150 Years of
Growth
Branded Growth • Global Growth • Shareholder Value Growth
General Mills
2016 Annual Report
Left: Wheaties cereal print ad, 1939
Below: Gold Medal flour recipe
book, 1907
Our Fiscal 2016 Financial Highlights
In Millions, Except per Share,
Profit Margin and Return on Capital Data
52 Weeks Ended
May 29, 2016
53 Weeks Ended
May 31, 2015
Net Sales
$ 16,563
$ 17,630
Total Segment Operating Profit*
$ 3,000
$ 3,035
Change on
a Constant
Currency Basis*
– 2%
+ 1%
Change
– 6%
– 1%
Adjusted Operating Profit Margin*
16.8%
15.9%
+90 basis points
Net Earnings Attributable to General Mills
$ 1,697
$ 1,221
Diluted Earnings per Share (EPS)
$ 2.77
$ 1.97
+ 39%
+ 41%
Adjusted Diluted EPS, Excluding Certain
Items Affecting Comparability*
$ 2.92
$ 2.86
+ 2%
+ 5%
Adjusted Return on Average Total Capital*
Average Diluted Shares Outstanding
11.3%
612
Dividends per Share
$ 1.78
$ 1.67
11.2%
+10 basis points
+40 basis points
619
– 1%
+ 7%
Net Sales
(dollars in millions)
Total Segment Operating Profit*
(dollars in millions)
Adjusted Diluted
Earnings per Share*
(dollars)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
$16,658
$17,774
$17,910
$17,630
$16,563
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
$3,012
$3,223
$3,154
$3,035
$3,000
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
$2.56
$2.72
$2.82
$2.86
$2.92
*See page 31 for a discussion of these non-GAAP measures.
150 Years of Growth
General Mills is celebrating its 150th anniversary this year!
From our grain-milling roots in the upper Midwest of the U.S.,
we have grown to become a global packaged food company
that generates nearly $18 billion in annual sales with products
available in more than 100 markets worldwide. We owe our
longevity to our ability to adapt to a changing marketplace
and, with our Consumer First strategy, we are excited about
our prospects for growth for the next 150 years.
General Mills at a Glance
U.S. Retail
Net Sales by Operating Unit
International
Net Sales by Region
Convenience Stores
and Foodservice
Net Sales by Brand Type
Joint Ventures
Net Sales by Joint Venture
(not consolidated,
proportionate(cid:455)share)
13%
24%
15%
19%
23%
21%
20%
43%
22%
12%
18%
36%
52%
82%
$10.0 Billion
$4.6 Billion
$1.9 Billion
$1.0 Billion
24% Meals
23% Cereal
21% Snacks
43% Europe
22% Asia/Pacific
20% Canada
19% Baking Products
15% Latin America
13% Yogurt and Other
52% Branded to
Foodservice
Operators
36% Branded to
Consumers
12% Unbranded
82% Cereal Partners
Worldwide (CPW)
18% Häagen-Dazs Japan
(HDJ)
2016 Annual Report
1
Ken Powell
Chairman and
Chief Executive Officer
To Our Shareholders
Total Shareholder Return
(fiscal years, stock price appreciation
plus reinvested dividends, compound
annual growth)
Fiscal 2016 was a milestone year for us at General
2016
Mills as we celebrated our 150th anniversary.
During our history, we have introduced some
of the most iconic food brands around the
world. We’ve grown globally and now compete
in more than 100 markets worldwide. And we’ve
consistently delivered solid shareholder value.
Our operating performance this year slightly
exceeded our plan and we generated double-digit
returns for our shareholders. And as our history
shows, we are adaptable and are positioning
ourselves well for future growth.
150 Years of Growth
Our company began with a single flour mill built in 1866 on the banks
of(cid:455)the Mississippi River in Minneapolis, Minn. Over the years, our
business portfolio expanded to include a broad range of industries —
from flour to apparel, from toys to restaurants — before refocusing on
consumer foods in 1995. We’ve grown our company by developing
and nurturing great brands that consumers trust. Our seven largest
brands — Cheerios, Betty Crocker, Pillsbury, Nature Valley, Yoplait, Old El Paso
and Häagen-Dazs— each generate more than $1(cid:455)billion in annual retail
sales. Most of our brands hold the No. 1 or No. 2 share positions in their
2
General Mills
2%
Latest 3 Years
Latest 5 Years
15%
12%
11%
13%
12%
General Mills
S&P 500 Index
Source: Bloomberg
Dividends per Share
(dollars)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
(cid:364)(cid:362)(cid:363)(cid:369)
1.22
1.32
1.55
1.67
1.78
1.92
New Annualized Rate
categories, and they
categories, and they’ve proven to be resilient as market conditions
and(cid:455)consumer tastes have changed through the years.
and(cid:455)consumer taste
We’ve also grown by substantially increasing our global presence.
We’ve also grown by
Over the past decade alone, combined net sales for our consolidated
Over the past decad
International operations plus our 50- percent share of joint venture
International operat
revenues have more than doubled. Today, these businesses combined
revenues have more
generate nearly $6(cid:455)billion in international net sales, or about one third
generate nearly $6 b
of total company sales. We’ve been increasing our global footprint
of total company sa
by acquiring new brands in international markets and expanding our
by acquiring new br
current brands into more markets around the world. A great example
current brands into
is(cid:455)our recent introduction of Yoplait yogurt in China; you can read
is(cid:455)our recent introdu
about that on page 6 of this report.
about that on page
By driving branded growth and global growth, we’ve generated strong
By driving branded g
increases in shareholder value over time. General(cid:455)Mills incorporated
increases in shareho
in 1928 and began trading on the New York Stock Exchange (NYSE) in
in 1928 and began t
November of that year. As a matter of fact, General(cid:455)Mills is the 48th
November of that ye
longest-trading company of the 2,400(cid:455)companies currently listed on the
longest-trading com
NYSE. Delivering value to our shareholders has been the cornerstone
NYSE. Delivering va
of our existence, and dividends are a key part of that. General(cid:455)Mills
of our existence, an
and(cid:455)its predecessor firm have paid a dividend for 117 consecutive years.
and(cid:455)its predecessor
Over the past five fiscal years, our annual dividend has grown at a
fi
O
10(cid:455)percent compound rate. And our total shareholder return, which is a
combination of stock price appreciation plus dividends, has consistently
outperformed the broader market, generating double-digit returns over
nearly any extended period of time. Fiscal 2016 was no exception as our
shareholder return totaled 15(cid:455)percent, well ahead of the S&P 500(cid:455)Index.
t fi
th
We attribute our longevity to our ability to adapt to changing
consumer needs, and never has that been more vital than today as
consumers’ food interests are evolving rapidly. Increasingly, consumers
value simplicity in their food, often in the form of fewer, natural
ingredients. They seek foods that meet their definition of wellness,
which can mean more protein, more whole grains, or less sugar. And
they’re snacking more than ever. Internationally, as the middle class
grows around the world, consumer demand for convenient, great-
tasting food is expanding. In fiscal 2016, we brought a variety of
renovation and innovation news to our brands designed to leverage
these changing consumer demands.
Fiscal 2016 Performance
General(cid:455)Mills net sales for the fiscal year ended May(cid:455)29, 2016, declined
6(cid:455)percent to $16.6(cid:455)billion, reflecting the sale of the Green Giant
vegetable business in North America, foreign currency headwinds
and(cid:455)a comparison to a 53-week fiscal year in 2015. Excluding the
impact of foreign exchange, our net sales declined 2(cid:455)percent in
fiscal 2016.* Total segment operating profit decreased 1(cid:455)percent to
$3.0(cid:455)billion. On a constant- currency basis, total segment operating
profit increased 1(cid:455)percent.
Growing Our Core
Growing Our Core
Cereal Brands
Cereal Brands
Cheerios is the best-selling cereal
Cheerios is the best-selling cereal
franchise in the U.S. and Honey Nut
franchise in the U.S. and Honey Nut
Cheerios is the best-selling cereal.
Cheerios is the best-selling cereal.
In fiscal 2016, we made five of the
top-selling Cheerios flavors gluten
free, driving low single-digit retail
sales growth on these varieties. We’ll
transition two more Cheerios varieties
to gluten free in fiscal 2017. More
than half of U.S. consumers told us
they want to avoid artificial colors
and flavors. So we announced our
commitment to remove artificial flavors
and colors from artificial sources from
all of our cereals. Today, 90(cid:454)percent
of our cereals meet this claim, and we
continue to work on the remainder
of our portfolio. In addition, all of our
cereals are free of high fructose corn
syrup. By putting the consumer first,
we saw improved retail sales trends
for our U.S. cereals in fiscal 2016.
1941
Cheerios cereal
was first introduced.
Thirty-seven years later,
we launched a second
variety: Honey Nut
Cheerios.
*See page 31 for a reconciliation of this and other non-GAAP measures used in this letter.
2016 Annual Report
3
Convenience Stores
and Foodservice Segment
Operating Profit
(fiscal years, dollars in millions)
2016
2009
19.7%
$379
8.9%
$178
Segment Operating Profit
Profit Margin
(operating profit divided by net sales)
1964
General Mills
entered the snack
food market with Bugles,
Daisy*s and Whistles. In
1975, we introduced Nature
Valley granola bars — and
the country has been
eating up our snacks
ever since.
International Growth by
Geographic Region
(fiscal 2016, dollars in millions)
% Growth in
Constant
Currency*
+3%
+1%
-4%
+12%
Net Sales
$1,998
$996
$929
$709
$4,632
+3%
Europe
Asia/Pacific
Canada
Latin America
Total
International
Diluted earnings per share increased 41(cid:455)percent to $2.77 in fiscal
2016.(cid:455)Adjusted diluted earnings per share, which excludes certain
items affecting comparability of results, rose 2(cid:455)percent to $2.92.
Excluding the impact of foreign exchange, adjusted diluted earnings
per share increased 5(cid:455)percent.
Net sales for U.S. Retail, our largest business segment, declined to
$10.0(cid:455)billion, due in part to the divestiture of the Green Giant vegetable
business and a comparison to last year’s 53-week fiscal year. As we
saw consumer food preferences changing, we went to work to bring
renovation and innovation news to many of our brands to drive growth.
For example, we made product improvements to our Nature(cid:455)Valley
snacks and brought gluten-free messaging to 20(cid:455)percent of the line.
We introduced the Annie’s organic brand to new categories, including
yogurt, soup and cereal. And we drove growth on many of our cereal
brands with gluten-free messaging and the removal of artificial flavors
and colors. In fiscal 2017, we’ll continue to innovate on(cid:455)our brands to
drive sales growth for us and our categories.
Our Convenience Stores and Foodservice segment had another
year of solid results in fiscal 2016. While net sales declined 4(cid:455)percent,
driven by market index pricing on bakery flour and the exit of some
low- margin businesses last year, segment operating profit grew
7(cid:455)percent to a record $379(cid:455)million. These results reflect our continued
focus on six key product platforms in growing foodservice channels:
cereal, snacks, yogurt, mixes, biscuits and frozen meals. These
priority businesses, which account for half of the segment’s sales and
70(cid:455)percent of the segment’s operating profit, posted combined net
sales growth of 5(cid:455)percent for the year.
Net sales for our International segment declined 10(cid:455)percent to
$4.6(cid:455)billion, and segment operating profit declined 15(cid:455)percent, reflecting
negative foreign currency translation effects. On a constant- currency
basis, International net sales increased 3(cid:455)percent and segment operating
profit declined 3(cid:455)percent. Net sales grew 12(cid:455)percent in Latin America,
with good performance in Brazil, including the acquisition of Carolina
yogurt in that market. Net sales increased 3(cid:455)percent in the Europe
region as we posted good growth on Old(cid:455)El(cid:455)Paso Mexican products
and Häagen-Dazs ice cream. Net sales in the Asia/Pacific region were
up 1(cid:455)percent, led by double-digit sales growth in India. And net sales
declined 4(cid:455)percent in Canada, driven by the divestiture of the Green
Giant vegetable business in that(cid:455)market.*
4
General Mills
*International net sales growth figures are in constant currency.
See page 31 for a discussion of these non-GAAP measures.
Reshaping Our Portfolio
with More Natural &
Organic Offerings
Our natural and organic products
generated $750 million in pro forma
net sales in fiscal 2016, and given
organic foods are projected to grow
at a double-digit compound rate over
the next five years, we are expanding
our offerings to leverage this growing
food trend. Since acquiring Annie’s
foods in 2014, we’ve expanded this
trusted brand into the soup, yogurt
and cereal categories. We further
increased our portfolio in fiscal 2016
with the addition of EPIC Provisions,
a(cid:454)line of meat-based snacks. And this
summer, Liberté yogurt will go organic.
With net sales for our natural and
organic offerings growing double
digits in fiscal 2016, we are well
on(cid:454)our(cid:454)way to our goal of reaching
$1(cid:454)billion in net sales for this U.S.
portfolio by 2019, a full year ahead
of(cid:454)our original(cid:454)plan.
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 $88(cid:455)million in after-tax earnings in
2016. This was 12(cid:455)percent above last year on a constant- currency basis,
driven primarily by favorable input costs and strong sales performance
from HDJ.
In fiscal 2016, we returned $1.5(cid:455)billion to shareholders through
share(cid:455)repurchases and dividends. We repurchased approximately
11(cid:455)million shares of common stock, reducing our average number
of diluted shares outstanding by 1(cid:455)percent. We also increased our
annual dividend by 7(cid:455)percent. In June 2016, we increased the quarterly
dividend rate another 4(cid:455)percent. The new annualized rate of $1.92 per
share represents a yield between 2.5 and 3(cid:455)percent at recent prices for
General(cid:455)Mills stock. Our(cid:455)goal is to continue to increase dividends as
earnings grow.
Building for the Future
At General(cid:455)Mills, we serve the world by making food people love.
This(cid:455)has been our guiding purpose over the past 150 years and will
continue to shape our company in the years ahead. We aspire to
continued levels of strong growth for our brands and our company.
Our goal is to create market- leading growth that will(cid:455)deliver top-tier
returns to(cid:455)shareholders.
General Mills Long-term Growth Model
Growth Factor
Net Sales
Total Segment Operating Profit
Compound Growth Rate
Low single-digit
Mid single-digit
Adjusted Diluted Earnings per Share
High single-digit
Dividend Yield
Total Return to Shareholders
2 to 3(cid:454)percent
Double-digit
2016 Annual Report
5
We remain committed to our long-term growth model. We believe
our businesses can generate low single-digit net sales growth, mid
single-digit total segment operating profit growth and high single-
digit growth in adjusted diluted earnings per share. When you add in a
dividend yield of between 2 and 3(cid:455)percent, we should deliver double-
digit returns to shareholders over the long term.
As we enter fiscal 2017, we will build on our successes while
maintaining our focus on our Consumer First strategy. Consumers
are(cid:455)at the core of what we do. We work to gain a deep understanding
of their needs and respond quickly to give them what they want.
We’re(cid:455)also sharpening the way we think about our portfolio to
make more strategic choices about our level of investments and
expectations for growth across our businesses. We’ll manage
three-quarters of our portfolio as Growth businesses, where we see
the best opportunities for long-term growth. The remaining quarter
of our portfolio consists of Foundation businesses. They deliver
strong, consistent profit that helps fund topline growth initiatives.
We will make selective investments in these businesses, focusing on
strong(cid:455)returns.
Keeping our Consumer First strategy and our Growth and Foundation
designations in mind, we’re centering our efforts on four key priorities
described below.
Drive More from the Core
Our core brands, like Cheerios, Pillsbury, Nature Valley, Häagen-Dazs
and more, are the economic engines of our company, and we
know(cid:455)that driving growth from these well- established brands tends
to generate the best return for investors. Retail sales for our Nature
Valley grain snacks in the U.S. grew 3(cid:455)percent in fiscal 2016 as we
introduced new varieties of this 40-year-old brand and also made
our crunchy bars easier to bite. Retail sales for Old El Paso Mexican
meals have been growing in markets around the world as we offer
more innovation and(cid:455)convenience. Our Häagen-Dazs super- premium
ice cream bars have been a(cid:455)big hit with European consumers,
driving 10(cid:455)percent retail sales growth for the brand in Europe. And
6
General Mills
Expanding Yogurt
Around the World
With its health profile and great taste,
yogurt is a fast-growing food around
the world, and Yoplait is the No.(cid:454)2
global yogurt brand. In fiscal 2016, we
launched Yoplait yogurt in Shanghai,
China, and the results have been
strong. In the last quarter of 2016,
Yoplait garnered a 10(cid:454)percent share
of the yogurt category in Shanghai,
and we have our sights set on
continued expansion in the $16(cid:454)billion
yogurt category in China. We’re also
expanding our portfolio of yogurt
brands. Last fall, we acquired the
Carolina yogurt business in Brazil. The
Brazilian yogurt category generates
$5 billion in annual sales, and we
see great opportunity for further
expansion of the many yogurt varieties
marketed under the Carolina(cid:454)brand.
1983
Pillsbury acquired
the Häagen-Dazs
ice cream brand from
businessman Reuben
Mattus who dreamt
up the brand name
back in(cid:455)1961.
