.0
$ 2,957.4 $ 2,851.8 $ 2,562.4 $ 2,774.6 $ 2,606.2
INTERNATIONAL SEGMENT OPERATING PROFIT EXCLUDING THE IMPACT OF
VENEZUELA CURRENCY DEVALUATION
In Millions
2014
2013
2012
2011
2010
Fiscal Year
International segment operating profit
Impact of Venezuela currency devaluation
International segment operating profit
$
472.9 $
490.2 $
429.6 $ 291.4 $
192.1
62.2
25.2
—
—
14.0
excluding Venezuela currency devaluation
$
535.1 $
515.4 $
429.6 $ 291.4 $
206.1
PB GE NER AL M ILLS
20 14 ANNUAL REPORT 87
DILUTED EPS EXCLUDING CERTAIN ITEMS AFFECTING COMPARABILITY
Per Share Data
2014
2013
2012
2011
2010
Fiscal Year
Diluted earnings per share, as reported
Mark-to-market effects (a)
Divestiture gain, net (b)
Tax items (c)
Acquisition integration costs (d)
Venezuela currency devaluation (e)
Restructuring costs (f)
Diluted earnings per share, excluding
certain items affecting comparability
$2.83
(0.05)
(0.06)
—
—
0.09
0.01
$2.79
—
—
(0.13)
0.01
0.03
0.02
$2.35
0.10
—
—
0.01
—
0.10
$2.70
(0.09)
—
$2.24
0.01
—
(0.13)
0.05
—
—
—
—
0.01
—
$2.82
$2.72
$2.56
$2.48
$2.31
(a) See Note 7 to the Consolidated Financial Statements on page 55 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 51 of this report.
(c) The fiscal 2013 tax items consist of a reduction to income taxes related to the restructuring of our GMC subsidiary and an increase to income taxes related
to the liquidation of a corporate investment. Additionally, fiscal 2013 and fiscal 2010 include changes in deferred taxes associated with the Medicare Part
D subsidies related to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. The fiscal
2011 tax item represents the effects of court decisions and audit settlements on uncertain tax matters.
(d) Integration costs resulting from the acquisitions of Yoki in fiscal 2013 and Yoplait S.A.S. and Yoplait Marques S.A.S. in fiscal 2012.
(e) Impact of remeasuring the assets and liabilities of our Venezuelan subsidiary following currency devaluation in fiscal 2014, fiscal 2013, and fiscal 2010.
(f) See Note 4 to the Consolidated Financial Statements on page 52 of this report.
DEBT TO EBITDA RATIOS
In Millions
Total debt (a)
Net earnings, including earnings attributable
Fiscal 2014
In Millions
$8,786
Total debt (a)
Net earnings
to redeemable and noncontrolling interests
1,861
Cumulative effect of change in accounting principle
After-tax earnings from joint ventures
Income taxes
Earnings before income taxes and
90
883
Earnings before cumulative effect of
change in accounting principle
Earnings from joint ventures
after-tax earnings from joint ventures
2,655
Income taxes
Interest, net
Operating profit
Depreciation and amortization
EBITDA
Debt to EBITDA
(a) Notes payable and long-term debt, including current portion.
Table does not foot due to rounding.
302
Earnings before taxes and earnings
2,957
from joint ventures
585
Interest, net
$3,543
Depreciation and amortization
2.5
EBITDA
Debt to EBITDA
Fiscal 2002 (b)
$9,439
458
(3)
461
33
239
667
416
296
$1,379
6.8
(a) Notes payable and long-term debt, including current portion.
(b) These numbers have not been restated for current classifications.
