General Mills Annual Report 2015

Plain-text annual report

General Mills 2 0 1 5 A N N U A L R E P O R T Making Food People Love U.S. Retail Convenience Stores and Foodservice International Fiscal 2015 Financial Summary In millions, except per share and return on capital data 53 Weeks Ended May 31, 2015 52 Weeks Ended May 25, 2014 Change Change on a Constant Currency Basis * Net Sales $ 17,630 $ 17,910 Segment Operating Profi t* $ 3,035 $ 3,154 Net Earnings Attributable to General Mills $ 1,221 $ 1,824 Diluted Earnings per Share (EPS) $ 1.97 $ 2.83 – 2% – 4% – 33% – 30% + 1% – 2% Adjusted Diluted EPS, Excluding Certain Items Aff ecting Comparability* $ 2.86 $ 2.82 + 1% + 4% Return on Average Total Capital* Average Diluted Shares Outstanding 11.2% 619 646 11.6% –40 basis points –20 basis points – 4% + 8% Adjusted Diluted Earnings per Share* (dollars) 2011 2012 2013 2014 2015 2.48 2.56 2.72 2.82 2.86 Dividends per Share $ 1.67 $ 1.55 Net Sales (dollars in millions) Segment Operating Profi t* (dollars in millions) 2011 2012 2013 2014 2015 14,880 16,658 17,774 17,910 17,630 2011 2012 2013 2014 2015 2,946 3,012 3,223 3,154 3,035 *(cid:17)See page 31 for discussion of non-GAAP measures. Making Food People Love At General Mills, we serve the world by making food people love. We’re putting the consumer fi rst, understanding their food preferences, how they shop and how they cook today, and respond- ing quickly to those desires. By focusing on consumer needs, we expect to drive market- leading growth for General Mills and deliver superior returns to our shareholders. Joint Ventures General Mills at a Glance 13% 26% 17% 13% 16% 19% 41% 20% 33% 54% 20% 22% 22% 84% U.S. Retail Net Sales by Operating Unit $10.5 Billion 26% Meals 22% Cereal 20% Snacks $5.1 Billion 41% Europe 22% Canada 20% Asia/Pacifi c 19% Baking Products 17% Latin America 13% Yogurt and Other International Net Sales by Region Convenience Stores and Foodservice Net Sales by Brand Type Joint Ventures Net Sales by Joint Venture (not consolidated, proportionate share) $2.0 Billion $1.1 Billion 54% Branded to 84% Cereal Partners Foodservice Operators Worldwide (CPW) 33% Branded to Consumers 16% Häagen-Dazs 13% Unbranded Japan (HDJ) 2015 ANNUAL REPORT 1 General Mills Total Shareholder Return (fi scal years, stock price appreciation plus reinvested dividends, compound annual growth) 16% 13% 8% 2015 Latest 3 Years Latest 5 Years Source: Bloomberg Dividends per Share (dollars) 1.67 1.55 1.32 1.22 1.12 2011 2012 2013 2014 2015 To Our Shareholders: Ken Powell Chairman and Chief Executive Offi cer General Mills 2015 operating performance was mixed. Where we had product news and marketing messages that were on-trend with consumers’ evolving food preferences, our businesses grew. But we didn’t have enough of these initiatives to lift our sales in the aggregate, and our profi t growth was less than originally targeted. Strategic actions that we’ve taken during the year will position us for stronger performance in 2016. General Mills net sales for the fi scal year ended May 31, 2015, declined 2 percent to $17.6 billion, as unfavorable foreign exchange off set the benefi ts of a 53rd week in the fi scal year and six months of incremental contribution from the Annie’s, Inc. (Annie’s) organic foods business we acquired in October 2014. Excluding the impact of foreign exchange, our net sales increased 1 percent in fi scal 2015.* Total segment operating profi t declined 4 percent to $3.0 billion. On a constant-currency basis, total segment operating profi t declined 2 percent. Diluted earnings per share totaled $1.97 in 2015, below the prior year primarily due to restructuring costs, an impairment charge and a one-time tax expense. Adjusted diluted earnings per share, which excludes these and certain other items aff ecting compara- bility of results, rose 1 percent to $2.86. Excluding the impact of foreign exchange, adjusted diluted earnings per share increased 4 percent. * See page 31 for a reconciliation of this and other non-GAAP measures used in this letter. 2 GENERAL MILLS Net sales for U.S. Retail, our largest business seg- ment, declined 1 percent to $10.5 billion. Our brands achieved share gains in categories representing 65 percent of our retail sales in Nielsen-measured channels, but overall sales trends in many categories were weak, refl ecting the impact of changing consumer food preferences. Consumers are increasingly interested in natural foods with simple ingredients and are limiting things like gluten, simple carbohydrates and artifi cial ingre- dients. They also are looking for more protein, fi ber, whole grains and organic products. And they are snacking more than ever. In categories where we applied a “consumer fi rst” approach and responded to these changes, we posted good growth. For example, retail sales for our grain snacks grew 4 percent, and we gained nearly two points of market share on the strength of our Nature Valley and Fiber One brands. Yoplait yogurt generated solid sales and share gains, led by strong performance on our Greek variet- ies, and we saw a resurgence of interest in Yoplait Original yogurt as we emphasized its all-family snack appeal. Our Convenience Stores and Foodservice segment had outstanding results in fi scal 2015. Net sales reached the $2 billion mark, a 4 percent increase over last year. And segment operating profi t grew 15 per- cent to a record $353 million. We remain focused on six key product platforms in foodservice channels: Growing Our Core with Yoplait By putting the consumer fi rst, we gener- ated 7 percent retail sales growth and gained nearly a point of market share for our U.S. Retail yogurt business in fi scal 2015. Consumers like the health benefi ts of yogurt, and Greek varieties remain the largest seg- ment of the $8 billion U.S. yogurt category. We’ve been promoting the great taste of our Yoplait Greek varieties, and launched Yoplait Greek 100 Whips! for consumers who prefer a lighter yogurt texture with just 100 calories per serving. We also renewed growth on Yoplait Original yogurt by adver- tising its all-family appeal as a great-tasting, good-for-you snack. We recently reduced sugar across this line by 25 percent. And retail sales for our kid-oriented yogurts returned to growth, driven by the removal of artifi cial colors and fl avors. We have more consumer-fi rst innovation coming in 2016, including Yoplait Plenti, a combination of grains and seeds mixed into delicious Yoplait Greek yogurt, for consumers looking for a heartier yogurt experience. 2015 ANNUAL REPORT 3 Our Five Global Categories Are Large and Growing Category Ready-to-eat Cereal Ice Cream Yogurt Convenient Meals Sweet and Savory Snacks * Projected 5-year compound rate Source: Euromonitor, calendar 2014 2014 Retail Sales in Billions Projected Growth* $ 28 $ 71 $ 83 $ 118 $ 287 4% 7% 8% 5% 6% Product renovation and new items that met changing consumer interests generated good growth in fi scal 2015. cereal, snacks, yogurt, mixes, biscuits and frozen breakfast. These priority businesses, which account for more than 70 percent of the segment’s operating profi t, posted combined net sales growth of 9 percent for the year. Net sales for our International segment declined 5 percent to $5.1 billion, and segment operating profi t declined 2 percent, refl ecting negative foreign cur- rency translation eff ects. On a constant-currency basis, International net sales grew 6 percent and seg- ment operating profi t rose 9 percent. This included constant-currency net sales gains of 17 percent in Latin America, 5 percent in the Asia/Pacifi c region and 5 percent in the Europe region. In addition to these three operating segments, we hold 50-percent non-consolidated interests in two joint ventures outside of North America. Together, Cereal Partners Worldwide (CPW) and Häagen-Dazs Japan (HDJ) contributed $84 million in after-tax earnings in fi scal 2015. This was 6 percent below last year’s results, refl ecting unfavorable foreign currency exchange. On a constant-currency basis, after-tax earnings from joint ventures matched year-ago levels. In fi scal 2015, we returned $2.2 billion to share- holders through share repurchases and dividends. We repurchased approximately 22 million shares of common stock, reducing our average number of shares outstanding by 4 percent. We also increased our annual dividend by 8 percent, including raising our quarterly dividend rate eff ective with our May 2015 payment. The new annualized rate of $1.76 represents a yield of roughly 3 percent at recent prices for General Mills stock. General Mills and its predeces- sor fi rm have paid shareholder dividends without interruption or reduction for 116 years, and our plans call for increasing our dividend as our earnings grow. Our total shareholder return, which is a combination of stock price appreciation and dividends, totaled 8 percent in fi scal 2015. This lagged the broader market, as the S&P 500 Index generated 13 percent return for the year. Over the past fi ve, 10, 15 and even 20 years, General Mills has consistently delivered double-digit returns to shareholders. We outper- formed the broader market during all of those time periods except during the most recent fi ve fi scal years, when the S&P 500 Index posted a strong 17 percent annual compound return to shareholders. 4 GENERAL MILLS Our Business Portfolio is a Strategic Advantage 5% 1% 10% 20% 10% 5% 18% 15% 16% Fiscal 2015 Net Sales by Platform $18.7 Billion* 20% Cereal 18% Snacks 16% Yogurt 15% Convenient Meals 5% Super-premium Ice Cream 10% Dough 10% Baking Mixes and Ingredients 5% Vegetables 1% Other * Non-GAAP measure. Includes $17.6 billion consolidated net sales plus $0.9 billion proportionate share of CPW (cereal) net sales plus $0.2 billion proportionate share of HDJ (ice cream) net sales. General Mills Long-term Growth Model Our Priorities for Fiscal 2016 Growth Factor Compound Growth Rate Net Sales Low single-digit Segment Operating Profi t Mid single-digit Adjusted Diluted Earnings per Share Dividend Yield High single-digit 2 to 3 percent Total Return to Shareholders Double-digit We remain committed to our long-term growth model and believe that our businesses can generate low single- digit net sales growth, mid single-digit segment operating profi t growth and high single-digit growth in adjusted diluted earnings per share. When you add in a dividend yield of between 2 and 3 percent, we should deliver double-digit returns to shareholders over the long term. Our focus is on fi ve global growth categories(cid:28)—(cid:28) cereal, ice cream, yogurt, convenient meals and sweet and savory snacks. According to Euromonitor, sales in these categories are projected to grow at attractive rates because they are on-trend with the consumer food trends described earlier. More than 70 percent of our worldwide sales are concentrated in these fi ve platforms, so we see strong opportuni- ties to grow our brands in these categories. As we enter fi scal 2016, we are dedicated to acceler- ating sales growth, which will refl ect one less week in the fi scal year. We’ll drive growth by responding to changing consumer demands and reshaping our product portfolio and our organization. This will gen- erate funds we can reinvest in our business. We have three key priorities described below. Drive More from the Core Our product portfolio is built on a core of well-known, iconic brands that have stood the test of time. We continue to renovate these brands to keep them rel- evant to today’s consumer and innovate to introduce 2015 ANNUAL REPORT 5 Expanding Our Natural and Organic Food Portfolio U.S. industry sales for natural and organic foods have been growing at a double-digit pace over the past three years. And sales are projected to continue to grow at a double-digit rate. We’ve been building our capabilities for sourcing, manufacturing and marketing natural and organic brands for the past 15 years. With the acquisition of Annie’s, Inc. in October 2014, we’re now the fourth-largest natural and organic food manufacturer in the U.S. We have strong levels of innovation coming in 2016 across our brands, including new Cascadian Farm cereals, Annie’s soups and Food Should Taste Good snack bars. We see great oppor- tunities to grow our brands by innovating, and by increasing their distribution in nat- ural and organic stores and in traditional grocery outlets. new products that meet changing consumer needs. For example, nearly 30 percent of U.S. consumers have purchased gluten-free products as recently as our fourth fi scal quarter, so we’ve increased our gluten-free cereal off erings to include varieties of granola and hot oatmeal. And starting this summer, fi ve varieties of Cheerios will be gluten free. For consumers desiring more sim- ple ingredients, we are removing artifi cial fl avors and colors from artifi cial sources from all of our Big G cereals by December 2017. In our Convenience Stores and Foodservice business, we con- tinue to innovate on our Pillsbury line of frozen breakfast items served in K-12 schools. This line of pancakes, waffl es, French toast and bagels can be heated right in the package(cid:28)—(cid:28) quick and easy preparation for foodservice operators(cid:28)—(cid:28) and kids love the great taste of these portable breakfast treats. We’re now expanding this concept to school lunchrooms with a heat-and- serve line of Old El Paso gorditas. Around the world, consumer preferences are changing, too. Our International business has been innovating on our global brands, launching Häagen-Dazs super-premium ice cream stick bars in France, new vegetable-packed varieties of Wanchai Ferry dump- lings in China, and a line of Nature Valley popcorn bars in the UK. These are just a few examples of the initiatives we have underway to grow our core brands. We have more exciting product news coming across all of our business segments throughout fi scal 2016 that we believe will generate sales and profi t growth. Reshape Our Portfolio for Growth We’ve been reshaping our business through acquisitions, divesti- tures and expansion of our existing brands into new geographies. In the U.S., we’ve been growing our natural and organic portfolio over the past 15 years. It started with the 2000 acquisition of Small Planet Foods, which included Cascadian Farm and Muir Glen brands. Since then, we’ve added to our portfolio with Lärabar nutrition bars, Immaculate baking products, Food Should Taste Good snacks, and Mountain High and Liberté yogurt. With the addition of a full year of results for Annie’s, our natural and organic sales total nearly $700 million, and we expect this port- folio to exceed $1 billion in annual sales by 2020. Over the past decade, we’ve taken actions to focus our Convenience Stores and Foodservice portfolio. The result is a portfolio that leverages our well-known consumer brands(cid:28)—(cid:28) more than 85 percent of our sales come from products that are branded to foodservice operators or the fi nal consumer. And 6 GENERAL MILLS we’ve signifi cantly improved our segment operat- ing profi t margin from 8.6 percent in fi scal 2008 to 17.7 percent today. We’ve also been growing our International businesses by expanding our presence in emerging markets and through strategic acquisitions, such as Yoki in Brazil. This summer, we brought an existing brand into a new market with the introduction of Yoplait yogurt in China. The Yoplait brand originated in France 50 years ago and today is available in more than 50 markets worldwide. We’re now competing in the $10 billion yogurt category in China with three yogurt off erings: a thick and creamy French-style yogurt, a fruit-on-the-bottom variety and a drinkable yogurt containing fresh fruit. We are excited about the growth prospects we see for Yoplait and the strong contributions it can make to our $725 million business in China. Fund Our Future We believe our business requires a balanced approach to drive growth(cid:28)—(cid:28) balanced between protecting our margins, investing in our business for future growth and providing solid returns to our shareholders over the long term. While our primary focus is on driving topline growth, we also look for opportunities to increase productivity and reduce expenses. Through Holistic Margin Management (HMM), we’ve been able to remove non-value adding costs across the company. Since 2010, we’ve generated a cumulative $2.4 billion in savings in our cost of sales. During fi scal 2015, we took additional signifi cant actions to streamline our organization and improve our operating effi ciency. Through Project Century, we are simplifying our North American supply chain, better balancing manufacturing and distribution, and adding fl exibility to adjust for future growth. Project Catalyst is focused on increasing our orga- nizational eff ectiveness across our U.S. businesses. We’ve created a new structure that allows us to be faster and more agile, so we can quickly adjust to a changing marketplace. We’re also making changes to our policies and practices that reduce overhead expense. And most recently, we announced Project Compass, which is our initiative to increase organi- zational eff ectiveness within our International business segment. Reshaping Our Convenience Stores and Foodservice Portfolio U.S. consumers spend more than $650 billion annually for food eaten away from home, and our Convenience Stores and Foodservice team has been reshaping its portfolio to drive growth in this industry. We’ve been focusing on our highest-margin businesses and divesting lower-margin performers. The result has been double-digit segment operating profi t growth com- pounded over the past seven years, and a 900-basis-point increase in profi t margin. We’re also emphasizing our six focus platforms(cid:28)—(cid:28) cereal, snacks, yogurt, mixes, biscuits and frozen breakfast(cid:28)—(cid:28) whose combined sales have been compounding at a 5 percent rate in recent years. We compete in large and growing channels in the foodservice industry, including K-12 schools, colleges and universities, and convenience stores. We’re now expanding our presence in the fresh bakery section of convenience stores with our Pillsbury line of grab-and-go baked goods. Convenience Stores and Foodservice Segment Operating Profi t (fi scal years, dollars in millions) 353 17.7% 170 8.6% 2008 2015 Segment Operating Profi t Profi t Margin (operating profi t divided by net sales) 2015 ANNUAL REPORT 7 Growing Our International Core with Old El Paso Despite slow economic growth and a challenging marketplace, General Mills posted 5 percent constant-currency net sales growth in fi scal 2015 in our Europe region, which also includes Australia and New Zealand. This performance was led by Old El Paso Mexican foods. Old El Paso is a global brand(cid:28)—(cid:28) it’s available in 60 markets worldwide. The convenience of these Mexican dinner kits, combined with innovative new products, is a great fi t for consumers everywhere who like to experiment with foods with ethnic fl avors. In our Europe region, net sales for Old El Paso grew by double digits on the strength of our Stand ’n Stuff tortillas, supported by strong levels of advertising. In 2016, we’ll introduce an Old El Paso Restaurante line in European markets. These kits contain high-quality ingredients and zesty fl avor combinations for a restaurant-quality meal at home. International Performance by Geographic Region (fi scal 2015, dollars in millions) Europe Canada Asia/Pacifi c Net Sales $ 2,126 $ 1,105 $ 1,024 Latin America $ 873 Total International $ 5,128 % Change on a Constant Currency Basis* 5% Flat 5% 17% 6% *See page 31 for discussion of non-GAAP measures. We delivered $75 million in cost savings from these actions in fi scal 2015 and expect this to grow to between $285 million and $310 million in fi scal 2016 from all our initiatives combined. A portion of these savings is being reinvested into the business through activities like consumer-focused promotions and product development and renovation(cid:28)—(cid:28) actions that drive future sales growth. Our People Drive Our Success The skill and talent of our 42,000 employees around the world gives me confi dence we will achieve our performance goals. Their hard work and dedica- tion is truly a competitive advantage for us. Several members of our leadership team have announced their retirement in the past fi scal year. Marc Belton, Mike Davis, Luis Merizalde, Rick Palmore and Kris Wenker all made signifi cant contributions to General Mills, and I want to thank them for their dedication to our company during their careers here. In addition, I’d like to thank Ray Gilmartin, Judy Hope and Hilda Ochoa-Brillembourg, who are retiring from our board of directors in September. They have provided invaluable counsel during their many years of service on our board. In closing, I want to thank you for your investment in General Mills. We are keenly focused on driving value for you, our shareholders. We appreciate your confi dence in our strategies and our company. And we look forward to reporting on continued strong performance in the future as we make food people love. Kendall J. Powell Chairman and Chief Executive Offi cer August 1, 2015 8 GENERAL MILLS Financial Review Contents Financial Summary Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations Non-GAAP Measures Reports of Management and Independent Registered Public Accounting Firm Consolidated Financial Statements Notes to Consolidated Financial Statements 1 Basis of Presentation and Reclassifi cations 2 Summary of Signifi cant Accounting Policies 3 Acquisition and Divestiture 4 Restructuring, Impairment, and Other Exit Costs 5 Investments in Unconsolidated 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 Benefi ts and Postemployment Benefi ts 14 Income Taxes 15 Leases, Other Commitments, and Contingencies 16 Business Segment and Geographic Information 17 Supplemental Information 18 Quarterly Data Glossary Total Return to Stockholders 10 12 13 31 37 39 44 44 47 48 50 51 52 61 63 63 66 68 69 76 78 78 80 82 83 85 2015 ANNUAL REPORT 9 Financial Summary Adjusted Gross Margin* (percent of net sales) INCREASING OUR EFFICIENCY 2008 2009 2010 2011 201 2 2013 2014 2015 * See page 31 for discussion of non-GAAP measures. 35.1% 36.4% 39.7% 39.4% 36.9% 36.2% 35.4% 34.7% Cash Flow from Operations (dollars in millions) 2011 201 2 2013 2014 2015 1,531 2,407 2,926 2,541 2,543 Core Working Capital (dollars in millions) 2011 201 2 2013 2014 2015 1,776 1,654 1,569 1,432 1,244 For the past several years, we have been increasing our productivity and eﬃ ciency to oﬀ set input cost inﬂ ation and fuel our consumer-ﬁ rst initiatives. Input cost inﬂ a- tion has been averaging 4 to 5 percent over the past ﬁ ve years, and we expect costs to remain inﬂ ationary for the foreseeable future. Holistic Margin Management (HMM) is our company-wide initiative to use produc- tivity savings, mix management and price realization to oﬀ set input cost inﬂ ation, protect margins and gen- erate funds to reinvest in sales-generating activities. Th anks to HMM actions that helped drive savings in our cost of sales, we’ve been able to hold our gross margin relatively steady for the past eight years. Th is period was marked by signiﬁ cant volatility of input costs from year to year and a change in our product mix as we acquired new businesses. To ensure we remain competitive in the marketplace, we took additional actions in ﬁ scal 2015 to increase our eﬃ ciency. Project Century is our eﬀ ort to streamline our North American supply chain. Project Catalyst is focused on increasing our organizational eﬀ ectiveness across our U.S. businesses. And in June, we launched Project Compass to increase organizational eﬀ ective- ness within our International business segment. We also are making changes to policies and practices that reduce overhead expense across the company. Combined, these initiatives generated $75 million in cost savings in ﬁ scal 2015, and we expect to achieve $285 million to $310 million in cost savings in ﬁ scal 2016. GENERATING CASH Our businesses have a long history of strong cash gen- eration. Over the past ﬁ ve years, we produced a cumula- tive $11.9 billion of operating cash ﬂ ow. Our discipline on core working capital, which is accounts receivable plus inventories less accounts pay- able, has contributed to our operating cash ﬂ ow. Over the past several years, we’ve been able to reduce our core working capital primarily through improvements in managing our accounts payable. Since 2011, our core working capital has declined by nearly 30 percent, while our net sales have grown by nearly 20 percent during that time period. In ﬁ scal 2015, we reduced our core working capital by 13 percent. 10 GENERAL MILLS Fixed Asset Investment (percent of net sales) USES OF CASH 2011 2012 2013 2014 2015 4.4% 4.1% 3.4% 3.7% 4.0% Dividends Paid (dollars in millions) 2011 201 2 2013 2014 2015 729 800 868 983 1,018 Average Diluted Shares Outstanding (shares in millions) 2011 2012 2013 2014 2015 665 667 666 646 619 Return on Average Total Capital* (percent) 2011 2012 2013 2014 2015 * See page 31 for discussion of non-GAAP measures. 13.7% 12.7% 12.0% 11.6% 11.2% Our ﬁ rst priority for this cash is investment in growth opportunities and cost-saving projects we’ve identiﬁ ed across our businesses. On average, our annual ﬁ xed asset investment represents 4 percent of net sales. In ﬁ scal 2015, ﬁ xed asset investments totaled $712 million, in line with our 4 percent of net sales average. In ﬁ scal 2016, we expect to invest approximately $840 million in capital expenditures, including initiatives related to Project Century and projects to increase our production capacity on growing businesses. Aft er capital investment, we prioritize cash returns to shareholders through dividends and share repurchases. Cash dividends to shareholders totaled more than $1 billion in ﬁ scal 2015. Since ﬁ scal 2011, our dividends per share have grown at an 11 percent compound rate. In March 2015, our board of directors approved a 7 per- cent increase in the quarterly dividend rate eﬀ ective with the May 2015 payment. Th e current annualized rate of $1.76 represents a yield of roughly 3 percent at recent market prices for General Mills stock. General Mills and its predecessor ﬁ rm have paid regular divi- dends without interruption or reduction for 116 years, and our goal is to continue increasing dividends over time, in line with our earnings growth. We also return cash to shareholders through share repurchases. Since 2011, our share repurchase activ- ity has lowered average diluted shares outstanding by roughly 2 percent a year, consistent with our long-term share reduction target. Th at’s despite the fact that we used cash to fund the strategic acquisitions of Yoplait International, Yoki and Annie’s during that time. In ﬁ s- cal 2015, we repurchased 22 million shares for a total of $1.2 billion. Net income growth and disciplined uses of cash are the drivers of increasing returns on average total cap- ital (ROC). General Mills ROC has declined in recent years, primarily due to the acquisitions of Yoplait International, Yoki and Annie’s. Our plans for 2016 call for improved ROC, powered by earnings growth and continued prudent capital management. 2015 ANNUAL REPORT 11 Selected Financial Data Th e following table sets forth selected ﬁ nancial data for each of the ﬁ scal years in the ﬁ ve-year period ended May 31, 2015: In Millions, Except Per Share Data, Percentages and Ratios 2015 (a) 2014 2013 2012 2011 Fiscal Year Operating data: Net sales Gross margin (b) Selling, general, and administrative expenses Total segment operating proﬁ t (c) Divestiture (gain) $ 17,630.3 $ 17,909.6 $ 17,774.1 $ 16,657.9 $ 14,880.2 5,949.2 6,369.8 6,423.9 6,044.7 5,953.5 3,328.0 3,474.3 3,552.3 3,380.7 3,192.0 3,035.0 3,153.9 3,222.9 3,011.6 2,945.6 — (65.5) — — (17.4) Net earnings attributable to General Mills 1,221.3 1,824.4 1,855.2 1,567.3 1,798.3 Advertising and media expense Research and development expense Average shares outstanding: Diluted Earnings per share: Diluted $ Diluted, excluding certain items aﬀ ecting comparability (c) $ Operating ratios: Gross margin as a percentage of net sales Selling, general, and administrative expenses as a percentage of net sales Total segment operating proﬁ t as a percentage of net sales (c) Eﬀ ective income tax rate Return on average total capital (b) (c) Balance sheet data: Land, buildings, and equipment Total assets Long-term debt, excluding current portion Total debt (b) Cash ﬂ ow data: Net cash provided by operating activities Capital expenditures Fixed charge coverage ratio (b) Operating cash ﬂ ow to debt ratio (b) Share data: Low stock price High stock price Closing stock price Cash dividends per common share 823.1 229.4 869.5 243.6 895.0 237.9 913.7 245.4 843.7 235.0 618.8 645.7 665.6 666.7 664.8 1.97 2.86 $ $ 2.83 2.82 $ $ 2.79 $ 2.72 $ 2.35 2.56 $ $ 2.70 2.48 33.7% 35.6% 36.1% 36.3% 40.0% 18.9% 19.4% 20.0% 20.3% 21.5% 17.2% 33.3% 11.2% 17.6% 33.3% 11.6% 18.1% 29.2% 12.0% 18.1% 32.1% 12.7% 19.8% 29.7% 13.7% $ 3,783.3 $ 3,941.9 $ 3,878.1 $ 3,652.7 $ 3,345.9 21,964.5 23,145.7 22,658.0 21,096.8 18,674.5 7,607.7 6,423.5 5,926.1 6,161.9 5,542.5 9,223.9 8,785.8 7,969.1 7,429.6 6,885.1 $ 2,542.8 $ 2,541.0 $ 2,926.0 $ 2,407.2 $ 1,531.1 712.4 5.54 663.5 8.04 613.9 7.62 675.9 6.26 648.8 7.03 27.6% 28.9% 36.7% 32.4% 22.2% $ 48.86 $ 46.86 $ 37.55 $ 34.95 $ 33.57 57.14 56.15 1.67 54.40 53.81 1.55 50.93 48.98 1.32 41,000 41.05 39.08 1.22 34,500 39.95 39.29 1.12 35,000 Number of full- and part-time employees 42,000 43,000 (a) Fiscal 2015 was a 53-week year; all other ﬁ scal years were 52 weeks. (b) See “Glossary” on page 83 of this report for deﬁ nition. (c) See “Non-GAAP Measures” on page 31 of this report for our discussion of this measure not deﬁ ned by generally accepted accounting principles. 