Funding Our Future
with a Rectangular Pizza
Totino’s is a leading brand in the
$4(cid:454)billion frozen pizza category in
the(cid:454)U.S. On any given day, we can
produce more than 1 million pizzas,
so we thought our manufacturing
process was already very efficient until
we asked the question “Does a pizza
have to be round?” By changing to a
rectangular shape, we’ve identified
significant costs savings while
maintaining the value and quality of
the product. The new rectangular
pizzas come in a plastic overwrap
instead of a paperboard carton. This
change reduces packaging costs
and waste and also allows us to put
more pizzas on a truck, reducing
transportation costs. In addition to
cost savings, we’re also decreasing
the environmental impact with
less packaging waste and reduced
emissions from fewer trucks on
the(cid:454)road.
the Pillsbury brand has been growing in U.S. schools as we added
mini-bagels and cheesy pull- aparts to our line of frozen meals
designed for school(cid:455)cafeterias.
Funding Our Future
We believe creating superior long-term shareholder value requires
a(cid:455)balance of growth and returns. We have a long history of funding
our(cid:455)future by generating cost savings we use to invest in topline
growth-driving ideas while still expanding our margins. Through
Holistic Margin Management (HMM), we are removing non-value
adding costs across the company. We are well on our way to
generating a cumulative $4(cid:455)billion in cost-of-goods savings over the
decade ending in 2020. In the past two years, we have implemented
additional cost savings initiatives to streamline our global supply chain
and restructure our organization. These additional initiatives have
delivered $350(cid:455)million in annual savings through 2016, and we expect
them to deliver $600(cid:455)million in total annual savings by fiscal 2018.
These efforts, along with our sharpened focus on strategic investments
across our portfolio going forward, will help us achieve our goal of an
adjusted operating profit margin of 20(cid:455)percent by fiscal(cid:455)2018.
Reshaping Our Portfolio
We’re acquiring and divesting products to increase the growth profile
of(cid:455)our businesses. We’re also getting our brands into the fastest- growing
outlets where people buy food and expanding into new geographies to
reach more consumers around the world. In fiscal 2016, we divested our
Green Giant vegetable business in the U.S. and Canada. We expanded
our international portfolio with the acquisition of Carolina yogurt in
Brazil, and see page(cid:455)5 for how we’re increasing our natural and organic
product portfolio.
Building an Advantaged and Agile Organization
We are developing new capabilities throughout our organization to
enable growth in a rapidly changing marketplace. We’re integrating
Consumer First principles into our innovation process to drive faster,
2016 Annual Report
7
Fiscal 2016
Net Sales by Platform
Cereal
Snacks
Yogurt
Convenient Meals
Super-premium Ice Cream
Dough
Baking Mixes
and Ingredients
Vegetables
Other
more successful product introductions. We’re also investing in
e-commerce capabilities to capture growth from this emerging
channel. And we’re adopting new tools such as net revenue
management to optimize our promotions, prices and mix of products
to(cid:455)drive sales(cid:455)growth.
Our employees are at the heart of our organization. Their skills and
commitment give me confidence we will achieve our performance
goals. We also are guided by an experienced and diverse board of
directors. I’d like to acknowledge the contributions of Mike Rose and
Paul Danos who are retiring from our board in September. They have
provided invaluable advice and counsel during their combined 39 years
of service to our company. I’d also like to recognize Dave Dudick,
Senior Vice President; President, Canada, who retired this summer
after a distinguished 36-year career with General Mills.
In closing, I want to thank you for your investment in General Mills.
Through our Consumer First strategy and our four key priorities, we
are committed to driving solid returns for you, our shareholders.
We(cid:455)appreciate your confidence in our plans for growth, and we look
forward to reporting on our continued strong performance for the
next 150 years.
Kendall J. Powell
Chairman and Chief Executive Officer
August(cid:455)1, 2016
3% 1%
10%
20%
$17.6
BILLION*
19%
10%
5%
16%
16%
Our Business Portfolio
is a Strategic Advantage
We’re focused on five global growth
categories — cereal, snacks, yogurt,
convenient meals and ice cream.
According to Euromonitor, retail sales
in these categories are projected to
grow at attractive rates because they
are on-trend with consumers’ food
interests. More than 75(cid:454)percent of our
worldwide net sales are concentrated
in these five platforms, and we see
strong opportunities to leverage our
technical know-how to grow our
leading brands in these categories.
* Non-GAAP measure. Includes $16.6 billion
consolidated net sales plus $0.8 billion
proportionate share of CPW (cereal) net
sales plus $0.2 billion proportionate share
of HDJ (ice cream) net sales.
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 Reclassifications
2 Summary of Significant Accounting Policies
3 Acquisition and Divestitures
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 Benefits and Postemployment Benefits
14 Income Taxes
15 Leases, Other Commitments, and Contingencies
16 Business Segment and Geographic Information
17 Supplemental Information
18 Quarterly Data
Glossary
Total Return to Stockholders
10
12
13
31
41
43
47
47
50
51
54
54
56
65
66
67
69
71
72
78
80
81
82
84
85
87
2016 Annual Report
9
Financial Summary
Margin Expansion Helps Fund Our Future
For the past several years, we have been increasing our productivity
and efficiency to offset input cost inflation and fuel our Consumer(cid:455)First
initiatives. While input cost inflation slowed to 2(cid:455)percent in fiscal 2016
from an average of 4 to 5(cid:455)percent over the previous five years, we still
expect costs to remain inflationary for the foreseeable future. Holistic
Margin Management (HMM) is our company-wide initiative to use
productivity savings, mix management and price realization to offset
input cost inflation, protect margins and generate funds to reinvest
in sales- generating activities. Due to HMM, we’ve been able to hold
our adjusted gross margin relatively steady over the past five years,
and we have a strong pipeline of additional HMM cost- savings
opportunities ahead.
Last year, we took additional actions to increase our efficiency and
generate cost savings. Projects Century, Catalyst and Compass were
implemented to streamline our global supply chain and restructure
our organization. We also implemented zero-based budgeting, which
drove further administrative cost savings. These initiatives combined
generated $350(cid:455)million in total annual savings through fiscal 2016.
We(cid:455)expect them to deliver $600(cid:455)million in total annual savings by 2018,
which is a $100(cid:455)million increase over our previous target. In addition,
we are sharpening our focus in fiscal 2017 to accelerate our margin
expansion efforts, building on our success from fiscal 2016 when we
grew our adjusted operating profit margin by 90(cid:455)basis points.* All told,
our goal is to achieve an adjusted operating profit margin of 20(cid:455)percent
by fiscal 2018.
Generating Cash
Our businesses have a long history of strong cash generation. In fiscal
2016, our cash flow from operations totaled $2.6(cid:455)billion, up 3(cid:455)percent
from last year. Our free cash flow, which is operating cash flow less
capital expenditures, was $1.9(cid:455)billion in fiscal 2016, a 4(cid:455)percent increase
over the previous year. We have a goal of converting 95(cid:455)percent of
our adjusted after-tax earnings to free cash on(cid:455)a long-term basis. Our
rolling three-year cumulative free cash flow has improved substantially,
and we exceeded our goal in the most recent three-year period with a
conversion rate of 102(cid:455)percent.
Our continued discipline on core working capital, which is accounts
receivable plus inventories less accounts payable, has contributed to
our operating cash flow. In fiscal 2016, we reduced our core working
capital 41(cid:455)percent versus last year’s fourth quarter, primarily due to
operational improvements across our business as well as the divestiture
of the Green Giant vegetable business in North America. We have
now posted year-over-year reductions in our core working capital for
13(cid:455)consecutive quarters.
10
General Mills
Adjusted Operating Profit Margin*
(percent of net sales)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
16.7%
16.3%
16.2%
15.9%
16.8%
Cash Flow From Operations
(dollars in millions)
2012
2013
2014
2015
2016
Free Cash Flow*
(dollars in millions)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
Core Working Capital
(dollars in millions)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
729
2,407
2,926
2,541
2,543
2,630
1,731
2,312
1,878
1,830
1,900
1,654
1,569
1,432
1,244
Fixed Asset Investment
(percent of net sales)
Uses of Cash
Our first priority for our cash is investment in growth opportunities and
cost- savings projects we’ve identified across our businesses. In(cid:455)fiscal
2016, fixed asset investments totaled $729(cid:455)million, largely in line with
our long-term target of 4(cid:455)percent of net sales. In fiscal 2017, we expect
capital expenditures to be comparable to 2016 levels as we continue
to(cid:455)fund Project Century and other projects to increase our efficiency.
After capital investment, we prioritize cash returns to shareholders
through dividends and share repurchases. Cash dividends to
shareholders totaled nearly $1.1(cid:455)billion in fiscal 2016. Since fiscal
2012, our dividends per share have grown at a 10(cid:455)percent compound
rate. In(cid:455)June 2016, our board of directors approved an increase to
our quarterly dividend rate, effective with the August 2016 payment.
The new annualized dividend rate of $1.92 per share represents an
8(cid:455)percent increase over the(cid:455)annual dividend paid in fiscal 2016. And
this marks the eighth increase in our quarterly dividend rate since 2010.
General Mills and its predecessor firm have paid regular dividends for
117 years. Our goal is to continue increasing dividends over time, in line
with our earnings growth.
We also return cash to shareholders through share repurchases.
Net(cid:455)share repurchases in fiscal 2016 totaled $435(cid:455)million. We reduced
average net shares outstanding by 1(cid:455)percent, slightly below our long-
term share(cid:455)reduction target of 2(cid:455)percent, as we had higher cash needs
for capital investment related to restructuring activities in fiscal 2016.
For(cid:455)fiscal 2017, we are targeting a net reduction of 1 to 2(cid:455)percent in
average diluted shares outstanding. Our goal is to return 90(cid:455)percent
of our free cash flow to shareholders through dividends and share
repurchases. Over the past several years, we have exceeded that goal
with more than 100(cid:455)percent of free cash flow returned to shareholders
between fiscal 2014 and 2016.
Net income growth and disciplined uses of cash are the drivers of
increasing adjusted returns on average total capital (ROC). General
Mills adjusted ROC has declined in recent years, primarily due to the
acquisitions of Yoplait International, Yoki and Annie’s. In fiscal 2016, we
saw an increase in adjusted ROC over the previous year, due to earnings
growth and continued prudent capital management.
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
Dividends Paid
(dollars in millions)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
4.1%
3.4%
3.7%
4.0%
4.4%
800
868
983
1,018
1,072
Average Diluted Shares Outstanding
(shares in millions)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
667
666
646
619
612
Adjusted Return on Average
Total Capital* (percent)
(cid:364)(cid:362)(cid:363)(cid:364)
(cid:364)(cid:362)(cid:363)(cid:365)
(cid:364)(cid:362)(cid:363)(cid:366)
(cid:364)(cid:362)(cid:363)(cid:367)
(cid:364)(cid:362)(cid:363)(cid:368)
12.7%
12.0%
11.6%
11.2%
11.3%
* See page 31 for a reconciliation of this and other non-GAAP measures used in this summary.
2016 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 29, 2016:
In Millions, Except Per Share Data, Percentages and Ratios
2016
2015 (a)
2014
2013
2012
Fiscal Year
Operating data:
Net sales
Gross margin (b)
Selling, general, and administrative expenses
Operating profi t
Total segment operating profi t (c)
Divestitures (gain)
$ 16,563.1
$ 17,630.3
$ 17,909.6
$ 17,774.1
$ 16,657.9
5,829.5
5,949.2
6,369.8
6,423.9
6,044.7
3,118.9
3,328.0
3,474.3
3,552.3
3,380.7
2,707.4
2,077.3
2,957.4
2,851.8
2,562.4
2,999.5
3,035.0
3,153.9
3,222.9
3,011.6
(148.2)
—
(65.5)
—
—
Net earnings attributable to General Mills
1,697.4
1,221.3
1,824.4
1,855.2
1,567.3
Advertising and media expense
Research and development expense
Average shares outstanding:
Diluted
Earnings per share:
754.4
222.1
823.1
229.4
869.5
243.6
895.0
237.9
913.7
245.4
611.9
618.8
645.7
665.6
666.7
$
Diluted
Diluted, excluding certain items aff ecting comparability (c) $
Operating ratios:
2.77
2.92
$
$
1.97
2.86
$
$
2.83
2.82
$
$
2.79
2.72
$
$
2.35
2.56
Gross margin as a percentage of net sales
35.2%
33.7%
35.6%
36.1%
36.3%
Selling, general, and administrative expenses as a
percentage of net sales
Operating profi t as a percentage of net sales
Adjusted operating profi t
as a percentage of net sales (b) (c)
Total segment operating profi t
as a percentage of net sales (c)
Eff ective income tax rate
Return on average total capital (b)
Adjusted return on average total capital (b) (c)
Balance sheet data:
18.8%
16.3%
18.9%
11.8%
19.4%
16.5%
20.0%
16.0%
20.3%
15.4%
16.8%
15.9%
16.2%
16.3%
16.7%
18.1%
31.4%
12.9%
11.3%
17.2%
33.3%
9.1%
11.2%
17.6%
33.3%
12.5%
11.6%
18.1%
29.2%
13.4%
12.0%
18.1%
32.1%
12.8%
12.7%
Land, buildings, and equipment
$ 3,743.6
$ 3,783.3
$ 3,941.9
$ 3,878.1
$ 3,652.7
Total assets
Long-term debt, excluding current portion
Total debt (b)
Cash fl ow data:
21,712.3
21,832.0
23,044.7
22,505.7
21,014.8
7,057.7
7,575.3
6,396.6
5,901.8
6,139.5
8,430.9
9,191.5
8,758.9
7,944.8
7,407.2
Net cash provided by operating activities
$ 2,629.8
$ 2,542.8
$ 2,541.0
$ 2,926.0
$ 2,407.2
Capital expenditures
Free cash fl ow (b) (c)
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
729.3
712.4
663.5
613.9
675.9
1,900.5
1,830.4
1,877.5
2,312.1
1,731.3
7.40
31.2%
5.54
27.7%
8.04
29.0%
7.62
36.8%
6.26
32.5%
$
54.12
$
48.86
$
46.86
$
37.55
$
65.36
62.87
1.78
57.14
56.15
1.67
54.40
53.81
1.55
50.93
48.98
1.32
34.95
41.05
39.08
1.22
Number of full- and part-time employees
39,000
42,000
43,000
41,000
34,500
(a) Fiscal 2015 was a 53-week year; all other fi scal years were 52 weeks.
(b) See “Glossary” on page 85 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.
12
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 shareholders over the long term.
We believe that increases in net sales, segment oper-
ating profi t, earnings per share (EPS), free cash fl ow
conversion, cash return to shareholders, and return on
average total capital are key drivers of fi nancial perfor-
mance 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 oper-
ating profi t;
• high single-digit annual growth in diluted EPS exclud-
ing certain items aff ecting comparability;
• improvement in adjusted return on average total
capital;
• free cash fl ow conversion averaging above 95 percent
of adjusted net earnings aft er tax; and
• cash return to shareholders averaging above 90 per-
cent of free cash fl ow, including an attractive divi-
dend yield.
We believe that this fi nancial performance should
result in long-term value creation for shareholders.
Fiscal 2016 was an important step toward return-
ing to our long-term growth objectives. Our U.S. Retail
segment improved its operating profi t performance in
fi scal 2016, excluding the impact of acquisitions and
divestitures, primarily the North American Green Giant
business (Green Giant) divestiture and 6 incremen-
tal months of results from the acquisition of Annie’s,
Inc. (Annie’s). Net sales as reported declined 5 percent-
age points in fi scal 2016, which included 2 percentage
points of decline from the net impact of Green Giant
and Annie’s and 1 percentage point of decline from a
53rd week in fi scal 2015. While net sales growth did
not meet our expectations, operating profi t increased
1 percent, despite the 53rd week in fi scal 2015 and
the net unfavorable impact of the Green Giant dives-
titure and Annie’s acquisition. Operating profi t for the
Convenience Stores and Foodservice segment increased
7 percent, driven primarily by our 6 priority prod-
uct platforms. Operating results for the International
segment had good growth in developed markets that
was tempered by slowdowns in developing markets.
International net sales as reported declined 10 percent,
including 1 percentage point of decline from the dives-
titure of Green Giant, our Venezuela business, and our
foodservice business in Argentina, but grew 3 percent
on a constant-currency basis. International segment
operating profi t declined 15 percent and was impacted
by 12 percentage points of unfavorable foreign currency
exchange and slowing economic growth in China and
Brazil, as well as the eff ect of divestitures.
Our consolidated net sales for fi scal 2016 declined 6
percent to $16.6 billion, primarily driven by unfavor-
able foreign exchange, a 53rd week in fi scal 2015, and
the net impact of acquisitions and divestitures. On a
constant-currency basis, net sales decreased 2 percent.
Operating profi t of $2.7 billion increased 30 percent.
Total segment operating profi t of $3.0 billion declined
1 percent and grew 1 percent on a constant-currency
basis. Diluted EPS increased 41 percent to $2.77 per
share. Adjusted diluted EPS, which excludes certain
items aff ecting comparability of results, rose 2 percent
to $2.92 per share and increased 5 percent on a con-
stant-currency basis. Our return on average total capital
was 12.9 percent, and return on adjusted average total
capital increased 10 basis points to 11.3 percent. (See
the “Non-GAAP Measures” section below for discussion
of total segment operating profi t, adjusted diluted EPS,
constant-currency net sales growth rates, constant-cur-
rency International segment net sales growth rate, con-
stant-currency total segment operating profi t growth
rate, constant-currency adjusted diluted EPS growth
rate, and adjusted return on average total capital, which
are not defi ned by generally accepted accounting prin-
ciples (GAAP)).