88 GENERAL MILL S
2014 ANNUAL REPORT 89
RETURN ON AVERAGE TOTAL CAPITAL
In Millions
2014
2013
2012
2011
2010
2009
Fiscal Year
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$ 1,861.3 $ 1,892.5 $ 1,589.1 $ 1,803.5 $ 1,535.0
Interest, net, after-tax
190.9
201.2
238.9
243.5
261.1
Earnings before interest, after-tax
2,052.2
2,093.7
1,828.0
2,047.0
1,796.1
Mark-to-market effects
Tax items
Restructuring costs
Acquisition integration costs
Divestiture gain, net
Venezuela currency devaluation
Earnings before interest, after-tax for
return on capital calculation
Current portion of long-term debt
Notes payable
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
Accumulated other comprehensive loss
After-tax earnings adjustments (a)
Adjusted total capital
Adjusted average total capital
Return on average total capital
(30.5)
—
3.6
—
(36.0)
57.8
(2.8)
(85.4)
15.9
8.8
—
20.8
65.6
—
64.3
9.7
—
—
(60.0)
(88.9)
—
—
—
—
4.5
35.0
—
—
—
9.4
$ 2,047.1 $ 2,051.0 $ 1,967.6 $ 1,898.1 $ 1,845.0
$ 1,250.6 $ 1,443.3 $
741.2 $ 1,031.3 $ 107.3 $
508.5
1,111.7
599.7
526.5
311.3
1,050.1
812.2
6,423.5
5,926.1
6,161.9
5,542.5
5,268.5
5,754.8
8,785.8
7,969.1
7,429.6
6,885.1
6,425.9
7,075.5
984.1
470.6
967.5
456.3
847.8
461.0
—
—
—
246.7
245.1
244.2
6,534.8
6,672.2
6,421.7
6,365.5
5,402.9
5,172.3
16,775.3
16,065.1
15,160.1
13,497.3
12,073.9 12,492.0
1,340.3
1,585.3
1,743.7
1,010.8
1,486.9
(209.3)
(204.2)
(161.5)
(301.1)
(152.2)
877.8
(201.1)
$ 17,906.3 $ 17,446.2 $ 16,742.3 $ 14,207.0 $ 13,408.6 $ 13,168.7
$ 17,676.2 $ 17,094.2 $ 15,474.6 $ 13,807.8 $ 13,288.6
11.6%
12.0%
12.7%
13.7%
13.9%
(a) Sum of current year and previous year after-tax adjustments.
88 GENER AL MILLS
20 14 ANNUAL REPORT 89
NET SALES GROWTH RATES FOR OUR
INTERNATIONAL SEGMENT EXCLUDING
THE IMPACT OF CHANGES IN FOREIGN
CURRENCY EXCHANGE
The reconciliation of International segment and region
sales growth rates as reported to growth rates excluding
the impact of foreign currency exchange below
demonstrates the effect of foreign currency exchange
rate fluctuations from year to year. To present this
information, current-period results for entities reporting
in currencies other than U.S. dollars are converted into
U.S. dollars at the average exchange rates in effect during
the corresponding period of the prior fiscal year, rather
than the actual average exchange rates in effect during
the current fiscal year. Therefore, the foreign currency
impact is equal to current-year results in local currencies
multiplied by the change in the average foreign currency
exchange rates between the current fiscal period and
the corresponding period of the prior fiscal year.
Europe
Canada
Asia/Pacific
Latin America
Total International
Europe
Canada
Asia/Pacific
Latin America
Total International
Fiscal 2014
Percentage Change
in Net Sales
as Reported
Impact of Foreign
Currency Exchange
Percentage Change
in Net Sales
on Constant
Currency Basis
(1)%
(1)
9
16
4%
3 pts
(6)
—
(22)
(4) pts
(4)%
5
9
38
8 %
Fiscal 2013
Percentage Change
in Net Sales
as Reported
Impact of Foreign
Currency Exchange
Percentage Change
in Net Sales
on Constant
Currency Basis
11%
22
11
116
24%
(4) pts
—
—
(23)
(4) pts
15%
22
11
139
28%
(4)%
8 pts
6 pts
10%
FISCAL 2014 CONSTANT-CURRENCY INTERNATIONAL SEGMENT OPERATING PROFIT GROWTH
International segment operating profit growth
Impact of Venezuela currency devaluation
Impact of foreign currency exchange
Constant-currency International segment operating profit growth
90 GENERAL MI L LS
2014 ANN UAL REPORT 91
Total Return to Stockholders
These line graphs compare the cumulative total return
for holders of our common stock with the cumulative
total return of the Standard & Poor’s 500 Stock Index
and Standard & Poor’s 500 Packaged Foods Index for
the last five-year and ten-year fiscal periods. The graphs
assume the investment of $100 in each of General Mills’
common stock and the specified indexes at the begin-
ning of the applicable period, and assume the reinvest-
ment of all dividends.
On June 30, 2014, there were approximately 33,000
record holders of our common stock.