1 2 GENERAL MILLS 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 core products and to create new products that meet consumers’ evolving needs and preferences. In addition, we build the equity of our brands over time with strong consumer-directed marketing, innovative new products, and eﬀ ective merchandising. We believe our brand-building strategy is the key to winning and sustaining leading share positions in markets around the globe. Our fundamental ﬁ nancial goal is to generate supe- rior returns for our stockholders over the long term. We believe that increases in net sales, segment oper- ating proﬁ t, earnings per share (EPS), and return on average total capital are the key drivers of ﬁ nancial per- formance for our business. Our long-term growth objectives are to consistently deliver: • low single-digit annual growth in net sales; • mid single-digit annual growth in total segment operating proﬁ t; • high single-digit annual growth in diluted EPS excluding certain items aﬀ ecting comparability; and • improvement in return on average total capital. We believe that this financial performance, cou- pled with an attractive dividend yield, should result in long-term value creation for stockholders. We return a substantial amount of cash to stockholders through dividends and share repurchases. Our ﬁ scal 2015 performance was mixed. Our two smaller operating segments delivered growth. Operating proﬁ t for the Convenience Stores and Foodservice seg- ment increased 15 percent to an all-time high of $353 million. Operating results for the International segment were muted by a signiﬁ cant negative impact from for- eign currency exchange and slowing economic growth in key emerging markets, but the segment achieved good margin expansion and proﬁ t growth in constant currency. Results for our U.S. Retail segment were dis- appointing, as both net sales and segment operating proﬁ t declined. Our brands achieved share gains in categories representing 65 percent of our products’ sales in measured U.S. retail channels, but overall sales trends in many categories were weak, reﬂ ecting the impact of changing consumer food preferences. Our consolidated net sales for the ﬁ scal year ended May 31, 2015, declined 2 percent to $17.6 billion, as unfavorable foreign exchange oﬀ set the beneﬁ ts of a 53rd week and six months of incremental contribu- tion from the Annie’s Inc. (Annie’s) natural and organic foods business acquired in October 2014. On a con- stant-currency basis, net sales increased 1 percent. Total segment operating proﬁ t of $3.0 billion declined 4 percent and 2 percent in constant currency. Diluted EPS declined 30 percent to $1.97 per share. Adjusted diluted EPS, which excludes certain items aﬀ ecting comparability of results, rose 1 percent to $2.86 per share and increased 4 percent on a constant-currency basis. Th ese results were in line with our expectations which were revised in the second quarter of ﬁ scal 2015. Our return on average total capital declined 40 basis points to 11.2 percent. (See the “Non-GAAP Measures” section below for discussion of total segment operat- ing profit, adjusted diluted EPS, constant-currency nets sales growth rates, constant-currency total seg- ment operating proﬁ t growth rate, constant-currency adjusted diluted EPS growth rate, and return on aver- age total capital, which are not deﬁ ned by generally accepted accounting principles (GAAP)). Net cash provided by operations totaled $2.5 billion in ﬁ scal 2015. Th is cash generation supported capital investments totaling $712 million in ﬁ scal 2015. We also returned signiﬁ cant cash to stockholders through an 8 percent dividend increase, and share repurchases totaling $1.2 billion. We recorded the following achievements related to our other key operating objectives for ﬁ scal 2015: • Product improvements on established brands and new-product introductions designed to respond to evolving consumer food preferences generated good growth for a variety of our product lines. Examples included renewed sales growth for our U.S. Yogurt operating unit; strong sales contributions from pro- tein-enriched cereal varieties; robust consumer demand across international markets for new Old El Paso Mexican food items; and double-digit growth for our U.S. portfolio of natural and organic food products. • Th e acquisition of Annie’s in October 2014 signiﬁ - cantly expanded our scale and participation in the attractive U.S. natural and organic food category. Combined net sales in the U.S. for our portfolio of natural and organic brands exceeded $570 million in ﬁ scal 2015. 2015 ANNUAL REPORT 13 • We increased our share of U.S. cereal category mea- sured dollar sales. • We increased our share of U.S. yogurt category mea- sured dollar sales, including strong gains in the Greek yogurt segment, and renewed sales growth in the reg- ular and child yogurt segments. Our international yogurt operations expanded to China with ﬁ rst pro- duction and order shipments to the Shanghai market commencing near the end of the ﬁ scal year. • We generated strong levels of supply chain produc- tivity savings in 2015 through our ongoing Holistic Margin Management (HMM) efforts. Beyond this program, we began several new cost savings ini- tiatives during the ﬁ scal year. Project Century is our eﬀ ort to simplify our North American supply chain. Project Catalyst is focused on increasing the agility and eﬀ ectiveness of our U.S. Retail and corporate organi- zations, and we are making changes to various corpo- rate policies and practices to reduce overhead expense. Together, these three initiatives generated more than $75 million in cost savings during ﬁ scal 2015, and they are expected to produce a cumulative $260 to $280 mil- lion in savings in ﬁ scal 2016. • We delivered strong cash returns to stockholders through dividends of $1.67 per share and share repur- chases totaling $1.2 billion. Share repurchase activity in ﬁ scal 2015 and 2014 reduced the average number of diluted shares outstanding in ﬁ scal 2015 by 4 percent from ﬁ scal 2014. A detailed review of our ﬁ scal 2015 performance appears below in the section titled “Fiscal 2015 Consolidated Results of Operations.” Our sales and earnings growth targets for ﬁ scal 2016 reﬂ ect the impact of one less week compared to ﬁ scal 2015. Th e Annie’s business will contribute 6 months of incremental results. We expect foreign currency exchange will continue to have a negative impact on reported results for our international operations, and we expect the operating environment in our large developing markets (China and Brazil) to remain uncer- tain. We estimate our input cost inﬂ ation for ﬁ scal 2016 at 2 percent. With these assumptions in mind: • We expect ﬁ scal 2016 net sales to essentially match 2015 levels in constant currency, reﬂ ecting the impact of one less week of business. • We expect ﬁ scal 2016 total segment operating proﬁ t to increase at a low-single-digit rate in constant cur- rency, as HMM and our more recent cost-saving initia- tives increase our eﬃ ciency and improve margins. • We expect ﬁ scal 2016 adjusted diluted EPS to increase at a mid-single-digit rate in constant currency. • Our ﬁ scal 2016 plans call for continued strong cash returns to stockholders. Th e current annualized divi- dend rate of $1.76 per share is up 5 percent from the annual dividend paid in 2015. Share repurchases in ﬁ scal 2016 are expected to result in a net reduction in average diluted shares outstanding of approximately 1 percent. Certain terms used throughout this report are deﬁ ned in a glossary on page 83 of this report. FISCAL 2015 CONSOLIDATED RESULTS OF OPERATIONS Fiscal 2015 had 53 weeks compared to 52 weeks in ﬁ scal 2014. Fiscal 2015 net sales declined 2 percent to $17,630 million and increased 1 percent on a constant-cur- rency basis. In ﬁ scal 2015, net earnings attributable to General Mills were $1,221 million, down 33 percent from $1,824 million in ﬁ scal 2014, and we reported diluted EPS of $1.97 in ﬁ scal 2015, down 30 percent from $2.83 in ﬁ scal 2014. Fiscal 2015 results include restructuring-related charges, an indefinite-lived intangible asset impairment charge, tax impact of the repatriation of foreign earnings, losses from the mark- to-market valuation of certain commodity positions and grain inventories, integration costs resulting from the acquisition of Annie’s, and the impact of Venezuela currency devaluation. Fiscal 2014 results include the impact of Venezuela currency devaluation, a gain on the divestiture of certain grain elevators, losses from the mark-to-market valuation of certain commodity posi- tions and grain inventories, and restructuring charges related to our ﬁ scal 2012 productivity and cost savings plan. Diluted EPS excluding these items aﬀ ecting com- parability totaled $2.86 in ﬁ scal 2015, up 1 percent from $2.82 in ﬁ scal 2014. Diluted EPS excluding certain items aﬀ ecting comparability on a constant-currency basis increased 4 percent compared to ﬁ scal 2014 (see the “Non-GAAP Measures” section below for a description of our use of these measures not deﬁ ned by GAAP). 1 4 GENERAL MILLS Net sales declined 2 percent to $17,630 million in ﬁ s- cal 2015 from $17,910 in ﬁ scal 2014. Th e components of net sales growth are shown in the following table: Contributions from volume growth (a) Net price realization and mix Foreign currency exchange Net sales growth Fiscal 2015 vs. 2014 (1) pt 2 pts (3) pts (2) pts (a) Measured in tons based on the stated weight of our product shipments. Th e 53rd week in ﬁ scal 2015 contributed approxi- mately 1 percentage point of net sales growth, reﬂ ect- ing 1 percentage point of growth from volume. Cost of sales increased $141 million in ﬁ scal 2015 to $11,681 million. In ﬁ scal 2015, we recorded a $90 million net increase in cost of sales related to mark-to-mar- ket valuation of certain commodity positions and grain inventories as described in Note 7 to the Consolidated Financial Statements on page 52 of this report, com- pared to a net decrease of $49 million in ﬁ scal 2014. In ﬁ scal 2015, we recorded $60 million of restructuring charges in cost of sales. Product mix drove a $17 million increase in cost of sales. We also recorded a $3 million foreign exchange loss in ﬁ scal 2015 related to Venezuela currency devaluation compared to a $23 million loss in ﬁ scal 2014. Lower volume drove a $68 million decrease in cost of sales. We also expect to incur approximately $65 million of restructuring initiative project-related cash costs and recorded $13 million of these costs in cost of sales in ﬁ scal 2015 (please refer to Note 4 to the Consolidated Financial Statements on page 48 of this report). Gross margin declined 7 percent in ﬁ scal 2015 versus ﬁ scal 2014. Gross margin as a percent of net sales of 34 percent decreased 190 basis points compared to ﬁ scal 2014. Selling, general and administrative (SG&A) expenses decreased $146 million in ﬁ scal 2015 versus ﬁ scal 2014 primarily due to a 5 percent decrease in advertising and media expense, and savings from Project Catalyst (please refer to Note 4 to the Consolidated Financial Statements on page 48 of this report) and our other cost management initiatives. In ﬁ scal 2015, we recorded a $5 million charge related to Venezuela currency deval- uation compared to a $39 million charge in ﬁ scal 2014. In addition, we recorded $16 million of integration costs in ﬁ scal 2015 related to our acquisition of Annie’s. SG&A expenses as a percent of net sales decreased 50 basis points compared to ﬁ scal 2014. Restructuring, impairment, and other exit costs totaled $544 million in ﬁ scal 2015 compared to $4 mil- lion in ﬁ scal 2014. During the fourth quarter of ﬁ scal 2015, we made a strategic decision to redirect certain resources support- ing our Green Giant business in our U.S. Retail segment to other businesses within the segment. As a result, we recorded a $260 million impairment charge in the fourth quarter of ﬁ scal 2015 related to the Green Giant brand intangible asset. Restructuring charges recorded in restructuring, impairment, and other exit costs were $284 million in ﬁ scal 2015 compared to $4 million in ﬁ scal 2014. Total charges associated with our restructuring initiatives recognized in fiscal 2015 and 2014 consisted of the following: In Millions Total Century (a) Catalyst International Other Total restructuring charges (a) Project-related costs recorded in costs of sales As Reported Estimated Fiscal 2015 Fiscal 2014 Future Total Charge Cash Charge Cash Charge Cash Charge Cash Savings(b) $ 181.8 $ 12.0 $ — $ — $ 111 $ 109 $ 293 $ 121 148.4 45.0 13.9 (0.6) 6.5 0.1 343.5 63.6 13.2 9.7 — 1.0 2.6 3.6 — — 6.0 16.4 — 1 — 73 148 118 8 — 15 — 14 — 22.4 112 190 456 253 — 52 55 65 65 Restructuring charges and project-related costs $ 356.7 $ 73.3 $ 3.6 $ 22.4 $ 164 $ 245 $ 521 $ 318 Future cumulative annual savings $ 350 (a) Includes $59.6 million of restructuring charges recorded in cost of sales during ﬁ scal 2015. (b) Cumulative annual savings estimated by ﬁ scal 2017. Includes savings from SG&A cost reduction projects. Please refer to Note 4 to the Consolidated Financial Statements on page 48 of this report for more information regarding our restructuring activities. 2015 ANNUAL REPORT 15 Th ere were no divestitures in ﬁ scal 2015. During ﬁ s- cal 2014, we recorded a divestiture gain of $66 million related to the sale of certain grain elevators in our U.S. Retail segment. Interest, net for ﬁ scal 2015 totaled $315 million, $13 million higher than ﬁ scal 2014. Average interest bear- ing instruments increased $1,370 million, generating a $55 million increase in net interest. Th e average inter- est rate decreased 47 basis points, including the eﬀ ect of the mix of debt, generating a $42 million decrease in net interest. Our consolidated eﬀ ective tax rate for ﬁ scal 2015 of 33.3 percent was consistent with ﬁ scal 2014. Th e 4.5 percentage point impact resulting from the repatriation of $606 million of foreign earnings in ﬁ scal 2015 was oﬀ set by changes in earnings mix by country, certain favorable discrete items, and favorable state tax rate changes. Aft er-tax earnings from joint ventures for ﬁ scal 2015 decreased to $84 million compared to $90 million in ﬁ scal 2014 primarily driven by unfavorable foreign currency exchange and an asset impairment charge of $3 million at Cereal Partners Worldwide (CPW) in South Africa. Th e change in net sales for each joint venture is set forth in the following table: As Reported Fiscal 2015 vs. 2014 Constant Currency Basis Fiscal 2015 vs. 2014 CPW (10)% Häagen-Dazs Japan, Inc. (HDJ) (4) Joint Ventures (9)% (2)% 6 (1)% The components of our joint ventures’ net sales growth are shown in the following table: Fiscal 2015 vs. Fiscal 2014 Contributions from volume growth Net price realization and mix Foreign currency exchange Net sales growth CPW (1) pt (1) pt (8) pts (10) pts HDJ (5) pts 11 pts (10) pts (4) pts Average diluted shares outstanding decreased by 27 million in ﬁ scal 2015 from ﬁ scal 2014 due to share repurchases. FISCAL 2015 CONSOLIDATED BALANCE SHEET ANALYSIS Cash and cash equivalents decreased $533 million from ﬁ scal 2014, as discussed in the “Liquidity” section below. Receivables decreased $97 million from ﬁ scal 2014, primarily driven by timing of sales. Inventories decreased $19 million from ﬁ scal 2014. Prepaid expenses and other current assets increased $15 million from ﬁ scal 2014. Land, buildings, and equipment decreased $159 mil- lion from ﬁ scal 2014, primarily driven by $108 million related to restructuring activities. Goodwill and other intangible assets decreased $113 million from ﬁ scal 2014, driven by foreign exchange and a $260 million impairment charge related to an indeﬁ nite-lived intangible asset, partially oﬀ set by the $858 million of intangible assets recorded in the acqui- sition of Annie’s. Other assets decreased $302 million from fiscal 2014, largely driven by a decrease in the funded status of our deﬁ ned beneﬁ t pension plans primarily due to the adoption of new mortality tables for the annual remeasurement of the obligations associated with these plans. Accounts payable increased $73 million from ﬁ scal 2014, primarily driven by the extension of payment terms and the timing of payments. Notes payable and long-term debt, including current portion, increased $438 million from ﬁ scal 2014, pri- marily driven by $1,107 million of net long-term debt issuances, partially oﬀ set by net commercial paper payments. Th e current and noncurrent portions of net deferred income taxes liability decreased $142 million from ﬁ s- cal 2014, primarily as a result of changes in the funded status of our deﬁ ned beneﬁ t pension and postretire- ment plans. Other current liabilities increased $140 million from ﬁ scal 2014, primarily driven by the establishment of restructuring reserves related to the actions taken in ﬁ scal 2015. Other liabilities increased $102 million from ﬁ scal 2014, largely driven by an increase in our deﬁ ned bene- ﬁ t pension and postretirement plans liabilities primarily due to the adoption of new mortality tables for the annual remeasurement of the obligations associated with these plans. 1 6 GENERAL MILLS Redeemable interest decreased $205 million from ﬁ s- cal 2014, primarily driven by foreign exchange. Retained earnings increased $204 million from ﬁ scal 2014, reﬂ ecting ﬁ scal 2015 net earnings of $1,221 mil- lion less dividends declared of $1,018 million. Treasury stock increased $836 million from ﬁ scal 2014, driven by $1,162 million of share repurchases, partially oﬀ - set by $326 million related to stock-based compensa- tion plans. Additional paid in capital increased $65 million from ﬁ scal 2014, primarily driven by redeemable interest revaluation, partially oﬀ set by stock compen- sation activity. AOCI increased by $970 million from ﬁ scal 2014. Noncontrolling interests decreased $75 million from ﬁ scal 2014, primarily driven by foreign exchange. FISCAL 2014 CONSOLIDATED RESULTS OF OPERATIONS Our consolidated results for ﬁ scal 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 addi- tional quarters of operating activity from the acqui- sition of Immaculate Baking Company in the United States. Collectively, these items are referred to as “new businesses” in comparing our ﬁ scal 2014 results to ﬁ scal 2013. Fiscal 2014 net sales grew 1 percent to $17,910 million including 1 percentage point of growth contributed by new businesses and 1 percentage point of unfavorable foreign currency exchange. In ﬁ scal 2014, net earn- ings attributable to General Mills were $1,824 million, down 2 percent from $1,855 million in ﬁ scal 2013, and we reported diluted EPS of $2.83 in ﬁ scal 2014, up 1 percent from $2.79 in ﬁ scal 2013. Fiscal 2014 results include a gain on the divestiture of certain grain ele- vators, the impact of Venezuela currency devaluation, gains from the mark-to-market valuation of certain commodity positions and grain inventories, and restruc- turing charges related to our ﬁ scal 2012 productivity and cost savings plan. Fiscal 2013 results include the eﬀ ects from various discrete tax items, the impact of Venezuela currency devaluation, restructuring charges related to our ﬁ scal 2012 productivity and cost savings plan, integration 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 aﬀ ecting comparabil- ity totaled $2.82 in ﬁ scal 2014, up 4 percent from $2.72 in ﬁ scal 2013 (see the “Non-GAAP Measures” section below for a description of our use of this measure not deﬁ ned by GAAP). Net sales grew 1 percent in ﬁ scal 2014 to $17,910 from $17,774 in ﬁ scal 2013. Th e components of net sales growth are shown in the following table: Contributions from volume growth (a) Net price realization and mix Foreign currency exchange Net sales growth Fiscal 2014 vs. 2013 1 pt 1 pt (1) pt 1 pt (a) Measured in tons based on the stated weight of our product shipments. Net sales growth included 1 percentage point of growth from new businesses. Contributions from vol- ume growth included 2 percentage points from new businesses. Cost of sales increased $190 million in ﬁ scal 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 ﬁ scal 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 52 of this report, compared to a net decrease of $4 million in ﬁ scal 2013. We also recorded a $23 million foreign exchange loss in ﬁ scal 2014 related to the Venezuela currency devaluation compared to a $16 million loss in ﬁ scal 2013. In ﬁ scal 2013, we also recorded a $17 million non-recurring expense related to the assumption of the Canadian Yoplait franchise license. Gross margin declined 1 percent in ﬁ scal 2014 versus ﬁ scal 2013. Gross margin as a percent of net sales of 36 percent was unchanged compared to ﬁ scal 2013. SG&A expenses decreased $78 million in ﬁ scal 2014 versus ﬁ scal 2013. Th e decrease in SG&A expenses was primarily driven by a 3 percent decrease in advertis- ing and media expense, a smaller contribution to the General Mills Foundation, a decrease in incentive com- pensation expense, and lower pension expense com- pared to ﬁ scal 2013. In ﬁ scal 2014, we recorded a $39 million charge related to Venezuela currency devalua- tion compared to a $9 million charge in ﬁ scal 2013. In addition, we recorded $12 million of integration costs 2015 ANNUAL REPORT 17 The components of our joint ventures’ net sales growth are shown in the following table: Fiscal 2014 vs. Fiscal 2013 Contributions from volume growth Net price realization and mix Foreign currency exchange Net sales growth CPW Flat Flat (1) pt (1) pt HDJ 11 pts (2) pts (17) pts (8) pts Average diluted shares outstanding decreased by 20 million in ﬁ scal 2014 from ﬁ scal 2013 due primarily to the repurchase of 36 million shares, partially oﬀ set by the issuance of 7 million shares related to stock com- pensation plans. in ﬁ scal 2013 related to our acquisition of Yoki. SG&A expenses as a percent of net sales decreased 1 percent compared to ﬁ scal 2013. During ﬁ scal 2014, we recorded a divestiture gain of $66 million related to the sale of certain grain elevators in our U.S. Retail segment. Th ere were no divestitures in ﬁ scal 2013. Interest, net for ﬁ scal 2014 totaled $302 million, $15 million lower than ﬁ scal 2013. Th e average interest rate decreased 41 basis points, including the eﬀ ect of the mix of debt, generating a $31 million decrease in net inter- est. Average interest bearing instruments increased $367 million, generating a $16 million increase in net interest. Our consolidated eﬀ ective tax rate for ﬁ scal 2014 was 33.3 percent compared to 29.2 percent in ﬁ scal 2013. Th e 4.1 percentage point increase was primarily related to the restructuring of our General Mills Cereals, LLC (GMC) subsidiary during the ﬁ rst quarter of ﬁ scal 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 corresponding non-cash reduction to income taxes. During ﬁ scal 2013, we also recorded a $34 million dis- crete decrease in income tax expense and an increase in our deferred tax assets related to certain actions taken to restore part of the tax beneﬁ ts associated with Medicare Part D subsidies which had previously been reduced in ﬁ scal 2010 with the enactment of the Patient Protection and Aﬀ ordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. Our ﬁ scal 2013 tax expense also includes a $12 million charge associated with the liquidation of a cor- porate investment. Aft er-tax earnings from joint ventures for ﬁ scal 2014 decreased to $90 million compared to $99 million in ﬁ scal 2013 primarily driven by increased consumer spending at CPW and unfavorable foreign currency exchange from HDJ. Th e change in net sales for each joint venture is set forth in the following table: As Reported Fiscal 2014 vs. 2013 Constant Currency Basis Fiscal 2014 vs. 2013 CPW HDJ Joint Ventures (1)% (8) (2)% Flat 9% 2% 1 8 GENERAL MILLS RESULTS OF SEGMENT OPERATIONS Our businesses are organized into three operating segments: U.S. Retail; International; and Convenience Stores and Foodservice. Beginning in the first quarter of fiscal 2015, we changed how we assess segment operating performance to exclude the asset and liability remeasurement impact from hyperinflationary economies. This impact is now included in unallocated corporate items. All peri- ods presented have been changed to conform to this presentation. Th e following tables provide the dollar amount and percentage of net sales and operating proﬁ t from each segment for ﬁ scal years 2015, 2014, and 2013: In Millions Net Sales U.S. Retail International Convenience Stores and Foodservice Total Segment Operating Proﬁ t U.S. Retail International Convenience Stores and Foodservice Total 2015 Fiscal Year 2014 2013 Dollars Percent of Total Dollars Percent of Total Dollars Percent of Total $10,507.0 60% $10,604.9 59% $10,614.9 5,128.2 1,995.1 29 11 5,385.9 1,918.8 30 11 5,200.2 1,959.0 60% 29 11 $17,630.3 100% $17,909.6 100% $17,774.1 100% $2,159.3 71% $2,311.5 522.6 353.1 17 12 535.1 307.3 73% 17 10 $2,392.9 515.4 314.6 74% 16 10 $3,035.0 100% $3,153.9 100% $3,222.9 100% Segment operating proﬁ t excludes unallocated cor- porate items, gain on divestitures, and restructuring, impairment, and other exit costs because these items aﬀ ecting operating proﬁ t are centrally managed at the corporate level and are excluded from the mea- sure of segment proﬁ tability reviewed by our executive management. U.S. Retail Segment Beginning with the second quar- ter of ﬁ scal 2015, we realigned certain operating units within our U.S. Retail operating segment. We also changed the name of our Yoplait operating unit to Yogurt and our Big G operating unit to Cereal. Frozen Foods transitioned into Meals and Baking Products. Small Planet Foods transitioned into Snacks, Cereal, and Meals. Th e Yogurt operating unit was unchanged. We revised the amounts previously reported in the net sales and net sales percentage change by operating unit within our U.S. Retail segment to conform to the new operating unit structure. Th ese realignments had no eﬀ ect on previously reported consolidated net sales, operating segments’ net sales, operating proﬁ t, segment operating proﬁ t, net earnings attributable to General Mills, or EPS. In addition, results from the acquired Annie’s business are included in the Meals and Snacks operating units. Our U.S. Retail segment reﬂ ects business with a wide variety of grocery stores, mass merchandisers, mem- bership stores, natural food chains, and drug, dollar and discount chains operating throughout the United States. Our product categories in this business segment are ready-to-eat cereals, refrigerated yogurt, soup, meal kits, shelf stable and frozen vegetables, 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 includ- ing meal kits, granola bars, and cereal. In ﬁ scal 2015, net sales for our U.S. Retail segment were $10,507 million, down 1 percent compared to ﬁ scal 2014. In ﬁ scal 2014, net sales for this segment totaled $10,605 million, ﬂ at compared to ﬁ scal 2013. 2015 ANNUAL REPORT 19 Th e components of U.S. Retail net sales growth are shown in the following table: Contributions from volume growth (a) Net price realization and mix Net sales growth Fiscal 2015 vs. 2014 Fiscal 2014 vs. 2013 (1) pt Flat (1) pt Flat Flat Flat (a) Measured in tons based on the stated weight of our product shipments. Th e acquisition of Annie’s added 1 percentage point of net sales growth, reﬂ ecting 1 percentage point of growth from volume in ﬁ scal 2015. Th e 53rd week in ﬁ scal 2015 contributed approximately 1 percentage point of net sales growth, reﬂ ecting 1 percentage point of growth from volume. Net sales for our U.S. retail operating units are shown in the following table: Fiscal Year In Millions 2015 2014 2013 Meals Cereal Snacks $ 2,674.3 $ 2,772.4 $ 2,836.0 2,330.1 2,410.2 2,407.8 2,134.4 1,997.8 1,867.6 Baking Products 1,969.8 2,096.1 2,133.9 Yogurt and other 1,398.4 1,328.4 1,369.6 Total $ 10,507.0 $ 10,604.9 $ 10,614.9 U.S. Retail net sales percentage change by operating unit are shown in the following table: Fiscal 2015 vs. 2014 Fiscal 2014 vs. 2013 International Segment Our International segment consists 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, des- sert and baking mixes, frozen pizza snacks, refriger- ated yogurt, grain and fruit snacks, and super-premium ice cream and frozen desserts. We also sell super-pre- mium ice cream and frozen desserts directly to con- sumers 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 international joint ventures. Revenues from export activities and franchise fees are reported in the region or country where the end customer is located. Net sales for our International segment were down 5 percent in ﬁ scal 2015 compared to ﬁ scal 2014, to $5,128 million. Net sales totaled $5,386 million in ﬁ scal 2014, up 4 percent from $5,200 million in ﬁ scal 2013. Th e components of International net sales growth are shown in the following table: Contributions from volume growth (a) Net price realization and mix Foreign currency exchange Net sales growth Fiscal 2015 vs. 2014 Fiscal 2014 vs. 2013 Flat 6 pts (11) pts (5) pts 5 pts 3 pts (4) pts 4 pts (a) Measured in tons based on the stated weight of our product shipments. Meals Cereal Baking Products Snacks Yogurt Total (4)% (3) (6) 7 5 (2)% Flat (2) 7 (3) Th e 53rd week in ﬁ scal 2015 contributed approxi- mately 1 percentage point of net sales growth, reﬂ ect- ing 1 percentage point of growth from volume. Net sales for our International segment by geographic region are shown in the following table: (1)% Flat Segment operating proﬁ t of $2,159 million in ﬁ scal 2015 declined $152 million, or 7 percent, from ﬁ scal 2014. Th e decrease was primarily driven by lower volume and an increase in supply chain costs, partially oﬀ set by a 6 percent reduction in advertising and media expense. Segment operating proﬁ t of $2,312 million in ﬁ scal 2014 declined $81 million, or 3 percent, from ﬁ scal 2013. Th e decrease reﬂ ected higher trade spending, partially oﬀ set by a 1 percent reduction in advertising and media expense. In Millions Europe (a) Canada Asia/Paciﬁ c Latin America Total Fiscal Year 2015 2014 2013 $2,126.5 $2,188.8 $2,214.6 1,105.1 1,195.3 1,210.5 1,023.5 981.8 873.1 1,020.0 899.1 876.0 $5,128.2 $5,385.9 $5,200.2 (a) Fiscal 2013 net sales for the Europe region include an additional month of results. 