Net cash provided by operations totaled $2.6 billion
in fi scal 2016 at a conversion rate of 151 percent of net
earnings, including earnings attributable to redeem-
able and noncontrolling interests. Th is cash generation
supported capital investments totaling $729 million,
and our resulting free cash fl ow was $1.9 billion at a
conversion rate of 104 percent of adjusted net earn-
ings, including earnings attributable to redeemable and
2016 Annual Report
13
noncontrolling interests. We also returned signifi cant
cash to shareholders through a 7 percent dividend
increase and share repurchases totaling $607 mil-
lion. Total cash returned to shareholders represented
79 percent of our free cash fl ow (see the “Non-GAAP
Measures” section below for a description of our use of
measures not defi ned by GAAP).
We recorded the following achievements related to
our other key operating objectives for fi scal 2016:
• We took steps to reshape our business portfolio to
drive future growth with the divestiture of our North
American Green Giant vegetable business and two
smaller divestures, the Venezuela canned meat business
and the foodservice dough business in Argentina. We
also acquired EPIC Provisions LLC (Epic), broadening
our product off erings in our U.S. natural and organic
portfolio to include meat snacks, and we entered the
growing Brazilian yogurt market through the acquisi-
tion of Laticinios Carolina Ltda. (Carolina).
• We generated strong levels of supply chain productiv-
ity savings in fi scal 2016 through our ongoing Holistic
Margin Management (HMM) eff orts. We also continued
to execute our cost savings and organizational initiatives
during the fi scal year. We expanded Project Century, an
initiative to streamline our North American distribution
and manufacturing network, to our International seg-
ment supply chain. We also initiated Project Compass,
with a focus on increasing the agility and eff ectiveness
of our International segment. Finally, we continued
to realize benefi ts from Project Catalyst, a fi scal 2015
restructuring plan to increase organizational eff ective-
ness and reduce overhead expense. In aggregate, the ini-
tiatives taken in fi scal 2015 and 2016 generated almost
$350 million in cost savings during fi scal 2016.
A detailed review of our fi scal 2016 performance
appears below in the section titled “Fiscal 2016
Consolidated Results of Operations.”
With strong savings in Fiscal 2016 and visibility to
further savings over the next two years, we now expect
our previously announced organizational restructur-
ing and cost-reduction initiatives, including Projects
Century, Catalyst, and Compass, as well as administra-
tive cost reductions, to generate total annual savings of
$600 million by fi scal 2018. We are also undertaking
further eff orts to prioritize investments, reduce com-
plexity, and streamline our operations to drive profi table
sales growth. As a result, we are increasing and accel-
erating our adjusted operating profi t margin expan-
sion target. We expect to achieve an adjusted operating
14
General Mills
profi t margin of 20 percent by fi scal 2018, an increase
of 400 basis points over fi scal 2015 levels. Key drivers of
margin expansion over the next two years will include:
• Strong levels of HMM productivity gains;
• Continuing savings from previously announced
cost-reduction initiatives;
• Increased effi ciency and prioritization of commercial
investments, including trade and consumer spending;
• Continuing focus on complexity reduction through
SKU optimization;
• Further supply chain optimization; and
• Continued expansion of zero-based budgeting across
the business.
We will focus our fi scal 2017 and fi scal 2018 growth
investments on our brands and platforms with the
strongest profi table growth potential, including:
• In the U.S. Retail segment – Cereal, snack bars, the
natural and organic portfolio, hot snacks, Mexican
products, and yogurt;
• Our International segment;
• In the Convenience Stores and Foodservice segment
– Cereal, yogurt, snacks, frozen meals, biscuits, and bak-
ing mixes – the segment’s current Focus 6 platforms.
Net sales for these “growth” businesses, which com-
prise 75 percent of total company net sales and a simi-
lar proportion of operating profi t, are expected to grow
at a low single-digit organic rate in fi scal 2017. In our
“foundation” businesses, which comprise the remainder
of the portfolio, we will only pursue selective growth
investments and will focus on reducing SKU complex-
ity, optimizing commercial investments, and prioritiz-
ing profi table volume while making selective Consumer
First investments. We expect organic net sales to
decline mid single-digits for these businesses in fi scal
2017. With this focused approach, we expect:
• Fiscal 2017 organic net sales growth ranging from fl at
to down 2 percent compared to fi scal 2016, but deliver a
6 to 8 percent increase in constant-currency total seg-
ment operating profi t.
• Fiscal 2017 adjusted operating profit margin to
increase by approximately 150 basis points; and
• Constant-currency adjusted diluted EPS to grow 6 to
8 percent from the base of $2.92 earned in fi scal 2016.
Our fi scal 2017 plans call for continued strong cash
returns to shareholders. Th e current annualized divi-
dend rate of $1.92 per share is up 8 percent from the
annual dividend paid in fi scal 2016. Share repurchases
in fi scal 2017 are expected to result in a net reduction
in average diluted shares outstanding of approximately
1 to 2 percent.
Th e foregoing non-GAAP forward-looking fi nancial
measures are not reconcilable to the equivalent GAAP
measure because we cannot accurately predict the
excluded variables that may impact these measures.
Certain terms used throughout this report are defi ned
in a glossary on page 85 of this report.
FISCAL 2016 CONSOLIDATED RESULTS OF
OPERATIONS
Fiscal 2016 had 52 weeks compared to 53 weeks in fi s-
cal 2015. Included in fi scal 2016 is an additional month
of results from Annie’s and Yoplait SAS (please refer
to Note 1 to the Consolidated Financial Statements on
page 47 of this report).
Fiscal 2016 net sales declined 6 percent to $16,563
million and decreased 2 percent on a constant-currency
basis. Operating profi t of $2,707 million was 30 percent
higher than fi scal 2015. Total segment operating profi t
was $3,000 million, 1 percent lower than fi scal 2015 and
1 percent higher on a constant-currency basis. In fi scal
2016, net earnings attributable to General Mills were
$1,697 million, up 39 percent from $1,221 million in fi s-
cal 2015, and we reported diluted EPS of $2.77 in fi s-
cal 2016, up 41 percent from $1.97 in fi scal 2015. Fiscal
2016 results include restructuring-related charges, a net
gain from divestitures, and gains from the mark-to-
market valuation of certain commodity positions and
grain inventories. Fiscal 2015 results include restructur-
ing-related charges, an indefi nite-lived intangible asset
impairment charge, tax impacts from the repatriation
of historical 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 cur-
rency devaluation. Diluted EPS excluding these items
aff ecting comparability totaled $2.92 in fi scal 2016, up 2
percent from $2.86 in fi scal 2015. Diluted EPS excluding
certain items aff ecting comparability on a constant-cur-
rency basis increased 5 percent compared to fiscal
2015 (see the “Non-GAAP Measures” section below
for a description of our use of measures not defi ned
by GAAP).
Net sales declined 6 percent to $16,563 million in fi s-
cal 2016 from $17,630 in fi scal 2015. 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 2016
vs. 2015
(3) pts
1 pt
(4) pts
(6) pts
(a) Measured in tons based on the stated weight of our product shipments.
Net sales growth for fi scal 2016 included a 1 percent
decrease from acquisitions and divestitures, primar-
ily Green Giant and Annie’s, refl ecting 2 percentage
points of decline from volume (please refer to Note 3
to the Consolidated Financial Statements on page 50 of
this report). Th e 53rd week in fi scal 2015 contributed
approximately 1 percentage point of net sales decline
in fi scal 2016, refl ecting 1 percentage point of decline
from volume.
Cost of sales decreased $948 million in fi scal 2016 to
$10,734 million. In fi scal 2016, product mix drove a $486
million decrease in cost of sales and lower volume drove
a $369 million decrease. We recorded a $63 million net
decrease in cost of sales related to mark-to-market valu-
ation of certain commodity positions and grain invento-
ries as described in Note 7 to the Consolidated Financial
Statements on page 56 of this report, compared to a
net increase of $90 million in fi scal 2015. In fi scal 2016,
we recorded $78 million of restructuring charges in
cost of sales compared to $60 million in fi scal 2015.
We also recorded a $3 million foreign exchange loss in
cost of sales in fi scal 2015 related to Venezuela currency
devaluation.
We also expect to incur approximately $109 million
of restructuring initiative project-related cash costs and
recorded $58 million of these costs in cost of sales in
fi scal 2016 compared to $13 million in fi scal 2015 (please
refer to Note 4 to the Consolidated Financial Statements
on page 51 of this report).
Gross margin declined 2 percent in fi scal 2016 versus
fi scal 2015. Gross margin as a percent of net sales of
35 percent increased 150 basis points compared to
fi scal 2015.
Selling, general and administrative (SG&A) expenses
decreased $209 million in fi scal 2016 versus fi scal 2015
primarily due to an 8 percent decrease in advertising
and media expense, and savings from Project Catalyst,
Project Compass, and our other cost-management
initiatives (please refer to Note 4 to the Consolidated
Financial Statements on page 51 of this report). In fi s-
cal 2015, we recorded a $5 million charge in SG&A
2016 Annual Report
15
expenses related to Venezuela currency devaluation and
$16 million of integration costs related to our acquisi-
tion of Annie’s. SG&A expenses as a percent of net sales
decreased 10 basis points compared to fi scal 2015.
During fi scal 2016, we recorded an $148 million dives-
titures gain (net) from the sale of Green Giant, our sub-
sidiary in Venezuela, and our foodservice business in
Argentina (please refer to Note 3 of the Consolidated
Financial Statements on page 50 of this report).
Restructuring, impairment, and other exit costs
totaled $151 million in fi scal 2016 compared to $544 mil-
lion in fi scal 2015.
In 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. As a result, we recorded a $260 million
impairment charge in fi scal 2015 related to the Green
Giant brand intangible asset.
Restructuring charges recorded in restructuring,
impairment, and other exit costs were $151 million in
fi scal 2016 compared to $284 million in fi scal 2015.
Total charges associated with our restructuring initia-
tives recognized in fi scal 2016 and 2015 consisted of the
following:
In Millions
Compass
Total Century (a)
Catalyst
Combination of certain operational facilities
Other
Total restructuring charges (a)
Project-related costs
As Reported
Estimated
Fiscal 2016
Fiscal 2015
Future
Total
Charge
Cash
Charge
Cash
Charge
Cash
Charge
Cash
Savings(b)
$ 54.7 $ 36.1 $ —
$ —
$ 5
$ 24 $ 60 $ 60
182.6
34.1
181.8
(7.5)
47.8
148.4
—
—
4.5
0.1
13.9
(0.6)
0.1
229.8
122.6
343.5
57.5
54.5
13.2
63.6
9.7
12.0
45.0
6.5
75
—
1
—
81
38
120
439
166
25
141
118
2
15
12
—
—
—
171
655
356
45
109
109
Restructuring charges and project-related costs $ 287.3 $ 177.1 $ 356.7
$ 73.3
$ 119
$ 216 $ 764 $ 465
Future cumulative annual savings
$ 600
(a) Includes restructuring charges recorded in cost of sales of $78.4 million in fi scal 2016 and $59.6 million in fi scal 2015.
(b) Cumulative annual savings estimated by fi scal 2018. Includes savings from SG&A cost reduction projects.
Please refer to Note 4 to the Consolidated Financial Statements on page 51 of this report for more information
regarding our restructuring activities.
Interest, net for fi scal 2016 totaled $304 million, $12
million lower than fi scal 2015, primarily driven by lower
average debt balances, partially off set by changes in the
mix of debt.
Our consolidated eff ective tax rate for fi scal 2016 was
31.4 percent compared to 33.3 percent in fi scal 2015. Th e
1.9 percentage point decrease was primarily due to the
unfavorable impact of our repatriation of historical for-
eign earnings in fi scal 2015, partially off set by non-de-
ductible expenses related to the Green Giant divestiture
in fi scal 2016. Our eff ective tax rate excluding certain
items aff ecting comparability was 29.8 percent in fi scal
2016 compared to 30.5 percent in fi scal 2015 (see the
“Non-GAAP Measures” section below for a description
of our use of measures not defi ned by GAAP).
After-tax earnings from joint ventures for fiscal
2016 increased to $88 million compared to $84 million
in fi scal 2015 primarily driven by favorable input costs
16
General Mills
in fi scal 2016, favorable product mix for Häagen-Dazs
Japan, Inc. (HDJ), and lapping an impairment charge
of $3 million at Cereal Partners Worldwide (CPW) in
South Africa in fi scal 2015, partially off set by unfavor-
able foreign currency. On a constant-currency basis,
aft er-tax earnings from joint ventures increased 12 per-
cent (see the “Non-GAAP Measures” section below for
a description of our use of this measure not defi ned by
GAAP). Th e change in net sales for each joint venture is
set forth in the following table:
As Reported
Constant-Currency Basis
Fiscal 2016
vs. 2015
Fiscal 2016
vs. 2015
CPW
HDJ
Joint Ventures
(12)%
Flat
(10)%
Flat
5
1%
The components of our joint ventures’ net sales
growth are shown in the following table:
Fiscal 2016 vs. Fiscal 2015
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Net sales growth
CPW
Flat
Flat
(12) pts
(12) pts
HDJ
11 pts
(6) pts
(5) pts
Flat
(a) Measured in tons based on the stated weight of our product shipments.
Average diluted shares outstanding decreased by
7 million in fi scal 2016 from fi scal 2015 due to share
repurchases, partially off set by option exercises.
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-currency
basis. Operating profi t of $2,077 million was 30 percent
lower than fi scal 2014. Total segment operating profi t
was $3,035 million, 4 percent lower than fi scal 2014
and 2 percent lower on a constant-currency basis. In
fi scal 2015, net earnings attributable to General Mills
were $1,221 million, down 33 percent from $1,824 mil-
lion 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 indefi nite-lived intangible asset impairment
charge, tax impacts from the repatriation of historical
foreign earnings, losses from the mark-to-market valu-
ation of certain commodity positions and grain invento-
ries, integration costs resulting from the acquisition of
Annie’s, and the impact of Venezuela currency devalua-
tion. Fiscal 2014 results include the impact of Venezuela
currency devaluation, a gain on the divestiture of cer-
tain grain elevators, losses from the mark-to-market
valuation of certain commodity positions and grain
inventories, and restructuring charges related to our fi s-
cal 2012 productivity and cost savings plan. Diluted EPS
excluding these items aff ecting comparability totaled
$2.86 in fi scal 2015, up 1 percent from $2.82 in fi scal
2014 (see the “Non-GAAP Measures” section below for
a description of our use of these measures not defi ned
by GAAP).
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 ecting
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 mil-
lion net increase in cost of sales related to mark-to-
market valuation of certain commodity positions and
grain inventories, compared 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 s-
cal 2015 related to Venezuela currency devaluation com-
pared to a $23 million loss in fi scal 2014. Lower volume
drove a $68 million decrease in cost of sales in fi scal
2015. We recorded $13 million of restructuring initiative
project-related cash costs in cost of sales in fi scal 2015.
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.
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 and our other cost management initia-
tives. In fi scal 2015, we recorded a $5 million charge in
SG&A expenses related to Venezuela currency devalua-
tion compared to a $39 million charge in fi scal 2014. In
addition, we recorded $16 million of integration costs in
SG&A expenses 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.
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.
2016 Annual Report
17
Restructuring, impairment, and other exit costs
totaled $544 million in fi scal 2015 compared to $4 mil-
lion in fi scal 2014.
In 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. As a result, we recorded a $260 million
impairment charge in 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 fi scal 2015 and 2014 consisted of the
following:
As Reported
Fiscal 2015
Fiscal 2014
In Millions
Charge
Cash
Charge
Cash
of $606 million of historical 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. Our eff ective tax rate excluding certain
items aff ecting comparability was 30.5 percent in fi scal
2015 compared to 32.2 percent in fi scal 2014 (see the
“Non-GAAP Measures” section below for a description
of our use of measures not defi ned by GAAP).
After-tax earnings from joint ventures for fiscal
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 CPW in South Africa. On a constant-cur-
rency basis, aft er-tax earnings from joint ventures were
fl at (see the “Non-GAAP Measures” section below for a
description of our use of this measure not defi ned by
GAAP). Th e change in net sales for each joint venture is
set forth in the following table:
As Reported
Constant Currency Basis
Fiscal 2015
vs. 2014
Fiscal 2015
vs. 2014
CPW
HDJ
Joint Ventures
(10)%
(4)
(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 (a)
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
(a) Measured in tons based on the stated weight of our product shipments.
Average diluted shares outstanding decreased by
27 million in fi scal 2015 from fi scal 2014 due to share
repurchases.
Total Century (a)
Catalyst
International
(0.6)
Other
Total restructuring charges (a) 343.5
Project-related costs
$181.8
$12.0
$ —
$ —
148.4
45.0
13.9
6.5
0.1
63.6
—
1.0
2.6
3.6
—
6.0
16.4
22.4
recorded in costs of sales
13.2
9.7
—
—
Restructuring charges and
project-related costs
$356.7
$73.3
$3.6
$22.4
(a) Includes $59.6 million of restructuring charges recorded in cost of sales
during fi scal 2015.