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Total Return to Stockholders
Total Return to Stockholders
10 Years
10 Years
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May 04 May 05 May 06 May 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14
General Mills (GIS)
General Mills (GIS)
S&P 500
S&P 500
S&P Packaged Foods
S&P Packaged Foods
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0
90 GENERAL MILLS
20 14 ANNUAL REPORT 91
World Headquarters
Number One General Mills Boulevard
Minneapolis, MN 55426-1347
Phone: (763) 764-7600
Website
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
General Shareholder Information:
Investor Relations Department
(800) 245-5703 or (763) 764-3202
Analysts/Investors:
Kristen S. Wenker
(763) 764-2607
Shareholder Information
Transfer Agent and Registrar
Our transfer agent can assist you
with a variety of services, including
change of address or questions
about dividend checks:
Wells Fargo Bank, N.A.
1110 Centre Pointe Curve
Mendota Heights, MN 55120-4100
Phone: (800) 670-4763 or
(651) 450-4084
shareowneronline.com
Electronic Access to Proxy
Statement, Annual Report
and Form 10-K
Shareholders who have access to
the Internet are encouraged to enroll
in the electronic delivery program.
Please see the Investors section of
our website, GeneralMills.com, or go
directly to the website, ICSDelivery
.com/GIS and follow the instructions
to enroll. If your General Mills shares
are not registered in your name,
contact your bank or broker to enroll
in this program.
Visit Us on the Web
Notice of Annual Meeting
The annual meeting of shareholders
will be held at 10 a.m., Central
Daylight Time, Tuesday, Sept. 23,
2014, at the Children’s Theatre
Company, 2400 Third Avenue South,
Minneapolis, MN 55404-3597.
Proof of share ownership is required
for admission. Please refer to the
Proxy Statement for information
concerning admission to the meeting.
General Mills Direct Stock
Purchase Plan
This plan provides a convenient
and economical way to invest
in General Mills stock. You can
increase your ownership over time
through purchases of common
stock and reinvestment of cash
dividends, without paying brokerage
commissions and other fees on
your purchases and reinvestments.
For more information and a copy
of a plan prospectus, go to the
Investors section of our website
at GeneralMills.com.
We have a variety of websites that appeal to consumers around the world. Below is a selection of our most popular sites.
For a more complete list, see the “Our websites” page under the Company tab on GeneralMills.com.
QueRicaVida.com
Recipes and nutritional information for
Hispanic consumers.
Tablespoon.com
Download coupons, recipes and more
for a variety of our brands.
Blog.GeneralMills.com
Get a unique perspective on recent
news and stories about our brands
and our company.
You also can visit us on LinkedIn or
follow us on Twitter.
INTERNATIONAL SITES
HaagenDazs.com.cn (China)
Yoplait.fr (France)
NatureValley.co.uk (United Kingdom)
OldElPaso.com.au (Australia)
Yoki.com.br (Brazil)
LifeMadeDelicious.ca (Canada)
Get recipes, promotions and
entertaining ideas for many of
our brands.
U.S. SITES
Cheerios.com
Pillsbury.com
Yoplait.com
Larabar.com
BettyCrocker.com
Get recipes, cooking tips and view
instruction videos.
BoxTops4Education.com
Sign up to support your school.
LiveBetterAmerica.com
Simple ways to maintain a healthy
lifestyle.
92 GENERA L MILLS
2014 ANNUAL REPORT PB
Our Mission at General Mills Is Nourishing Lives
We believe that doing well for our share-
holders goes hand in hand with doing well
for our consumers, our communities and
our planet. Our efforts include providing
convenient, nutritious food around the world,
building strong communities through philan-
thropy and volunteerism, and developing
sustainable business practices that reduce
our environmental footprint.
For a comprehensive overview of our
commitment to stand among the most socially
responsible food companies in the world,
see our Global Responsibility Report available
online at GeneralMills.com/Responsibility.
Holiday Gift Boxes
General Mills Gift Boxes are a part of many
shareholders’ December holiday traditions.
To request an order form, call us toll-free
at (888) 496-7809 or write, including your
name, street address, city, state, zip code
and phone number (including area code) to:
2014 General Mills Holiday Gift Box
Department 9756
P.O. Box 5014
Stacy, MN 55078-5014
Or you can place an order online at:
GMIHolidayGiftBox.com
Please contact us after
October 1, 2014.
This report is printed on
recycled paper.
©2014 General Mills
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Number One General Mills Boulevard
Minneapolis, MN 55426-1347
GeneralMills.com