20 GENERAL MILLS International change in net sales by geographic region are shown in the following table: Percentage Change in Net Sales as Reported Percentage Change in Net Sales on Constant Currency Basis (a) Fiscal 2015 Fiscal 2014 vs. 2013 vs. 2014 Fiscal 2015 Fiscal 2014 vs. 2013 vs. 2014 Europe Canada Asia/Paciﬁ c Latin America Total (3)% (1)% 5% (4)% (8) 4 (14) (1) 9 16 (5)% 4% Flat 5 17 6% 5 9 38 8% (a) See the “Non-GAAP Measures” section below for our use of this measure. Segment operating proﬁ t for ﬁ scal 2015 declined 2 percent to $523 million from $535 million in ﬁ scal 2014, primarily driven by unfavorable foreign currency exchange and higher input costs, partially oﬀ set by favorable net price realization and mix. International segment operating proﬁ t increased 9 percent on a con- stant-currency basis in ﬁ scal 2015 compared to ﬁ scal 2014 (see the “Non-GAAP Measures” section below for our use of this measure). Segment operating proﬁ t for ﬁ scal 2014 grew 4 per- cent to $535 million from $515 million in ﬁ scal 2013, primarily driven by volume growth, favorable net price realization and mix, and an additional quarter of results from the Yoki acquisition, partially oﬀ set by unfavor- able foreign currency and higher input costs. In addi- tion, we recorded a $17 million non-recurring expense related to the assumption of the Canadian Yoplait franchise license in ﬁ scal 2013. International segment operating proﬁ t increased 10 percent on a constant-cur- rency basis in ﬁ scal 2014 compared to ﬁ scal 2013 (see the “Non-GAAP Measures” section below for our use of this measure). Convenience Stores and Foodservice Segment In our Convenience Stores and Foodservice segment our major product categories are ready-to-eat cereals, snacks, refrigerated yogurt, frozen breakfasts, unbaked and fully baked frozen dough products, baking mixes, and ﬂ our. Many products we sell are branded to the con- sumer and nearly all are branded to our customers. We sell to distributors and operators 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 ﬁ scal 2015, net sales for our Convenience Stores and Foodservice segment increased 4 percent to $1,995 million. For ﬁ scal 2014, net sales decreased 2 percent to $1,919 million compared to $1,959 million in ﬁ scal 2013. Th e components of Convenience Stores and Foodservice net sales growth are shown in the following table: Fiscal 2015 vs. 2014 Fiscal 2014 vs. 2013 Contributions from volume growth (a) Net price realization and mix Foreign currency exchange Net sales growth 1 pt 3 pts NM 4 pts (1) pt (1) pt NM (2) pts (a) Measured in tons based on the stated weight of our product shipments. Th e 53rd week in ﬁ scal 2015 contributed approxi- mately 2 percentage points of net sales growth, reﬂ ect- ing 2 percentage points of growth from volume. In ﬁ scal 2015, segment operating proﬁ t was $353 million, up 15 percent from $307 million in ﬁ scal 2014. Th e increase was primarily driven by favorable net price realization and mix and higher volume. In ﬁ scal 2014, segment operating proﬁ t was $307 mil- lion, down 2 percent from $315 million in ﬁ scal 2013. Th e decrease was primarily driven by volume declines, unfavorable net price realization, and investments to protect and grow the business. Unallocated Corporate Items Beginning in the ﬁ rst quarter of ﬁ scal 2015, we changed how we assess seg- ment operating performance to exclude the asset and liability remeasurement impact from hyperinﬂ ation- ary economies. Th is impact is now included in unallo- cated corporate items. All periods presented have been changed to conform to this presentation. Unallocated corporate items include corporate over- head expenses, variances to planned domestic employee beneﬁ ts and incentives, contributions to the General Mills Foundation, asset and liability remeasurement impact of hyperinﬂ ationary economies, restructuring initiative project-related costs, and other items that are not part of our measurement of segment operat- ing performance. Th is includes gains and losses from mark-to-market valuation of certain commodity posi- tions until passed back to our operating segments in accordance with our policy as discussed in Note 7 to the Consolidated Financial Statements on page 52 of this report. 2015 ANNUAL REPORT 21 For ﬁ scal 2015, unallocated corporate expense totaled $414 million compared to $258 million last year. In ﬁ scal 2015, we recorded a $90 million net increase in expense related to mark-to-market valuation of certain commodity positions and grain inventories, compared to a $49 million net decrease in expense in ﬁ scal 2014. In addition, we recorded $60 million of restructur- ing charges, and $13 million of restructuring initiative project-related costs in cost of sales in ﬁ scal 2015. We recorded an $8 million foreign exchange loss related to the remeasurement of assets and liabilities of our Venezuelan subsidiary compared to $62 million in ﬁ scal 2014. We also recorded $16 million of integration costs resulting from the acquisition of Annie’s in ﬁ scal 2015. For ﬁ scal 2014, unallocated corporate expense totaled $258 million compared to $351 million in ﬁ scal 2013. In ﬁ scal 2014, we recorded a $49 million net decrease in expense related to mark-to-market valuation of certain commodity positions and grain inventories, compared to a $4 million net decrease in expense in the prior year. Compensation and beneﬁ t expenses decreased $59 million and the contribution to the General Mills Foundation decreased in ﬁ scal 2014 compared to ﬁ scal 2013. We also recorded a $62 million foreign exchange loss related to the remeasurement of assets and liabil- ities of our Venezuelan subsidiary in ﬁ scal 2014 com- pared to $25 million in ﬁ scal 2013. In ﬁ scal 2013, we also recorded $12 million of integration costs related to the acquisition of Yoki. Venezuela is a highly inﬂ ationary economy, and 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 2014, the Venezuelan government established a new foreign exchange market mechanism (SICAD 2) and at that time indicated that it would be the mar- ket through which U.S. dollars would be obtained for the remittance of dividends. On February 12, 2015, the Venezuelan government replaced SICAD 2 with a new foreign exchange market mechanism (SIMADI). We expect to be able to access U.S. dollars through the SIMADI market. SIMADI has signiﬁ cantly higher for- eign exchange rates than those available through the other foreign exchange mechanisms. In ﬁ scal 2015, we recorded an $8 million foreign exchange loss in unallocated corporate items resulting from the remea- surement of assets and liabilities of our Venezuelan subsidiary at the SIMADI rate of 199 bolivars per U.S. dollar. Our Venezuela operations represent less than 1 percent of our consolidated assets, liabilities, net sales, and segment operating proﬁ t. As of May 31, 2015, we had $0.3 million of non-U.S. dollar cash balances in Venezuela. IMPACT OF INFLATION Our gross margin performance in ﬁ scal 2015 reﬂ ects the impact of 2 percent input cost inﬂ ation, primarily on commodities inputs. We expect input cost inﬂ ation of 2 percent in ﬁ scal 2016. We attempt to minimize the eﬀ ects of inﬂ ation through HMM, planning, and operating practices. Our risk management practices are discussed on page 36 of this report. LIQUIDITY Th e primary source of our liquidity is cash ﬂ ow from operations. Over the most recent three-year period, our operations have generated $8.0 billion in cash. A sub- stantial portion of this operating cash ﬂ ow has been returned to stockholders through share repurchases and dividends. We also use cash from operations to fund our capital expenditures and acquisitions. We typ- ically use a combination of cash, notes payable, and long-term debt to ﬁ nance signiﬁ cant acquisitions and major capital expansions. As of May 31, 2015, we had $311 million of cash and cash equivalents held in foreign jurisdictions which will be used to fund foreign operations and acquisitions. During the fourth quarter of ﬁ scal 2015, we approved a one-time repatriation of $606 million of foreign earn- ings. Th is action reduced the economic cost of funding current restructuring initiatives and the acquisition of Annie’s completed in ﬁ scal 2015. We recorded a discrete income tax charge of $79 million in ﬁ scal 2015 related to this action, and we expect to make approximately $24 million in related cash income tax payments related to this action. We have previously asserted that our foreign earnings are permanently reinvested and will only be repatriated in a tax-neutral manner, and this one-time repatriation does not change this ongo- ing assertion. 22 GENERAL MILLS Cash Flows from Operations In Millions 2015 2014 2013 Fiscal Year Net earnings, including earnings attributable to redeemable and noncontrolling interests $1,259.4 $1,861.3 $1,892.5 Depreciation and amortization 588.3 585.4 588.0 Aft er-tax earnings from joint ventures (84.3) (89.6) (98.8) Distributions of earnings from joint ventures 72.6 90.5 115.7 Stock-based compensation 106.4 108.5 100.4 Deferred income taxes 25.3 172.5 81.8 Tax beneﬁ t on exercised options (74.6) (69.3) (103.0) Pension and other postretirement beneﬁ t plan contributions (49.5) (49.7) (223.2) Pension and other postretirement beneﬁ t plan costs Divestiture (gain) Restructuring, impairment, 91.3 124.1 131.2 — (65.5) — and other exit costs 531.1 (18.8) (60.2) Changes in current assets and liabilities, excluding the eﬀ ects of acquisitions 214.7 (32.2) 471.1 Other, net Net cash provided by operating activities (137.9) (76.2) 30.5 $2,542.8 $2,541.0 $2,926.0 In ﬁ scal 2015, our operations generated $2.5 billion of cash, ﬂ at compared to ﬁ scal 2014. Th e $247 million change in current assets and liabilities was primarily driven by the timing of trade and promotion accruals, changes in tax accruals, and changes in derivative posi- tions. Th is was largely oﬀ set by lower net earnings, which included a $260 million non-cash impairment charge and $271 million of non-cash restructuring charges, and a $147 million change in net deferred income taxes. We strive to grow core working capital at or below the rate of growth in our net sales. For ﬁ scal 2015, core working capital decreased 13 percent, primarily due to a decrease in accounts receivable and an increase in accounts payable, compared to a net sales decline of 2 percent. In ﬁ scal 2014, core working capital decreased 9 percent, compared to net sales growth of 1 percent, and in ﬁ scal 2013, core working capital decreased 5 percent, compared to net sales growth of 7 percent. In ﬁ scal 2014, our operations generated $2.5 billion of cash compared to $2.9 billion in ﬁ scal 2013. Th e $385 million decrease was primarily due to a $503 million change in current assets and liabilities. Th e change in current assets and liabilities was 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 ﬁ scal 2013 we made a $200 million voluntary contribution to our principal domestic pen- sion plans. Cash Flows from Investing Activities In Millions 2015 2014 2013 Fiscal Year Purchases of land, buildings, and equipment Acquisitions, net of cash acquired Investments in aﬃ liates, net Proceeds from disposal of land, $ (712.4) $ (663.5) $ (613.9) (822.3) (102.4) — (898.0) (54.9) (40.4) buildings, and equipment 11.0 6.6 Proceeds from divestiture — 121.6 24.2 — Exchangeable note Other, net Net cash used by 27.9 (4.0) 29.3 16.2 (0.9) (3.5) investing activities $(1,602.2) $(561.8) $(1,515.4) In fiscal 2015, cash used by investing activities increased by $1.0 billion from ﬁ scal 2014. We invested $712 million in land, buildings, and equipment in ﬁ s- cal 2015, $49 million more than the same period last year. In the second quarter of ﬁ scal 2015, we acquired Annie’s, a publicly traded food company headquartered in Berkeley, California, for an aggregate purchase price of $809 million, net of $12 million of cash acquired. We made $102 million of investments in aﬃ liates, primarily CPW, in ﬁ scal 2015. In addition, we received $28 million in payments from Sodiaal International (Sodiaal) in ﬁ s- cal 2015 against the $132 million exchangeable note we purchased in ﬁ scal 2012. In fiscal 2014, cash used by investing activities decreased by $954 million from ﬁ scal 2013. We invested $664 million in land, buildings, and equipment in ﬁ scal 2014, $50 million more than in ﬁ scal 2013. We made $55 million of investments in aﬃ liates, primarily CPW, in ﬁ scal 2014. In the fourth quarter of ﬁ scal 2014, we sold certain grain elevators for $124 million in cash, 2015 ANNUAL REPORT 23 accelerated repurchase programs. Th e authorization has no speciﬁ ed termination date. During ﬁ scal 2015, we repurchased 22 million shares of our common stock for $1,162 million. During ﬁ scal 2014, we repurchased 36 million shares of our com- mon stock for $1,745 million. During ﬁ scal 2013, we repurchased 24 million shares of our common stock for $1,015 million. Dividends paid in ﬁ scal 2015 totaled $1,018 million, or $1.67 per share, an 8 percent per share increase from ﬁ scal 2014. Dividends paid in ﬁ scal 2014 totaled $983 million, or $1.55 per share, a 17 percent per share increase from ﬁ scal 2013 dividends of $1.32 per share. On March 10, 2015, our Board of Directors approved a 5 percent dividend increase, eﬀ ective with the May 1, 2015 payment, to an annualized rate of $1.76 per share. Selected Cash Flows from Joint Ventures Selected cash ﬂ ows from our joint ventures are set forth in the following table: Inﬂ ow (Outﬂ ow), in Millions 2015 2014 2013 Advances to joint ventures, net $(102.4) $(54.9) $(36.7) Dividends received 72.6 90.5 115.7 Fiscal Year CAPITAL RESOURCES Total capital consisted of the following: In Millions Notes payable May 31, 2015 May 25, 2014 $ 615.8 $ 1,111.7 Current portion of long-term debt Long-term debt 1,000.4 7,607.7 1,250.6 6,423.5 Total debt Redeemable interest Noncontrolling interests Stockholders’ equity Total capital 9,223.9 8,785.8 778.9 396.0 984.1 470.6 4,996.7 6,534.8 $15,395.5 $16,775.3 including a working capital adjustment ﬁ nalized in the ﬁ rst quarter of ﬁ scal 2015. In addition we received $29 million in payments from Sodiaal in ﬁ scal 2014 against the exchangeable note. We expect capital expenditures to be approximately $840 million in ﬁ scal 2016. Th ese expenditures will fund initiatives that are expected to fuel International growth, support innovative products, and continue HMM initiatives throughout the supply chain. Cash Flows from Financing Activities Fiscal Year In Millions 2015 2014 2013 Change in notes payable $ (509.8) $ 572.9 $ (44.5) Issuance of long-term debt 2,253.2 1,673.0 1,001.1 Payment of long-term debt (1,145.8) (1,444.8) (542.3) Proceeds from common stock issued on exercised options 163.7 108.1 300.8 Tax beneﬁ t on exercised options 74.6 69.3 103.0 Purchases of common stock for treasury Dividends paid Addition of (1,161.9) (1,745.3) (1,044.9) (1,017.7) (983.3) (867.6) noncontrolling interest — 17.6 — Distributions to noncontrolling and redeemable interest holders (25.0) (77.4) (39.2) Other, net Net cash used by (16.1) (14.2) (6.6) ﬁ nancing activities $ (1,384.8) $ (1,824.1) $ (1,140.2) Net cash used by ﬁ nancing activities decreased by $439 million in ﬁ scal 2015. We had $204 million less net debt issuances in ﬁ scal 2015 than the same period a year ago. For more information on our debt issuances and payments, please refer to Note 8 to the Consolidated Financial Statements on page 61 of this report. During ﬁ scal 2015, we received $164 million in pro- ceeds from common stock issued on exercised options compared to $108 million in ﬁ scal 2014, an increase of $56 million. During ﬁ scal 2013, we received $301 million in proceeds from common stock issued on exercised options. In May 2014, our Board of Directors 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 trans- actions, including the use of call options and other derivative instruments, Rule 10b5-1 trading plans, and 24 GENERAL MILLS Th e following table details the fee-paid committed and uncommitted credit lines we had available as of May 31, 2015: In Billions Credit facility expiring: April 2017 May 2019 June 2019 Total committed credit facilities Uncommitted credit facilities Total committed and Facility Amount Borrowed Amount $ 1.7 1.0 0.2 2.9 0.5 $ — — 0.1 0.1 0.1 uncommitted credit facilities $3.4 $0.2 To ensure availability of funds, we maintain bank credit lines suﬃ cient to cover our outstanding notes payable. Commercial paper is a continuing source of short-term ﬁ nancing. We have commercial paper pro- grams available to us in the United States and Europe. We also have uncommitted and asset-backed credit lines that support our foreign operations. Th e credit facilities contain several covenants, including a require- ment to maintain a ﬁ xed 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 31, 2015, we were in compliance with all of these covenants. We have $1,000 million of long-term debt maturing in the next 12 months that is classiﬁ ed as current. We believe that cash ﬂ ows from operations, together with available short- and long-term debt ﬁ nancing, will be adequate to meet our liquidity and capital needs for at least the next 12 months. As of May 31, 2015, our total debt, including the impact of derivative instruments designated as hedges, was 72 percent in ﬁ xed-rate and 28 percent in ﬂ oat- ing-rate instruments, compared to 71 percent in ﬁ xed- rate and 29 percent in ﬂ oating-rate instruments on May 25, 2014. Improvement in return on average total capital is one of our key performance measures (see the “Non-GAAP Measures” section below for our discussion of this mea- sure, which is not deﬁ ned by GAAP). Return on average total capital decreased 40 basis points from 11.6 percent in ﬁ scal 2014 to 11.2 percent in ﬁ scal 2015 as ﬁ scal 2015 earnings declined. On a constant-currency basis, return on average total capital decreased 20 basis points. We also believe that our ﬁ xed charge coverage ratio and the ratio of operating cash ﬂ ow to debt are important measures of our ﬁ nancial strength. Our ﬁ xed charge coverage ratio in ﬁ scal 2015 was 5.54 compared to 8.04 in ﬁ scal 2014. Th e measure decreased from ﬁ scal 2014 as earnings before income taxes and aft er-tax earnings from joint ventures decreased by $893 million includ- ing a $260 million non-cash pretax charge related to an indeﬁ nite-lived intangible asset impairment and a $344 million pretax increase in restructuring charges in ﬁ scal 2015. Our operating cash ﬂ ow to debt ratio decreased 1.3 percentage points to 27.6 percent in ﬁ scal 2015, driven by an increase in total debt. We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal holds the remaining interests in each of these entities. We consolidate these entities into our consolidated ﬁ nancial statements. We record Sodiaal’s 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl as noncontrolling inter- ests, and their 49 percent interest in Yoplait SAS as a redeemable interest on our Consolidated Balance Sheets. Th ese 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 interest to us at fair value once per year through a maximum term expiring December 2020. As of May 31, 2015, the redemption value of the redeemable interest was $779 million which approxi- mates its fair value. Th e third-party holder of the General Mills Cereals, LLC (GMC) Class A Interests receives quarterly pre- ferred distributions from available net income based on the application of a ﬂ oating preferred return rate, to the holder’s capital account balance established in the most recent mark-to-market valuation (currently $252 million). For ﬁ scal 2015, the ﬂ oating preferred rate was equal to the sum of three-month LIBOR plus 110 basis points. Th e preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction. On June 1, 2015, subsequent to our year-end, the ﬂ oat- ing preferred return rate on GMC’s Class A Interests was reset to the sum of three-month LIBOR plus 125 basis points. We have an 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 2015 ANNUAL REPORT 25 interests, any change in the third-party holder’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 31, 2015, we have issued guarantees and comfort letters of $434 million for the debt and other obligations of consolidated subsidiaries, and guarantees and comfort letters of $258 million for the debt and other obligations of non-consolidated aﬃ liates, mainly CPW. In addition, off-balance sheet arrangements are generally limited to the future payments under non-cancelable operating leases, which totaled $400 million as of May 31, 2015. As of May 31, 2015, we had invested in ﬁ ve variable interest entities (VIEs). None of our VIEs are material to our results of operations, ﬁ nancial condition, or liquid- ity as of and for the year ended May 31, 2015. Th e following table summarizes our future estimated cash payments under existing contractual obligations, including payments due by period: Payments Due by Fiscal Year In Millions Total 2021 and 2016 2017 - 18 2019 - 20 Th ereaft er Long-term debt (a) $ 8,615.4 $1,000.0 $1,707.5 $1,650.0 $4,257.9 Accrued interest 91.8 91.8 — — — Operating leases (b) 400.5 108.4 133.1 77.4 81.6 Capital leases 1.5 0.6 0.6 0.3 — Purchase obligations (c) 2,363.8 2,124.2 141.8 65.5 32.3 Total contractual obligations 11,473.0 3,325.0 1,983.0 1,793.2 4,371.8 Other long-term obligations (d) 1,738.2 — — — — Total long-term obligations $13,211.2 $3,325.0 $1,983.0 $1,793.2 $4,371.8 (a) Amounts represent the expected cash payments of our long-term debt and do not include $1 million for capital leases or $8 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) Th e majority of the purchase obligations represent commitments for raw material and packaging to be utilized in the normal course of busi- ness and for consumer marketing spending commitments that support our brands. For purposes of this table, arrangements are considered purchase obligations if a contract speciﬁ es all signiﬁ cant terms, including ﬁ xed or minimum quantities to be purchased, a pricing structure, and approximate timing of the transaction. Most arrangements are cancelable without a signiﬁ cant penalty and with short notice (usually 30 days). Any amounts reﬂ ected on the Consolidated Balance Sheets as accounts payable and accrued liabilities are excluded from the table above. (d) Th e fair value of our foreign exchange, equity, commodity, and grain derivative contracts with a payable position to the counterparty was $133 million as of May 31, 2015, based on fair market values as of that date. Future changes in market values will impact the amount of cash ultimately paid or received to settle those instruments in the future. Other long-term obligations mainly consist of liabilities for accrued compensation and ben- eﬁ ts, including the underfunded status of certain of our deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plans, and miscellaneous liabilities. We expect to pay $22 million of beneﬁ ts from our unfunded postemployment beneﬁ t plans and $14 million of deferred compensation in ﬁ scal 2016. We are unable to reliably estimate the amount of these payments beyond ﬁ scal 2016. As of May 31, 2015, our total lia- bility for uncertain tax positions and accrued interest and penalties was $196 million. SIGNIFICANT ACCOUNTING ESTIMATES For a complete description of our signiﬁ cant account- ing policies, see Note 2 to the Consolidated Financial Statements on page 44 of this report. Our signiﬁ cant accounting estimates are those that have a meaning- ful impact on the reporting of our ﬁ nancial condition and results of operations. Th ese estimates include our accounting for promotional expenditures, valuation of long-lived assets, intangible assets, redeemable interest, stock-based compensation, income taxes, and deﬁ ned benefit pension, other postretirement benefit, and post-employment beneﬁ t plans. Promotional Expenditures Our promotional activities are conducted through our customers and directly or indirectly with end consumers. Th ese activities include: payments to customers to perform merchandising 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. Th e recognition of these costs requires estimation of customer participation and per- formance levels. Th ese estimates are based on the fore- casted customer sales, the timing and forecasted costs of promotional activities, and other factors. Diﬀ erences between estimated expenses and actual costs are recog- nized as a change in management estimate in a subse- quent period. Our accrued trade, coupon, and consumer marketing liabilities were $565 million as of May 31, 2015, and $578 million as of May 25, 2014. Because our total promotional expenditures (including amounts classiﬁ ed as a reduction of revenues) are signiﬁ cant, if our estimates are inaccurate we would have to make 26 GENERAL MILLS adjustments in subsequent periods that could have a material eﬀ ect 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 ﬂ ows 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 ﬂ ows or independent appraisals, as appropriate. Intangible Assets Goodwill and other indeﬁ nite lived intangible assets are not subject to amortization and are tested for impairment annually and whenever events or changes in circumstances indicate that impair- ment may have occurred. Our estimates of fair value for goodwill impairment testing are determined based on a discounted cash ﬂ ow model. We use inputs from our long-range planning process to determine growth rates for sales and proﬁ ts. We also make estimates of discount rates, perpetuity growth assumptions, market comparables, and other factors. We evaluate the useful lives of our other intangible assets, mainly brands, to determine if they are ﬁ nite or indeﬁ nite-lived. Reaching a determination on useful life requires signiﬁ cant judgments and assumptions regard- ing the future eﬀ ects 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 deﬁ - nite 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 ﬂ ow 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 31, 2015, we had $13.1 billion of good- will and indeﬁ nite-lived intangible assets. While we currently believe that the fair value of each intangi- ble exceeds its carrying value and that those intan- gibles so classiﬁ ed will contribute indeﬁ nitely to our cash ﬂ ows, materially diﬀ erent assumptions regarding future performance of our businesses or a diﬀ erent weighted-average cost of capital (WACC) could result in signiﬁ cant impairment losses and amortization expense. We performed our ﬁ scal 2015 assessment of our intan- gible assets as of November 24, 2014. As of our annual assessment date, there was no impairment of any of our intangible assets as their related fair values were substantially in excess of the carrying values, except for the Mountain High, Uncle Toby’s, and Green Giant brands. Th e excess fair value above the carrying value of these brand assets were as follows: In Millions Mountain High Uncle Toby’s Green Giant Excess Fair Value Above Carrying Value 3% 7% 13% Carrying Value $ 35.4 $ 57.7 $ 425.9 At the end of the fourth quarter of ﬁ scal 2015, we made a strategic decision to redirect certain resources supporting our Green Giant business in our U.S. Retail segment to other businesses within the segment. Th erefore, future sales and proﬁ tability projections in our long-range plan for this business declined. As a result of this triggering event, we performed an interim impairment assessment of the Green Giant brand intangible asset as of May 31, 2015, and determined that the fair value of the brand asset no longer exceeded the carrying value of the asset. Signiﬁ cant assumptions used in that assessment included our updated long- range cash ﬂ ow projections for the Green Giant busi- ness, an updated royalty rate, a WACC, and a tax rate. We recorded a $260 million impairment charge in the fourth quarter of ﬁ scal 2015 related to this asset. Our Green Giant, Uncle Toby’s and Mountain High brands have experienced declining business performance, and we will continue to monitor these businesses. Redeemable Interest During the third quarter of ﬁ s- cal 2015, we adjusted the redemption value of Sodiaal’s redeemable interest in Yoplait SAS based on a dis- counted cash ﬂ ow model. Th e signiﬁ cant assumptions used to estimate the redemption value include projected revenue growth and proﬁ tability from our long-range plan, capital spending, depreciation and taxes, foreign currency exchange rates, and a discount rate. As of May 31, 2015, the redemption value of the redeemable interest was $779 million. 