Please refer to Note 4 to the Consolidated Financial
Statements on page 51 of this report for more informa-
tion regarding our restructuring activities.
Interest, net for fi scal 2015 totaled $315 million, $13
million higher than fi scal 2014, primarily driven by
higher average debt balances, partially off set by changes
in the mix of debt.
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
18
General Mills
RESULTS OF SEGMENT OPERATIONS
Our businesses are organized into three operating
segments: U.S. Retail; International; and Convenience
Stores and Foodservice.
In fi scal 2015, we changed how we assess segment
operating performance to exclude the asset and liability
remeasurement impact from hyperinfl ationary econo-
mies. Th is impact is now included in unallocated corpo-
rate items. All periods 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 seg-
ment for fi scal years 2016, 2015, and 2014:
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
2016
Fiscal Year
2015
2014
Dollars
Percent
of Total
Dollars
Percent
of Total
Dollars
Percent
of Total
$10,007.1
60%
$10,507.0
60%
$10,604.9
4,632.2
1,923.8
28
12
5,128.2
1,995.1
29
11
5,385.9
1,918.8
59%
30
11
$16,563.1
100%
$17,630.3
100%
$17,909.6
100%
$2,179.0
72%
$2,159.3
71%
$2,311.5
441.6
378.9
15
13
522.6
353.1
17
12
535.1
307.3
73%
17
10
$2,999.5
100%
$3,035.0
100%
$3,153.9
100%
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, drug, dollar and
discount chains, and e-commerce grocery providers
operating throughout the United States. Our product
categories in this business segment are ready-to-eat
cereals, refrigerated yogurt, soup, meal kits, 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.
Segment operating profi t excludes unallocated cor-
porate items, net gain on divestitures, and restructur-
ing, 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 In fi scal 2015, we realigned cer-
tain 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 con-
solidated net sales, operating segments’ net sales, oper-
ating profi t, segment operating profi t, net earnings
2016 Annual Report
19
U.S. Retail net sales were as follows:
Net sales (in millions)
Contributions from volume growth (a)
Net price realization and mix
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
Fiscal
2015
Fiscal
2015 vs. 2014
Percentage Change
Fiscal
2014
$10,007.1
(5)%
$10,507.0
(1)%
$10,604.9
(7) pts
2 pts
(1) pt
Flat
Segment operating profi t of $2,179 million in fi scal
2016 increased $20 million, or 1 percent, from fi scal
2015. Th e increase was primarily driven by high levels
of promotional expense in fi scal 2015, cost savings from
Project Catalyst and other cost management initiatives,
a decrease in media and advertising expenses, and lower
supply chain costs, partially off set by the net impact of
the Green Giant divestiture and Annie’s acquisition.
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 vol-
ume and an increase in supply chain costs, partially off -
set by a 6 percent reduction in media and advertising
expenses.
International Segment Our International segment con-
sists of retail and foodservice businesses outside of the
United States. Our product categories include ready-
to-eat cereals, shelf stable and frozen vegetables, meal
kits, refrigerated and frozen dough products, dessert
and baking mixes, frozen pizza snacks, refrigerated
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.
(a) Measured in tons based on the stated weight of our product shipments.
Th e net impact of acquisitions and divestitures, pri-
marily Green Giant and Annie’s, decreased net sales
growth by 2 percentage points in fi scal 2016, refl ecting
3 percentage points of decline from volume. Th e 53rd
week in fi scal 2015 contributed approximately 1 per-
centage point of net sales decline in fi scal 2016, refl ect-
ing 2 percentage points of decline from volume. In fi scal
2015, the acquisition of Annie’s added 1 percentage
point of net sales growth, refl ecting 1 percentage point
of growth from volume. Th e 53rd week contributed
approximately 1 percentage point of net sales growth in
fi scal 2015, 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
2016
2015
2014
Meals (a)
Cereal
Snacks (a)
Baking Products
$ 2,393.9
$ 2,674.3
$ 2,772.4
2,312.8
2,330.1
2,410.2
2,094.3
2,134.4
1,997.8
1,903.4
1,969.8
2,096.1
Yogurt and other
1,302.7
1,398.4
1,328.4
Total
$ 10,007.1
$ 10,507.0
$ 10,604.9
(a) Fiscal 2016 net sales for the Meals and Snacks operating units include an
additional month of results from Annie’s.
U.S. Retail net sales percentage change by operating
unit are shown in the following table:
Meals (a)
Yogurt
Baking Products
Snacks (a)
Cereal
Total
Fiscal 2016
vs. 2015
Fiscal 2015
vs. 2014
(10)%
(7)
(3)
(2)
(1)
(5)%
(4)%
5
(6)
7
(3)
(1)%
(a) Th e impact due to an additional month of results from Annie’s was not
material to the Meals and Snacks operating units. Th e impact to fi scal 2016
net sales growth for the U.S. Retail segment was not material.
20
General Mills
International net sales were as follows:
Net sales (in millions)
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Fiscal
2016
$4,632.2
Fiscal
2016 vs. 2015
Percentage Change
Fiscal
2015
Fiscal
2015 vs. 2014
Percentage Change
Fiscal
2014
(10)%
3 pts
Flat
(13) pts
$5,128.2
(5)%
$5,385.9
Flat
6 pts
(11) pts
(a) Measured in tons based on the stated weight of our product shipments.
Th e impact of acquisition and divestitures, primarily
Green Giant, decreased net sales growth by 1 percent-
age point in fi scal 2016. Th e 53rd week in fi scal 2015
contributed approximately 1 percentage point of net
sales decline in fi scal 2016, refl ecting 1 percentage point
of decline from volume. Th e 53rd week contributed
approximately 1 percentage point of net sales growth in
fi scal 2015, refl ecting 1 percentage point of growth from
volume.
Net sales for our International segment by geographic
region are shown in the following table:
In Millions
Europe (a)
Canada
Asia/Pacifi c
Latin America
Total
Fiscal Year
2016
2015
2014
$1,998.0
$2,126.5
$2,188.8
929.5
995.7
709.0
1,105.1
1,023.5
1,195.3
981.8
873.1
1,020.0
$4,632.2
$5,128.2
$5,385.9
(a) Fiscal 2016 net sales for the Europe region include an additional month
of results from Yoplait SAS.
International percentage change in net sales by geo-
graphic 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 2016 Fiscal 2015
vs. 2014
vs. 2015
Fiscal 2016 Fiscal 2015
vs. 2014
vs. 2015
Europe (b)
Canada
Asia/Pacifi c
Latin America
Total
(6)%
(3)%
3%
5%
(16)
(3)
(19)
(8)
4
(14)
(4)
1
12
Flat
5
17
(10)%
(5)%
3%
6%
(a) See the “Non-GAAP Measures” section below for our use of this measure.
(b) Fiscal 2016 percentage change in net sales as reported for the Europe
region includes 3 percentage points of growth due to an additional month
of results from Yoplait SAS. Th e impact to fi scal 2016 net sales growth for
the International segment was not material.
Segment operating profit for fiscal 2016 declined
15 percent to $442 million from $523 million in fi s-
cal 2015, primarily driven by unfavorable foreign cur-
rency exchange, an increase in SG&A expenses, and
the impact of the Green Giant divestiture. International
segment operating profi t decreased 3 percent on a con-
stant-currency basis in fi scal 2016 compared to fi scal
2015 (see the “Non-GAAP Measures” section below for
our use of this measure).
Segment operating profit for fiscal 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).
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 meals, unbaked and
fully baked frozen dough products, and baking mixes.
Many products we sell are branded to the consumer
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.
2016 Annual Report
21
Convenience Stores and Foodservice net sales were as follows:
Net sales (in millions)
Contributions from volume growth (a)
Net price realization and mix
Foreign currency exchange
Fiscal
2016
Fiscal
2016 vs. 2015
Percentage Change
Fiscal
2015
Fiscal
2015 vs. 2014
Percentage Change
$1,923.8
(4)%
$1,995.1
(3) pts
(1) pt
NM
4%
1 pt
3 pts
NM
Fiscal
2014
$1,918.8
(a) Measured in tons based on the stated weight of our product shipments.
Th e 53rd week in fi scal 2015 contributed approx-
imately 2 percentage points of net sales decline in
fi scal 2016, refl ecting 2 percentage points of decline
from volume. In fi scal 2015, the 53rd week contributed
approximately 2 percentage points of net sales growth,
refl ecting 2 percentage points of growth from volume.
In fi scal 2016, segment operating profi t was $379
million, up 7 percent from $353 million in fi scal 2015
primarily driven by favorable product mix and cost sav-
ings from Project Catalyst and other cost management
initiatives. In fi scal 2015, segment operating profi t was
up 15 percent from $307 million in fi scal 2014 primarily
driven by favorable net price realization and mix and
higher volume.
Unallocated Corporate Items 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 is includes gains
and losses from the mark-to-market valuation of certain
commodity positions until passed back to our operating
segments in accordance with our policy as discussed
in Note 7 to the Consolidated Financial Statements on
page 56 of this report.
For fi scal 2016, unallocated corporate expense totaled
$289 million compared to $414 million last year. In
fi scal 2016, we recorded a $63 million net decrease in
expense related to mark-to-market valuation of certain
commodity positions and grain inventories compared to
a $90 million net increase in expense in the prior year.
In addition, we recorded $78 million of restructuring
charges, and $58 million of restructuring initiative proj-
ect-related costs in cost of sales in fi scal 2016, compared
to $60 million of restructuring charges and $13 million
of restructuring initiative project-related costs in cost of
22
General Mills
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 in fi scal
2015. We also recorded $16 million of integration costs
resulting from the acquisition of Annie’s in fi scal 2015.
Th e decrease in unallocated corporate expense also
refl ects cost savings from Project Catalyst and other
cost management initiatives.
For fi scal 2015, unallocated corporate expense totaled
$414 million compared to $258 million in fi scal 2014. 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 fi scal 2014. In addition, we
recorded $60 million of restructuring charges and $13
million of restructuring initiative project-related costs in
cost of sales in fi scal 2015. In fi scal 2015, we recorded an
$8 million foreign exchange loss related to the remea-
surement of assets and liabilities of our Venezuelan sub-
sidiary 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.
Venezuela is a highly infl ationary economy and as
such, we remeasured the value of the assets and liabil-
ities of our former Venezuelan subsidiary based on the
exchange rate at which we expected to remit dividends
in U.S. dollars from the SIMADI market. In fi scal 2015,
we recorded an $8 million foreign currency exchange
loss related to remeasurement. In fi scal 2016, we sold
our General Mills de Venezuela CA subsidiary to a third
party and exited our business in Venezuela. As a result
of this transaction, we recorded a loss on the sale of
$38 million pre-tax.
In fi scal 2015, we changed how we assess segment
operating performance to exclude the asset and liability
remeasurement impact from hyperinfl ationary econo-
mies. Th is impact is now included in unallocated corpo-
rate items. All periods presented have been changed to
conform to this presentation.
IMPACT OF INFLATION
Cash Flows from Operations
Our gross margin performance in fi scal 2016 refl ects
the impact of 2 percent input cost infl ation, primarily
on commodity inputs. We expect input cost infl ation
of 2 percent in fi scal 2017. We attempt to minimize the
eff ects of infl ation through HMM, planning, and oper-
ating practices. Our risk management practices are dis-
cussed on page 40 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 $7.7 billion in cash. A sub-
stantial portion of this operating cash fl ow has been
returned to shareholders through share repurchases
and dividends. We also use cash from operations to
fund our capital expenditures and acquisitions. We
typically use a combination of cash, notes payable, and
long-term debt to fi nance signifi cant acquisitions and
major capital expansions.
As of May 29, 2016, we had $645 million of cash and
cash equivalents held in foreign jurisdictions, which will
be used to fund foreign operations and acquisitions.
Th ere is currently no need to repatriate these funds in
order to meet domestic funding obligations or sched-
uled cash distributions. If we choose to repatriate his-
torical earnings held in foreign jurisdictions, we intend
to do so only in a tax-neutral manner.
In Millions
2016
2015
2014
Fiscal Year
Net earnings, including
earnings attributable to
redeemable and
noncontrolling interests
$1,736.8 $1,259.4 $1,861.3
Depreciation and amortization
608.1
588.3
585.4
Aft er-tax earnings
from joint ventures
Distributions of earnings
from joint ventures
Stock-based compensation
Deferred income taxes
(88.4)
(84.3)
(89.6)
75.1
89.8
120.6
72.6
106.4
25.3
90.5
108.5
172.5
Tax benefi t on exercised options
(94.1)
(74.6)
(69.3)
Pension and other postretirement
benefi t plan contributions
(47.8)
(49.5)
(49.7)
Pension and other postretirement
benefi t plan costs
Divestitures (gain)
Restructuring, impairment,
118.1
(148.2)
91.3
124.1
—
(65.5)
and other exit costs
107.2
531.1
(18.8)
Changes in current assets
and liabilities, excluding the
eff ects of acquisitions
and divestitures
Other, net
Net cash provided by
258.2
214.7
(105.6)
(137.9)
(32.2)
(76.2)
operating activities
$2,629.8 $2,542.8 $2,541.0
In fi scal 2016, our operations generated $2.6 billion of
cash compared to $2.5 billion in fi scal 2015. Th e $477
million increase in net earnings included a $96 million
change in deferred income taxes and a $148 million
net gain on divestitures and was also off set by a $424
million decrease in non-cash restructuring charges.
Th e $43 million change in current assets and liabilities
was primarily driven by the timing of accounts payable
including the impact of longer terms off set by the tim-
ing of inventory build.
We strive to grow core working capital at or below
the rate of growth in our net sales. For fi scal 2016, core
working capital decreased 41 percent, primarily due to
an increase in accounts payable, largely driven by lon-
ger payables terms and a decrease in inventory, com-
pared to a net sales decline of 6 percent. In fi scal 2015,
core working capital decreased 13 percent, compared to
a net sales decline of 2 percent, and in fi scal 2014, core
2016 Annual Report
23
working capital decreased 9 percent, compared to net
sales growth of 1 percent.
growth, support innovative products, and continue
HMM initiatives throughout the supply chain.
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, $271 million of non-cash restructuring charges,
and a $147 million change in net deferred income taxes.
Cash Flows from Financing Activities
Fiscal Year
In Millions
2016
2015
2014
Change in notes payable
$ (323.8) $ (509.8) $ 572.9
Issuance of long-term debt
542.5
2,253.2
1,673.0
Payment of long-term debt
(1,000.4) (1,145.8) (1,444.8)
Proceeds from common stock
issued on exercised options
171.9
163.7
108.1
Tax benefi t on exercised options
94.1
74.6
69.3
Cash Flows from Investing Activities
Fiscal Year
Purchases of common
stock for treasury
In Millions
2016
2015
2014
Dividends paid
Purchases of land, buildings,
and equipment
Acquisitions,
$ (729.3) $ (712.4) $ (663.5)
Distributions to noncontrolling
and redeemable interest holders
(84.3)
(25.0)
Addition of noncontrolling interest
—
—
17.6
(606.7) (1,161.9) (1,745.3)
(1,071.7) (1,017.7)
(983.3)
net of cash acquired
(84.0)
(822.3)
—
Investments in affi liates, net
63.9
(102.4)
(54.9)
Proceeds from disposal of land,
buildings, and equipment
4.4
11.0
6.6
Proceeds from divestitures
Exchangeable note
Other, net
Net cash provided (used) by
828.5
21.1
—
121.6
27.9
29.3
(11.2)
(4.0)
(0.9)
investing activities
$ 93.4 $ (1,602.2) $ (561.8)
In fiscal 2016, we generated $93 million of cash
through investing activities compared to a use of $1.6
billion in fi scal 2015. We invested $729 million in land,
buildings, and equipment in fi scal 2016, $17 million
more than last year. In fi scal 2016, we received proceeds
of $828 million from the divestitures of certain busi-
nesses, primarily Green Giant. In fi scal 2015, we acquired
Annie’s for an aggregate purchase price of $809 million,
net of $12 million of cash acquired.
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 in fi scal 2014. In fi s-
cal 2015, we acquired Annie’s. We made $102 million of
investments in affi liates, primarily CPW, in fi scal 2015.
In fi scal 2014, we sold certain grain elevators for $124
million in cash.
We expect capital expenditures to be approximately
$734 million in fi scal 2017. Th ese expenditures will
fund initiatives that are expected to fuel International
24
General Mills
(77.4)
(14.2)
Other, net
Net cash used by
(7.2)
(16.1)
fi nancing activities
$ (2,285.6) $ (1,384.8) $ (1,824.1)
Net cash used by fi nancing activities increased by
$901 million in fi scal 2016. We had $1.4 billion less net
debt issuances in fi scal 2016 than the prior year. For
more information on our debt issuances and payments,
please refer to Note 8 to the Consolidated Financial
Statements on page 65 of this report.
During fi scal 2016, we received $172 million in pro-
ceeds from common stock issued on exercised options
compared to $164 million in fi scal 2015, an increase of
$8 million. During fi scal 2014, we received $108 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
accelerated repurchase programs. Th e authorization has
no specifi ed termination date.
During fi scal 2016, we repurchased 11 million shares of
our common stock for $607 million. 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 common stock for $1,745 million.
Dividends paid in fi scal 2016 totaled $1,072 million,
or $1.78 per share, a 7 percent per share increase from
fi scal 2015. 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 of $1.55 per share.