2015 ANNUAL REPORT 27 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 ﬁ nancial statements. Annually, we make predictive assumptions regarding future stock price volatility, employee exer- cise behavior, dividend yield, and the forfeiture rate. For more information on these assumptions, please refer to Note 11 to the Consolidated Financial Statements on page 66 of this report. Th e estimated fair values of stock options granted and the assumptions used for the Black-Scholes option-pricing model were as follows: Fiscal Year 2015 2014 2013 Estimated fair values of stock options granted $ 7.22 $ 6.03 $ 3.65 Assumptions: Risk-free interest rate 2.6% 2.6% 1.6% Expected term Expected volatility Dividend yield 8.5 years 9.0 years 9.0 years 17.5% 17.4% 17.3% 3.1% 3.1% 3.5% Th e 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 eﬀ ect at the time of grant. An increase in the expected term by 1 year, leaving all other assumptions constant, would increase the grant date fair value by 2 percent. If all other assumptions are held constant, a one percentage point increase in our ﬁ scal 2015 volatility assumption would increase the grant date fair value of our ﬁ scal 2015 option awards by 7 percent. To the extent that actual outcomes diﬀ er from our assumptions, we are not required to true up grant- date fair value-based expense to ﬁ nal intrinsic values. However, these diﬀ erences can impact the classiﬁ ca- tion of cash tax beneﬁ ts realized upon exercise of stock options, as explained in the following two paragraphs. Furthermore, historical data has a signiﬁ cant bearing on our forward-looking assumptions. Signiﬁ cant vari- ances between actual and predicted experience could lead to prospective revisions in our assumptions, which could then signiﬁ cantly impact the year-over-year com- parability of stock-based compensation expense. Any corporate income tax beneﬁ t realized upon exer- cise or vesting of an award in excess of that previously recognized in earnings (referred to as a windfall tax beneﬁ t) is presented in the Consolidated Statements of Cash Flows as a ﬁ nancing cash ﬂ ow. Th e actual impact on future years’ ﬁ nancing cash ﬂ ows will depend, in part, on the volume of employee stock option exercises during a particular year and the relationship between the exercise-date market value of the underlying stock and the original grant-date fair value previously deter- mined for ﬁ nancial reporting purposes. Realized windfall tax beneﬁ ts are credited to addi- tional paid-in capital within the Consolidated Balance Sheets. Realized shortfall tax beneﬁ ts (amounts which are less than that previously recognized in earnings) are ﬁ rst oﬀ set against the cumulative balance of windfall tax beneﬁ ts, if any, and then charged directly to income tax expense, potentially resulting in volatility in our consolidated eﬀ ective income tax rate. We calculated a cumulative amount of windfall tax beneﬁ ts for the pur- pose of accounting for future shortfall tax beneﬁ ts and currently have suﬃ cient cumulative windfall tax bene- ﬁ ts to absorb projected arising shortfalls, such that we do not currently expect future earnings to be aﬀ ected by this provision. However, as employee stock option exercise behavior is not within our control, it is possible that materially diﬀ erent reported results could occur if diﬀ erent assumptions or conditions were to prevail. Income Taxes We apply a more-likely-than-not thresh- old to the recognition and derecognition of uncertain tax positions. Accordingly, we recognize the amount of tax beneﬁ t 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 aﬀ ect 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 76 of this report. Defined Benefit Pension, Other Postretirement Beneﬁ t, and Postemployment Beneﬁ t Plans We have deﬁ ned beneﬁ t pension plans covering many employees in the United States, Canada, France, and the United Kingdom. We also sponsor plans that provide health care beneﬁ ts to many of our retirees in the United States, Canada, and Brazil. Under certain circumstances, we also provide accruable beneﬁ ts to former or inactive employees in the United States, Canada, and Mexico, and members of our Board of Directors, including sev- erance and certain other beneﬁ ts payable upon death. Please refer to Note 13 to the Consolidated Financial 28 GENERAL MILLS Statements on page 69 of this report for a description of our deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plans. We recognize beneﬁ ts 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 judgment and have a material impact on the measure- ment of our net periodic beneﬁ t expense or income and accumulated beneﬁ t obligations include the long-term rates of return on plan assets, the interest rates used to discount the obligations for our beneﬁ t plans, and 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 performance, our estimate of future long-term returns by asset class (using input from our actuaries, invest- ment services, and investment managers), and long- term inﬂ ation assumptions. We review this assumption annually for each plan, however, our annual investment performance for one particular year does not, by itself, signiﬁ cantly inﬂ uence our evaluation. Our historical investment returns (compound annual growth rates) for our United States deﬁ ned beneﬁ t pension and other postretirement beneﬁ t plan assets were 6.5 percent, 11.7 percent, 8.1 percent, 7.8 percent, and 9.6 percent for the 1, 5, 10, 15, and 20 year periods ended May 31, 2015. On a weighted-average basis, the expected rate of return for all deﬁ ned beneﬁ t plans was 8.53 percent for ﬁ scal 2015, 8.53 percent for ﬁ scal 2014, and 8.53 per- cent for ﬁ scal 2013. Lowering the expected long-term rate of return on assets by 100 basis points would increase our net pen- sion and postretirement expense by $62 million for ﬁ scal 2016. A market-related valuation basis is used to reduce year-to-year expense volatility. Th e market-related valu- ation recognizes certain investment gains or losses over a ﬁ ve-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 out- side actuaries perform these calculations as part of our determination of annual expense or income. Discount Rates Our discount rate assumptions are determined annually as of the last day of our ﬁ scal year for our deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plan obligations. We work with our outside actuaries to determine the timing and amount of expected future cash outﬂ ows 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. Th is forward interest rate curve is applied to our expected future cash outﬂ ows to determine our discount rate assumptions. Our weighted-average discount rates were as follows: Deﬁ ned Other Beneﬁ t Postretirement Postemployment Beneﬁ t Beneﬁ t Pension Plans Plans Plans Obligations as of May 31, 2015, and ﬁ scal 2016 expense 4.38% 4.20% 3.55% Obligations as of May 25, 2014, and ﬁ scal 2015 expense 4.54% Fiscal 2014 expense 4.54% 4.51% 4.52% 3.82% 3.70% Lowering the discount rates by 100 basis points would increase our net deﬁ ned beneﬁ t pension, other post- retirement beneﬁ t, and postemployment beneﬁ t plan expense for ﬁ scal 2016 by approximately $167 million. All obligation-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 experi- ence and information provided by our actuaries. Th is information includes recent plan experience, plan design, overall industry experience and projections, and assumptions used by other similar organizations. Our initial health care cost trend rate is adjusted as neces- sary to remain consistent with this review, recent expe- riences, and short-term expectations. Our initial health care cost trend rate assumption is 7.3 percent for retir- ees age 65 and over and 6.5 percent for retirees under age 65 at the end of ﬁ scal 2015. Rates are graded down annually until the ultimate trend rate of 5.0 percent is reached in 2025 for all retirees. Th e trend rates are applicable for calculations only if the retirees’ beneﬁ ts 2015 ANNUAL REPORT 29 increase as a result of health care inﬂ ation. Th e ulti- mate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inﬂ ation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important eﬀ ect on the amounts reported for the other postretirement beneﬁ t plans. A one percentage point change in the health care cost trend rate would have the following eﬀ ects: In Millions Eﬀ ect on the aggregate of the service and interest cost One One Percentage Percentage Point Decrease Point Increase components in ﬁ scal 2016 $ 3.7 $ (3.2) Eﬀ ect on the other postretirement accumulated beneﬁ t obligation as of May 31, 2015 77.1 (68.9) 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 amortiza- tion required being recorded. Financial Statement Impact In ﬁ scal 2015, we recorded net deﬁ ned beneﬁ t pension, other postretirement ben- eﬁ t, and postemployment beneﬁ t plan expense of $153 million compared to $140 million of expense in ﬁ scal 2014 and $159 million of expense in ﬁ scal 2013. As of May 31, 2015, we had cumulative unrecognized actu- arial net losses of $1.7 billion on our deﬁ ned beneﬁ t pension plans and $81 million on our postretirement and postemployment beneﬁ t plans, mainly as the result of liability increases from lower interest rates, partially oﬀ set by recent increases in the values of plan assets. Th ese unrecognized actuarial net losses will result in increases in our future pension and postretirement beneﬁ t expenses because they currently exceed the cor- ridors deﬁ ned by GAAP. Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a participant will receive over their lifetime and the amount of expense we recognize. On October 27, 2014, the Society of Actuaries published RP-2014 Mortality Tables and Mortality Improvement Scale MP-2014, which both reﬂ ect improved longevity. We adopted the change to the mortality assumptions to remeasure our deﬁ ned beneﬁ t pension plans and other postretirement beneﬁ t plans obligations, which increased the total of these obligations by $437 million. In addition, these assumptions increased the ﬁ scal 2016 expense associ- ated with these plans by $72 million. Actual future net deﬁ ned beneﬁ t pension, other post- retirement beneﬁ t, and postemployment beneﬁ t 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 2015, the Financial Accounting Standards Board (FASB) issued new accounting requirements for the presentation of certain investments using the net asset value, providing a practical expedient to exclude such investments from categorization within the fair value hierarchy and make a separate disclosure. Th e requirements of the new standard are eﬀ ective for annual reporting periods beginning aft er December 15, 2015, and interim periods within those annual periods, which for us is the ﬁ rst quarter of ﬁ scal 2017. We do not expect this guidance to have a material impact on our results of operations or ﬁ nancial position. In April 2015, the FASB issued new accounting requirements that permit reporting entities with a ﬁ s- cal year-end that does not coincide with a month-end to apply a practical expedient to measure deﬁ ned ben- eﬁ t plan assets and obligations using the month-end that is closest to the entity’s ﬁ scal year-end and apply the practice consistently to all plans. Th e requirements of the new standard are eﬀ ective for annual reporting periods beginning aft er December 15, 2015, and interim periods within those annual periods, which for us is the ﬁ rst quarter of ﬁ scal 2017. We do not expect this guidance to have a material impact on our results of operations or ﬁ nancial position. In May 2014, the FASB issued new accounting requirements for the recognition of revenue from con- tracts with customers. Th e requirements of the new standard are eﬀ ective for annual reporting periods beginning aft er December 15, 2016, and interim periods within those annual periods, which for us is the ﬁ rst quarter of ﬁ scal 2018. We do not expect this guidance 30 GENERAL MILLS Net sales growth rates on a constant-currency basis is calculated as follows: Percentage change in total net sales Impact of foreign currency exchange Percentage change in total net sales Fiscal 2015 2014 (2) % (3) pts 1 % (1) pts on a constant-currency basis 1 % 2 % Diluted EPS Excluding Certain Items Affecting Comparability and Related Constant Currency Growth Rate Th is measure is used in reporting to our executive management and as a component of the Board of Directors’ measurement of our performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is the proﬁ tability measure we use to eval- uate earnings performance on a comparable year-over- year basis. Th e adjustments are either items resulting from infrequently occurring events or items that, in management’s judgment, signiﬁ cantly aﬀ ect the year- over-year assessment of operating results. to have a material impact on our results of operations or ﬁ nancial position. In June 2014, the FASB issued new accounting requirements for share-based payment awards issued based upon speciﬁ c performance targets. Th e require- ments of the new standard are eﬀ ective for annual reporting periods beginning aft er December 15, 2015, and interim periods within those annual periods, which for us is the ﬁ rst quarter of ﬁ scal 2017. We do not expect this guidance to have a material impact on our results of operations or ﬁ nancial position. NON-GAAP MEASURES We have included in this report measures of ﬁ nancial performance that are not deﬁ ned by GAAP. We believe that these measures provide useful information to investors, and include these measures in other commu- nications to investors. For each of these non-GAAP ﬁ nancial measures, we are providing below a reconciliation of the diﬀ erences between the non-GAAP measure and the most directly comparable GAAP measure, an explanation of why our management or the Board of Directors believes the non-GAAP measure provides useful information to investors and any additional purposes for which our management or Board of Directors uses the non- GAAP measure. Th ese non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure. Constant Currency Net Sales Growth Rates This measure is used in reporting to our executive manage- ment and as a component of the Board of Directors’ measurement of our performance for incentive com- pensation purposes. We believe that this measure provides useful information to investors because it pro- vides transparency to underlying performance in our consolidated net sales by excluding the eﬀ ect that for- eign currency exchange rate ﬂ uctuations have on the year-to-year comparability given volatility in foreign currency exchange markets. 2015 ANNUAL REPORT 31 Th e reconciliation of our GAAP measure, diluted EPS, to diluted EPS excluding certain items aﬀ ecting comparabil- ity and the related constant-currency growth rate follows: Per Share Data Diluted earnings per share, as reported Mark-to-market eﬀ ects (a) Divestiture gain, net (b) Tax items (c) Acquisition integration costs (d) Venezuela currency devaluation (e) Restructuring costs (f) Project-related costs (f) Indeﬁ nite-lived intangible asset impairment (g) Diluted earnings per share, excluding 2015 2014 Fiscal Year Change 2013 2012 2011 $1.97 0.09 — 0.13 0.02 0.01 0.35 0.01 0.28 $ 2.83 (0.05) (0.06) — — 0.09 0.01 — — (30)% $ 2.79 — — (0.13) 0.01 0.03 0.02 — — $2.35 0.10 — — 0.01 — 0.10 — — $ 2.70 (0.09) — (0.13) — — — — — certain items aﬀ ecting comparability $2.86 $ 2.82 Foreign currency exchange impact Diluted earnings per share growth, excluding certain items aﬀ ecting comparability, on a constant-currency basis (a) See Note 7 to the Consolidated Financial Statements on page 52 of this report. (b) See Note 3 to the Consolidated Financial Statements on page 47 of this report. 1% (3)pts 4% $ 2.72 $2.56 $ 2.48 (c) Th e ﬁ scal 2015 tax item is related to the one-time repatriation of foreign earnings in ﬁ scal 2015. Th e ﬁ scal 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, ﬁ scal 2013 includes changes in deferred taxes associated with the Medicare Part D subsidies related to the Patient Protection and Aﬀ ordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. Th e ﬁ scal 2011 tax item represents the eﬀ ects of court decisions and audit settle- ments on uncertain tax matters. (d) Integration costs resulting from the acquisitions of Annie’s in ﬁ scal 2015, Yoki in ﬁ scal 2013, and Yoplait SAS and Yoplait Marques SNC in ﬁ scal 2012. (e) See Note 7 to the Consolidated Financial Statements on page 52 of this report. (f) See Note 4 to the Consolidated Financial Statements on page 48 of this report. (g) See Note 6 to the Consolidated Financial Statements on page 51 of this report. Total Segment Operating Proﬁ t and Related Constant Currency Growth Rate Th is measure is used in report- ing to our executive management and as a compo- nent of the Board of Directors’ measurement of our performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is the proﬁ tability measure we use to evaluate segment performance. A reconciliation of total segment operating proﬁ t to operating proﬁ t, the relevant GAAP measure, is included in Note 16 to the Consolidated Financial Statements on page 78 of this report. Total segment operating proﬁ t growth rate on a constant-currency basis is calculated as follows: Percentage change in total segment operating proﬁ t as reported Impact of foreign currency exchange Percentage change in total segment operating proﬁ t on a Fiscal 2015 2014 (4) % (2) pts (2) % (1) pt constant-currency basis (2) % (1) % 32 GENERAL MILLS Net Sales Growth Rates for Our International Segment on Constant-Currency Basis We believe this measure of our International segment and region net sales provides useful information to investors because it provides transpar- ency to the underlying performance by excluding the eﬀ ect that foreign currency exchange rate ﬂ uctuations have on year-to-year comparability given volatility in foreign currency exchange markets. Percentage Change in Net Sales as Reported (3)% (8) 4 (14) (5)% Fiscal 2015 Impact of Foreign Currency Exchange Percentage Change in Net Sales on Constant Currency Basis Percentage Change in Net Sales as Reported Fiscal 2014 Impact of Foreign Currency Exchange Percentage Change in Net Sales on Constant Currency Basis (8) pts (8) (1) (31) (11) pts 5% Flat 5 17 6% (1)% (1) 9 16 4% 3 pts (6) — (22) (4) pts (4)% 5 9 38 8% Europe Canada Asia/Paciﬁ c Latin America Total International Constant Currency International Segment Operating Proﬁ t Growth Rate We believe that this measure pro- vides useful information to investors because it pro- vides transparency to underlying performance of the International segment by excluding the effect that foreign currency exchange rate ﬂ uctuations have on year-to-year comparability given volatility in foreign currency exchange markets. International segment operating proﬁ t growth rate on a constant-currency basis is calculated as follows: Fiscal 2015 2014 Percentage change in International segment operating proﬁ t as reported Impact of foreign currency exchange (2) % (11) pts 4 % (6) pts Percentage change in International segment operating proﬁ t on a constant-currency basis 9 % 10 % Constant Currency Joint Venture Earnings Aft er Tax Growth Rate We believe that this measure provides useful information to investors because it provides transparency to underlying performance of our joint ventures by exclud- ing the eﬀ ect that foreign currency rate ﬂ uctuations have on year-to-year comparability given volatility in foreign currency exchange markets. Total Joint Ventures (6)% (6) pts Flat Percentage Change in Aft er-tax Earnings From Joint Ventures as Reported Impact of Foreign Currency Exchange Percentage Change in Aft er-tax Earnings From Joint Ventures on a Constant Currency Basis 2015 ANNUAL REPORT 33 Return on Average Total Capital Change in return on average total capital is a measure used in reporting to our executive management and as a component of the Board of Director’s measurement of our performance for incentive compensation purposes. We believe that this measure provides useful information to investors because it is import- ant for assessing the utilization of capital and it eliminates certain items that aﬀ ect year-to-year comparability. In Millions 2015 2014 2013 2012 2011 2010 Fiscal Year Net earnings, including earnings attributable to redeemable and noncontrolling interests $ 1,259.4 $ 1,861.3 $ 1,892.5 $ 1,589.1 $ 1,803.5 Interest, net, aft er-tax 199.8 190.9 201.2 238.9 243.5 Earnings before interest, aft er-tax 1,459.2 2,052.2 2,093.7 1,828.0 2,047.0 Mark-to-market eﬀ ects Divestiture gain, net Tax items Acquisition integration costs Venezuela currency devaluation Restructuring costs Project-related costs Indeﬁ nite-lived intangible impairment Earnings before interest, aft er-tax for 56.5 (30.5) — (36.0) 78.6 10.4 8.0 217.7 8.3 176.9 — — 57.8 3.6 — — (2.8) — (85.4) 8.8 20.8 15.9 — — 65.6 (60.0) — — 9.7 — 64.3 — — — (88.9) — — — — — return on capital calculation $ 2,015.6 $ 2,047.1 $ 2,051.0 $ 1,967.6 $ 1,898.1 Current portion of long-term debt $ 1,000.4 $ 1,250.6 $ 1,443.3 $ 741.2 $ 1,031.3 $ 107.3 Notes payable Long-term debt Total debt Redeemable interest Noncontrolling interests Stockholders’ equity Total capital Accumulated other comprehensive loss Aft er-tax earnings adjustments (a) Adjusted total capital Adjusted average total capital Return on average total capital Change in return on average total capital Foreign currency exchange impact Change in return on average total capital on a constant-currency basis 615.8 1,111.7 599.7 526.5 311.3 1,050.1 7,607.7 6,423.5 5,926.1 6,161.9 5,542.5 5,268.5 9,223.9 8,785.8 7,969.1 7,429.6 6,885.1 6,425.9 778.9 396.0 984.1 470.6 967.5 456.3 847.8 461.0 — — 246.7 245.1 4,996.7 6,534.8 6,672.2 6,421.7 6,365.5 5,402.9 15,395.5 16,775.3 16,065.1 15,160.1 13,497.3 12,073.9 2,310.7 1,340.3 1,585.3 1,743.7 1,010.8 1,486.9 347.1 (209.3) (204.2) (161.5) (301.1) (152.2) $ 18,053.3 $ 17,906.3 $ 17,446.2 $ 16,742.3 $ 14,207.0 $ 13,408.6 $ 17,979.8 $ 17,676.2 $ 17,094.2 $ 15,474.6 $ 13,807.8 11.2% 11.6% 12.0% 12.7% 13.7% (40) bps (20) bps (20) bps (a) Sum of current year and previous year aft er-tax adjustments. 34 GENERAL MILLS Adjusted Gross Margin We believe that this measure provides useful information to investors because it provides transparency to underlying gross margin performance by excluding the eﬀ ects of items resulting from infrequently occurring events or items that, in management’s judgment, signiﬁ cantly aﬀ ect the year-over-year assessment of operating results. In Millions Net sales 2015 2014 2013 2012 2011 2010 2009 2008 $ 17,630.3 $ 17,909.6 $ 17,774.1 $ 16,657.9 $ 14,880.2 $ 14,635.6 $ 14,555.8 $ 13,548.0 Gross margin as reported 5,949.2 6,369.8 6,423.9 6,044.7 5,953.5 5,800.2 5,174.9 4,816.2 Fiscal Year Mark-to-market eﬀ ects Restructuring charges Project-related costs Venezuela currency 89.7 59.6 13.2 (48.5) (4.4) 104.2 (95.2) — — — — — — — — — — 7.1 — — — 118.9 (57.0) — — — — — — devaluation 3.2 22.6 16.0 Adjusted gross margin $ 6,114.9 $ 6,343.9 $ 6,435.5 $ 6,148.9 $ 5,858.3 $ 5,807.3 $ 5,293.8 $ 4,759.2 Gross margin % of net sales As reported As adjusted 33.7% 34.7% 35.6% 35.4% 36.1% 36.2% 36.3% 36.9% 40.0% 39.4% 39.6% 39.7% 35.6% 36.4% 35.5% 35.1% CAUTIONARY STATEMENT RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Th is 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 assump- tions. We also may make written or oral forward-look- ing statements, including statements contained in our ﬁ lings 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 “for- ward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertain- ties that could cause actual results to diﬀ er 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 aﬀ ect our ﬁ nancial performance and could cause our actual results in future periods to diﬀ er materially from any current opinions or statements. Our future results could be aﬀ ected by a variety of factors, such as: competitive dynamics in the consumer foods industry and the markets for our products, including new product introductions, advertising activ- ities, pricing actions, and promotional activities of our competitors; economic conditions, including changes in inﬂ ation 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 dispo- sitions of businesses or assets; changes in capital struc- ture; changes in the legal and regulatory environment, including labeling and advertising regulations and liti- gation; 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 signiﬁ cant accounting estimates; product quality and safety issues, including recalls and product liability; changes in consumer demand for our products; eﬀ ec- tiveness of advertising, marketing, and promotional programs; changes in consumer behavior, trends, and preferences, including weight loss trends; consumer perception of health-related issues, including obesity; consolidation in the retail environment; changes in pur- chasing and inventory levels of signiﬁ cant customers; ﬂ uctuations in the cost and availability of supply chain resources, including raw materials, packaging, and 2015 ANNUAL REPORT 35 energy; disruptions or ineﬃ ciencies in the supply chain; eﬀ ectiveness of restructuring and cost savings initia- tives; volatility in the market value of derivatives used to manage price risk for certain commodities; beneﬁ t 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; for- eign economic conditions, including currency rate ﬂ uc- tuations; and political unrest in foreign markets and economic uncertainty due to terrorism or war. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market risk stemming from changes in interest and foreign exchange rates and commod- ity and equity prices. Changes in these factors could cause ﬂ uctuations in our earnings and cash ﬂ ows. In the normal course of business, we actively manage our exposure to these market risks by entering into vari- ous hedging transactions, authorized under established policies that place clear controls on these activities. Th e 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 ﬁ nancial 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 52 of this report. VALUE AT RISK Th e 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. Th e models assumed normal market conditions and used a 95 percent conﬁ - dence level. Th e 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. Th e market You should also consider the risk factors that we identify in Item 1A of our 2015 Form 10-K, which could also aﬀ ect our future results. We undertake no obligation to publicly revise any forward-looking statements to reﬂ ect events or circum- stances aft er the date of those statements or to reﬂ ect the occurrence of anticipated or unanticipated events. data were drawn from the RiskMetrics™ data set. Th e calculations are not intended to represent actual losses in fair value that we expect to incur. Further, since the hedging instrument (the derivative) inversely correlates with the underlying exposure, we would expect that any loss or gain in the fair value of our derivatives would be generally oﬀ set by an increase or decrease in the fair value of the underlying exposure. Th e positions included in the calculations were: debt; investments; interest rate swaps; foreign exchange forwards; com- modity swaps, futures and options; and equity instru- ments. Th e calculations do not include the underlying foreign exchange and commodities or equity-related positions that are oﬀ set by these market-risk-sensitive instruments. Th e 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 31, 2015, and May 25, 2014, and the average fair value impact during the year ended May 31, 2015. In Millions Fair Value Impact May 31, 2015 Average During ﬁ scal 2015 May 25, 2014 Interest rate instruments $25.1 $23.7 $32.7 Foreign currency instruments 17.9 Commodity instruments Equity instruments 3.7 1.2 8.8 3.7 1.2 7.2 3.0 1.1 36 GENERAL MILLS Reports of Management and Independent Registered Public Accounting Firm REPORT OF MANAGEMENT RESPONSIBILITIES REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Th e management of General Mills, Inc. is responsible for the fairness and accuracy of the consolidated ﬁ nan- cial statements. Th e statements have been prepared in accordance with accounting principles that are gener- ally accepted in the United States, using management’s best estimates and judgments where appropriate. Th e ﬁ nancial information throughout the Annual Report on Form 10-K is consistent with our consolidated ﬁ nancial statements. Management has established a system of inter- nal controls that provides reasonable assurance that assets are adequately safeguarded and transactions are recorded accurately in all material respects, in accor- dance with management’s authorization. We maintain a strong audit program that independently evaluates the adequacy and eﬀ ectiveness of internal controls. Our internal controls provide for appropriate separa- tion of duties and responsibilities, and there are docu- mented policies regarding use of our assets and proper ﬁ nancial reporting. Th ese formally stated and regularly communicated policies demand highly ethical conduct from all employees. Th e Audit Committee of the Board of Directors meets regularly with management, internal auditors, and our independent registered public accounting ﬁ rm to review internal control, auditing, and ﬁ nancial reporting mat- ters. The independent registered public accounting ﬁ rm, internal auditors, and employees have full and free access to the Audit Committee at any time. Th e Audit Committee reviewed and approved the Company’s annual financial statements. The Audit Committee recommended, and the Board of Directors approved, that the consolidated ﬁ nancial statements be included in the Annual Report. Th e Audit Committee also appointed KPMG LLP to serve as the Company’s independent registered public accounting firm for ﬁ scal 2016. K. J. Powell Chairman of the Board and Chief Executive Oﬃ cer D. L. Mulligan Executive Vice President and Chief Financial Oﬃ cer July 6, 2015 Th e Board of Directors and Stockholders General Mills, Inc.: We have audited the accompanying consolidated bal- ance sheets of General Mills, Inc. and subsidiaries as of May 31, 2015 and May 25, 2014, and the related consol- idated statements of earnings, comprehensive income, total equity and redeemable interest, and cash ﬂ ows for each of the ﬁ scal years in the three-year period ended May 31, 2015. In connection with our audits of the consolidated ﬁ nancial statements, we have audited the accompanying ﬁ nancial statement schedule. We also have audited General Mills, Inc.’s internal control over ﬁ nancial reporting as of May 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). General Mills, Inc.’s management is responsible for these consolidated ﬁ nancial statements and ﬁ nancial statement schedule, for maintaining eﬀ ective internal control over ﬁ nancial reporting, and for its assessment of the eﬀ ectiveness of internal control over ﬁ nancial reporting, included in Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated ﬁ nancial statements and ﬁ nancial statement schedule and an opinion on the Company’s internal control over ﬁ nan- cial reporting based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Th ose standards require that we plan and perform the audits to obtain reasonable assur- ance about whether the ﬁ nancial statements are free of material misstatement and whether eﬀ ective internal control over ﬁ nancial reporting was maintained in all material respects. Our audits of the consolidated ﬁ nan- cial statements included examining, on a test basis, evi- dence supporting the amounts and disclosures in the ﬁ nancial statements, assessing the accounting princi- ples used and signiﬁ cant estimates made by manage- ment, and evaluating the overall ﬁ nancial statement presentation. Our audit of internal control over ﬁ nan- cial reporting included obtaining an understanding of internal control over ﬁ nancial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating eﬀ ectiveness 2015 ANNUAL REPORT 37 of internal control based on 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 ﬁ nancial reporting is a process designed to provide reasonable assurance regarding the reliability of ﬁ nancial reporting and the preparation of ﬁ nancial statements for external pur- poses in accordance with generally accepted account- ing principles. A company’s internal control over ﬁ nancial reporting includes those policies and proce- dures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂ ect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that trans- actions are recorded as necessary to permit preparation of ﬁ nancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material eﬀ ect on the ﬁ nancial statements. Because of its inherent limitations, internal control over ﬁ nancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of eﬀ ectiveness 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 ﬁ nancial statements referred to above present fairly, in all material respects, the ﬁ nancial position of General Mills, Inc. and subsid- iaries as of May 31, 2015 and May 25, 2014, and the results of their operations and their cash ﬂ ows for each of the ﬁ scal years in the three-year period ended May 31, 2015, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the accom- panying ﬁ nancial statement schedule, when considered in relation to the basic consolidated ﬁ nancial 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, eﬀ ective internal control over ﬁ nancial report- ing as of May 31, 2015, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Minneapolis, Minnesota July 6, 2015 38 GENERAL MILLS 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 proﬁ t Interest, net Fiscal Year 2015 2014 2013 $ 17,630.3 $ 17,909.6 $ 17,774.1 11,681.1 11,539.8 11,350.2 3,328.0 3,474.3 3,552.3 — 543.9 (65.5) 3.6 — 19.8 2,077.3 2,957.4 2,851.8 315.4 302.4 316.9 Earnings before income taxes and aft er-tax earnings from joint ventures 1,761.9 2,655.0 2,534.9 Income taxes Aft er-tax earnings from joint ventures 586.8 84.3 883.3 89.6 741.2 98.8 Net earnings, including earnings attributable to redeemable and noncontrolling interests 1,259.4 1,861.3 1,892.5 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 ﬁ nancial statements. 