Selected Cash Flows from Joint Ventures
Selected cash fl ows from our joint ventures are set
forth in the following table:
Fiscal Year
Infl ow (Outfl ow), in Millions
2016
2015
2014
Repayments from (advances to)
joint ventures, net
$63.9
$(102.4)
$(54.9)
Dividends received
75.1
72.6
90.5
CAPITAL RESOURCES
Total capital consisted of the following:
In Millions
Notes payable
May 29, 2016 May 31, 2015
$ 269.8
$ 615.8
Current portion of long-term debt
1,103.4
1,000.4
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
7,057.7
7,575.3
8,430.9
9,191.5
845.6
376.9
778.9
396.0
4,930.2
4,996.7
$14,583.6
$15,363.1
Th e following table details the fee-paid committed
and uncommitted credit lines we had available as of
May 29, 2016:
In Billions
Credit facility expiring:
May 2021
June 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and
Facility
Amount
Borrowed
Amount
$2.7
0.2
2.9
0.4
$ —
0.1
0.1
0.1
uncommitted credit facilities
$3.3
$0.2
In May 2016, we entered into a $2.7 billion fee-paid
committed credit facility that is scheduled to expire in
May 2021. Concurrent with the execution of this credit
facility, we terminated our $1.7 billion and $1.0 billion
credit facilities.
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.
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 29, 2016, we were in
compliance with all of these covenants.
We have $1,103 million of long-term debt maturing in
the next 12 months that is classifi ed as current, includ-
ing $1,000 million of 5.7 percent fi xed rate notes due
February 2017. We believe that cash fl ows from opera-
tions, 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 29, 2016, our total debt, including the
impact of derivative instruments designated as hedges,
was 78 percent in fi xed-rate and 22 percent in fl oat-
ing-rate instruments, compared to 72 percent in fi xed-
rate and 28 percent in fl oating-rate instruments on
May 31, 2015.
Return on average total capital was 12.9 percent
in fi scal 2016 compared to 9.1 percent in fi scal 2015.
Improvement in return on adjusted average total capital
is one of our key performance measures (see the “Non-
GAAP Measures” section below for our discussion of
this measure, which is not defi ned by GAAP). Adjusted
return on average total capital increased 10 basis points
from 11.2 percent in fi scal 2015 to 11.3 percent in fi s-
cal 2016 as fi scal 2016 earnings increased. On a con-
stant-currency basis, adjusted return on average total
capital increased 40 basis points.
We also believe that our fi xed charge coverage ratio
and the ratio of operating cash fl ow to debt are import-
ant measures of our fi nancial strength. Our fi xed charge
coverage ratio in fi scal 2016 was 7.40 compared to 5.54
in fi scal 2015. Th e measure increased from fi scal 2015
as earnings before income taxes and aft er-tax earnings
from joint ventures increased by $642 million in fi scal
2016. Our operating cash fl ow to debt ratio increased
3.5 percentage points to 31.2 percent in fi scal 2016,
driven by a decrease in total debt.
2016 Annual Report
25
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 its 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 all or a portion of
its redeemable interest to us at fair value once per year,
up to three times before December 2024. As of May 29,
2016, the redemption value of the redeemable interest
was $846 million which approximates 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). On June 1, 2015, 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. Th e pre-
ferred return rate is adjusted every three years through
a negotiated agreement with the Class A Interest holder
or through a remarketing auction.
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
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 29, 2016, we have issued guarantees and
comfort letters of $383 million for the debt and other
obligations of consolidated subsidiaries, and guarantees
and comfort letters of $239 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 $398
million as of May 29, 2016.
26
General Mills
As of May 29, 2016, 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 liquidity
as of and for the fi scal year ended May 29, 2016.
Our defi ned benefi t plans in the United States are
subject to the requirements of the Pension Protection
Act (PPA). In the future, the PPA may require us to
make additional contributions to our domestic plans.
We do not expect to be required to make any contribu-
tions in fi scal 2017.
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
2017
2022 and
2018-19 2020-21 Th ereaft er
Long-term debt (a)
$ 8,190.2 $1,103.0 $1,754.2 $1,611.6 $3,721.4
Accrued interest
90.4
90.4
—
Operating leases (b)
397.6
107.9
150.7
Capital leases
2.7
0.9
1.3
—
89.2
0.4
Purchase obligations (c) 3,082.1 1,955.9
603.7
497.4
—
49.8
0.1
25.1
Total contractual
obligations
11,763.0 3,258.1 2,509.9 2,198.6 3,796.4
Other long-term
obligations (d)
1,957.0
—
—
—
—
Total long-term
obligations
$13,720.0 $3,258.1 $2,509.9 $2,198.6 $3,796.4
(a) Amounts represent the expected cash payments of our long-term
debt and do not include $2 million for capital leases or $31 million for net
unamortized debt issuance costs, 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 business and
for consumer marketing spending commitments that support our brands.
For purposes of this table, arrangements are considered purchase obliga-
tions 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 $44
million as of May 29, 2016, 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 2017. We are unable to reliably estimate the amount
of these payments beyond fi scal 2017. As of May 29, 2016, our total liability
for uncertain tax positions and accrued interest and penalties was $209
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 47 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
postemployment 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 $564 million as of May 29,
2016, and $565 million as of May 31, 2015. Because our
total promotional expenditures (including amounts clas-
sifi ed as a reduction of revenues) are signifi cant, if our
estimates are inaccurate we would have to make adjust-
ments in subsequent periods that could have a signifi -
cant eff ect on our results of operations.
Valuation of Long-Lived Assets We estimate the useful
lives of long-lived assets and make estimates concerning
undiscounted cash fl ows to review for impairment when-
ever 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.
or changes in circumstances indicate that impairment
may have occurred. Our estimates of fair value for
goodwill impairment testing are determined based on
a discounted cash 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 compara-
bles, 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 29, 2016, we had $12.9 billion of goodwill
and indefi nite-lived intangible assets. While we currently
believe that the fair value of each intangible exceeds its
carrying value and that those intangibles so classifi ed will
contribute indefi nitely to our cash fl ows, materially dif-
ferent assumptions regarding future performance of our
businesses or a diff erent weighted-average cost of capital
could result in material impairment losses and amortiza-
tion expense. We performed our fi scal 2016 assessment
of our intangible assets as of August 31, 2015. 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 and Uncle Toby’s brands. Th e
excess fair value above the carrying value of these brand
assets were as follows:
Intangible Assets Goodwill and other indefi nite-lived
intangible assets are not subject to amortization and are
tested for impairment annually and whenever events
In Millions
Mountain High
Uncle Toby’s
Excess Fair
Value Above
Carrying
Value
20%
11%
Carrying
Value
$ 35.4
$ 52.2
2016 Annual Report
27
Our Mountain High and Uncle Toby’s brands have
experienced declining business performance, and we
will continue to monitor these businesses.
Our strategies for fi scal 2017 and fi scal 2018 will focus
our growth investments on our brands and platforms
with the strongest profi table growth potential. As a
result, certain parts of our U.S. Retail segment could
experience reduced future sales projections. We per-
formed a sensitivity analysis for certain brand intangi-
ble assets and determined that, while not impaired as
of May 29, 2016, the Progresso and Food Should Taste
Good brands had risk of decreasing coverage. We will
continue to monitor these businesses.
Redeemable Interest In fi scal 2016, we adjusted the
redemption value of Sodiaal’s redeemable interest in
Yoplait SAS based on a discounted cash fl ow model.
The significant 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 29, 2016, the redemp-
tion value of the redeemable interest was $846 million.
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 69 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
2016
2015
2014
Estimated fair values of
stock options granted
$7.24
$7.22
$6.03
Assumptions:
Risk-free interest rate
2.4%
2.6%
2.6%
Expected term
Expected volatility
Dividend yield
8.5 years 8.5 years 9.0 years
17.6%
17.5%
17.4%
3.2%
3.1%
3.1%
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 less than 1 percent. If all
other assumptions are held constant, a one percentage
point increase in our fi scal 2016 volatility assumption
would increase the grant date fair value of our fi scal
2016 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
28
General Mills
that signifi cantly 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 78 of this report.
Defi ned Benefi t 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 and 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. Please refer to Note
13 to the Consolidated Financial Statements on page 72
of this report for a description of our defi ned benefi t
pension, other postretirement benefi t, and postemploy-
ment 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 signifi cant management judg-
ment and have a material impact on the measurement
of our net periodic benefi t expense or income and accu-
mulated benefi t obligations include the long-term rates
of return on plan assets, the interest rates used to dis-
count 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 perfor-
mance, our estimate of future long-term returns by
asset class (using input from our actuaries, investment
services, and investment managers), and long-term
inflation 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 pen-
sion and other postretirement benefi t plan assets were
0.7 percent, 7.8 percent, 6.6 percent, 7.4 percent, and 8.6
percent for the 1, 5, 10, 15, and 20 year periods ended
May 29, 2016.
On a weighted-average basis, the expected rate of
return for all defi ned benefi t plans was 8.53 percent
for fi scal 2016, 8.53 percent for fi scal 2015, and 8.53
percent for fi scal 2014. During fi scal 2016, we lowered
our weighted-average expected rate of return on plan
assets for our principal defi ned benefi t pension and
other postretirement plans in the United States to 8.25
percent due to asset changes that decreased investment
risk in the portfolio.
Lowering the expected long-term rate of return on
assets by 100 basis points would increase our net pen-
sion and postretirement expense by $64 million for fi scal
2017. 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 outside
actuaries perform these calculations as part of our deter-
mination of annual expense or income.
Discount Rates Our discount rate assumptions are
determined annually as of the last day of our 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.
2016 Annual Report
29
Our weighted-average discount rates were as follows:
Defi ned
Other
Benefi t Postretirement Postemployment
Benefi t
Benefi t
Pension
Plans
Plans
Plans
In Millions
Eff ect on the aggregate of the
service and interest cost
One
One
Percentage Percentage
Point
Decrease
Point
Increase
Obligations as of
May 29, 2016, and
components in fi scal 2017
$ 3.1
$ (2.7)
Eff ect on the other postretirement
fi scal 2017 expense
4.19%
3.97%
2.94%
accumulated benefi t obligation
Obligations as of
May 31, 2015, and
fi scal 2016 expense
Fiscal 2015 expense
4.38%
4.54%
4.20%
4.51%
3.55%
3.82%
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 2017 by approximately $96 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 7.5 percent for retir-
ees age 65 and over and 7.3 percent for retirees under
age 65 at the end of fi scal 2016. Rates are graded down
annually until the ultimate trend rate of 5.0 percent
is reached in 2024 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 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:
30
General Mills
as of May 29, 2016
71.2
(63.8)
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
10 years, resulting in at least the minimum amortization
required being recorded.
Financial Statement Impact In fi scal 2016, we recorded
net defi ned benefi t pension, other postretirement ben-
efi t, and postemployment benefi t plan expense of $163
million compared to $153 million of expense in fi scal
2015 and $140 million of expense in fi scal 2014. As of
May 29, 2016, we had cumulative unrecognized actu-
arial net losses of $1.9 billion on our defi ned benefi t
pension plans and $72 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. In fi scal 2015,
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 fi scal 2015. In addition, these assumptions increased
the fi scal 2016 expense associated with these plans by
$72 million.
Actual future net defined benefit pension, other
postretirement benefit, and postemployment bene-
fi t plan income or expense will depend on investment
performance, 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 March 2016, the Financial Accounting Standards
Board (FASB) issued new accounting requirements for
the accounting and presentation of stock-based pay-
ments. Th is will result in realized windfall and short-
fall tax benefi ts upon exercise or vesting of stock-based
awards being recorded in our Consolidated Statements
of Earnings in addition to other presentation changes.
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. Early
adoption is permitted. We are in the process of analyz-
ing the impact on our results of operations and fi nan-
cial position.
In February 2016, the FASB issued new accounting
requirements for accounting, presentation and classifi -
cation of leases. Th is will result in most leases being
capitalized as a right of use asset with a related liability
on our Consolidated Balance Sheets. Th e requirements
of the new standard are eff ective for annual reporting
periods beginning aft er December 15, 2018, and interim
periods within those annual periods, which for us is the
fi rst quarter of fi scal 2020. We are in the process of
analyzing the impact on our results of operations and
fi nancial position.
In May 2015, the FASB issued new accounting
requirements for the presentation of certain invest-
ments using the net asset value, providing a practical
expedient to exclude such investments from catego-
rization within the fair value hierarchy and 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 which permits reporting entities with a
fi scal year-end that does not coincide with a month-
end to apply a practical expedient that permits the
entity to measure defi ned benefi t plan assets and obli-
gations using the month-end that is closest to the
entity’s fi scal year-end and apply such practical expedi-
ent 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 and its subsequent amendments are eff ective
for annual reporting periods beginning aft er December
15, 2017, and interim periods within those annual peri-
ods, which for us is the fi rst quarter of fi scal 2019. 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 manage-
ment 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 Th is mea-
sure is used in reporting to our executive management
and as a component of the Board of Directors’ mea-
surement of our performance for incentive compensa-
tion purposes. We believe that this measure provides
useful information to investors because it provides
transparency to underlying performance in our con-
solidated net sales by excluding the eff ect that foreign
currency exchange rate fl uctuations have on the year-
to-year comparability given volatility in foreign cur-
rency exchange markets.
2016 Annual Report
31
Net sales growth rates on a constant-currency basis
are calculated as follows:
Percentage change in total net sales
Impact of foreign currency exchange
Percentage change in total net sales
Fiscal
2016
2015
(6)%
(2)%
(4) pts
(3) pts
on a constant-currency basis
(2)%
1%
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.
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)
Divestitures 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
2016
$2.77
(0.07)
(0.10)
—
—
—
0.26
0.06
—
2015
$1.97
0.09
—
0.13
0.02
0.01
0.35
0.01
0.28
certain items aff ecting comparability
$2.92
$2.86
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 56 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 50 of this report.
Fiscal Year
Change
41%
2%
(3) pts
5%
2014
$2.83
(0.05)
(0.06)
—
—
0.09
0.01
—
—
2013
$2.79
—
—
(0.13)
0.01
0.03
0.02
—
—
2012
$2.35
0.10
—
—
0.01
—
0.10
—
—
$2.82
$2.72
$2.56
(c) Th e fi scal 2015 tax item is related to the one-time repatriation of historical 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.
(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 56 of this report.
(f) See Note 4 to the Consolidated Financial Statements on page 51 of this report.
(g) See Note 6 to the Consolidated Financial Statements on page 54 of this report.
See our reconciliation below of the eff ective income tax rate as reported to the eff ective income tax rate excluding
certain items aff ecting comparability for the tax impact of each item aff ecting comparability.
32
General Mills
Total Segment Operating Profit 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 informa-
tion to investors because it is the profi tability measure
we use to evaluate segment performance. A reconcil-
iation 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 81
of this report.
Total segment operating profi t growth rates on a
constant-currency basis are calculated as follows:
Fiscal
Constant-currency Aft er-tax Earnings from Joint
Ventures Growth Rates We believe that this mea-
sure provides useful information to investors because
it provides transparency to underlying performance of
our joint ventures 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.
Aft er-tax earnings from joint ventures growth rates
on a constant-currency basis are calculated as follows:
Percentage change in aft er-tax
earnings from joint ventures as reported
5%
(6)%
Impact of foreign currency exchange
(7) pts
(6) pts
Fiscal
2016
2015
Percentage change in total segment
operating profi t as reported
Impact of foreign currency exchange
Percentage change in total segment
2016
2015
Percentage change in aft er-tax
earnings from joint ventures
(1)%
(4)%
(2) pts
(2) pts
on a constant-currency basis
12%
Flat
operating profi t on a constant-currency basis
1%
(2)%
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.
Europe
Canada
Asia/Pacifi c
Latin America
Total International
Europe
Canada
Asia/Pacifi c
Latin America
Total International
Fiscal 2016
Percentage Change
in Net Sales
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in
Net Sales on Constant
Currency Basis
(6)%
(16)
(3)
(19)
(10)%
(9) pts
(12)
(4)
(31)
(13) pts
3%
(4)
1
12
3%
Fiscal 2015
Percentage Change
in Net Sales
as Reported
Impact of Foreign
Currency
Exchange
Percentage Change in
Net Sales on Constant
Currency Basis
(3)%
(8)
4
(14)
(5)%
(8) pts
(8)
(1)
(31)
(11) pts
5%
Flat
5
17
6%
2016 Annual Report
33
Constant-currency International Segment Operating Profi t Growth Rates We believe that this measure provides
useful information to investors because it provides transparency to underlying performance of the International seg-
ment 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.