38.1 36.9 37.3 $ 1,221.3 $ 1,824.4 $ 1,855.2 $ $ $ 2.02 1.97 1.67 $ $ $ 2.90 2.83 1.55 $ $ $ 2.86 2.79 1.32 2015 ANNUAL REPORT 39 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 income (loss) Other fair value changes: Securities Hedge derivatives Reclassiﬁ cation 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 ﬁ nancial statements. Fiscal Year 2015 2014 2013 $ 1,259.4 $ 1,861.3 $ 1,892.5 (957.9) (358.4) (11.3) 206.0 0.8 4.1 0.3 5.0 4.9 (4.6) 105.1 107.6 (1,201.4) 303.0 58.0 2,164.3 0.8 45.0 0.8 24.6 12.2 98.8 182.2 2,074.7 (192.9) 94.9 61.1 $ 250.9 $ 2,069.4 $ 2,013.6 40 GENERAL MILLS 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 155.9 and 142.3 Accumulated other comprehensive loss Total stockholders’ equity Noncontrolling interests Total equity Total liabilities and equity See accompanying notes to consolidated ﬁ nancial statements. May 31, 2015 May 25, 2014 $ 334.2 $ 867.3 1,386.7 1,483.6 1,540.9 1,559.4 100.1 423.8 74.1 409.1 3,785.7 4,393.5 3,783.3 3,941.9 8,874.9 4,677.0 8,650.5 5,014.3 843.6 1,145.5 $ 21,964.5 $ 23,145.7 $ 1,684.0 $ 1,611.3 1,000.4 1,250.6 615.8 1,111.7 1,589.9 1,449.9 4,890.1 5,423.5 7,607.7 6,423.5 1,550.3 1,666.0 1,744.8 1,643.2 15,792.9 15,156.2 778.9 984.1 75.5 75.5 1,296.7 1,231.8 11,990.8 11,787.2 (6,055.6) (5,219.4) (2,310.7) 4,996.7 (1,340.3) 6,534.8 396.0 470.6 5,392.7 7,005.4 $ 21,964.5 $ 23,145.7 2015 ANNUAL REPORT 41 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 Shares Amount Accumulated Other Retained Comprehensive Noncontrolling Interests Earnings Loss Total Redeemable Interest Equity 754.6 $75.5 $1,308.4 (106.1) $(3,177.0) $ 9,958.5 1,855.2 $(1,743.7) 158.4 $461.0 $6,882.7 18.3 2,031.9 $ 847.8 42.8 (1,111.1) (30.0) (24.2) (1,014.9) (38.6) 16.5 504.7 (80.5) 100.4 (93.1) (1,111.1) (1,044.9) 466.1 (80.5) 100.4 (93.1) 93.1 (23.0) (23.0) (16.2) 754.6 75.5 1,166.6 (113.8) (3,687.2) 10,702.6 (1,585.3) 456.3 7,128.5 967.5 1,824.4 245.0 24.9 2,094.3 70.0 30.0 (35.6) (1,775.3) 13.8 7.1 243.1 (739.8) (91.3) 108.5 4.2 (739.8) (1,745.3) 256.9 (91.3) 108.5 4.2 17.6 17.6 (4.2) 754.6 75.5 1,231.8 (142.3) (5,219.4) 11,787.2 (1,340.3) (28.2) 470.6 (28.2) 7,005.4 (49.2) 984.1 1,221.3 (970.4) (70.0) 180.9 (122.9) (22.3) (1,161.9) (1,017.7) (38.1) 8.7 325.7 (80.8) 111.1 83.2 (10.5) (1,017.7) (1,161.9) 287.6 (80.8) 111.1 20.7 0.6 83.2 20.7 (9.9) (83.2) (25.9) (25.9) 0.9 In Millions, Except per Share Data Balance as of May 27, 2012 Total comprehensive income Cash dividends declared ($1.70 per share) Shares purchased Stock compensation plans (includes income tax beneﬁ ts of $103.0) Unearned compensation related to restricted stock unit awards Earned 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 beneﬁ ts of $69.3) Unearned compensation related to restricted stock unit awards Earned compensation Decrease in redemption value of redeemable interest Addition of noncontrolling interest Distributions to noncontrolling interest holders Balance as of May 25, 2014 Total comprehensive income (loss) Cash dividends declared ($1.67 per share) Shares purchased Stock compensation plans (includes income tax beneﬁ ts of $74.6) Unearned compensation related to restricted stock unit awards Earned compensation Decrease in redemption value of redeemable interest Addition of noncontrolling interest Acquisition of interest in subsidiary Distributions to redeemable and noncontrolling interest holders Balance as of May 31, 2015 754.6 $75.5 $1,296.7 (155.9) $(6,055.6) $11,990.8 $(2,310.7) $396.0 $5,392.7 $778.9 See accompanying notes to consolidated ﬁ nancial statements. 42 GENERAL MILLS 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 Aft er-tax earnings from joint ventures Distributions of earnings from joint ventures Stock-based compensation Deferred income taxes Tax beneﬁ t on exercised options Pension and other postretirement beneﬁ t plan contributions Pension and other postretirement beneﬁ t plan costs Divestiture (gain) Restructuring, impairment, and other exit costs Changes in current assets and liabilities, excluding the eﬀ ects 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 aﬃ liates, 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 beneﬁ t 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 ﬁ nancing activities Eﬀ ect 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 eﬀ ects 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 ﬁ nancial statements. Fiscal Year 2015 2014 2013 $ 1,259.4 $ 1,861.3 $ 1,892.5 588.3 (84.3) 72.6 106.4 25.3 (74.6) (49.5) 91.3 — 531.1 214.7 (137.9) 2,542.8 (712.4) (822.3) (102.4) 11.0 — 27.9 (4.0) (1,602.2) (509.8) 2,253.2 (1,145.8) 163.7 74.6 (1,161.9) (1,017.7) — (25.0) (16.1) (1,384.8) (88.9) (533.1) 867.3 334.2 $ $ $ 6.8 (24.2) (50.5) 145.8 136.8 214.7 585.4 (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 2015 ANNUAL REPORT 43 Notes to Consolidated Financial Statements GENERAL MILLS, INC. AND SUBSIDIARIES NOTE 1. BASIS OF PRESENTATION AND RECLASSIFICATIONS Shipping costs associated with the distribution of ﬁ nished product to our customers are recorded as cost of sales, and are recognized when the related ﬁ nished product is shipped to and accepted by the customer. Basis of Presentation Our Consolidated Financial Statements include the accounts of General Mills, Inc. and all subsidiaries in which we have a controlling financial interest. Intercompany transactions and accounts, including any noncontrolling and redeemable interests’ share of those transactions, are eliminated in consolidation. Our ﬁ scal year ends on the last Sunday in May. Fiscal year 2015 consisted of 53 weeks, while ﬁ scal years 2014 and 2013 consisted of 52 weeks. Change in Reporting Period As part of a long-term plan to conform the ﬁ scal year ends of all our opera- tions, in ﬁ scal 2013 we changed the reporting period of Europe and Australia within our International segment from an April ﬁ scal year end to a May ﬁ scal year end to match our ﬁ scal calendar. Accordingly, in the year of change, our results included 13 months of results from the aﬀ ected operations compared to 12 months in following ﬁ scal years. Th e impact of these changes was not material to our consolidated results of operations. Our Yoplait SAS, Yoplait Marques SNC, Yoki Alimentos S.A. (Yoki), and India businesses remain on an April ﬁ scal year end. Certain reclassiﬁ cations to our previously reported ﬁ nancial information have been made to conform to the current period presentation. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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, ﬁ rst-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. Inventories outside of the United States are generally valued at the lower of cost, using the ﬁ rst-in, ﬁ rst-out (FIFO) method, or market. Land, Buildings, Equipment, and Depreciation Land is recorded at historical cost. Buildings and equipment, including capitalized interest and internal engineering costs, are recorded at cost and depreciated over esti- mated 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 soft ware are usually depreciated over 3 to 10 years. Fully depre- ciated assets are retained in buildings and equipment until disposal. When an item is sold or retired, the accounts are relieved of its cost and related accumu- lated depreciation and the resulting gains and losses, if any, are recognized in earnings. As of May 31, 2015, assets held for sale were insigniﬁ cant. 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 ﬂ ows from the operation and disposition of the asset group are less than the carrying amount of the asset group. Asset groups have identiﬁ able cash ﬂ ows and are largely independent of other asset groups. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset group over its fair value. Fair value is measured using a discounted cash ﬂ ow model or independent appraisals, as appropriate. 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 reporting unit, including goodwill, to the fair value of the unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit, which oft en requires allocation of shared or corporate items 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 4 4 GENERAL MILLS 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 deter- mined based on a discounted cash ﬂ ow model. Growth rates for sales and proﬁ ts are determined using inputs from our long-range planning process. We also make estimates of discount rates, perpetuity growth assump- tions, market comparables, and other factors. We evaluate the useful lives of our other intangible assets, mainly brands, to determine if they are ﬁ nite or indeﬁ nite-lived. Reaching a determination on useful life requires signiﬁ cant judgments and assumptions regard- ing the future eﬀ ects 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 deﬁ - nite lives are amortized on a straight-line basis, over their useful lives, generally ranging from 4 to 30 years. Our indeﬁ nite-lived intangible assets, mainly intan- gible assets primarily associated with the Pillsbury, Totino’s, Progresso, Green Giant, Yoplait, Old El Paso, Yoki, Häagen-Dazs, and Annie’s 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 ﬂ ow 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 ﬁ nite-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 ﬂ ows from the operation and disposition of the asset are less than the carrying amount of the asset. Assets generally have identiﬁ able cash ﬂ ows and are largely independent of other assets. Measurement of an impairment loss would be based on the excess of the carrying amount of the asset over its fair value. Fair value is measured using a discounted cash ﬂ ow model or other similar valuation model, as appropriate. Investments in Unconsolidated Joint Ventures Our investments in companies over which we have the abil- ity to exercise signiﬁ cant inﬂ uence are stated at cost plus our share of undistributed earnings or losses. We receive royalty income from certain joint ventures, incur various expenses (primarily research and develop- ment), and record the tax impact of certain joint ven- ture operations 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 materials, semi-ﬁ nished goods, and ﬁ nished 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 earn- ings, increases in the weighted average cost of capital or signiﬁ cant business disruptions. Th e signiﬁ cant assumptions used to estimate fair value include revenue growth and proﬁ tability, royalty rates, capital spend- ing, depreciation and taxes, foreign currency exchange rates, and a discount rate. By their nature, these pro- jections 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 SAS, a consolidated entity. Sodiaal International (Sodiaal) holds the remaining 49 percent interest in Yoplait SAS. Sodiaal has the ability to put a limited portion of its redeemable interest to us at fair value through a maximum term expiring December 2020. Th is 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 reclassiﬁ ed 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. During the third quarter of ﬁ scal 2015, we adjusted the redeemable interest’s redemption value based on a dis- counted cash ﬂ ow model. Th e signiﬁ cant assumptions 2015 ANNUAL REPORT 45 used to estimate the redemption value include projected revenue growth and proﬁ tability from our long-range plan, capital spending, depreciation, taxes, foreign cur- rency exchange rates, and a discount rate. other supplies attributable to time spent on R&D activ- ities. Other costs include depreciation and maintenance of research facilities, including assets at facilities that are engaged in pilot plant activities. 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 redemption, trade promotion and other costs, including estimated 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 oﬀ ered 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 customers to return product. In limited circumstances, product returned in saleable condition is resold to other cus- tomers or outlets. Receivables from customers gener- ally do not bear interest. Terms and collection patterns vary around the world and by channel. Th e allowance for doubtful accounts represents our estimate of prob- able non-payments and credit losses in our existing receivables, as determined based on a review of past due balances and other speciﬁ c account data. Account balances are written oﬀ against the allowance when we deem the amount is uncollectible. Environmental Environmental costs relating to existing conditions caused by past operations that do not contrib- ute to current or future revenues are expensed. Liabilities for anticipated remediation costs are recorded on an undiscounted basis when they are probable and reason- ably estimable, generally no later than the completion of feasibility studies or our commitment to a plan of action. Advertising Production Costs We expense the produc- tion costs of advertising the ﬁ rst time that the adver- tising takes place. Research and Development All expenditures for research and development (R&D) are charged against earnings in the year incurred. R&D includes expen- ditures for new product and manufacturing process innovation, and the annual expenditures are comprised primarily of internal salaries, wages, consulting, and Foreign Currency Translation For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of these opera- tions are translated at the period-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the period. Translation adjustments are reﬂ ected within accumu- lated other comprehensive loss (AOCI) in stockholders’ equity. Gains and losses from foreign currency transac- tions 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 instru- ments designated as net investment hedges. Th ese 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 eﬀ ective as a hedge trans- action and, if so, the type of hedge transaction. Gains or losses on derivative instruments reported in AOCI are reclassiﬁ ed to earnings in the period the hedged item aﬀ ects earnings. If the underlying hedged transaction ceases to exist, any associated amounts reported in AOCI are reclassiﬁ ed to earnings at that time. Any ineﬀ ective- ness is recognized in earnings in the current period. Stock-based Compensation We generally measure compensation 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 vest- ing period. Our stock compensation expense is recorded in selling, general and administrative (SG&A) expenses and cost of sales in the Consolidated Statements of Earnings and allocated to each reportable segment in our segment results. 46 GENERAL MILLS NOTE 3. ACQUISITION AND DIVESTITURE On October 21, 2014, we acquired Annie’s, Inc. (Annie’s), a publicly traded food company headquartered in Berkeley, California, for an aggregate purchase price of $821.2 million, which we funded by issuing debt. We consolidated Annie’s into our Consolidated Balance Sheets and recorded goodwill of $589.8 million, an indeﬁ nite lived intangible asset for the Annie’s brand of $244.5 million, and a ﬁ nite lived customer relationship asset of $23.9 million. Th e pro forma eﬀ ects of this acquisition were not material. During the fourth quarter of ﬁ scal 2014, we sold certain grain elevators in our U.S. Retail segment for $124.0 million in cash and recorded a pre-tax gain of $65.5 million. Certain equity-based compensation plans contain provisions that accelerate vesting of awards upon retirement, 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 recog- nized immediately for awards granted to retirement- eligible individuals or over the period from the grant date to the date retirement eligibility is achieved, if less than the stated vesting period. We report the beneﬁ ts of tax deductions in excess of recognized compensation cost as a ﬁ nancing cash ﬂ ow, thereby reducing net operating cash ﬂ ows and increas- ing net ﬁ nancing cash ﬂ ows. Defined Benefit Pension, Other Postretirement Beneﬁ t, and Postemployment Beneﬁ t Plans We spon- sor several domestic and foreign deﬁ ned beneﬁ t plans to provide pension, health care, and other welfare ben- eﬁ ts to retired employees. Under certain circumstances, we also provide accruable beneﬁ ts to former or inactive employees in the United States and Canada and mem- bers of our Board of Directors, including severance and certain other beneﬁ ts payable upon death. We recog- nize an obligation for any of these beneﬁ ts that vest or accumulate with service. Postemployment beneﬁ ts 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 beneﬁ t plans are unfunded. We recognize the underfunded or overfunded status of a deﬁ ned beneﬁ t 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 aﬀ ect reported amounts of assets and liabilities, disclosures of contin- gent assets and liabilities at the date of the ﬁ nancial statements, and the reported amounts of revenues and expenses during the reporting period. Th ese estimates include our accounting for promotional expenditures, valuation of long-lived assets, intangible assets, redeem- able interest, stock-based compensation, income taxes, and deﬁ ned beneﬁ t pension, other postretirement ben- eﬁ t and postemployment beneﬁ t plans. Actual results could diﬀ er from our estimates. 2015 ANNUAL REPORT 47 NOTE 4. RESTRUCTURING, IMPAIRMENT, AND OTHER EXIT COSTS Intangible Asset Impairment In fiscal 2015, we recorded a $260 million charge related to the impair- ment of our Green Giant brand intangible asset in restructuring, impairment, and other exit costs. See Note 6 for additional information. Restructuring Initiatives 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 normally 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 savings and/or reduced depreciation. Th ese activities result in various restruc- turing costs, including asset write-oﬀ s, exit charges including severance, contract termination fees, and decommissioning and other costs. Accelerated depre- ciation associated with restructured assets, as used in the context 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 ﬁ xed assets to coincide with the end of production under an approved restruc- turing plan. Any impairment of the asset is recognized immediately in the period the plan is approved. We are currently pursuing several multi-year restruc- turing initiatives designed to increase our eﬃ ciency and focus our business behind our key growth strat- egies. Charges recorded in ﬁ scal 2015 related to these initiatives were as follows: Expense, in Millions Project Catalyst Project Century Combination of certain operational facilities Charges associated with restructuring actions previously announced Total Severance $121.5 44.3 Asset Write-oﬀ s Pension Related Accelerated Depreciation $12.3 42.3 $ 6.6 31.2 $ — 53.1 Other $ 8.0 10.9 Total $148.4 181.8 13.0 0.7 — — 0.2 13.9 (0.6) $178.2 — $55.3 — $37.8 — $53.1 — $19.1 (0.6) $343.5 During the second quarter of ﬁ scal 2015, we approved Project Catalyst, a restructuring plan to increase orga- nizational eﬀ ectiveness and reduce overhead expense. In connection with this project, we expect to eliminate approximately 800 positions primarily in the United States. We expect to incur approximately $148 mil- lion of net expenses relating to these actions of which approximately $118 million will be cash. Th ese actions were largely completed in ﬁ scal 2015. Project Century (Century) is a review of our North American manufacturing and distribution network to streamline operations and identify potential capacity reductions. In addition to the actions taken at certain facilities described below, we incurred $17.2 million of restructuring charges in ﬁ scal 2015 related to Century of which $6.0 million was cash. As part of Century, we approved actions in the third quarter of ﬁ scal 2015 to reduce our refrigerated dough capacity and exit our Midland, Ontario, Canada and New Albany, Indiana facilities, which support our U.S. Retail, International, and Convenience Stores and Foodservice supply chains. Th e Midland action will aﬀ ect approximately 100 positions, and we expect to incur approximately $21 million of net expenses relat- ing to this action, of which approximately $12 million will be cash. We recorded $6.5 million of restructuring charges relating to this action in ﬁ scal 2015. Th e New Albany action will aﬀ ect approximately 400 positions, and we expect to incur approximately $84 million of net expenses relating to this action of which approxi- mately $44 million will be cash. We recorded $51.3 mil- lion of restructuring charges relating to this action in ﬁ scal 2015. We anticipate these actions will be com- pleted by the end of ﬁ scal 2018. During the second quarter of ﬁ scal 2015, we approved a restructuring plan to consolidate yogurt manufac- turing capacity and exit our Methuen, Massachusetts facility in our U.S. Retail and Convenience Stores and 48 GENERAL MILLS Foodservice supply chains as part of Century. Th is action will affect approximately 250 positions. We recorded $43.6 million of restructuring charges in ﬁ scal 2015. We expect to incur approximately $69 million of net expenses relating to this action of which approxi- mately $18 million will be cash. We expect this action to be completed by the end of ﬁ scal 2016. Also as part of Century, during the second quarter of ﬁ scal 2015, we approved a restructuring plan to elim- inate excess cereal and dry mix capacity and exit our Lodi, California facility in our U.S. Retail supply chain. Th is action will aﬀ ect approximately 430 positions. We recorded $63.2 million of restructuring charges in ﬁ scal 2015. We expect to incur approximately $102 million of net expenses relating to this action of which approxi- mately $41 million will be cash. We expect this action to be completed by the end of ﬁ scal 2016. During the ﬁ rst quarter of ﬁ scal 2015, we approved a plan to combine certain Yoplait and General Mills operational facilities within our International segment to increase eﬃ ciencies and reduce costs. Th is action will aﬀ ect approximately 240 positions. We recorded $13.9 million of restructuring charges in ﬁ scal 2015. We expect to incur approximately $15 million of net expenses relating to this action and to make approx- imately $14 million in cash payments. We expect this action to be completed by the end of ﬁ scal 2016. In ﬁ scal 2015, we paid $63.6 million in cash related to restructuring initiatives. In addition to restructuring charges, we expect to incur approximately $65 million of additional proj- ect-related costs, which will be recorded in cost of sales, all of which will be cash. We recorded $13.2 million in cost of sales for project-related costs in ﬁ scal 2015. Subsequent to our ﬁ scal 2015 year end, in the ﬁ rst quarter of ﬁ scal 2016, we approved Project Compass, a restructuring plan designed to enable our International segment to accelerate long-term growth through increased organizational effectiveness and reduced administrative expense. In connection with this ini- tiative, we expect to eliminate approximately 675 to 725 positions. We expect to record total restructur- ing charges of approximately $57 to $62 million, pri- marily reflecting one-time employee termination beneﬁ ts, of which approximately $54 to $57 million will be recorded in the ﬁ rst quarter of ﬁ scal 2016. We expect approximately $54 to $59 million of the total expense will result in future cash expenditures. Th ese restructuring actions are expected to be completed by the end of ﬁ scal 2017. Restructuring charges and project-related costs are classiﬁ ed in our Consolidated Statements of Earnings as follows: In Millions Cost of sales Restructuring, impairment, and other exit costs Total restructuring charges Project-related costs classiﬁ ed Fiscal Year 2015 2014 2013 $ 59.6 $ — $ — 283.9 343.5 3.6 3.6 19.8 19.8 in cost of sales $ 13.2 $ — $ — In ﬁ scal 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 ﬁ scal 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 ﬁ scal 2014. In ﬁ scal 2014, we paid $22.4 million in cash related to restructuring actions. In ﬁ scal 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 ﬁ scal 2013, the restructuring charge was primarily related to a productivity and cost savings plan approved in the fourth quarter of ﬁ scal 2012, consisting of $10.6 million of employee severance expense and other exit costs of $8.0 million. In ﬁ scal 2013, we paid $79.9 mil- lion in cash related to restructuring actions. 2015 ANNUAL REPORT 4 9 Th e roll forward of our restructuring and other exit cost reserves, included in other current liabilities, is as follows: Results from our CPW and HDJ joint ventures are reported for the 12 months ended March 31. Joint venture related balance sheet activity follows: In Millions Cumulative investments Goodwill and other intangibles Aggregate advances included in May 31, 2015 May 25, 2014 $530.6 $ 507.5 465.1 563.2 cumulative investments 390.3 332.0 Joint venture earnings and cash ﬂ ow activity follows: Fiscal Year In Millions 2015 2014 2013 Sales to joint ventures $ 11.6 $ 12.1 $ 12.3 Net advances Dividends received 102.4 54.9 36.7 72.6 90.5 115.7 Summary combined ﬁ nancial information for the joint ventures on a 100 percent basis follows: In Millions Net sales: CPW HDJ Total net sales Gross margin Fiscal Year 2015 2014 2013 $1,894.5 $2,107.9 $2,132.2 370.2 386.9 420.5 2,264.7 2,494.8 2,552.7 925.4 1,030.3 1,057.3 Earnings before income taxes 220.9 219.1 260.3 Earnings aft er income taxes 170.7 168.8 201.6 In Millions Current assets Noncurrent assets Current liabilities Noncurrent liabilities May 31, 2015 May 25, 2014 $ 800.1 $ 1,031.1 962.1 1,484.8 1,129.8 1,779.0 118.2 110.3 In Millions Reserve balance as of Other Exit Severance Termination Costs Contract Total 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 foreign currency translation 6.4 Utilized in 2014 (22.4) — — — 6.4 — (22.4) Reserve balance as of May 25, 2014 2015 charges, including 3.5 — — 3.5 foreign currency translation 176.4 0.6 8.1 185.1 Utilized in 2015 (61.3) — (6.5) (67.8) Reserve balance as of May 31, 2015 $ 118.6 $ 0.6 $ 1.6 $ 120.8 Th e 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 reﬂ ected in our restructuring and other exit cost reserves on our Consolidated Balance Sheets. NOTE 5. INVESTMENTS IN UNCONSOLIDATED 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 coun- tries outside the United States and Canada. CPW also markets cereal bars in several European countries and manufactures 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). Th is joint venture manufactures and markets Häagen-Dazs ice cream products and fro- zen novelties. 