International segment operating profi t growth rates on a constant-currency basis are calculated as follows:
Percentage change in International segment operating profi t as reported
Impact of foreign currency exchange
Percentage change in International segment operating profi t on a constant-currency basis
Fiscal
2016
(15)%
(12) pts
(3)%
2015
(2)%
(11) pts
9%
34
General Mills
Adjusted Return on Average Total Capital Change in adjusted 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 perfor-
mance for incentive compensation purposes. We believe that this measure provides useful information to investors
because it is important for assessing the utilization of capital and it eliminates certain items that aff ect year-to-year
comparability. Th e calculation of adjusted return on average total capital and return on average total capital, its GAAP
equivalent follows:
In Millions
2016
2015
2014
2013
2012
2011
Net earnings, including earnings attributable to
redeemable and noncontrolling interests
$ 1,736.8 $ 1,259.4 $ 1,861.3 $ 1,892.5 $ 1,589.1
Fiscal Year
Interest, net, aft er-tax
Earnings before interest, aft er-tax
Adjustments, aft er-tax: (a)
Mark-to-market eff ects
Divestitures gain, net
Tax items
Acquisition integration costs
Venezuela currency devaluation
Restructuring costs
Project-related costs
Indefi nite-lived intangible impairment
Adjusted earnings before interest, aft er-tax for
193.1
199.8
190.9
201.2
238.9
1,929.9
1,459.2
2,052.2
2,093.7
1,828.0
(39.6)
(66.0)
—
—
—
160.8
36.8
—
56.5
—
78.6
10.4
8.0
217.7
8.3
176.9
(30.5)
(36.0)
—
—
57.8
3.6
—
—
(2.8)
—
(85.4)
8.8
20.8
15.9
—
—
65.6
—
—
9.7
—
64.3
—
—
adjusted return on capital calculation
$ 2,021.9 $ 2,015.6 $ 2,047.1 $ 2,051.0 $ 1,967.6
Current portion of long-term debt
$ 1,103.4 $ 1,000.4 $ 1,250.6 $ 1,443.3 $
741.2 $ 1,031.3
Notes payable
Long-term debt
Total debt
Redeemable interest
Noncontrolling interests
Stockholders’ equity
Total capital
Accumulated other comprehensive loss
Aft er-tax earnings adjustments (b)
Adjusted total capital
Average total capital (c)
Return on average total capital (c)
Adjusted average total capital (c)
Adjusted return on average total capital (c)
Change in adjusted return on average total capital
Foreign currency exchange impact
Change in adjusted return on average total capital
on a constant-currency basis
269.8
615.8
1,111.7
599.7
526.5
311.3
7,057.7
7,575.3
6,396.6
5,901.8
6,139.5
5,524.1
8,430.9
9,191.5
8,758.9
7,944.8
7,407.2
6,866.7
845.6
376.9
778.9
396.0
984.1
470.6
967.5
456.3
847.8
461.0
—
246.7
4,930.2
4,996.7
6,534.8
6,672.2
6,421.7
6,365.5
14,583.6
15,363.1
16,748.4
16,040.8
15,137.7
13,478.9
2,612.2
2,310.7
1,340.3
1,585.3
1,743.7
1,010.8
439.1
347.1
(209.3)
(204.2)
(161.5)
(301.1)
$ 17,634.9 $ 18,020.9 $ 17,879.4 $ 17,421.9 $ 16,719.9 $ 14,188.6
$ 14,973.4 $ 16,055.8 $ 16,394.6 $ 15,589.2 $ 14,308.3
12.9%
9.1%
12.5%
13.4%
12.8%
$ 17,827.9 $ 17,950.1 $ 17,650.6 $ 17,070.8 $ 15,454.3
11.3%
11.2%
11.6%
12.0%
12.7%
10 bps
(30) bps
40 bps
(a) See our reconciliation below of the eff ective income tax rate as reported to the eff ective income tax rate excluding certain items aff ecting comparability for
the tax impact of each item aff ecting comparability.
(b) Sum of current year and previous year aft er-tax adjustments.
(c) See “Glossary” on page 85 of this report for defi nition.
2016 Annual Report
35
In Millions
As reported
Mark-to-market eff ects (b)
Divestitures (gain) (c)
Tax items (d)
Acquisition
Venezuela currency
devaluation (b)
Restructuring costs (f)
Project-related costs (f)
Intangible asset
impairment (f)
As adjusted
Eff ective tax rate:
As reported
As adjusted
Sum of adjustments
to income taxes
Average number of common
Eff ective Income Tax Rate Excluding Certain Items Aff ecting Comparability We believe this measure provides
useful information to investors because it is important for assessing the eff ective tax rate excluding certain items
aff ecting comparability and presents the income tax eff ects of certain items aff ecting comparability.
Eff ective income tax rates excluding certain items aff ecting comparability are calculated as follows:
May 29, 2016
May 31, 2015
May 25, 2014
May 26, 2013
May 27, 2012
May 29, 2011
May 30, 2010
Fiscal Year Ended
Pretax
Pretax
Earnings Income Earnings Income Earnings Income Earnings Income Earnings
(a)
(a) Taxes
(a) Taxes
(a) Taxes
(a) Taxes
Pretax
Pretax
Pretax
Pretax
Pretax
Income Earnings Income Earnings
(a)
(a) Taxes
Taxes
Income
Taxes
$2,403.6 $755.2 $1,761.9 $586.8 $2,655.0 $883.3 $2,534.9 $741.2 $2,210.5 $709.6 $2,428.2 $721.1 $2,204.5 $771.2
(62.8)
(23.2)
89.7
33.2
(48.5)
(18.0)
(4.4)
(1.6)
104.2
38.6
(95.2)
(35.2)
(148.2)
(82.2)
—
—
—
—
—
(65.5)
(29.5)
(78.6)
—
—
—
—
—
85.4
—
—
—
—
integration costs (e)
—
—
16.0
5.6
—
—
12.3
3.5
11.2
1.5
—
229.8
57.5
—
69.0
20.7
8.0
—
62.2
4.4
343.5 125.8
13.2
4.9
3.6
—
—
—
25.2
18.6
—
4.4
2.7
—
—
—
260.0
83.1
—
—
—
—
—
—
100.6
36.3
—
—
—
—
$2,479.9 $739.5 $2,492.3 $760.8 $2,606.8 $840.2 $2,586.6 $835.6 $2,426.5 $786.0 $2,337.4 $776.4 $2,243.0 $750.4
—
—
—
—
4.4
—
—
88.9
—
—
1.6
—
—
—
7.1
—
—
2.6
—
(35.0)
—
—
—
—
31.4
11.6
—
—
—
—
31.4%
29.8%
33.3%
30.5%
33.3%
32.2%
29.2%
32.3%
$(15.7)
$174.0
$(43.1)
$94.4
32.1%
32.4%
$76.4
666.7
shares - diluted EPS
611.9
618.8
645.7
665.6
Impact of income tax
adjustments on diluted
EPS excluding certain items
aff ecting comparability
$0.03
$(0.28)
$0.07
$(0.14)
$(0.11)
(a) Earnings before income taxes and aft er-tax earnings from joint ventures.
(b) See Note 7 to the Consolidated Financial Statements on page 56 of this report.
(c) See Note 3 to the Consolidated Financial Statements on page 50 of this report.
(d) Th e fi scal 2015 tax item is related to the one-time repatriation of historical 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.
(e) 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.
(f) See Note 4 to the Consolidated Financial Statements on page 51 of this report.
36
General Mills
Free Cash Flow Conversion Rate and Total Cash Returned to Shareholders as a Percentage of Free Cash Flow We
believe these measures provide useful information to investors because they are important for assessing our effi -
ciency in converting earnings to cash and returning cash to shareholders. Th e calculation of free cash fl ow conver-
sion rate and net cash provided by operating activities conversion rate, its equivalent GAAP measure follows:
In Millions
2016
2015
2014
2013
2012
2011
2010
Fiscal Year
Net earnings, including earnings
attributable to redeemable and
$ 1,736.8
noncontrolling interests as reported
Mark-to-market, net of tax (a)
(39.6)
$
Divestiture (gain), net of tax (b)
(66.0)
$
Tax items (c)
—
Acquisition integration costs, net of tax (b)
—
Venezuela currency devaluation, net of tax (a)
—
Restructuring costs, net of tax (d)
$ 160.8
Project-related costs, net of tax (d)
36.8
$
Intangible asset impairment, net of tax (e)
—
Adjusted net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Net cash provided by
operating activities, as reported
Purchases of land, buildings,
and equipment
Free cash fl ow
Net cash provided by operating
activities conversion rate
Free cash fl ow conversion rate
$
(729.3)
$ 1,900.5
$ 1,828.8
$ 2,629.8
151%
104%
$ 1,259.4
56.5
$
—
78.6
$
10.4
$
8.0
$
$ 217.7
$
8.3
$ 176.9
$ 1,861.3
(30.5)
$
(36.0)
$
—
—
57.8
3.6
—
—
$
$
$ 1,892.5
(2.8)
$
—
(85.4)
8.8
20.8
15.9
—
—
$
$
$
$
$
$ 1,589.1
65.6
$
—
—
9.7
—
64.3
—
—
$
$
$ 1,803.5 $ 1,535.0
4.5
$
—
35.0
—
—
19.8
—
—
(60.0) $
—
(88.9) $
—
—
2.8 $
—
—
$
$ 1,815.8 $ 1,856.2 $ 1,849.8 $ 1,728.7 $ 1,657.4 $ 1,594.3
$ 2,542.8 $ 2,541.0 $ 2,926.0 $ 2,407.2 $ 1,531.1 $ 2,185.1
(712.4) $
$
(649.9)
$ 1,830.4 $ 1,877.5 $ 2,312.1 $ 1,731.3 $ 882.3 $ 1,535.2
(675.9) $
(613.9) $
(663.5) $
(648.8) $
202%
101%
137%
101%
155%
125%
151%
100%
85%
53%
142%
96%
Rolling 3 Years, In Millions
Fiscal
2014-2016
Fiscal
2013-2015
Fiscal
2012-2014
Fiscal
2011-2013
Fiscal
2010-2012
Adjusted earnings, including earnings
attributable to redeemable and
noncontrolling interests
Free cash fl ow, rolling 3 years
Free cash fl ow conversion rate, rolling 3 years
$ 5,500.8
5,608.4
$ 5,521.8
6,020.0
$ 5,434.7
5,920.9
$ 5,235.9
4,925.7
$ 4,980.4
4,148.8
102%
109%
109%
94%
83%
Th e calculation of total cash returned to shareholders as a percentage of free cash fl ow follows:
In Millions
Fiscal Year
2016
2015
2014
Dividends paid
Purchases of common stock for treasury
Proceeds from common stock issued on exercised options
Total cash returned to shareholders
Total cash returned to shareholders as a percentage of free cash fl ow
Total cash returned to shareholders as a percentage of free cash fl ow – cumulative 2014-2016
$ 1,071.7
606.7
(171.9)
$ 1,506.5
79%
110%
$ 1,017.7 $ 983.3
1,745.3
1,161.9
(108.1)
(163.7)
$ 2,015.9 $ 2,620.5
140%
110%
(a) See Note 7 to the Consolidated Financial Statements on page 56 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 50 of this report.
(c) Th e fi scal 2015 tax item is related to the one-time repatriation of historical 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.
(d) See Note 4 to the Consolidated Financial Statements on page 51 of this report.
(e) See Note 6 to the Consolidated Financial Statements on page 54 of this report.
See our reconciliation above of the eff ective income tax rate as reported to the eff ective income tax rate excluding
certain items aff ecting comparability for the tax impact of each item aff ecting comparability.
2016 Annual Report
37
Adjusted Operating Profi t as a Percent of Net Sales Excluding Certain Items Aff ecting Comparability We believe
this measure provides useful information to investors because it is important for assessing our operating profi t mar-
gin on a comparable basis. Adjusted operating profi t excludes certain items aff ecting comparability.
Percent of Net Sales
2016
2015
Fiscal Year
2014
2013
2012
$2,707.4 16.3% $2,077.3 11.8% $2,957.4 16.5% $2,851.8 16.0% $2,562.4 15.4%
Operating profi t as reported
Mark-to-market eff ects (a)
Divestitures (gain) (b)
Acquisition integration costs (c)
Venezuela currency devaluation (d)
Restructuring costs (e)
Project-related costs (e)
(62.8) (0.4)
89.7
0.5
(148.2) (0.9)
—
—
—
—
—
—
16.0
0.1
8.0
—
229.8
1.4
343.5
1.9
57.5
0.4
13.2
0.1
Intangible asset impairment (f)
—
—
260.0
1.5
(48.5) (0.3)
(65.5) (0.4)
—
—
62.2
0.4
3.6
—
—
—
—
—
(4.4) —
— —
12.3
0.1
25.2
0.1
18.6
0.1
—
—
—
—
104.2 0.6
— —
11.2
0.1
—
—
100.6
0.6
—
—
—
—
Adjusted operating profi t
$2,783.7 16.8% $2,807.7 15.9% $2,909.2 16.2% $2,903.5 16.3% $2,778.4 16.7%
(a) See Note 7 to the Consolidated Financial Statements on page 56 of this report.
(b) See Note 3 to the Consolidated Financial Statements on page 50 of this report.
(c) 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.
(d) See Note 7 to the Consolidated Financial Statements on page 56 of this report.
(e) See Note 4 to the Consolidated Financial Statements on page 51 of this report.
(f) See Note 6 to the Consolidated Financial Statements on page 54 of this report.
38
General Mills
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 assumptions.
We also may make written or oral forward-looking
statements, including statements contained in our fi l-
ings with the SEC and in our reports to shareholders.
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 con-
sumer 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 sig-
nifi cant accounting estimates; product quality and safety
issues, including recalls and product liability; changes
in consumer demand for our products; eff ectiveness
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 purchasing and
inventory levels of signifi cant customers; fl uctuations
in the cost and availability of supply chain resources,
including raw materials, packaging, and energy; disrup-
tions or ineffi ciencies in the supply chain; eff ectiveness
of restructuring and cost savings initiatives; 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; foreign economic con-
ditions, including currency rate fl uctuations; and politi-
cal unrest in foreign markets and economic uncertainty
due to terrorism or war.
You should also consider the risk factors that we
identify in Item 1A of our 2016 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.
2016 Annual Report
39
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 56 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
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 cor-
relates 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 29, 2016, and May 31, 2015, and the average
fair value impact during the year ended May 29, 2016.
In Millions
Fair Value Impact
May 29,
2016
Average
During
Fiscal 2016
Interest rate instruments
$33.3
Foreign currency instruments
27.6
Commodity instruments
Equity instruments
3.3
1.7
$30.7
24.4
3.7
1.6
May 31,
2015
$25.1
17.9
3.7
1.2
40
General Mills
Reports of Management and Independent
Registered Public Accounting Firm
REPORT OF MANAGEMENT RESPONSIBILITIES
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 separation of
duties and responsibilities, and there are documented
policies regarding use of our assets and proper fi nancial
reporting. Th ese formally stated and regularly commu-
nicated 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. Th e 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 2017.
K. J. Powell
Chairman of the Board
and Chief Executive Offi cer
D. L. Mulligan
Executive Vice President
and Chief Financial
Offi cer
June 30, 2016
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Th e Board of Directors and Stockholders
General Mills, Inc.:
We have audited the accompanying consolidated balance
sheets of General Mills, Inc. and subsidiaries as of May
29, 2016 and May 31, 2015, and the related consolidated
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 29,
2016. In connection with our audits of the consolidated
fi nancial statements, we have audited the accompany-
ing fi nancial statement schedule. We also have audited
General Mills, Inc.’s internal control over fi nancial report-
ing as of May 29, 2016, 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 man-
agement is responsible for these consolidated fi nancial
statements and fi nancial statement schedule, for main-
taining 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 Item 9a
Management’s Report on Internal Control over Financial
Reporting in our 2016 Form 10-K. Our responsibility is to
express an opinion on these consolidated fi nancial state-
ments and fi nancial statement schedule and an opinion
on the Company’s internal control over fi nancial report-
ing 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
2016 Annual Report
41
evaluating the design and operating eff ectiveness 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 accounting
principles. A company’s internal control over fi nancial
reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in rea-
sonable detail, accurately and fairly refl ect the transac-
tions and dispositions of the assets of the Company;
(2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of fi nan-
cial statements in accordance with generally accepted
accounting principles, and that receipts and expendi-
tures of the Company are being made only in accor-
dance with authorizations of management and directors
of the Company; and (3) provide reasonable assurance
regarding prevention or timely detection of unautho-
rized acquisition, use, or disposition of the Company’s
assets that could have a material eff ect on the fi nancial
statements.
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 29, 2016 and May 31, 2015, 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
29, 2016, 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 29, 2016, based on criteria established
in Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations
of the Treadway Commission.
Because of its inherent limitations, internal control
over financial reporting may not prevent or detect
Minneapolis, Minnesota
June 30, 2016
42
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
Divestitures (gain)
Restructuring, impairment, and other exit costs
Operating profi t
Interest, net
Earnings before income taxes and aft er-tax earnings from joint ventures
Income taxes
Aft er-tax earnings from joint ventures
Net earnings, including earnings attributable to redeemable and noncontrolling interests
Net earnings attributable to redeemable and noncontrolling interests
Net earnings attributable to General Mills
Earnings per share - basic
Earnings per share - diluted
Dividends per share
See accompanying notes to consolidated fi nancial statements.