50 GENERAL MILLS NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS Th e components of goodwill and other intangible assets are as follows: May 31, 2015 May 25, 2014 $ 8,874.9 $ 8,650.5 In Millions Goodwill Other intangible assets: Intangible assets not subject to amortization: Brands and other indeﬁ nite-lived intangibles 4,262.1 4,504.1 Intangible assets subject to amortization: Franchise agreements, customer relationships, and other ﬁ nite-lived intangibles Less accumulated amortization Intangible assets subject to amortization Other intangible assets Total 544.0 (129.1) 414.9 4,677.0 630.7 (120.5) 510.2 5,014.3 $13,551.9 $13,664.8 Based on the carrying value of ﬁ nite-lived intangi- ble assets as of May 31, 2015, amortization expense for each of the next ﬁ ve ﬁ scal years is estimated to be approximately $28 million. Th e changes in the carrying amount of goodwill for ﬁ scal 2013, 2014, and 2015 are as follows: In Millions U.S. Joint Retail International Foodservice Ventures Convenience Stores and Total — — — 14.4 32.7 18.3 28.2 378.8 Balance as of May 27, 2012 $5,813.2 $ 989.9 $921.1 $458.3 $8,182.5 407.0 Acquisitions Other activity, primarily foreign currency translation — Balance as of May 26, 2013 5,841.4 1,387.0 Divestiture — Other activity, primarily foreign currency translation — Balance as of May 25, 2014 5,829.2 Acquisition 589.8 Other activity, primarily foreign currency translation — Balance as of 921.1 472.7 8,622.2 (12.2) 921.1 498.2 8,650.5 589.8 1,402.0 — (12.2) (268.7) 15.0 (96.7) (365.4) 40.5 25.5 — — — — — — During the second quarter of ﬁ scal 2015, we reor- ganized certain reporting units within our U.S. Retail operating segment. Our chief operating decision maker continues to assess performance and make decisions about resources to be allocated to our segments at the U.S. Retail, International, and Convenience Stores and Foodservice operating segment level. We performed our ﬁ scal 2015 impairment assess- ment as of the ﬁ rst day of the third quarter of ﬁ s- cal 2015, 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 carry- ing values. Th e changes in the carrying amount of other intangi- ble assets for ﬁ scal 2013, 2014, and 2015 are as follows: In Millions U.S. Retail International Joint Ventures Total Balance as of May 27, 2012 Acquisitions Other activity, primarily foreign currency translation Balance as of May 26, 2013 Other activity, primarily foreign currency translation Balance as of May 25, 2014 Acquisition Impairment charge Other activity, primarily foreign currency translation Balance as of May 31, 2015 $3,297.0 20.0 $1,344.1 290.7 $63.8 $4,704.9 310.7 — (4.6) 3.4 0.7 (0.5) 3,312.4 1,638.2 64.5 5,015.1 (4.9) 3.6 0.5 (0.8) 3,307.5 268.4 (260.0) 1,641.8 — — 65.0 5,014.3 268.4 (260.0) — — (4.0) (340.3) (1.4) (345.7) $3,311.9 $1,301.5 $63.6 $4,677.0 We performed our ﬁ scal 2015 impairment assessment as of the ﬁ rst day of the third quarter of ﬁ scal 2015. As of our assessment date, there was no impairment of any of our indeﬁ nite-lived intangible assets as their related fair values were substantially in excess of the carrying values, except for the Mountain High, Uncle Toby’s, and Green Giant brands. May 31, 2015 $6,419.0 $1,133.3 $921.1 $401.5 $8,874.9 2015 ANNUAL REPORT 51 As of the annual assessment date, excess fair value above the carrying value of these brand assets was as follows: In Millions Mountain High Uncle Toby’s Green Giant Excess Fair Value Above Carrying Value 3% 7% 13% Carrying Value $ 35.4 $ 57.7 $ 425.9 At the end of the fourth quarter of ﬁ scal 2015, we made a strategic decision to redirect certain resources support- ing our Green Giant business in our U.S. Retail segment to other businesses within the segment. Th erefore, future sales and proﬁ tability projections in our long-range plan for this business declined. As a result of this trigger- ing event, and in connection with the preparation of this report, we performed an interim impairment assessment of the Green Giant brand intangible asset as of May 31, 2015, and determined that the fair value of the brand asset no longer exceeded the carrying value of the asset. Signiﬁ cant assumptions used in that assessment included our updated long- range cash ﬂ ow projections for the Green Giant business, an updated royalty rate, a weight- ed-average cost of capital, and a tax rate. We recorded a $260 million impairment charge in restructuring, impair- ment, and other exit costs during the fourth quarter of ﬁ scal 2015 related to this asset. We will continue to monitor these businesses for potential impairment. NOTE 7. FINANCIAL INSTRUMENTS, RISK MANAGEMENT ACTIVITIES, AND FAIR VALUES Financial Instruments Th e 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 31, 2015, and May 25, 2014, 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 2015 2014 2015 2014 2015 2014 2015 2015 Available for sale: Debt securities $2.6 $318.6 $ 2.6 $318.8 $ — $0.2 $ — $ — Equity securities 1.8 1.8 8.3 7.2 6.5 5.4 — — Total $4.4 $320.4 $10.9 $326.0 $6.5 $5.6 $ — $ — Th ere were no realized gains or losses from sales of available-for-sale marketable securities. Gains and losses are determined by speciﬁ c identiﬁ cation. Classiﬁ cation of marketable securities as current or noncurrent is depen- dent upon our intended holding period, the security’s maturity date, or both. Th e aggregate unrealized gains and losses on available-for-sale securities, net of tax eﬀ ects, are classiﬁ ed 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) $ 2.5 $ 2.5 From 1 to 3 years From 4 to 7 years Equity securities Total — 0.1 1.8 — 0.1 8.3 $ 4.4 $ 10.9 As of May 31, 2015, cash and cash equivalents total- ing $40.1 million were pledged as collateral for deriv- ative contracts. As of May 31, 2015, $4.1 million of certain accounts receivable were pledged as collateral against a foreign uncommitted line of credit. Th e fair value and carrying amounts of long-term debt, including the current portion, were $8,996.6 mil- lion and $8,608.1 million, respectively, as of May 31, 2015. Th e fair value of long-term debt was estimated using market quotations and discounted cash ﬂ ows based on our current incremental borrowing rates for simi- lar types of instruments. Long-term debt is a Level 2 liability 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 foreign currency exchange rates and commodity and equity prices. To manage these risks, we may enter into var- ious 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 52 GENERAL MILLS 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 oﬀ set 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 assessments required to achieve hedge account- ing for commodity 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 ﬂ ow hedge accounting, we nonetheless believe that these instruments are eﬀ ective 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 aﬀ ects earnings. At that time we reclassify the gain or loss from unallocated corporate items to segment operating proﬁ t, allowing our operating segments to realize the economic eﬀ ects of the derivative without experiencing any resulting mark-to-market volatility, which remains in unallocated corporate items. Unallocated corporate items for ﬁ scal 2015, 2014 and 2013 included: In Millions 2015 2014 2013 Fiscal Year Net loss on mark-to-market valuation of commodity positions $ (163.7) Net loss on commodity positions reclassiﬁ ed from unallocated corporate items to segment operating proﬁ t Net mark-to-market revaluation of certain grain inventories Net mark-to-market valuation of certain commodity positions (10.4) 84.4 $ (4.9) $ (7.6) 51.2 13.7 2.2 (1.7) recognized in unallocated corporate items $ (89.7) $ 48.5 $ 4.4 As of May 31, 2015, the net notional value of com- modity derivatives was $384.0 million, of which $214.7 million related to agricultural inputs and $169.3 million related to energy inputs. Th ese 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 ﬁ xed-rate debt, and existing and future issuances of ﬂ oating-rate debt. Primary exposures include U.S. Treasury rates, LIBOR, Euribor, and commercial 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 interest rate changes, to reduce the vola- tility of our ﬁ nancing costs, and to achieve a desired proportion of ﬁ xed versus ﬂ oating-rate debt, based on current and projected market conditions. Generally under these swaps, we agree with a counterparty to exchange the diﬀ erence between ﬁ xed-rate and ﬂ oat- ing-rate interest amounts based on an agreed upon notional principal amount. Floating Interest Rate Exposures — Floating-to- ﬁ xed interest rate swaps are accounted for as cash ﬂ ow hedges, as are all hedges of forecasted issuances of debt. Eﬀ ectiveness is assessed based on either the perfectly eﬀ ective hypothetical derivative method or changes in the present value of interest payments on the underlying debt. Eﬀ ective gains and losses deferred to AOCI are reclassiﬁ ed into earnings over the life of the associated debt. Ineﬀ ective gains and losses are recorded as net interest. Th e amount of hedge ineﬀ ec- tiveness was less than $1 million in each of ﬁ scal 2015, 2014, and 2013. Fixed Interest Rate Exposures — Fixed-to-ﬂ oating interest rate swaps are accounted for as fair value hedges with eﬀ ectiveness assessed based on changes in the fair value of the underlying debt and derivatives, using incremental borrowing rates currently available on loans with similar terms and maturities. Ineﬀ ective gains and losses on these derivatives and the under- lying hedged items are recorded as net interest. Th e amount of hedge ineﬀ ectiveness was a $1.6 million gain in ﬁ scal 2015 and less than $1 million in ﬁ scal 2014 and 2013. In advance of planned debt ﬁ nancing, we entered into €600.0 million of forward starting swaps with an average ﬁ xed rate of 0.5 percent. All of these forward starting swaps were cash settled for $6.5 million during 2015 ANNUAL REPORT 53 Th e following table summarizes the notional amounts and weighted-average interest rates of our interest rate derivatives. Average ﬂ oating rates are based on rates as of the end of the reporting period. In Millions May 31, 2015 May 25, 2014 Pay-ﬂ oating swaps – notional amount $ 1,250.0 $ 250.0 Average receive rate Average pay rate 1.6% 0.9% 0.7% 0.5% Th e swap contracts mature at various dates from ﬁ s- cal 2016 to 2020 as follows: In Millions 2016 2017 2018 2019 2020 Total Pay Floating $ 250.0 — 500.0 — 500.0 $ 1,250.0 the fourth quarter of ﬁ scal 2015, coincident with the issuance of our €500 million 8-year ﬁ xed-rate notes and €400 million 12-year ﬁ xed-rate notes. During the second quarter of ﬁ scal 2015, we entered into swaps to convert $500.0 million of 1.4 percent ﬁ xed-rate notes due October 20, 2017, and $500.0 mil- lion of 2.2 percent ﬁ xed-rate notes due October 21, 2019, to ﬂ oating rates. In advance of planned debt ﬁ nancing, we entered into $250.0 million of treasury locks with an average ﬁ xed rate of 1.99 percent. All of these treasury locks were cash settled for $17.9 million during the third quarter of ﬁ scal 2014, coincident with the issuance of our $500.0 million 10-year ﬁ xed-rate notes. During the third quarter of ﬁ scal 2013, we entered into swaps to convert $250.0 million of 0.875 percent ﬁ xed-rate notes due January 29, 2016, to ﬂ oating rates. As of May 31, 2015, the pre-tax amount of cash-set- tled interest rate hedge gain or loss remaining in AOCI which will be reclassiﬁ ed to earnings over the remain- ing term of the related underlying debt follows: In Millions 5.7% notes due February 15, 2017 5.65% notes due February 15, 2019 3.15% notes due December 15, 2021 1.0% notes due April 27, 2023 3.65% notes due February 15, 2024 1.5% notes due April 27, 2027 5.4% notes due June 15, 2040 4.15% notes due February 15, 2043 Net pre-tax hedge loss in AOCI Gain/(Loss) $ (3.8) 1.8 (64.7) (1.9) 15.5 (3.9) (14.0) 10.9 $(60.1) 54 GENERAL MILLS Th e following tables reconcile the net fair values of assets and liabilities subject to oﬀ setting arrangements that are recorded in the Consolidated Balance Sheets to the net fair values that could be reported in the Consolidated Balance Sheets: May 31, 2015 Assets Gross Amounts Not Oﬀ set in the Balance Sheet (e) Liabilities Gross Amounts Not Oﬀ set in the Balance Sheet (e) Gross Gross Assets Amounts of Oﬀ set in Recognized Instruments Received Amount (c) Liabilities Cash Collateral Net Net the Balance Amounts of Financial Sheet (a) Liabilities (b) Instruments Pledged Amount (d) Net Cash Collateral Gross Gross Liabilities Amounts of Oﬀ set in Recognized the Balance Amounts of Financial Net In Millions Assets Sheet (a) Assets (b) Commodity contracts $ 10.1 $ — $ 10.1 $ (1.3) $ — $ 8.8 $ (59.4) $ — $ (59.4) $ 1.3 $ 40.1 $ (18.0) Interest rate contracts Foreign exchange 4.0 — 4.0 — — 4.0 — — — — — — contracts 25.9 — 25.9 (12.5) — 13.4 (65.3) — (65.3) 12.5 — (52.8) Total $ 40.0 $ — $ 40.0 $ (13.8) $ — $ 26.2 $ (124.7) $ — $ (124.7) $ 13.8 $ 40.1 $ (70.8) (a) Includes related collateral oﬀ set 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 25, 2014 Assets Gross Amounts Not Oﬀ set in the Balance Sheet (e) Liabilities Gross Amounts Not Oﬀ set in the Balance Sheet (e) Gross Gross Assets Amounts of Oﬀ set in Recognized Instruments Received Amount (c) Liabilities Cash Collateral Net Net the Balance Amounts of Financial Sheet (a) Liabilities (b) Instruments Pledged Amount (d) Net Cash Collateral Gross Gross Liabilities Amounts of Oﬀ set 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 oﬀ set 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. 2015 ANNUAL REPORT 55 foreign exchange market mechanism (SIMADI). We expect to be able to access U.S. dollars through the SIMADI market. SIMADI has signiﬁ cantly higher for- eign exchange rates than those available through the other foreign exchange mechanisms. In ﬁ scal 2015, we recorded an $8.0 million foreign exchange loss in unallocated corporate items resulting from the remea- surement of assets and liabilities of our Venezuelan subsidiary at the SIMADI rate of 199 bolivars per U.S. dollar. Our Venezuela operations represent less than 1 percent of our consolidated assets, liabilities, net sales, and segment operating proﬁ t. As of May 31, 2015, we had $0.3 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 employ- ees in our deferred compensation plan are revalued. We use equity swaps to manage this risk. As of May 31, 2015, the net notional amount of our equity swaps was $124.2 million. Th ese swap contracts mature in ﬁ scal 2016. Foreign Exchange Risk Foreign currency ﬂ uctuations aﬀ ect our net invest- ments in foreign subsidiaries and foreign currency cash ﬂ ows related to third party purchases, intercompany loans, product shipments, and foreign-denominated debt. We are also exposed to the translation of foreign currency earnings to the U.S. dollar. Our principal expo- sures 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 ﬂ ow 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 oﬀ - set 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 31, 2015, the net notional value of foreign exchange derivatives was $1,448.5 million. Th e amount of hedge ineﬀ ectiveness was less than $1 million in each of ﬁ scal 2015, 2014, and 2013. 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 fourth quarter of ﬁ scal 2015, we entered into a net investment hedge for a portion of our net investment in foreign opera- tions denominated in euros by issuing €900.0 million of euro-denominated bonds. During the second quarter of ﬁ scal 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 31, 2015, we had deferred net foreign currency transaction gains of $10.7 million in AOCI associated with hedging activity. Venezuela is a highly inﬂ ationary economy and 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 2014, the Venezuelan government established a new foreign exchange market mechanism (SICAD 2) and at that time indicated that it would be the mar- ket through which U.S. dollars would be obtained for the remittance of dividends. On February 12, 2015, the Venezuelan government replaced SICAD 2 with a new 56 GENERAL MILLS Fair Value Measurements And Financial Statement Presentation Th e 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 31, 2015 and May 25, 2014, were as follows: In Millions Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total May 31, 2015 May 31, 2015 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) Long-lived assets (g) Indeﬁ nite-lived intangible asset (h) Total $ — $ 4.0 $ — $ 4.0 $ — $ — $ — $ — — — 25.5 29.5 — 25.5 — (23.3) — (23.3) — 29.5 — (23.3) — (23.3) — 7.2 — 0.4 2.9 3.3 — 0.4 — 10.1 3.3 — — — — (42.0) — (42.0) (59.4) — (59.4) (7.8) (7.8) — 7.2 6.6 — 13.8 — (109.2) — (109.2) 8.3 2.6 — 10.9 — — 37.8 — 37.8 — 154.3 154.3 8.3 40.4 154.3 203.0 — — — — — — — — — — — — — — — — Total assets, liabilities, and derivative positions recorded at fair value $15.5 $76.5 $154.3 $246.3 $ — $(132.5) $ — $(132.5) (a) Th ese 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) Th ese 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. (g) We recorded $30.3 million in non-cash impairment charges in ﬁ scal 2015 to write down certain long-lived assets to their fair value. Fair value was based on recently reported transactions for similar assets in the marketplace. Th ese assets had a carrying value of $68.1 million and were associated with the restructuring actions described in Note 4. (h) We recorded a $260.0 million non-cash impairment charge in ﬁ scal 2015 to write down our Green Giant brand asset to its fair value of $154.3 million. Th is asset had a carrying value of $414.3 million. See Note 6 for additional information. 2015 ANNUAL REPORT 57 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 recorded at fair value $ — $ 0.7 $ — $ 0.7 $ — $ — $ — $ — — 9.9 — 10.6 — — 9.9 — (12.6) — (12.6) 10.6 — (12.6) — (12.6) — 0.6 — 0.6 — (6.5) 11.1 8.0 — 19.1 — (4.0) — 7.5 — 7.5 — (4.9) 11.1 16.1 — 27.2 — (15.4) — — — — (6.5) (4.0) (4.9) (15.4) 7.2 318.8 7.2 318.8 — 326.0 — — 326.0 — — — — — — — $ 18.3 $ 345.5 $ — $ 363.8 $ — $ (28.0) $ — $ (28.0) (a) Th ese 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) Th ese 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 signiﬁ cantly change our valuation techniques from prior periods. 58 GENERAL MILLS Information related to our cash ﬂ ow hedges, fair value hedges, and other derivatives not designated as hedging instruments for the ﬁ scal years ended May 31, 2015, and May 25, 2014, follows: In Millions Derivatives in Cash Flow Hedging Relationships: Amount of gain (loss) recognized in Interest Rate Foreign Exchange Contracts Contracts Equity Contracts Commodity Contracts Total Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 other comprehensive income (OCI) (a) $(5.9) $10.6 $13.3 $0.6 $ — $ — $ — $ — $7.4 $11.2 Amount of net gain (loss) reclassiﬁ ed from AOCI into earnings (a) (b) (10.6) (11.7) 5.0 16.4 — — — — (5.6) 4.7 Amount of net gain (loss) recognized in earnings (c) Derivatives in Fair Value Hedging Relationships: Amount of net gain recognized in earnings (d) Derivatives in Net Investment Hedging Relationships: Amount of loss recognized in OCI (a) Derivatives Not Designated as Hedging Instruments: Amount of net gain (loss) recognized in earnings (d) (a) Eﬀ ective portion. (0.6) — 0.1 (0.1) — — — — (0.5) (0.1) 1.6 0.2 — — — — — — 1.6 0.2 — — (6.9) — — — — — (6.9) — — — (54.3) (20.0) 9.6 9.8 (163.7) (4.9) (208.4) (15.1) (b) Gain (loss) reclassiﬁ ed 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 ineﬀ ective 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 eﬀ ectiveness. (d) Gain 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. 2015 ANNUAL REPORT 59 our International segment accounted for 24 percent of its ﬁ scal 2015 net sales, and the ﬁ ve largest custom- ers in our Convenience Stores and Foodservice segment accounted for 44 percent of its ﬁ scal 2015 net sales. We enter into interest rate, foreign exchange, and certain commodity and equity derivatives, primarily with a diversiﬁ ed 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. Th ese transactions may expose us to potential losses due to the risk of nonperformance by these counter- parties; however, we have not incurred a material loss. We also enter into commodity futures transactions through various regulated exchanges. Th e amount of loss due to the credit risk of the counterparties, should the counterparties fail to per- form according to the terms of the contracts, is $16.7 million against which we do not hold collateral. Under the terms of our swap agreements, some of our trans- actions require collateral or other security to support ﬁ nancial 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 coun- terparty defaults. We oﬀ er certain suppliers access to a third party ser- vice that allows them to view our scheduled payments online. Th e third party service also allows suppliers to ﬁ nance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these ﬁ nancing arrange- ments and no direct relationship with the suppliers, the third party, or any ﬁ nancial institutions concerning this service. All of our accounts payable remain as obli- gations to our suppliers as stated in our supplier agree- ments. As of May 31, 2015, $448.6 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 31, 2015, the aft er-tax amounts of unrealized gains and losses in AOCI related to hedge derivatives follows: In Millions Aft er-Tax Gain/(Loss) Unrealized losses from interest rate cash ﬂ ow hedges $ (36.5) Unrealized gains from foreign currency cash ﬂ ow hedges 7.7 Aft er-tax loss in AOCI related to hedge derivatives $ (28.8) Th e net amount of pre-tax gains and losses in AOCI as of May 31, 2015, that we expect to be reclassiﬁ ed into net earnings within the next 12 months is $2.3 million of gain. Credit-Risk-Related Contingent Features Certain of our derivative instruments contain pro- visions 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 deriva- tive instruments could request full collateralization on derivative instruments in net liability positions. Th e aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on May 31, 2015, was $81.5 million. We have posted $25.0 million of collateral under these contracts. If the credit-risk-related contingent features underlying these agreements had been triggered on May 31, 2015, we would have been required to post $56.5 million of collateral to counterparties. Concentrations Of Credit And Counterparty Credit Risk During ﬁ scal 2015, Wal-Mart Stores, Inc. and its aﬃ li- ates (Wal-Mart) accounted for 21 percent of our consol- idated 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 9 percent of our net sales in the Convenience Stores and Foodservice segment. As of May 31, 2015, Wal-Mart accounted for 29 percent of our U.S. Retail receivables, 6 percent of our International receivables, and 9 percent of our Convenience Stores and Foodservice receivables. Th e ﬁ ve largest customers in our U.S. Retail segment accounted for 54 percent of its ﬁ scal 2015 net sales, the ﬁ ve largest customers in 60 GENERAL MILLS NOTE 8. DEBT Notes Payable Th e components of notes payable and their respective weighted-average interest rates at the end of the periods were as follows: May 31, 2015 May 25, 2014 Weighted- average Interest Rate Notes Payable Weighted- average Interest Rate Notes Payable In Millions U.S. commercial paper $432.0 0.3% $1,007.6 0.2% Financial institutions 183.8 9.5 104.1 12.1 Total $615.8 3.0% $1,111.7 1.3% To ensure availability of funds, we maintain bank credit lines suﬃ cient to cover our outstanding notes payable. Commercial paper is a continuing source of short-term ﬁ nancing. We have commercial paper pro- grams available to us in the United States and Europe. We also have uncommitted and asset-backed credit lines that support our foreign operations. Th e following table details the fee-paid committed and uncommitted credit lines we had available as of May 31, 2015: In Billions Credit facility expiring: April 2017 May 2019 June 2019 Total committed credit facilities Uncommitted credit facilities Total committed and uncommitted Facility Amount Borrowed Amount $ 1.7 $ — 1.0 0.2 2.9 0.5 — 0.1 0.1 0.1 credit facilities $ 3.4 $ 0.2 In June 2014, our subsidiary, Yoplait S.A.S. entered into a €200.0 million fee-paid committed credit facility that is scheduled to expire in June 2019. 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. Th e credit facilities contain covenants, including a requirement to maintain a ﬁ xed charge coverage ratio of at least 2.5 times. We were in compliance with all credit facility covenants as of May 31, 2015. Long-Term Debt In April 2015, we issued €500.0 mil- lion principal amount of 1.0 percent ﬁ xed-rate notes due April 27, 2023 and €400.0 million principal amount of 1.5 percent ﬁ xed-rate notes due April 27, 2027. Interest on the notes is payable annually in arrears. Th e notes due April 27, 2023 may be redeemed in whole, or in part, at our option at any time prior to January 27, 2023 for a speciﬁ ed make whole amount and any time on or aft er that date at par. Th e notes due April 27, 2027 may be redeemed in whole, or in part, at our option at any time prior to January 27, 2027 for a speciﬁ ed make whole amount and any time on or aft er that date at par. Th ese notes are senior unsecured obligations that include a change of control repurchase provision. Th e net proceeds were used for general corporate purposes and to reduce our commercial paper borrowings. In March 2015, we repaid $750.0 million of 5.2 per- cent notes. In October 2014, we issued $500.0 million aggregate principal amount of 1.4 percent ﬁ xed-rate notes due October 20, 2017 and $500.0 million aggregate princi- pal amount of 2.2 percent ﬁ xed-rate notes due October 21, 2019. Interest on the notes is payable semi-annually in arrears. Th e notes may be redeemed in whole, or in part, at our option at any time at the applicable redemp- tion price. Th e notes are senior unsecured obligations that include a change of control repurchase provision. Th e net proceeds were used to fund our acquisition of Annie’s and for general corporate purposes. In June 2014, we issued €200.0 million principal amount of 2.2 percent fixed-rate senior unsecured notes due June 24, 2021 in a private placement oﬀ er- ing. Interest on the notes is payable semi-annually in arrears. Th e notes may be redeemed in whole, or in part, at our option at any time for a speciﬁ c make- whole amount and include a change of control repur- chase provision. The net proceeds were used to reﬁ nance existing debt. In June 2014, we repaid €290.0 million of float- ing-rate notes. In May 2014, we repaid $400.0 million of float- ing-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 ﬁ xed-rate notes due February 15, 2024 and $250.0 million aggregate princi- pal amount of ﬂ oating-rate notes due January 28, 2016. Interest on the ﬁ xed-rate notes is payable semi-annu- ally in arrears. Th e ﬁ xed-rate notes may be redeemed in whole, or in part, at our option at any time prior to 2015 ANNUAL REPORT 61 November 15, 2023 for a speciﬁ ed make whole amount and any time on or aft er that date at par. Th e ﬂ oat- ing-rate notes bear interest equal to three-month LIBOR plus 20 basis points, subject to quarterly reset. Interest on the ﬂ oating-rate notes is payable quarterly in arrears. Th e ﬂ oating-rate notes are not redeemable prior to maturity. Th e ﬁ xed-rate and ﬂ oating-rate notes are senior unsecured obligations that include a change of control repurchase provision. Th e 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 ﬁ xed-rate notes due November 16, 2020. Interest on the notes is pay- able annually in arrears. Th e notes may be redeemed in whole, or in part, at our option at any time prior to August 16, 2020 for a speciﬁ ed make whole amount and any time on or aft er that date at par. Th ese notes are senior unsecured obligations that include a change of control repurchase provision. Th e net proceeds were used for general corporate purposes and to reduce our commercial paper borrowings. A summary of our long-term debt is as follows: In Millions May 31, 2015 May 25, 2014 5.65% notes due February 15, 2019 $1,150.0 $1,150.0 5.7% notes due February 15, 2017 1,000.0 1,000.0 3.15% notes due December 15, 2021 1,000.0 1,000.0 5.2% notes due March 17, 2015 — 750.0 Euro-denominated 2.1% notes due November 16, 2020 549.4 681.5 Euro-denominated 1.0% notes due April 27, 2023 1.4% notes due October 20, 2017 5.4% notes due June 15, 2040 4.15% notes due February 15, 2043 3.65% notes due February 15, 2024 549.4 500.0 500.0 500.0 500.0 2.2% notes due October 21, 2019 500.0 — — 500.0 500.0 500.0 — Floating-rate notes due January 29, 2016 500.0 500.0 Euro-denominated 1.5% notes due April 27, 2027 439.5 Floating-rate notes due December 15, 2014 — 0.875% notes due January 29, 2016 250.0 Floating-rate notes due January 28, 2016 250.0 — 395.3 250.0 250.0 Euro-denominated 2.2% notes due In August 2013, we repaid $700.0 million of 5.25 June 24, 2021 219.7 — percent notes. Medium-term notes, 0.02% to 6.44%, due ﬁ scal 2017 or later Other, including capital leases 204.2 204.2 (4.1) (6.9) 8,608.1 7,674.1 Less amount due within one year (1,000.4) (1,250.6) Total long-term debt $7,607.7 $6,423.5 Principal payments due on long-term debt in the next ﬁ ve years based on stated contractual maturities, our intent to redeem, or put rights of certain note hold- ers are $1,000.4 million in ﬁ scal 2016, $1,103.4 million in ﬁ scal 2017, $604.5 million in ﬁ scal 2018, $1,150.2 million in ﬁ scal 2019, and $500.1 million in ﬁ scal 2020. Certain of our long-term debt agreements contain restrictive covenants. As of May 31, 2015, we were in compliance with all of these covenants. As of May 31, 2015, the $60.1 million pre-tax loss recorded in AOCI associated with our previously des- ignated interest rate swaps will be reclassiﬁ ed to net interest over the remaining lives of the hedged trans- actions. Th e amount expected to be reclassiﬁ ed from AOCI to net interest in ﬁ scal 2016 is a $10.6 million pre-tax loss. 62 GENERAL MILLS NOTE 9. REDEEMABLE AND NONCONTROLLING INTERESTS Our principal redeemable and noncontrolling interests relate to our Yoplait SAS, Yoplait Marques SNC, Liberté Marques Sàrl, and General Mills Cereals, LLC (GMC) subsidiaries. In addition, we have six foreign subsid- iaries that have noncontrolling interests totaling $8.2 million as of May 31, 2015. We have a 51 percent controlling interest in Yoplait SAS and a 50 percent interest in Yoplait Marques SNC and Liberté Marques Sàrl. Sodiaal holds the remaining interests in each of the entities. On the acquisition date, we recorded the $904.4 million fair value of Sodiaal’s 49 percent euro-denominated interest in Yoplait SAS 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 through a maximum term expiring December 2020. We adjust the value of the redeemable interest through additional paid-in capital on our Consolidated Balance Sheets quarterly to the redeemable interest’s redemp- tion value, which approximates its fair value. Yoplait SAS pays dividends annually if it meets certain ﬁ nan- cial metrics set forth in its shareholders agreement. As of May 31, 2015, the redemption value of the euro-de- nominated redeemable interest was $778.9 million. In addition, a subsidiary of Yoplait SAS 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 $271.3 mil- lion for ﬁ scal 2015 and $311.2 million for ﬁ scal 2014. On the acquisition dates, we recorded the $281.4 million fair value of Sodiaal’s 50 percent euro-denom- inated interest in Yoplait Marques SNC and 50 per- cent Canadian dollar-denominated interest in Liberté Marques Sàrl as noncontrolling interests on our Consolidated Balance Sheets. Yoplait Marques SNC earns a royalty stream through a licensing agreement with Yoplait SAS for the rights to Yoplait and related trademarks. Liberté Marques Sàrl earns a royalty stream through licensing agreements with certain Yoplait group companies for the rights to Liberté and related trade- marks. Th ese entities pay dividends annually based on their available cash as of their ﬁ scal year end. During ﬁ scal 2015, we paid $17.7 million of dividends to Sodiaal under the terms of the Yoplait SAS and Yoplait Marques SNC shareholder agreements. Th e 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, to the holder’s capital account bal- ance established in the most recent mark-to-market valuation (currently $251.5 million). In ﬁ scal 2015, the ﬂ oating preferred return rate was equal to the sum of three-month LIBOR plus 110 basis points. Th e preferred return rate is adjusted every three years through a negotiated agreement with the Class A Interest holder or through a remarketing auction. On June 1, 2015, sub- sequent to our year-end, the ﬂ oating preferred return rate on GMC’s Class A interests was reset to the sum of three-month LIBOR plus 125 basis points. For ﬁ nancial reporting purposes, the assets, liabilities, results of operations, and cash ﬂ ows of our non-wholly owned subsidiaries are included in our Consolidated Financial Statements. Th e third-party investor’s share of the net earnings of these subsidiaries is reﬂ ected in net earnings attributable to redeemable and non- controlling interests in the Consolidated Statements of Earnings. Our noncontrolling interests contain restrictive cove- nants. As of May 31, 2015, 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 May 6, 2014, our Board of Directors authorized the repurchase of up to 100 million shares of our com- mon 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. Th e authorization has no speciﬁ ed termination date. During ﬁ scal 2015, we repurchased 22.3 million shares of common stock for an aggregate purchase price of $1,161.9 million. During ﬁ scal 2014, we repurchased 35.6 million shares of common stock for an aggregate pur- chase price of $1,774.4 million. During ﬁ scal 2013, we repurchased 24.2 million shares of common stock for an aggregate purchase price of $1,014.9 million. During the fourth quarter of ﬁ scal 2013, we entered into an Accelerated Share Repurchase (ASR) agree- ment with an unrelated third party ﬁ nancial institution to repurchase an aggregate of $300.0 million of our 2015 ANNUAL REPORT 63 outstanding common stock. Under the ASR agreement, we paid $300.0 million to the ﬁ nancial 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 agree- ment during the ﬁ rst quarter of ﬁ scal 2014. As of May 26, 2013, we recorded this transaction as an increase in treasury 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 ﬁ rst quarter of ﬁ scal 2014, we reclassiﬁ ed the $30.0 million to treasury stock from additional paid-in capital on our Consolidated Balance Sheets. Th e following table provides details of total comprehensive income: Pretax General Mills Tax Net Noncontrolling Interests Net Redeemable Interests Net Fiscal 2015 $ 1,221.3 $ 8.2 $ 29.9 In Millions Net earnings, including earnings attributable to redeemable and noncontrolling interests Other comprehensive income (loss): Foreign currency translation Net actuarial loss Other fair value changes: Securities Hedge derivatives Reclassiﬁ cation to earnings: $ (727.9) (561.1) $ — 202.7 (727.9) (358.4) 1.3 13.6 (0.5) (4.8) 0.8 8.8 1.2 105.1 (970.4) $ 250.9 Hedge derivatives (a) 0.7 0.5 Amortization of losses and prior service costs (b) Other comprehensive loss Total comprehensive income (loss) 170.2 (1,103.2) (65.1) 132.8 (78.2) — — — — — (78.2) $ (70.0) (151.8) — — (4.7) 3.7 — (152.8) $ (122.9) (a) Loss reclassiﬁ ed 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 reclassiﬁ ed from AOCI into earnings is reported in SG&A expense. 64 GENERAL MILLS 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 Reclassiﬁ cation 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 19.1 — — — 41.4 — — (2.4) (4.7) 0.2 (4.5) — (0.1) 172.7 438.3 (65.1) (193.3) 107.6 245.0 $ 2,069.4 — 19.1 $ 24.9 — 38.9 $ 70.0 (a) Gain reclassiﬁ ed 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 reclassiﬁ ed from AOCI into earnings is reported in SG&A expense. 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 Reclassiﬁ cation 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 reclassiﬁ ed 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 reclassiﬁ ed from AOCI into earnings is reported in SG&A expense. 2015 ANNUAL REPORT 65 In ﬁ scal 2015, 2014, and 2013, except for reclassiﬁ - cations to earnings, changes in other comprehensive income (loss) were primarily non-cash items. Stock Options The estimated fair values of stock options granted and the assumptions used for the Black-Scholes option-pricing model were as follows: Accumulated other comprehensive loss balances, net of tax eﬀ ects, were as follows: Fiscal Year 2015 2014 2013 In Millions May 31, 2015 May 25, 2014 Estimated fair values of Foreign currency translation adjustments Unrealized gain (loss) from: Securities Hedge derivatives Pension, other postretirement, and postemployment beneﬁ ts: stock options granted $ 7.22 $ 6.03 $ 3.65 $ (536.6) $ 191.3 Assumptions: 3.7 (28.8) 2.9 (38.8) Risk-free interest rate 2.6% 2.6% 1.6% Expected term 8.5 years 9.0 years 9.0 years Expected volatility 17.5% 17.4% Dividend yield 3.1% 3.1% 17.3% 3.5% Net actuarial loss (1,756.1) (1,469.2) Prior service credits (costs) 7.1 (26.5) Accumulated other comprehensive loss $ (2,310.7) $ (1,340.3) NOTE 11. STOCK PLANS We use broad-based stock plans to help ensure that management’s interests are aligned with those of our stockholders. As of May 31, 2015, a total of 27.1 mil- lion 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. Th e 2011 Plan also provides for the issuance of cash-set- tled share-based units, stock appreciation rights, and performance based stock awards. Stock-based awards now outstanding include some granted under the 2001, 2005, 2006, 2007, and 2009 stock plans, under which no further awards may be granted. Th e stock plans provide for accelerated vesting of awards upon retire- ment, termination, or death of eligible employees and directors. 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 ﬁ nancial statements. 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, dividend yield, and the forfeiture rate. 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 considered, but did not use, implied volatility in our estimate, because trading activity in options on our stock, especially those with tenors of greater than 6 months, is insuﬃ cient 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. Th e weighted-aver- age expected term for all employee groups is presented in the table above. Th e risk-free interest rate for peri- ods during the expected term of the options is based on the U.S. Treasury zero-coupon yield curve in eﬀ ect at the time of grant. Any corporate income tax beneﬁ t realized upon exer- cise or vesting of an award in excess of that previously recognized in earnings (referred to as a windfall tax beneﬁ t) is presented in the Consolidated Statements of Cash Flows as a ﬁ nancing cash ﬂ ow. 66 GENERAL MILLS 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 2015 2014 2013 Fiscal Year Net cash proceeds Intrinsic value of $ 163.7 $ 108.1 $ 300.8 options exercised $ 201.9 $ 166.6 $ 297.2 Restricted Stock, Restricted Stock Units, and Performance Share 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 employees under the 2011 Plan. Restricted stock and restricted stock units generally vest and become unre- stricted four years aft er the date of grant. Performance share units are earned based on our future achievement of three-year goals for average organic net sales growth and cumulative free cash ﬂ ow. Performance share units are subject to a four year vesting period and will be set- tled with common stock one year following the comple- tion of the three-year performance period. Th e sale or transfer of these awards is restricted during the vest- ing period. Participants holding restricted stock, but not restricted stock units or performance share units, are entitled to vote on matters submitted to holders of common stock for a vote. Th ese awards accumulate dividends from the date of grant, but participants only receive payment if the awards vest. Realized windfall tax beneﬁ ts are credited to addi- tional paid-in capital within the Consolidated Balance Sheets. Realized shortfall tax beneﬁ ts (amounts which are less than that previously recognized in earnings) are ﬁ rst oﬀ set against the cumulative balance of wind- fall tax beneﬁ ts, if any, and then charged directly to income tax expense, potentially resulting in volatility in our consolidated eﬀ ective income tax rate. We calcu- lated a cumulative memo balance of windfall tax ben- eﬁ ts for the purpose of accounting for future shortfall tax beneﬁ ts. Options may be priced at 100 percent or more of the fair market value on the date of grant, and generally vest four years aft er the date of grant. Options gen- erally expire within 10 years and one month aft er the date of grant. Information on stock option activity follows: Weighted- Average Exercise Weighted- Average Exercise Exercisable Price Per Outstanding Price Per Share (Th ousands) (Th ousands) Options Options Share Balance as of 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 Granted Exercised Forfeited or expired Balance as of 2,253.1 (7,297.2) 53.70 26.68 (47.7) 43.73 May 31, 2015 26,991.5 $ 30.44 39,077.2 $ 34.35 Stock-based compensation expense related to stock option awards was $18.1 million in ﬁ scal 2015, $18.2 million in ﬁ scal 2014, and $17.5 million in ﬁ scal 2013. Compensation expense related to stock-based pay- ments recognized in the Consolidated Statements of Earnings includes amounts recognized in restructuring, impairment, and other exit costs for ﬁ scal 2015. 2015 ANNUAL REPORT 67 Information on restricted stock unit, performance share units, and cash-settled share-based units activity follows: Equity Classiﬁ ed Liability Classiﬁ ed Share- Settled Units (Th ousands) Weighted- Average Grant-Date Fair Value Share- Settled Units (Th ousands) Weighted- Average Grant-Date Fair Value Cash-Settled Share-Based Units (Th ousands) Weighted- Average Grant-Date Fair Value Non-vested as of May 25, 2014 Granted Vested Forfeited, expired, or reclassiﬁ ed Non-vested as of May 31, 2015 7,893.7 1,658.7 (2,978.7) (338.1) 6,235.6 $40.81 53.44 35.19 46.13 $46.44 249.5 49.5 (55.7) (6.3) 237.0 $25.67 53.70 37.68 45.41 $44.84 822.8 $36.52 — 37.40 37.40 $ — — (822.1) (0.7) — Fiscal Year Number of units granted (thousands) Weighted average price per unit Th e total grant-date fair value of restricted stock unit awards that vested during ﬁ scal 2015 was $133.7 million, and $104.6 million vested during ﬁ scal 2014. As of May 31, 2015, unrecognized compensation expense related to non-vested stock options, restricted stock units, and performance share units was $101.9 million. Th is expense will be recognized over 17 months, on average. Stock-based compensation expense related to restricted stock units, performance share units, and cash-settled share-based payment awards was $96.6 million for ﬁ scal 2015, $107.0 million for ﬁ scal 2014, and $128.9 million for ﬁ scal 2013. Compensation expense related to stock-based payments recognized in the Consolidated Statements of Earnings includes amounts recognized in restructuring, impairment, and other exit costs for ﬁ scal 2015. 2015 2014 2013 1,708.2 2,144.1 2,404.9 $53.45 $48.49 $38.41 NOTE 12. EARNINGS PER SHARE Basic and diluted EPS were calculated using the following: In Millions, Except per Share Data 2015 2014 2013 Net earnings attributable to General Mills $1,221.3 $1,824.4 $1,855.2 Fiscal Year Average number of common shares - basic EPS Incremental share eﬀ ect from: (a) Stock options Restricted stock, restricted 603.3 628.6 648.6 11.3 12.3 12.0 stock units, and other 4.2 4.8 5.0 Average number of common shares - diluted EPS 618.8 645.7 665.6 Earnings per share - basic Earnings per share - diluted $ 2.02 $ 2.90 $ $ 1.97 $ 2.83 $ 2.86 2.79 (a) Incremental shares from stock options, restricted stock units, and performance share units are computed by the treasury stock method. Stock options, restricted stock units, and performance share units excluded from our computation of diluted EPS because they were not dilutive were as follows: In Millions 2015 2014 2013 Fiscal Year Anti-dilutive stock options, restricted stock units, and performance share units 2.1 1.7 0.6 6 8 GENERAL MILLS NOTE 13. RETIREMENT BENEFITS AND POSTEMPLOYMENT BENEFITS Deﬁ ned Beneﬁ t Pension Plans We have deﬁ ned beneﬁ t pension plans covering many employees in the United States, Canada, France, and the United Kingdom. Beneﬁ ts for salaried employees are based on length of service and ﬁ nal average compensation. Beneﬁ ts for hourly employees include various monthly amounts for each year of credited service. Our funding policy is consistent with the requirements of applicable laws. We made no voluntary contributions to our principal U.S. plans in ﬁ scal 2015 and 2014, and made a $200.0 million voluntary contribution in ﬁ scal 2013. We do not expect to be required to make any contributions in ﬁ s- cal 2016. Our principal domestic retirement plan cover- ing salaried employees has a provision that any excess pension assets would be allocated to active participants if the plan is terminated within ﬁ ve years of a change in control. In ﬁ scal 2012, we announced changes to our U.S. deﬁ ned beneﬁ t pension plans. All new salaried employees hired on or aft er June 1, 2013 are eligible for a new retirement program that does not include a deﬁ ned beneﬁ t pension plan. Current salaried employ- ees remain in the existing deﬁ ned beneﬁ t pension plan with adjustments to beneﬁ ts. Other Postretirement Beneﬁ t Plans We also sponsor plans that provide health care beneﬁ ts to many of our retirees in the United States, Canada, and Brazil. Th e United States salaried health care beneﬁ t plan is con- tributory, 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 ﬁ scal 2015 and $24.0 million in voluntary con- tributions to these plans in ﬁ scal 2014. Health Care Cost Trend Rates Assumed health care cost trends are as follows: Fiscal Year 2015 2014 Health care cost trend rate for next year 6.5% and 7.3% 6.5% and 7.3% Rate to which the cost trend rate is assumed to decline (ultimate rate) 5.0% 5.0% Year that the rate reaches the ultimate trend rate 2025 2025 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. Th is 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 ﬁ scal 2015. Rates are graded down annually until the ultimate trend rate of 5.0 percent is reached in 2025 for all retirees. Th e trend rates are applicable for calculations only if the retirees’ beneﬁ ts increase as a result of health care inﬂ ation. Th e ultimate trend rate is adjusted annually, as necessary, to approximate the current economic view on the rate of long-term inﬂ ation plus an appropriate health care cost premium. Assumed trend rates for health care costs have an important eﬀ ect on the amounts reported for the other postretirement beneﬁ t plans. A one percentage point change in the health care cost trend rate would have the following eﬀ ects: In Millions One One Percentage Percentage Point Decrease Point Increase Eﬀ ect on the aggregate of the service and interest cost components in ﬁ scal 2016 $ 3.7 $ (3.2) Eﬀ ect on the other postretirement accumulated beneﬁ t obligation as of May 31, 2015 77.1 (68.9) 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. Th e Act codiﬁ es health care reforms with staggered eﬀ ective dates from 2010 to 2018. Estimates of the future impacts of several of the Act’s provisions are incorporated into our postre- tirement beneﬁ t liability. Postemployment Beneﬁ t Plans Under certain circum- stances, we also provide accruable beneﬁ ts to former or inactive employees in the United States, Canada, and Mexico, and members of our Board of Directors, including severance and certain other beneﬁ ts payable upon death. We recognize an obligation for any of these beneﬁ ts that vest or accumulate with service. Postemployment beneﬁ ts 2015 ANNUAL REPORT 69 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 beneﬁ t plans are unfunded. We use our ﬁ scal year end as the measurement date for our deﬁ ned beneﬁ t pension and other postretirement beneﬁ t plans. Summarized ﬁ nancial information about deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemploy- ment beneﬁ t plans is presented below: Deﬁ ned Beneﬁ t Pension Plans Fiscal Year Other Postretirement Beneﬁ t Plans Fiscal Year Postemployment Beneﬁ t Plans Fiscal Year In Millions 2015 2014 2015 2014 2015 2014 Change in Plan Assets: Fair value at beginning of year Actual return on assets Employer contributions Plan participant contributions Beneﬁ ts payments Foreign currency Fair value at end of year Change in Projected Beneﬁ t Obligation: Beneﬁ t obligation at beginning of year Service cost Interest cost Plan amendment Curtailment/other Plan participant contributions Medicare Part D reimbursements Actuarial loss (gain) Beneﬁ ts payments Foreign currency Projected beneﬁ t obligation at end of year Plan assets less than beneﬁ t obligation as of ﬁ scal year end $5,611.8 $ 5,066.1 740.2 25.6 6.7 (231.4) 4.6 $5,758.5 $ 5,611.8 373.6 24.1 10.3 (244.9) (16.4) $ 517.3 $ 436.9 59.1 24.1 13.5 (16.3) — $ 582.8 $ 517.3 44.0 24.1 13.6 (16.2) — $5,618.0 $ 5,381.4 133.0 239.5 17.8 — 6.7 — 67.6 (231.6) 3.6 $ 6,252.1 $ 5,618.0 137.0 249.2 1.9 19.9 10.3 — 479.7 (245.5) (18.4) $ 1,074.8 $ 1,148.2 22.7 50.5 18.2 (2.9) 13.5 4.3 (119.4) (59.3) (1.0) $ 1,079.6 $ 1,074.8 22.4 46.9 (42.4) 3.4 13.6 3.2 23.5 (62.8) (3.0) $ 145.3 7.5 4.3 — 9.5 — — (0.4) (19.1) (0.5) $ 146.6 $ 145.4 7.7 4.1 — 3.7 — — 1.8 (17.2) (0.2) $ 145.3 $ (493.6) $ (6.2) $ (496.8) $ (557.5) $ (146.6) $ (145.3) Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a partic- ipant will receive over their lifetime and the amount of expense we recognize. On October 27, 2014, the Society of Actuaries published RP-2014 Mortality Tables and Mortality Improvement Scale MP-2014, which both reﬂ ect improved longevity. We adopted the change to the mortality assumptions to remeasure our deﬁ ned beneﬁ t pension plans and other postretirement beneﬁ t plans obligations, which increased the total of these obligations by $436.7 million. Th e accumulated beneﬁ t obligation for all deﬁ ned beneﬁ t pension plans was $5,750.4 million as of May 31, 2015, and $5,093.1 million as of May 25, 2014. Amounts recognized in AOCI as of May 31, 2015, and May 25, 2014, are as follows: Deﬁ ned Beneﬁ t Pension Plans Fiscal Year Other Postretirement Beneﬁ t Plans Fiscal Year Postemployment Beneﬁ t Plans Fiscal Year Total Fiscal Year In Millions 2015 2014 2015 2014 2015 2014 2015 2014 Net actuarial loss Prior service (costs) credits Amounts recorded in accumulated $(1,674.9) $(1,389.2) (26.1) (13.8) $(72.2) 23.8 $(70.2) 4.0 $ (9.0) (2.9) $ (9.8) (4.4) $(1,756.1) $(1,469.2) (26.5) 7.1 other comprehensive loss $(1,688.7) $(1,415.3) $(48.4) $(66.2) $(11.9) $(14.2) $(1,749.0) $ (1,495.7) 70 GENERAL MILLS Plans with accumulated beneﬁ t obligations in excess of plan assets are as follows: In Millions Projected beneﬁ t obligation Accumulated beneﬁ t obligation Plan assets at fair value Deﬁ ned Beneﬁ t Pension Plans Fiscal Year Other Postretirement Beneﬁ t Plans Fiscal Year Postemployment Beneﬁ t Plans Fiscal Year 2015 2014 2015 2014 2015 2014 $512.3 $433.1 $ — $ — $ — $ — 440.6 375.6 1,074.8 1,070.0 143.5 145.3 — — 582.8 517.3 — — Components of net periodic beneﬁ t expense are as follows: In Millions Service cost Interest cost Deﬁ ned Beneﬁ t Pension Plans Fiscal Year Other Postretirement Beneﬁ t Plans Fiscal Year Postemployment Beneﬁ t Plans Fiscal Year 2015 2014 2013 2015 2014 2013 2015 2014 2013 $ 137.0 $ 133.0 $ 124.4 $ 22.4 $ 22.7 $ 21.6 $ 7.5 $ 7.7 $ 7.8 249.2 239.5 237.3 46.9 50.5 52.1 Expected return on plan assets (476.4) (455.6) (428.0) (40.2) (34.6) (32.1) Amortization of losses 141.7 151.0 136.0 4.9 15.4 17.1 Amortization of prior service costs (credits) Other adjustments Settlement or curtailment losses 7.4 5.6 6.2 15.1 18.0 — — — — (1.6) 3.3 1.3 (3.4) (3.4) — (2.9) — — 4.3 — 0.7 2.4 9.5 — 4.1 — 0.6 2.4 3.7 — 4.4 — 2.1 1.9 11.4 — Net expense $ 92.0 $ 73.5 $ 75.9 $ 37.0 $ 47.7 $ 55.3 $ 24.4 $ 18.5 $ 27.6 We expect to recognize the following amounts in net periodic beneﬁ t expense in ﬁ scal 2016: In Millions Amortization of losses Amortization of prior service costs (credits) Deﬁ ned Beneﬁ t Pension Plans Other Postretirement Beneﬁ t Plans Postemployment Beneﬁ t Plans $ 189.9 4.7 $ 6.7 (5.4) $ 0.7 2.4 Assumptions Weighted-average assumptions used to determine ﬁ scal year-end beneﬁ t obligations are as follows: Discount rate Rate of salary increases Deﬁ ned Beneﬁ t Pension Plans Other Postretirement Beneﬁ t Plans Postemployment Beneﬁ t Plans Fiscal Year Fiscal Year Fiscal Year 2015 2014 2015 2014 2015 2014 4.38% 4.54% 4.20% 4.51% 3.55% 3.82% 4.09 4.44 — — 4.36 4.44 2015 ANNUAL REPORT 7 1 Weighted-average assumptions used to determine ﬁ scal year net periodic beneﬁ t expense are as follows: Deﬁ ned Beneﬁ t Pension Plans Fiscal Year Other Postretirement Beneﬁ t Plans Fiscal Year Postemployment Beneﬁ t Plans Fiscal Year 2015 2014 2013 2015 2014 2013 2015 2014 2013 Discount rate 4.54% 4.54% 4.85% 4.51% 4.52% 4.70% 3.82% 3.70% 3.86% Rate of salary increases 4.44 4.44 4.44 — — — 4.44 4.44 4.45 Expected long-term rate of return on plan assets 8.53 8.53 8.53 8.13 8.11 8.13 — — — Discount Rates Our discount rate assumptions are determined annually as of the last day of our ﬁ scal year for our deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plan obligations. We also use the same discount rates to determine deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plan income and expense for the following ﬁ scal year. We work with our out- side actuaries to determine the timing and amount of expected future cash outﬂ ows to plan participants and, using the Aa Above Median corporate bond yield, to develop a forward interest rate curve, including a mar- gin to that index based on our credit risk. Th is forward interest rate curve is applied to our expected future cash outﬂ ows to determine our discount rate assumptions. Fair Value of Plan Assets Th e fair values of our pen- sion and postretirement benefit plans’ assets and their respective levels in the fair value hierarchy at May 31, 2015 and May 25, 2014, by asset category were as follows: 72 GENERAL MILLS In Millions Level 1 Level 2 Level 3 Total Assets Level 1 Level 2 Level 3 Total Assets May 31, 2015 May 25, 2014 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 $ 1,634.4 $ 1,010.3 $ 542.9 $ 3,187.6 $ 1,305.4 $ 793.9 $ 568.2 $ 2,667.5 486.3 1,158.5 — 1,644.8 586.3 1,347.7 — 1,934.0 124.3 116.7 498.1 739.1 98.2 128.3 602.9 829.4 — 186.6 — — 0.4 0.4 — — 186.6 180.6 — — 0.3 0.3 — 180.6 of pension plan assets $ 2,431.6 $ 2,285.5 $ 1,041.4 $ 5,758.5 $ 2,170.5 $ 2,269.9 $ 1,171.4 $ 5,611.8 Fair value measurement of postretirement beneﬁ t plan assets: Equity (a) Fixed income (b) Real asset investments (c) Other investments (d) Cash and accruals Fair value measurement of postretirement beneﬁ t $ 134.0 $ 120.6 $ 23.7 $ 278.3 $ 86.6 $ 129.1 $ 21.1 $ 236.8 14.0 0.2 73.7 25.7 — 16.6 87.7 42.5 — 168.9 5.4 — — — 168.9 5.4 18.5 — — 65.8 19.3 152.4 6.6 — — 17.9 84.3 37.2 — — 152.4 6.6 plan assets $ 153.6 $ 388.9 $ 40.3 $ 582.8 $ 111.7 $ 366.6 $ 39.0 $ 517.3 (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 investment 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 ﬁ nancing, and expected cash ﬂ ows. 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 ﬁ xed income exposure to policy allocations. Investments include: ﬁ xed income securities and bond futures generally valued at closing prices from national exchanges, ﬁ xed income pricing models, and independent ﬁ nancial analysts; and ﬁ xed 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, ﬁ xed 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 beneﬁ ts. 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. 2015 ANNUAL REPORT 73 Th e following table is a roll forward of the Level 3 investments of our pension and postretirement beneﬁ t plans’ assets during the years ended May 31, 2015 and May 25, 2014: In Millions Pension beneﬁ t plan assets: Equity Real asset investments Other investments Balance as of May 25, 2014 Net Transfers Out Fiscal 2015 Net Purchases, Sales, Issuances, Net Gain Balance as of (Loss) May 31, 2015 and Settlements $ 568.2 $ — $ (61.0) $ 35.7 $ 542.9 602.9 0.3 — — (18.2) (86.6) 498.1 0.2 (0.1) 0.4 Fair value activity of level 3 pension plan assets $ 1,171.4 $ — $ (79.0) $ (51.0) $ 1,041.4 Postretirement beneﬁ t plan assets: Equity Real asset investments $ 21.1 $ — $ 0.3 $ 2.3 $ 23.7 17.9 — 0.5 (1.8) 16.6 Fair value activity of level 3 postretirement beneﬁ t plan assets $ 39.0 $ — $ 0.8 $ 0.5 $ 40.3 In Millions Pension beneﬁ t 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 beneﬁ t 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 beneﬁ t plan assets $ 34.7 $ (4.2) $ 0.7 $ 7.8 $ 39.0 Th e net change in level 3 assets attributable to unre- alized losses at May 31, 2015, was $113.4 million for our pension plan assets, and $1.5 million for our postretire- ment beneﬁ t 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 performance, our estimate of future long-term returns by asset class (using input from our actuaries, invest- ment services, and investment managers), and long- term inﬂ ation assumptions. We review this assumption annually for each plan, however, our annual investment performance for one particular year does not, by itself, signiﬁ cantly inﬂ uence our evaluation. 