Fiscal Year
2016
2015
2014
$ 16,563.1
$ 17,630.3
$ 17,909.6
10,733.6
3,118.9
11,681.1
3,328.0
11,539.8
3,474.3
(148.2)
151.4
2,707.4
303.8
2,403.6
755.2
88.4
1,736.8
39.4
—
543.9
2,077.3
315.4
1,761.9
586.8
84.3
1,259.4
38.1
(65.5)
3.6
2,957.4
302.4
2,655.0
883.3
89.6
1,861.3
36.9
$ 1,697.4
$ 1,221.3
$ 1,824.4
$
$
$
2.83
2.77
1.78
$
$
$
2.02
1.97
1.67
$
$
$
2.90
2.83
1.55
Consolidated Statements of Comprehensive Income
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions
Fiscal Year
2016
2015
2014
Net earnings, including earnings attributable to redeemable and noncontrolling interests
$ 1,736.8
$ 1,259.4
$ 1,861.3
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.
(108.7)
(325.9)
0.1
16.0
(9.5)
128.6
(957.9)
(358.4)
0.8
4.1
4.9
105.1
(299.4)
(1,201.4)
(11.3)
206.0
0.3
5.0
(4.6)
107.6
303.0
1,437.4
58.0
2,164.3
41.5
(192.9)
94.9
$ 1,395.9
$
250.9
$ 2,069.4
2016 Annual Report
43
Consolidated Balance Sheets
GENERAL MILLS, INC. AND SUBSIDIARIES
In Millions, Except Par Value
ASSETS
Current assets:
Cash and cash equivalents
Receivables
Inventories
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 157.8 and 155.9
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated fi nancial statements.
44
General Mills
May 29, 2016 May 31, 2015
$
763.7
$
334.2
1,360.8
1,386.7
1,413.7
1,540.9
399.0
423.8
3,937.2
3,685.6
3,743.6
3,783.3
8,741.2
8,874.9
4,538.6
4,677.0
751.7
811.2
$ 21,712.3
$ 21,832.0
$ 2,046.5
$ 1,684.0
1,103.4
1,000.4
269.8
615.8
1,595.0
1,589.9
5,014.7
4,890.1
7,057.7
7,575.3
1,399.6
1,450.2
2,087.6
1,744.8
15,559.6
15,660.4
845.6
778.9
75.5
75.5
1,177.0
1,296.7
12,616.5
11,990.8
(6,326.6)
(6,055.6)
(2,612.2)
(2,310.7)
4,930.2
4,996.7
376.9
396.0
5,307.1
5,392.7
$ 21,712.3
$ 21,832.0
Consolidated Statements of Total Equity
and Redeemable Interest
GENERAL MILLS, INC. AND SUBSIDIARIES
$.10 Par Value Common Stock
(One Billion Shares Authorized)
Issued
Treasury
Par
Shares Amount
Additional
Paid-In
Capital
754.6
$75.5
$1,166.6
Shares
Amount
Accumulated
Other
Retained Comprehensive Noncontrolling
Interests
Earnings
Loss
Total Redeemable
Interest
Equity
(113.8) $(3,687.2) $ 10,702.6
1,824.4
$(1,585.3)
245.0
$456.3 $7,128.5
2,094.3
24.9
$967.5
70.0
(739.8)
30.0
(35.6)
(1,775.3)
13.8
7.1
243.1
(91.3)
108.5
4.2
(739.8)
(1,745.3)
256.9
(91.3)
108.5
4.2
17.6
17.6
(28.2)
(28.2)
754.6
75.5
1,231.8
(142.3)
(5,219.4) 11,787.2
(1,340.3)
470.6
7,005.4
(4.2)
(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
83.2
20.7
(9.9)
20.7
0.6
(83.2)
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
(25.9)
(25.9)
0.9
1,697.4
(301.5)
11.2
1,407.1
30.3
(10.7)
(606.7)
(1,071.7)
(46.3)
8.8
335.7
(63.3)
84.8
(91.5)
(3.4)
(1,071.7)
(606.7)
289.4
(63.3)
84.8
(91.5)
(4.5)
(1.1)
91.5
(29.2)
(29.2)
(55.1)
In Millions, Except per Share Data
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 redeemable and
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 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
Total comprehensive
income (loss)
Cash dividends declared
($1.78 per share)
Shares purchased
Stock compensation plans (includes
income tax benefi ts of $94.1)
Unearned compensation related
to stock unit awards
Earned compensation
Increase in redemption
value of redeemable interest
Acquisition of interest in subsidiary
Distributions to redeemable and
noncontrolling interest holders
Balance as of May 29, 2016
754.6
$75.5
$1,177.0
(157.8) $(6,326.6) $12,616.5
$(2,612.2)
$376.9 $5,307.1
$845.6
See accompanying notes to consolidated fi nancial statements.
2016 Annual Report
45
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
Divestitures (gain), net
Restructuring, impairment, and other exit costs
Changes in current assets and liabilities, excluding the eff ects of acquisitions and divestitures
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 divestitures
Exchangeable note
Other, net
Net cash provided (used) by investing activities
Cash Flows - Financing Activities
Change in notes payable
Issuance of long-term debt
Payment of long-term debt
Proceeds from 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 and divestitures:
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.
46
General Mills
Fiscal Year
2016
2015
2014
$ 1,736.8
$ 1,259.4
$ 1,861.3
608.1
(88.4)
75.1
89.8
120.6
(94.1)
(47.8)
118.1
(148.2)
107.2
258.2
(105.6)
2,629.8
(729.3)
(84.0)
63.9
4.4
828.5
21.1
(11.2)
93.4
(323.8)
542.5
(1,000.4)
171.9
94.1
(606.7)
(1,071.7)
—
(84.3)
(7.2)
(2,285.6)
(8.1)
429.5
334.2
$ 763.7
$
(6.9)
(146.1)
(0.1)
318.7
92.6
$ 258.2
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)
$
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
years 2016 and 2014 consisted of 52 weeks, while fi scal
year 2015 consisted of 53 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 2016 we changed the reporting period
of Yoplait SAS and Yoplait Marques SNC within our
International segment and Annie’s, Inc. (Annie’s) within
our U.S. Retail segment from an April fi scal year-end
to a May fi scal year-end to match our fi scal calen-
dar. Accordingly, in fi scal 2016, our results included 13
months of results from the aff ected operations. Th e
impact of these changes was not material to our con-
solidated results of operations. Our General Mills Brasil
Alimentos Ltda (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 years, and equipment, furniture, and soft ware are
usually depreciated over 3 to 10 years. Fully depreciated
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 accumulated depre-
ciation and the resulting gains and losses, if any, are
recognized in earnings. As of May 29, 2016, 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. In
fi scal 2016, we changed the date of our annual goodwill
and indefi nite-lived intangible asset impairment assess-
ment from the fi rst day of the third quarter to the fi rst
day of the second quarter to more closely align with
the timing of our annual long-range planning process.
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
2016 Annual Report
47
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
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, 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 dis-
count 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
48
General Mills
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, as a
results of ongoing operating losses, projected decreases
in earnings, increases in the weighted average cost of
capital, or signifi cant business disruptions. Th e signif-
icant assumptions used to estimate fair value include
revenue growth and profi tability, royalty rates, capi-
tal spending, depreciation and taxes, foreign currency
exchange rates, and a discount rate. By their nature,
these projections and assumptions are uncertain. If we
were to determine the current fair value of our invest-
ment was less than the carrying value of the invest-
ment, 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 impair-
ment 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
all or a portion of its redeemable interest to us at fair
value once per year, up to three times before December
2024. 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 second quarter of fi scal 2016, we adjusted
the redeemable interest’s redemption value based on a
discounted cash fl ow model. Th e signifi cant assump-
tions used to estimate the redemption value include
projected revenue growth and profi tability from our
long-range plan, capital spending, depreciation, taxes,
foreign currency exchange rates, and a discount rate.
Revenue Recognition We recognize sales revenue when
the shipment is accepted by our customer. Sales include
shipping and handling charges billed to the customer
and are reported net of consumer coupon 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 exist-
ing conditions caused by past operations that do not
contribute to current or future revenues are expensed.
Liabilities for anticipated remediation costs are recorded
on an undiscounted basis when they are probable and
reasonably estimable, generally no later than the com-
pletion of feasibility studies or our commitment to a
plan of action.
Advertising Production Costs We expense the produc-
tion costs of advertising the 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 period 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
supplies attributable to R&D activities. Other costs
include depreciation and maintenance of research facil-
ities, including assets at facilities that are engaged in
pilot plant activities.
Foreign Currency Translation For all significant
foreign operations, the functional currency is the
local currency. Assets and liabilities of these 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 our 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 earn-
ings or other comprehensive income, based on whether
the instrument is designated and eff ective as a hedge
transaction 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 ectiveness 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-based
2016 Annual Report
49
compensation is recognized straight line over the vest-
ing period. Our stock-based compensation expense
is recorded in selling, general and administrative
(SG&A) expenses and cost of sales in our Consolidated
Statements of Earnings and allocated to each report-
able segment in our segment results.
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 generally
recognized immediately for awards granted to retire-
ment-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, Canada, and Mexico
and members of our Board of Directors, including sever-
ance 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 ben-
efi 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
50
General Mills
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.
Other New Accounting Standards In the fi rst quar-
ter of fi scal 2015, we adopted new accounting require-
ments on the financial statement presentation of
unrecognized tax benefi ts when a net operating loss, a
similar tax loss, or a tax credit carryforward exists. Th e
adoption of this guidance did not have an impact on
our results of operations or fi nancial position.
In the second quarter of fi scal 2015, we adopted new
accounting requirements for share-based payment
awards issued based upon specifi c performance targets.
Th e adoption of this guidance did not have a material
impact on our results of operations or fi nancial position.
In the fi rst quarter of fi scal 2016, we adopted new
accounting requirements for the classifi cation of debt
issuance costs presented in the balance sheet as a
direct reduction from the carrying amount of the debt
liability. This presentation change has been imple-
mented retroactively. Th e adoption of this guidance did
not have a material impact on our fi nancial position.
In the fourth quarter of fiscal 2016, we adopted
new accounting requirements for the presentation of
deferred tax assets and liabilities, requiring noncurrent
classifi cation for all deferred tax assets and liabilities on
the statement of fi nancial position. Th is presentation
change has been implemented retroactively. Th e adop-
tion of this guidance did not have a material impact on
our fi nancial position.
NOTE 3. ACQUISITION AND DIVESTITURES
During the fourth quarter of fi scal 2016, we sold our
General Mills de Venezuela CA subsidiary to a third
party and exited our business in Venezuela. As a result
of this transaction, we recorded a pre-tax loss of $37.6
million. In addition, we sold our General Mills Argentina
S.A. foodservice business in Argentina to a third party
and recorded a pre-tax loss of $14.8 million.
During the second quarter of fi scal 2016, we sold our
North American Green Giant product lines for $822.7
million in cash, and we recorded a pre-tax gain of $199.1
million. We received net cash proceeds of $788.0 million
aft er transaction related costs. Aft er the divestiture, we
retained a brand intangible asset on our Consolidated
Balance Sheets of $30.1 million related to our continued
use of the Green Giant brand in certain markets out-
side of North America.
During 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 $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.
NOTE 4. RESTRUCTURING, IMPAIRMENT, AND
OTHER EXIT COSTS
Intangible Asset Impairment In fiscal 2015, we
recorded a $260.0 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 strate-
gies. Charges recorded in fi scal 2016 and 2015 related to
these initiatives were as follows:
In Millions
Asset
Severance Write-off s
Fiscal 2016
Pension Accelerated
Related Depreciation
Other
Total
Asset
Severance Write-off s
Pension Accelerated
Related Depreciation
Other
Total
Fiscal 2015
Project Compass
$ 45.4 $ — $ 1.4
$ —
$ 7.9 $ 54.7 $ — $ —
$ —
$ —
$ — $ —
Project Catalyst
(8.7)
1.2
—
—
—
(7.5)
121.5
12.3
Project Century
30.9
30.7
19.1
76.5
25.4
182.6
44.3
42.3
6.6
31.2
—
8.0
148.4
53.1
10.9
181.8
Combination of
certain operational
facilities
—
—
—
—
—
—
13.0
0.7
—
—
0.2 13.9
Charges associated
with restructuring
actions previously
announced
—
—
—
—
—
—
(0.6)
—
—
—
—
(0.6)
Total
$ 67.6 $ 31.9 $ 20.5
$ 76.5 $ 33.3 $ 229.8 $ 178.2 $ 55.3
$ 37.8 $ 53.1
$ 19.1 $ 343.5
2016 Annual Report
51
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 project, we expect to eliminate approximately 725
to 775 positions. We expect to incur approximately $60
million of net expenses relating to this action of which
approximately $60 million will be cash. We recorded
$54.7 million of restructuring charges relating to this
action in fi scal 2016. We expect this action to be com-
pleted by the end of fi scal 2017.
Project Century (Century) began in fi scal 2015 as a
review of our North American manufacturing and dis-
tribution network to streamline operations and identify
potential capacity reductions. In the second quarter of
fi scal 2016, we broadened the scope of Project Century
to identify opportunities to streamline our supply chain
outside of North America. As part of the expanded
project, we approved a restructuring plan to close man-
ufacturing facilities in our International segment sup-
ply chain located in Berwick, United Kingdom and East
Tamaki, New Zealand. Th ese actions aff ected approxi-
mately 285 positions. We expect to incur total restruc-
turing charges of approximately $41 million relating
to these actions, of which approximately $20 million
will be cash. We recorded $30.0 million of restructur-
ing charges relating to these actions in fi scal 2016. We
expect these actions to be completed by the end of fi s-
cal 2018.
As part of Century, in the first quarter of fiscal
2016, we approved a restructuring plan to close our
West Chicago, Illinois cereal and dry dinner manufac-
turing plant in our U.S. Retail segment supply chain.
Th is action will aff ect approximately 500 positions,
and we expect to incur approximately $117 million of
net expenses relating to this action, of which approxi-
mately $53 million will be cash. We recorded $79.2 mil-
lion of restructuring charges relating to this action in
fi scal 2016. We expect this action to be completed by
the end of fi scal 2019.
As part of Century, in the fi rst quarter of fi scal 2016,
we approved a restructuring plan to close our Joplin,
Missouri snacks plant in our U.S. Retail segment supply
chain. Th is action aff ected approximately 120 positions,
and we incurred $6.3 million of net expenses relating to
this action, of which less than $1 million was cash. We
recorded $6.3 million of restructuring charges relating
52
General Mills
to this action in fi scal 2016. Th is action was completed
in fi scal 2016.
As part of Century, in the third quarter of fi scal 2015,
we approved a restructuring plan to reduce our refrig-
erated dough capacity and exit our Midland, Ontario,
Canada and New Albany, Indiana facilities, which sup-
port our U.S. Retail, International, and Convenience
Stores and Foodservice supply chains. Th e Midland
action will affect approximately 100 positions, and
we expect to incur approximately $23 million of net
expenses relating to this action, of which approxi-
mately $16 million will be cash. We recorded $2.7 mil-
lion of restructuring charges relating to this action in
fi scal 2016. 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 $82 million of
net expenses relating to this action of which approxi-
mately $40 million will be cash. We recorded $17.1 mil-
lion of restructuring charges relating to this action in
fi scal 2016 and $51.3 million in fi scal 2015. We expect
these actions to be completed by the end of fi scal 2018.
As part of Century, in the second quarter of fi scal
2015, we approved a restructuring plan to consolidate
yogurt manufacturing capacity and exit our Methuen,
Massachusetts facility in our U.S. Retail segment and
Convenience Stores and Foodservice segment supply
chains. Th is action aff ected approximately 175 posi-
tions. We expect to incur approximately $58 million of
net expenses relating to this action of which approxi-
mately $12 million will be cash. We recorded $15.6 mil-
lion of restructuring charges relating to this action in
fi scal 2016 and $43.6 million in fi scal 2015. Th is action
was largely completed in fi scal 2016.
As part of Century, in the second quarter of fi s-
cal 2015, we approved a restructuring plan to elimi-
nate excess cereal and dry mix capacity and exit our
Lodi, California facility in our U.S. Retail supply chain.
Th is action aff ected approximately 430 positions. We
incurred $93.8 million of net expenses relating to this
action of which $20 million was cash. We recorded
$30.6 million of restructuring charges relating to this
action in fi scal 2016 and $63.2 million in fi scal 2015.
Th is action was completed in fi scal 2016.
In addition to the actions taken at certain facilities
described above, we incurred $1.1 million of restructur-
ing charges in fi scal 2016, relating to Century, and $17.2
million in fi scal 2015, of which $6 million was cash.
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 eliminated approx-
imately 750 positions primarily in the United States.
We incurred $140.9 million of net expenses relating to
these actions of which $118 million will be cash. In fi s-
cal 2016, we reduced the estimate of charges related to
this action by $7.5 million. We recorded $148.4 million
of restructuring charges relating to this action in fi s-
cal 2015. Th ese actions were largely completed in fi scal
2015.
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 expect to
incur approximately $15 million of net expenses relat-
ing to this action of which approximately $12 million
will be cash. We recorded $13.9 million of restructuring
charges relating to this action in fi scal 2015. We expect
this action to be completed in fi scal 2017.
In fi scal 2014, we recorded $3.6 million of restruc-
turing charges related to a productivity and cost sav-
ings plan approved in the fourth quarter of fi scal 2012.
Th ese restructuring actions were completed in fi scal
2014.
In fi scal 2016, we paid $122.6 million in cash relating
to restructuring initiatives. In fi scal 2015, we paid $63.6
million in cash relating to restructuring initiatives. In
fi scal 2014, we paid $22.4 million in cash related to
restructuring actions.