74 GENERAL MILLS In Millions 2016 2017 2018 2019 2020 Other Deﬁ ned Beneﬁ t Pension Subsidy Beneﬁ t Plans Plans Gross Payments Receipts Postretirement Medicare Postemployment Beneﬁ t Plans $ 264.7 $ 60.8 $ 4.8 $ 21.9 278.1 288.3 298.6 309.3 64.8 67.7 69.6 70.8 362.3 5.2 5.6 6.0 5.5 23.6 18.5 17.3 16.1 15.2 66.7 2021-2025 1,700.0 Deﬁ ned Contribution Plans Th e General Mills Savings Plan is a deﬁ ned contribution plan that covers domestic salaried, hourly, nonunion, and certain union employ- ees. Th is 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 $21.9 million as of May 31, 2015, and $20.6 million as of May 25, 2014. We also sponsor deﬁ ned contribution plans in many of our foreign locations. Our total recog- nized expense related to deﬁ ned contribution plans was $44.0 million in ﬁ scal 2015, $44.8 million in ﬁ scal 2014, and $46.0 million in ﬁ scal 2013. We match a percentage of employee contributions to the General Mills Savings Plan. Th e Company match is directed to investment options of the participant’s choosing. Th e number of shares of our common stock allocated to participants in the ESOP was 7.5 million as of May 31, 2015, and 8.4 million as of May 25, 2014. Th e ESOP’s only assets are our common stock and tempo- rary cash balances. Th e Company stock fund and the ESOP held $655.6 million and $708.2 million of Company common stock as of May 31, 2015, and May 25, 2014. Weighted-average asset allocations for the past two ﬁ scal years for our deﬁ ned beneﬁ t pension and other postretirement beneﬁ t plans are as follows: Deﬁ ned Beneﬁ t Pension Plans Other Postretirement Beneﬁ t Plans Fiscal Year Fiscal Year 2015 2014 2015 2014 Asset category: United States equities 28.9% 25.5% 38.7% 38.4% International equities 18.4 13.9 24.1 Private equities Fixed income Real assets 9.5 30.3 12.9 10.3 35.5 14.8 4.1 26.3 6.8 24.0 4.1 26.3 7.2 Total 100.0% 100.0% 100.0% 100.0% Th e investment objective for our deﬁ ned beneﬁ t pen- sion and other postretirement beneﬁ t plans is to secure the beneﬁ t 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. Th e deﬁ ned beneﬁ t pension plan and other postretirement bene- ﬁ t plan portfolios are broadly diversiﬁ ed across asset classes. Within asset classes, the portfolios are further diversiﬁ ed across investment styles and investment organizations. For the deﬁ ned beneﬁ t pension plans, the long-term investment policy allocation is: 25 per- cent to equities in the United States; 15 percent to international equities; 10 percent to private equities; 35 percent to ﬁ xed income; and 15 percent to real assets (real estate, energy, and timber). For other postretire- ment beneﬁ t plans, the long-term investment policy allocations are: 30 percent to equities in the United States; 20 percent to international equities; 10 percent to private equities; 30 percent to ﬁ xed income; and 10 percent to real assets (real estate, energy, and timber). Th e actual allocations to these asset classes may vary tactically around the long-term policy allocations based on relative market valuations. Contributions and Future Beneﬁ t Payment We do not expect to be required to make contributions to our deﬁ ned beneﬁ t pension, other postretirement beneﬁ t, and postemployment beneﬁ t plans in ﬁ scal 2016. Actual ﬁ scal 2016 contributions could exceed our current pro- jections, as inﬂ uenced by our decision to undertake discretionary funding of our beneﬁ t trusts and future changes in regulatory requirements. Estimated bene- ﬁ t payments, which reﬂ ect expected future service, as appropriate, are expected to be paid from ﬁ scal 2016 to 2025 as follows: 2015 ANNUAL REPORT 75 0.8 169.0 — — 5.6 78.9 6.1 89.3 74.5 13.0 71.4 117.7 215.4 1,148.2 1,346.3 446.5 — 221.6 1,139.3 1,373.4 499.4 2.0 208.4 204.2 50.8 59.7 53.1 60.6 Earnings before income taxes and aft er-tax earnings from joint ventures: Total earnings before income taxes and aft er-tax earnings Income taxes: Currently payable: Federal State and local Foreign Total current Deferred: Federal State and local Foreign Total deferred Total income taxes NOTE 14. INCOME TAXES Th e components of earnings before income taxes and aft er-tax earnings from joint ventures and the corre- sponding income taxes thereon are as follows: Th e tax eﬀ ects of temporary diﬀ erences that give rise to deferred tax assets and liabilities are as follows: In Millions May 31, 2015 May 25, 2014 Accrued liabilities $ 98.0 $ 106.0 Compensation and employee beneﬁ ts 536.2 546.0 In Millions 2015 2014 2013 Pension Fiscal Year Unrealized hedges United States Foreign $1,338.6 $2,181.4 $2,051.2 Capital losses 423.3 473.6 483.7 Net operating losses from joint ventures $ 1,761.9 $ 2,655.0 $ 2,534.9 Valuation allowance Tax credit carryforwards Stock, partnership, and miscellaneous investments 384.1 427.9 Other Gross deferred tax assets 1,363.6 1,360.9 Net deferred tax assets Brands $ 392.7 $ 526.7 $ 493.4 Fixed assets 29.3 37.8 39.5 Pension 139.5 146.3 126.5 Intangible assets 561.5 710.8 659.4 Tax lease transactions Inventories Stock, partnership, and 70.3 159.1 (8.7) 21.3 (36.3) (7.9) 25.3 172.5 68.8 19.2 (6.2) 81.8 miscellaneous investments 472.5 470.7 Unrealized hedges Other — 14.2 22.8 45.0 $ 586.8 $ 883.3 $ 741.2 Gross deferred tax liabilities 2,598.4 2,731.2 Net deferred tax liability $ 1,450.2 $ 1,591.9 Th e following table reconciles the United States statu- tory income tax rate with our eﬀ ective income tax rate: Fiscal Year 2015 2014 2013 35.0% 35.0% 35.0% United States statutory rate State and local income taxes, net of federal tax beneﬁ ts Foreign rate diﬀ erences Repatriation of foreign earnings 0.7 (3.1) 4.5 Deferred taxes for Medicare subsidies — GMC subsidiary restructure Domestic manufacturing deduction Other, net — (2.9) (0.9) 1.4 (0.1) — — — (2.3) (0.7) 1.3 (0.6) — (1.3) (2.5) (2.1) (0.6) Eﬀ ective income tax rate 33.3% 33.3% 29.2% We have established a valuation allowance against certain of the categories of deferred tax assets described above as current evidence does not suggest we will real- ize suﬃ cient taxable income of the appropriate charac- ter (e.g., ordinary income versus capital gain income) within the carryforward period to allow us to realize these deferred tax beneﬁ ts. Of the total valuation allowance of $215.4 million, the majority relates to a deferred tax asset for losses recorded as part of the Pillsbury acquisition in the amount of $160.9 million and $47.8 million relates to various state and foreign loss carryforwards. As of May 31, 2015, we believe it is more-likely-than-not that the remainder of our deferred tax assets are realizable. We have $89.9 million of operating loss carryfor- wards. Of this amount, $78.7 million is foreign loss carryforwards and the carryforward periods are as fol- lows: $50.2 million do not expire; $3.8 million expire in ﬁ scal 2016 and 2017; and $24.7 million expire in ﬁ scal 2018 and beyond. Th e remaining $11.2 million are state 76 GENERAL MILLS operating loss carryforwards, the majority of which expire aft er 2023. We have not recognized a deferred tax liability for unremitted earnings of approximately $1.9 billion from our foreign operations because our subsidiaries have invested or will invest the undistributed earnings indef- initely, 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 indeﬁ nitely reinvested earnings. Deferred taxes are recorded for earnings of our foreign operations when we determine that such earnings are no longer indef- initely reinvested. In ﬁ scal 2015, we approved a one- time repatriation of $606.1 million of foreign earnings to reduce the economic cost of funding current restruc- turing initiatives and the acquisition of Annie’s com- pleted in ﬁ scal 2015. We recorded a discrete tax charge of $78.6 million in ﬁ scal 2015 related to this action. We have previously asserted that our foreign earnings are permanently reinvested and will only be repatriated in a tax-neutral manner, and this one-time repatriation does not change this on-going assertion. In ﬁ scal 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 ﬁ scal 2013 under the Patient Protection and Aﬀ ordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010. During ﬁ scal 2013, we took certain actions to restore part of the tax benefits associated with Medicare Part D subsidies and recorded a $33.7 mil- lion discrete decrease to income tax expense and an increase to our deferred tax assets. During the ﬁ rst quarter of ﬁ scal 2013, in conjunction with the consent of the Class A investor, we restruc- tured our GMC subsidiary through the distribution 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 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 dis- tributed assets, with a corresponding discrete non-cash reduction to income taxes in ﬁ scal 2013. We are subject to federal income taxes in the United States as well as various state, local, and foreign juris- dictions. A number of years may elapse before an uncertain tax position is audited and ﬁ nally resolved. While it is oft en diﬃ cult to predict the ﬁ nal outcome or the timing of resolution of any particular uncertain tax position, we believe that our liabilities for income taxes reﬂ ect the most likely outcome. We adjust these liabili- ties, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position would usually require the use of cash. Th e 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. Several state and foreign examinations are currently in progress. We do not expect these examinations to result in a material impact on our results of operations or ﬁ nancial position. During ﬁ scal 2014, the Internal Revenue Service con- cluded its ﬁ eld examination of our 2011 and 2012 tax years. Th e audit closure and related adjustments did not have a material impact on our results of opera- tions or ﬁ nancial position. As of May 31, 2015, we have eﬀ ectively settled all issues with the Internal Revenue Service for ﬁ scal years 2012 and prior. 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 beneﬁ t 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 aﬀ ect earnings in the quar- ter of such change. Th e following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for ﬁ scal 2015 and 2014. Approximately $84 million of this total in ﬁ scal 2015 represents the amount that, if recognized, would aﬀ ect our eﬀ ective income tax rate in future periods. Th is amount diﬀ ers from the gross unrecognized tax beneﬁ ts 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. federal income taxes upon rec- ognition of the state tax beneﬁ ts included therein. 2015 ANNUAL REPORT 7 7 In Millions Fiscal Year 2015 2014 Noncancelable future lease commitments are: Balance, beginning of year $150.9 $216.2 Tax positions related to current year: Additions 34.8 26.5 Tax positions related to prior years: Additions Reductions Settlements Lapses in statutes of limitations 17.4 (21.8) (12.0) (8.2) 15.1 (94.5) (5.4) (7.0) Balance, end of year $161.1 $150.9 As of May 31, 2015, we expect to pay approximately $1.4 million of unrecognized tax beneﬁ t liabilities and accrued interest within the next 12 months. We are not able to reasonably estimate the timing of future cash ﬂ ows beyond 12 months due to uncertainties in the timing of tax audit outcomes. Th e remaining amount of our unrecognized tax liability was classiﬁ ed in other liabilities. We report accrued interest and penalties related to unrecognized tax beneﬁ t liabilities in income tax expense. For ﬁ scal 2015, we recognized a net beneﬁ t of $0.2 million of tax-related net interest and penalties, and had $35.2 million of accrued interest and penalties as of May 31, 2015. For ﬁ scal 2014, we recognized a net beneﬁ t 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. In Millions Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Aft er Fiscal 2020 Total noncancelable future lease commitments Less: interest Operating Leases Capital Leases $ 108.4 $ 0.6 76.2 56.9 45.0 32.4 81.6 $ 400.5 0.4 0.2 0.2 0.1 — $ 1.5 (0.1) $ 1.4 Present value of obligations under capital leases Th ese future lease commitments will be partially oﬀ - set by estimated future sublease receipts of approxi- mately $4 million. Depreciation on capital leases is recorded as depreciation expense in our results of operations. As of May 31, 2015, we have issued guarantees and comfort letters of $434.4 million for the debt and other obligations of consolidated subsidiaries, and guarantees and comfort letters of $258.5 million for the debt and other obligations of non-consolidated aﬃ liates, mainly CPW. In addition, off-balance sheet arrangements are generally limited to the future payments under non-cancelable operating leases, which totaled $400.5 million as of May 31, 2015. NOTE 15. LEASES, OTHER COMMITMENTS, AND CONTINGENCIES NOTE 16. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION The Company’s leases are generally for warehouse space and equipment. Rent expense under all operating leases from continuing operations was $193.5 million, $189.0 million, and $187.9 million in ﬁ scal 2015, 2014, and 2013, respectively. 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 insigniﬁ cant. 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, 59.6 percent of our ﬁ scal 2015 consolidated net sales; International, 29.1 percent of our ﬁ scal 2015 consolidated net sales; and Convenience Stores and Foodservice, 11.3 percent of our ﬁ scal 2015 consolidated net sales. Beginning in the ﬁ rst quarter of ﬁ scal 2015, we have changed how we assess operating segment perfor- mance to exclude the asset and liability remeasurement impact from hyperinﬂ ationary economies. Th is impact is now included in unallocated corporate items. All peri- ods presented have been changed to conform to this presentation. Beginning with the second quarter of ﬁ scal 2015, we realigned certain operating units within our U.S. Retail operating segment. We also changed the name of our 78 GENERAL MILLS Yoplait operating unit to Yogurt and our Big G operat- ing unit to Cereal. Frozen Foods transitioned into Meals and Baking Products. Small Planet Foods transitioned into Snacks, Cereal, and Meals. Th e Yogurt operating unit was unchanged. We revised the amounts previously reported in the net sales and net sales percentage change by operating unit within our U.S. Retail segment to con- form to the new operating unit structure. Th ese realign- ments had no eﬀ ect on previously reported consolidated net sales, operating segments’ net sales, operating proﬁ t, segment operating profit, net earnings attributable to General Mills, or EPS. In addition, results from the acquired Annie’s business are included in the Meals and Snacks operating units. Our chief operating decision maker continues to assess performance and make deci- sions about resources to be allocated to our segments at the U.S. Retail, International, and Convenience Stores and Foodservice operating segment level. Our U.S. Retail segment reﬂ ects business with a wide variety of grocery stores, mass merchandisers, mem- bership stores, natural food chains, and drug, dollar and discount chains operating throughout the United States. Our product categories in this business segment are ready-to-eat cereals, refrigerated yogurt, soup, meal kits, shelf stable and frozen vegetables, 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 includ- ing meal kits, granola bars, and cereal. Our International segment consists 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, refriger- ated and frozen dough products, dessert and baking 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. In our Convenience Stores and Foodservice segment our major product categories are ready-to-eat cereals, snacks, refrigerated yogurt, frozen breakfasts, unbaked and fully baked frozen dough products, baking mixes, and ﬂ our. Many products we sell are branded to the consumer and nearly all are branded to our customers. We sell to distrib- utors and operators in many customer channels including foodservice, convenience stores, vending, and supermar- ket bakeries. Substantially all of this segment’s operations are located in the United States. Operating proﬁ t for these segments excludes unal- located corporate items and restructuring, impair- ment, and other exit costs. Unallocated corporate items include corporate overhead expenses, variances to planned domestic employee beneﬁ ts and incentives, contributions to the General Mills Foundation, asset and liability remeasurement impact of hyperinﬂ ationary economies, restructuring initiative project-related costs, and other items that are not part of our measurement of segment operating performance. Th ese include gains and losses arising 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. Th ese items aﬀ ecting operating proﬁ t are centrally managed at the corporate level and are excluded from the measure of segment proﬁ tability reviewed by executive management. Under our supply chain organization, our manufacturing, warehouse, and distribution activities are substantially integrated across our operations in order to maximize eﬃ ciency and productivity. As a result, ﬁ xed assets and depreciation and amortization expenses are neither maintained nor available by operating segment. Our operating segment results were as follows: In Millions Net sales: U.S. Retail Fiscal Year 2015 2014 2013 $10,507.0 $10,604.9 $10,614.9 International 5,128.2 5,385.9 5,200.2 Convenience Stores and Foodservice 1,995.1 1,918.8 1,959.0 Total Operating proﬁ t: U.S. Retail International Convenience Stores $17,630.3 $17,909.6 $17,774.1 $ 2,159.3 $ 2,311.5 $ 2,392.9 522.6 535.1 515.4 and Foodservice 353.1 307.3 314.6 Total segment operating proﬁ t 3,035.0 3,153.9 3,222.9 Unallocated corporate items 413.8 258.4 351.3 Divestiture (gain) — (65.5) — Restructuring, impairment, and other exit costs 543.9 3.6 19.8 Operating proﬁ t $ 2,077.3 $ 2,957.4 $ 2,851.8 2015 ANNUAL REPORT 79 Net sales by class of similar products were as follows: NOTE 17. SUPPLEMENTAL INFORMATION In Millions Snacks Yogurt Fiscal Year 2015 2014 2013 $ 3,392.0 $ 3,232.5 $ 3,024.0 2,938.3 2,964.7 2,908.4 Convenient meals 2,810.3 2,844.2 2,802.9 2,771.3 2,860.1 2,889.2 Th e components of certain Consolidated Balance Sheet accounts are as follows: In Millions Receivables: May 31, 2015 May 25, 2014 1,877.0 1,890.2 1,944.7 From customers $ 1,412.0 $ 1,504.6 Cereal Dough Baking mixes and ingredients 1,867.7 1,996.4 1,999.5 Less allowance for doubtful accounts (25.3) (21.0) Vegetables 937.3 1,014.7 1,089.5 Total $ 1,386.7 $ 1,483.6 Super-premium ice cream Other Total 769.5 266.9 756.6 350.2 717.1 398.8 $17,630.3 $17,909.6 $17,774.1 In Millions Inventories: May 31, 2015 May 25, 2014 Th e following table provides ﬁ nancial information by geographic area: In Millions Net sales: Fiscal Year 2015 2014 2013 United States $12,501.8 $12,523.0 $12,573.1 Non-United States 5,128.5 5,386.6 5,201.0 Total $17,630.3 $17,909.6 $17,774.1 Raw materials and packaging $ 390.8 $ 419.0 Finished goods Grain Excess of FIFO over LIFO cost (a) Total 1,268.6 1,260.2 95.7 97.1 (214.2) (216.9) $ 1,540.9 $ 1,559.4 (a) Inventories of $867.5 million as of May 31, 2015, and $904.2 million as of May 25, 2014, were valued at LIFO. During ﬁ scal 2015, LIFO inventory layers were reduced. Results of operations were not materially aﬀ ected by these liquidations of LIFO inventory. Th e diﬀ erence between replace- ment cost and the stated LIFO inventory value is not materially diﬀ er- ent from the reserve for the LIFO valuation method. 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 31, 2015 May 25, 2014 In Millions May 31, 2015 May 25, 2014 Prepaid expenses and other current assets: $ 22.9 $ 27.2 311.3 840.1 $ 334.2 $ 867.3 Other receivables Prepaid expenses Derivative receivables, May 31, 2015 May 25, 2014 $ 2,727.5 $ 2,756.6 1,055.8 1,185.3 primarily commodity-related Grain contracts Miscellaneous Total $ 3,783.3 $ 3,941.9 In Millions Land, buildings, and equipment: Land Buildings Buildings under capital lease Equipment Equipment under capital lease Capitalized soft ware Construction in progress $ 148.8 $ 153.9 169.3 187.2 80.9 3.3 21.5 33.3 7.5 27.2 $ 423.8 $ 409.1 May 31, 2015 May 25, 2014 $ 96.0 $ 106.9 2,272.7 2,228.4 0.3 0.3 6,091.1 5,979.7 9.8 9.0 499.0 468.0 622.2 600.8 Total land, buildings, and equipment 9,591.1 9,393.1 Less accumulated depreciation (5,807.8) (5,451.2) Total $ 3,783.3 $ 3,941.9 80 GENERAL MILLS May 31, 2015 May 25, 2014 Th e components of interest, net are as follows: Fiscal Year Expense (Income), In Millions 2015 2014 2013 Interest expense Capitalized interest Interest income Interest, net $335.5 $323.4 $333.8 (6.9) (4.9) (13.2) (16.1) (4.3) (12.6) $315.4 $302.4 $316.9 Certain Consolidated Statements of Cash Flows amounts are as follows: In Millions 2015 2014 2013 Cash interest payments $305.3 $288.3 $293.0 Cash paid for income taxes 562.6 757.2 569.4 Fiscal Year In Millions Other assets: Investments in and advances to joint ventures Pension assets Exchangeable note with related party Life insurance Miscellaneous Total In Millions Accrued payroll Dividends payable Accrued taxes Accrued interest, including interest rate swaps Grain contracts $ 530.6 $ 507.5 138.2 432.2 30.7 26.6 68.2 25.8 117.5 111.8 $ 843.6 $1,145.5 May 31, 2015 May 25, 2014 361.8 390.1 27.9 20.7 91.8 7.8 33.5 63.1 92.5 4.8 3.5 Other current liabilities: Accrued trade and consumer promotions $ 564.7 $ 578.2 Restructuring and other exit costs reserve 120.8 Derivative payable Miscellaneous Total In Millions Other noncurrent liabilities: Accrued compensation and beneﬁ ts, including obligations for underfunded other postretirement beneﬁ t and 122.9 23.1 271.5 261.1 $1,589.9 $1,449.9 May 31, 2015 May 25, 2014 postemployment beneﬁ t plans $1,451.4 $1,341.9 Accrued taxes Miscellaneous Total 202.5 195.6 90.9 105.7 $1,744.8 $1,643.2 Certain Consolidated Statements of Earnings amounts are as follows: In Millions 2015 2014 2013 Depreciation and amortization $588.3 $585.4 $588.0 Fiscal Year Research and development expense 229.4 243.6 237.9 Advertising and media expense (including production and communication costs) 823.1 869.5 895.0 2015 ANNUAL REPORT 81 NOTE 18. QUARTERLY DATA (UNAUDITED) Summarized quarterly data for ﬁ scal 2015 and ﬁ scal 2014 follows: In Millions, Except Per Share Amounts 2015 2014 2015 2014 2015 2014 2015 2014 First Quarter Fiscal Year Second Quarter Fiscal Year Th ird 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 $4,268.4 $4,372.7 $4,712.2 $4,875.7 $4,350.9 $4,377.4 $4,298.8 $4,283.8 1,438.7 1,613.0 1,619.1 1,761.7 1,375.9 1,512.7 1,515.5 1,482.4 345.2 459.3 346.1 549.9 343.2 410.6 186.8 404.6 $ $ $ 0.56 $ 0.71 0.55 $ 0.70 0.41 $ 0.38 $ $ $ 0.58 $ 0.87 0.56 $ 0.84 0.41 $ 0.38 $ $ $ 0.57 $ 0.66 0.56 $ 0.64 0.41 $ 0.38 $ $ $ 0.31 $ 0.66 0.30 $ 0.65 0.44 $ 0.41 $ 55.56 $ 52.73 $ 53.82 $ 51.53 $ 55.11 $ 51.50 $ 57.14 $ 54.40 $ 50.15 $ 47.08 $ 48.86 $ 47.41 $ 51.13 $ 46.86 $ 51.70 $ 49.66 At the end of the fourth quarter of ﬁ scal 2015, we made a strategic decision to redirect certain resources sup- porting our Green Giant business in our U.S. Retail segment to other businesses within the segment. Th erefore, we recorded a $260 million impairment charge in the fourth quarter of ﬁ scal 2015 related to the Green Giant brand intangible asset. See Note 6 for additional information. During the fourth quarter of ﬁ scal 2015, we approved a one-time repatriation of $606.1 million of foreign earnings and recorded a discrete income tax charge of $78.6 million. During the fourth quarter of ﬁ scal 2014, we sold certain grain elevators in our U.S. Retail segment and recorded a pre-tax gain of $65.5 million. 82 GENERAL MILLS Glossary Accelerated depreciation associated with restructured assets. Th e increase in depreciation expense caused by updating the salvage value and shortening the useful life of depreciable ﬁ xed assets to coincide with the end of production under an approved restructuring plan, but only if impairment is not present. 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 aft er-tax earnings adjustments are used to calculate return on average total capital. Th e average is calculated using the average of the begin- ning of ﬁ scal year and end of ﬁ scal 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 eﬀ ect 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 eﬀ ect during the corresponding period of the prior ﬁ scal year, rather than the actual average exchange rates in eﬀ ect during the current ﬁ scal year. Th erefore, 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 ﬁ scal period and the corresponding period of the prior ﬁ scal year. Core working capital. Accounts receivable plus inventories less accounts payable, all as of the last day of our ﬁ scal year. 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 Oﬀ ered 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 gen- erally requires signiﬁ cant management judgment. Th e three levels are deﬁ ned 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 liabili- ties in inactive markets. Level 3: Unobservable inputs reﬂ ecting management’s assumptions about the inputs used in pricing the asset or liability. Fixed charge coverage ratio. Th e sum of earnings before income taxes and ﬁ xed charges (before tax), divided by the sum of the ﬁ xed 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 ﬁ nancial statements. Goodwill. Th e diﬀ erence 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 oﬀ set 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 eﬀ ective, and only prospectively from the date a hedging relationship is formally documented. Interest bearing instruments. Notes payable, long- term debt, including current portion, cash and cash equivalents, and certain interest bearing investments classiﬁ ed within prepaid expenses and other current assets and other assets. 2015 ANNUAL REPORT 83 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. Th e impact on our Consolidated Financial Statements of foreign exchange rate changes arising from speciﬁ c transactions. Translation adjustments. Th e impact of the con- version of our foreign aﬃ liates’ ﬁ nancial statements to U.S. dollars for the purpose of consolidating our ﬁ nan- cial 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 proﬁ ts and losses or (2) has equity investors that do not provide suﬃ cient ﬁ nancial resources to support the entity’s activities. Working capital. Current assets and current liabili- ties, all as of the last day of our ﬁ scal year. LIBOR. London Interbank Oﬀ ered Rate. Mark-to-market. Th e act of determining a value for ﬁ nancial instruments, commodity contracts, and related assets or liabilities based on the current market price for that item. Net mark-to-market valuation of certain commod- ity positions. Realized and unrealized gains and losses on derivative contracts that will be allocated to seg- ment operating proﬁ t when the exposure we are hedg- ing aﬀ ects earnings. Net price realization. Th e impact of list and pro- moted price changes, net of trade and other price pro- motion costs. Noncontrolling interests. Interests of subsidiaries held by third parties. Notional principal amount. Th e principal amount on which ﬁ xed-rate or ﬂ oating-rate interest payments are calculated. OCI. Other comprehensive income (loss). Operating cash ﬂ ow to debt ratio. Net cash provided by operating activities, divided by the sum of notes payable and long-term debt, including the current portion. Project-related costs. Costs incurred related to our restructuring initiatives not included in restructuring charges. Redeemable interest. Interest of subsidiaries held by a third party that can be redeemed outside of our control and therefore cannot be classiﬁ ed as a noncon- trolling 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 aft er-tax net interest, and adjusted for certain items aﬀ ecting year-over-year comparability, divided by average total capital. Segment operating proﬁ t margin. Segment operat- ing proﬁ t divided by net sales for the segment. 84 GENERAL MILLS Total Return to Stockholders Th ese 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 ﬁ ve-year and ten-year ﬁ scal periods. Th e graphs assume the investment of $100 in each of General Mills’ common stock and the speciﬁ ed indexes at the begin- ning of the applicable period, and assume the reinvest- ment of all dividends. On June 19, 2015, there were approximately 32,000 record holders of our common stock. Total Return to Stockholders 5 Years x e d n I n r u t e R l a t o T x e d n I n r u t e R l a t o T 240 220 200 180 160 140 120 100 80 60 40 20 0 May 10 May 11 May 12 May 13 May 14 May 15 Total Return to Stockholders 10 Years 320 300 280 260 240 220 200 180 160 140 120 100 80 60 40 20 0 May 05 May 06 May 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 General Mills (GIS) S&P 500 S&P Packaged Foods 2015 ANNUAL REPORT 85 Board of Directors As of August 1, 2015 Bradbury H. Anderson(cid:3)2*,(cid:3)5 Retired Chief Executive Offi cer and Vice Chairman, Best Buy Co., Inc. (electronics retailer) R. Kerry Clark(cid:3)3,(cid:3)4* Retired Chairman and Chief Executive Offi cer, Cardinal Health, Inc. (medical services and supplies) David M. Cordani(cid:3)1,(cid:3)2 President and Chief Executive Offi cer, Cigna Corporation (health insurance and services) Henrietta H. Fore(cid:3)1,(cid:3)5 Chairman and Chief Executive Offi cer, Holsman International (manufacturing, consulting and investing) Raymond V. Gilmartin(cid:3)1,(cid:3)2,(cid:3)+ Retired Chairman, President and Chief Executive Offi cer, Merck & Company, Inc. (pharmaceuticals) Judith Richards Hope(cid:3)2,(cid:3)4,(cid:3)+ Retired Professor of Law, Georgetown University Law Center Paul Danos(cid:3)3,(cid:3)5* Dean Emeritus, Tuck School of Business and Laurence F. Whittemore Professor of Business Administration, Dartmouth College Heidi G. Miller(cid:3)1*,(cid:3)3 Retired President, JPMorgan International, JPMorgan Chase & Co. (banking and fi nancial services) Hilda Ochoa-Brillembourg(cid:3)1,(cid:3)5,(cid:3)+ Founder, Chairman and Chief Executive Offi cer, Strategic Investment Group (investment management) Robert L. Ryan(cid:3)1,(cid:3)3* Retired Senior Vice President and Chief Financial Offi cer, Medtronic, Inc. (medical technology) Steve Odland(cid:3)2,(cid:3)4 President and Chief Executive Offi cer, Committee for Economic Development (public policy) and Former Chairman and Chief Executive Offi cer, Offi ce Depot, Inc. (offi ce products retailer) Kendall J. Powell Chairman and Chief Executive Offi cer, General Mills, Inc. Michael D. Rose(cid:3)2,(cid:3)4,(cid:3)** Retired Chairman of the Board, First Horizon National Corporation (banking and fi nancial services) Dorothy A. Terrell(cid:3)4,(cid:3)5 Managing Partner, FirstCap Advisors (venture capital) Board Committees 1 Audit 2 Compensation 3 Finance 4 Corporate Governance 5 Public Responsibility * Denotes Committee Chair ** Denotes Independent Lead Director +Retiring September 2015 Senior Management As of August 1, 2015 Richard C. Allendorf Senior Vice President; General Counsel and Secretary John M. Foraker Vice President; President, Annie’s Foods Elizabeth M. Nordlie Vice President; President, Baking Gary Chu Senior Vice President; President, Greater China John R. Church Executive Vice President, Supply Chain David V. Clark Vice President; President, Yoplait USA David E. Dudick Sr. Senior Vice President; President, General Mills Canada Mary J. Ekman Senior Vice President, U.S. Retail Finance Peter C. Erickson Executive Vice President, Innovation, Technology and Quality Olivier Faujour Vice President; President, Yoplait International Jeff rey L. Harmening Executive Vice President; Chief Operating Offi cer, U.S. Retail David P. Homer Senior Vice President; Chief Executive Offi cer, Cereal Partners Worldwide Christina Law Vice President; President, Asia, Middle East and Africa Michele S. Meyer Senior Vice President; President, Meals Donal L. Mulligan Executive Vice President; Chief Financial Offi cer James H. Murphy Senior Vice President; President, Big G Cereals Kimberly A. Nelson Senior Vice President, External Relations; President, General Mills Foundation 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 Offi cer, International Kendall J. Powell Chairman and Chief Executive Offi cer Bethany C. Quam Vice President; President, Convenience Stores and Foodservice 86 GENERAL MILLS Ann W. H. Simonds Senior Vice President; Chief Marketing Offi cer Anton V. Vincent Vice President; President, Snacks Sean N. Walker Senior Vice President; President, Latin America Kristen S. Wenker(cid:3)+ Senior Vice President, Investor Relations Jacqueline R. Williams-Roll Senior Vice President, Human Resources Keith A. Woodward Senior Vice President; Treasurer Jerald A. Young Vice President; Controller +Retiring September 2015 Shareholder Information World Headquarters Number One General Mills Boulevard Minneapolis, MN 55426-1347 Phone: (763) 764-7600 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 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. 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: Jeff Siemon Director, Investor Relations Phone: (763) 764-2301 Notice of Annual Meeting The annual meeting of shareholders will be held at 8:30 a.m., Central Daylight Time, Tuesday, Sept. 29, 2015, at the Hilton Hotel Minneapolis, 1001 Marquette Avenue South, Minneapolis, MN 55403. 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 GeneralMills.com Global Responsibility Report We are committed to creating economic, social and environmental value around the world as we pursue our purpose of making food people love. Our eff orts include providing convenient, nutritious food for consumers globally, building strong communities through philanthropy and volun- teerism, and developing sustainable business practices that reduce our impact on the environment. For a comprehensive review of our commitment to stand among the most socially responsible food companies in the world, see our Global Responsibility Report available 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: 2015 General Mills Holiday Gift Box Department 10432 P.O. Box 5015 Stacy, MN 55078-5015 Or you can place an order online at: GMIHolidayGiftBox.com Please contact us after October 1, 2015. This report is printed on recycled paper. ©2015 General Mills i s e n a p m o C S L G y b g n i t n i r P i m o c . n o s d d a . w w w i n o s d d A y b i n g s e D Number One General Mills Boulevard Minneapolis, MN 55426-1347 GeneralMills.com

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