In addition to restructuring charges, we expect to
incur approximately $109 million of additional proj-
ect-related costs, which will be recorded in cost of sales,
all of which will be cash. We recorded project-related
costs in cost of sales of $57.5 million in fi scal 2016 and
$13.2 million in fi scal 2015. In addition, we paid $54.5
million in cash in fi scal 2016 and $9.7 million in fi scal
2015 for project-related costs.
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
2016
2015
2014
$ 78.4
$ 59.6
$ —
151.4
229.8
283.9
343.5
3.6
3.6
in cost of sales
$ 57.5
$ 13.2
$ —
Th e roll forward of our restructuring and other exit
cost reserves, included in other current liabilities, is as
follows:
In Millions
Reserve balance as
of May 26, 2013
2014 charges,
including foreign
currency translation
Utilized in 2014
Reserve balance as
of May 25, 2014
2015 charges,
including foreign
currency translation
Utilized in 2015
Reserve balance as
of May 31, 2015
2016 charges,
including foreign
currency translation
Utilized in 2016
Reserve balance as
Other
Severance Termination Exit Costs
Contract
Total
$ 19.5
$ —
$ — $ 19.5
6.4
(22.4)
3.5
—
—
—
—
—
6.4
(22.4)
—
3.5
176.4
(61.3)
0.6
—
8.1
185.1
(6.5) (67.8)
118.6
0.6
1.6
120.8
64.3
(109.3)
1.6
(0.7)
70.2
4.3
(4.4) (114.4)
of May 29, 2016
$ 73.6
$1.5
$1.5 $ 76.6
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.
2016 Annual Report
53
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.
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
cumulative investments
May 29,
2016
$518.9
469.2
May 31,
2015
$530.6
465.1
In Millions
Current assets
Noncurrent assets
Current liabilities
Noncurrent liabilities
May 29,
2016
May 31,
2015
$ 814.1
$ 800.1
959.9
962.1
1,457.3
1,484.8
81.7
118.2
NOTE 6. GOODWILL AND OTHER
INTANGIBLE ASSETS
Th e components of goodwill and other intangible assets
are as follows:
May 29,
2016
May 31,
2015
$ 8,741.2 $ 8,874.9
In Millions
Goodwill
Other intangible assets:
Intangible assets not subject
to amortization:
Brands and other
indefi nite-lived intangibles
4,147.5
4,262.1
Intangible assets subject to amortization:
Franchise agreements, customer
relationships, and other
fi nite-lived intangibles
Less accumulated amortization
536.9
(145.8)
Intangible assets subject to amortization
391.1
544.0
(129.1)
414.9
300.3
390.3
Total
Other intangible assets
4,538.6
4,677.0
$13,279.8 $13,551.9
Based on the carrying value of fi nite-lived intangi-
ble assets as of May 29, 2016, amortization expense
for each of the next fi ve fi scal years is estimated to be
approximately $28 million.
Joint venture earnings and cash fl ow activity follows:
Fiscal Year
In Millions
2016
2015
2014
Sales to joint ventures
$ 10.5
$ 11.6
$12.1
Net advances (repayments)
(63.9)
102.4
Dividends received
75.1
72.6
54.9
90.5
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
Earnings before income taxes
Earnings aft er income taxes
Fiscal Year
2016
2015
2014
$1,674.8 $1,894.5 $2,107.9
369.4
370.2
386.9
2,044.2 2,264.7
2,494.8
867.6
234.8
186.7
925.4
1,030.3
220.9
170.7
219.1
168.8
54
General Mills
Th e changes in the carrying amount of goodwill for
fi scal 2014, 2015, and 2016 are as follows:
Th e changes in the carrying amount of other intangi-
ble assets for fi scal 2014, 2015, and 2016 are as follows:
currency translation —
Balance as of
May 25, 2014 5,829.2
589.8
Acquisition
Other activity,
primarily foreign
currency translation —
Balance as of
In Millions
Balance as of
U.S.
Joint
Retail International Foodservice Ventures
Convenience
Stores and
Total
In Millions
Balance as of
U.S.
Retail
International
Joint
Ventures
Total
$3,312.4
$1,638.2
$64.5 $5,015.1
May 26, 2013 $5,841.4 $1,387.0 $921.1 $472.7 $8,622.2
Divestiture
Other activity,
primarily foreign
(12.2)
—
—
—
(12.2)
May 26, 2013
Other activity,
primarily foreign
currency translation
Balance as of
(4.9)
3.6
0.5
(0.8)
15.0
—
25.5
40.5
1,402.0
921.1 498.2 8,650.5
—
—
—
589.8
May 25, 2014
Acquisition
Impairment charge
Other activity,
primarily foreign
3,307.5
268.4
(260.0)
1,641.8
—
—
65.0 5,014.3
268.4
(260.0)
—
—
(268.7)
—
(96.7)
(365.4)
May 31, 2015 6,419.0
1,133.3
921.1 401.5 8,874.9
Acquisitions
Divestitures
Other activity,
54.1
(180.2)
29.4
(6.2)
—
—
—
—
83.5
(186.4)
primarily foreign
currency translation —
Balance as of
(35.5)
—
4.7
(30.8)
currency translation
Balance as of
May 31, 2015
Acquisitions
Divestiture
Other activity,
primarily amortization
and foreign currency
translation
Balance as of
(4.0)
(340.3)
(1.4)
(345.7)
3,311.9
23.1
(119.6)
1,301.5
7.0
—
63.6 4,677.0
30.1
(119.6)
—
—
(3.7)
(44.6)
(0.6)
(48.9)
May 29, 2016 $6,292.9 $1,121.0 $921.1 $406.2 $8,741.2
May 29, 2016
$3,211.7
$1,263.9
$63.0 $4,538.6
In fi scal 2015, we reorganized certain reporting units
within our U.S. Retail operating segment. Our chief
operating decision maker continues to assess perfor-
mance and make decisions about resources to be allo-
cated to our segments at the U.S. Retail, International,
and Convenience Stores and Foodservice operating seg-
ment level.
We performed our fi scal 2016 impairment assess-
ment as of the fi rst day of the second quarter of fi s-
cal 2016, 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.
As of our fi scal 2016 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 and Uncle Toby’s brand assets. Th e excess fair
value above the carrying value of these brand assets is
as follows:
In Millions
Mountain High
Uncle Toby’s
Excess Fair
Value Above
Carrying
Value
20%
11%
Carrying
Value
$35.4
$52.2
Our strategies for fi scal 2017 and fi scal 2018 will focus
our growth investments on our brands and platforms
with the strongest profi table growth potential. As a
result, certain parts of our U.S. Retail segment could
experience reduced future sales projections. We per-
formed a sensitivity analysis for certain brand intangi-
ble assets and determined that, while not impaired as
of May 29, 2016, the Progresso and Food Should Taste
2016 Annual Report
55
Good brands had risk of decreasing coverage. We will
continue to monitor these businesses.
In fi scal 2015, we made a strategic decision to redi-
rect certain resources supporting our Green Giant busi-
ness in our U.S. Retail segment to other businesses
within the segment. Th erefore, future sales and prof-
itability 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 flow projec-
tions for the Green Giant business, an updated royalty
rate, a weighted-average cost of capital, and a tax rate.
We recorded a $260.0 million impairment charge in
restructuring, impairment, and other exit costs in fi scal
2015 related to this asset.
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 29, 2016 and
May 31, 2015, a comparison of cost and market val-
ues of our marketable debt and equity securities is as
follows:
Cost
Fair
Value
Gross
Gains
Gross
Losses
Fiscal Year Fiscal Year Fiscal Year Fiscal Year
In Millions
2016 2015
2016 2015 2016 2015 2016 2015
Available for sale:
Debt securities $165.7 $2.6 $165.8 $ 2.6 $0.1 $ — $ — $ —
Equity securities
1.8 1.8
8.4
8.3
6.6
6.5 —
—
Total
$167.5 $4.4 $174.2 $10.9 $6.7 $6.5 $ — $ —
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
dependent upon our intended holding period, and/or
the security’s maturity date. 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.
56
General Mills
Scheduled maturities of our marketable securities are
as follows:
In Millions
Under 1 year (current)
Equity securities
Total
Available for Sale
Cost
$ 165.7
1.8
$ 167.5
Market
Value
$ 165.8
8.4
$ 174.2
As of May 29, 2016, cash and cash equivalents total-
ing $7.5 million were pledged as collateral for derivative
contracts. As of May 29, 2016, $9.1 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 $8,629.0 mil-
lion and $8,161.1 million, respectively, as of May 29,
2016. 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
similar 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
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 believe that these instruments
are eff ective in achieving our objective of providing cer-
tainty 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 corporate 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 unal-
located corporate items to segment operating profi t,
allowing our operating segments to realize the eco-
nomic 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 2016, 2015 and
2014 included:
In Millions
2016
2015
2014
Net loss on mark-to-market
valuation of commodity positions $ (69.1)
$ (163.7)
$ (4.9)
Fiscal Year
Net loss on commodity
positions reclassifi ed from
unallocated corporate items
to segment operating profi t
127.9
84.4
51.2
Net mark-to-market revaluation
of certain grain inventories
4.0
(10.4)
2.2
Net mark-to-market valuation
of certain commodity positions
recognized in unallocated
corporate items
$ 62.8
$ (89.7)
$ 48.5
As of May 29, 2016, the net notional value of com-
modity derivatives was $295.4 million, of which $189.1
million related to agricultural inputs and $106.3 mil-
lion 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 rate 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 2016,
2015, and 2014.
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 less than $1 mil-
lion in fi scal 2016, an $1.6 million gain in fi scal 2015,
and less than $1 million in fi scal 2014.
In fi scal 2016, in advance of planned debt fi nancing,
we entered into $400.0 million of treasury locks with an
average fi xed rate of 2.1 percent due February 15, 2017.
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 in fi s-
cal 2015, coincident with the issuance of our €500 mil-
lion 8-year fi xed-rate notes and €400 million 12-year
fi xed-rate notes.
2016 Annual Report
57
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 29,
2016
May 31,
2015
Pay-fl oating swaps - notional amount
$ 1,000.0 $ 1,250.0
Average receive rate
Average pay rate
1.8%
1.1%
1.6%
0.7%
Th e swap contracts mature as follows:
In Millions
2018
2020
Total
Pay Floating
$ 500.0
500.0
$ 1,000.0
In fi scal 2015, we entered into swaps to convert
$500.0 million of 1.4 percent fixed-rate notes due
October 20, 2017, and $500.0 million 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 in fi scal 2014, coin-
cident with the issuance of our $500.0 million 10-year
fi xed-rate notes.
As of May 29, 2016, 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)
$ (1.6)
1.4
(54.9)
(1.7)
13.8
(3.6)
(13.4)
10.5
$ (49.5)
58
General Mills
Interest rate
contracts
Foreign
exchange
contracts
Equity
Th e following tables reconcile the net fair values of assets and liabilities subject to off setting arrangements that
are recorded in our Consolidated Balance Sheets to the net fair values that could be reported in our Consolidated
Balance Sheets:
May 29, 2016
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
$ 4.4
$ —
$ 4.4
$ (3.9)
$ —
$ 0.5
$(22.2)
$ —
$(22.2)
$ 3.9
$7.5 $(10.8)
8.5
—
8.5
—
—
8.5
(3.0)
—
(3.0)
—
—
(3.0)
contracts
2.4
25.4
—
—
25.4
(8.7)
—
16.7
(13.7)
—
(13.7)
8.7
—
(5.0)
2.4
—
—
2.4
—
—
—
—
—
—
Total
$40.7
$ —
$40.7
$(12.6)
$ —
$28.1
$(38.9)
$ —
$(38.9)
$12.6
$7.5 $(18.8)
(a) Includes related collateral off set in our Consolidated Balance Sheets.
(b) Net fair value as recorded in our Consolidated Balance Sheets.
(c) Fair value of assets that could be reported net in our Consolidated Balance Sheets.
(d) Fair value of liabilities that could be reported net in our Consolidated Balance Sheets.
(e) Fair value of assets and liabilities reported on a gross basis in our 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
contracts
Total
4.0
—
4.0
—
—
4.0
—
—
—
—
—
—
25.9
—
25.9
(12.5)
—
13.4
(65.3)
—
(65.3)
12.5
—
(52.8)
$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 our Consolidated Balance Sheets.
(b) Net fair value as recorded in our Consolidated Balance Sheets.
(c) Fair value of assets that could be reported net in our Consolidated Balance Sheets.
(d) Fair value of liabilities that could be reported net in our Consolidated Balance Sheets.
(e) Fair value of assets and liabilities reported on a gross basis in our Consolidated Balance Sheets.
2016 Annual Report
59
we recorded an $8 million foreign exchange loss. In the
fourth quarter of fi scal 2016, we sold our General Mills
de Venezuela CA subsidiary to a third party and exited
our business in Venezuela.
Equity Instruments
Equity price movements affect our compensation
expense as certain investments made by our employees
in our deferred compensation plan are revalued. We use
equity swaps to manage this risk. As of May 29, 2016,
the net notional amount of our equity swaps was $113.5
million. Th ese swap contracts mature in fi scal 2017.
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 for-
eign currency earnings to the U.S. dollar. Our principal
exposures are to the Australian dollar, Brazilian real,
British pound sterling, Canadian dollar, Chinese ren-
minbi, euro, Japanese yen, Mexican peso, and Swiss
franc. We primarily use foreign currency forward con-
tracts to selectively hedge our foreign currency cash
fl ow exposures. We also generally swap our foreign-de-
nominated commercial paper borrowings and nonfunc-
tional currency intercompany loans back to U.S. dollars
or the functional currency of the entity with foreign
exchange exposure. Th e gains or losses on these deriv-
atives off set the foreign currency revaluation gains or
losses recorded in earnings on the associated borrow-
ings. We generally do not hedge more than 18 months
in advance.
As of May 29, 2016, the net notional value of foreign
exchange derivatives was $997.7 million. Th e amount
of hedge ineff ectiveness was less than $1 million in
each of fi scal 2016, 2015, and 2014.
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. In fi scal 2016, we entered
into a net investment hedge for a portion of our net
investment in foreign operations denominated in euros
by issuing €500.0 million of euro-denominated bonds.
In 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. In fi scal 2014, we entered
into a net investment hedge for a portion of our net
investment in foreign operations denominated in euros
by issuing €500.0 million of euro-denominated bonds.
As of May 29, 2016, we had deferred net foreign cur-
rency transaction losses of $20.1 million in AOCI asso-
ciated with hedging activity.
Venezuela is a highly infl ationary economy and as
such, we remeasured the value of the assets and liabil-
ities of our former Venezuelan subsidiary based on the
exchange rate at which we expected to remit dividends
in U.S. dollars from the SIMADI market. In fi scal 2015,
60
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 29, 2016 and May 31, 2015, were as follows:
In Millions
Level 1 Level 2 Level 3
Total
Level 1 Level 2 Level 3 Total
May 29, 2016
May 29, 2016
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)
Total
$ — $ 7.7 $ — $ 7.7 $ — $
(3.0) $ — $ (3.0)
—
12.2
— 12.2
— (12.2) —
(12.2)
—
19.9
— 19.9
— (15.2) —
(15.2)
—
13.2
— 13.2
—
(1.5) —
(1.5)
2.6
1.7
— 4.3
(0.6) (21.6) —
(22.2)
—
1.8
— 1.8
—
(5.5) —
(5.5)
2.6
16.7
— 19.3
(0.6) (28.6) —
(29.2)
8.4
165.8
— 174.2
— —
—
—
—
26.0
— 26.0
— —
—
—
8.4
191.8
— 200.2
— —
—
—
Total assets, liabilities, and derivative positions recorded at fair value
$ 11.0 $ 228.4 $ — $ 239.4 $ (0.6) $ (43.8) $ — $ (44.4)
(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 $11.4 million in non-cash impairment charges in fi scal 2016 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 $28.2 million and were associated with the
restructuring actions described in Note 4.
2016 Annual Report
61
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)
—
0.4
—
0.4
7.2
2.9
— 10.1
—
3.3
—
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
37.8
—
—
10.9
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.
We did not signifi cantly change our valuation techniques from prior periods.
62
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 29, 2016 and May 31, 2015, follows:
In Millions
Derivatives in Cash Flow Hedging Relationships:
Amount of gain (loss) recognized in other
Interest Rate Foreign Exchange
Contracts
Contracts
Equity
Contracts
Commodity
Contracts
Total
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
Fiscal Year
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
comprehensive income (OCI) (a)
$ (2.6) $ (5.9) $21.2 $13.3
$ —
$ —
$ —
$ — $18.6
$7.4
Amount of net gain (loss) reclassifi ed from
AOCI into earnings (a) (b)
(10.6)
(10.6) 22.1
5.0
—
—
—
—
11.5
(5.6)
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.
(0.1)
(0.6)
(0.7)
0.1
—
—
—
—
(0.8)
(0.5)
0.1
1.6
—
—
—
—
—
—
0.1
1.6
—
—
(0.2)
(6.9) —
—
—
—
(0.2)
(6.9)
—
—
1.1
(54.3)
(4.5)
9.6
(56.1) (163.7) (59.5) (208.4)
(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 (loss) recognized in earnings is reported in interest, net for interest rate contracts, in cost of sales for commodity contracts, and in SG&A expenses for
equity contracts and foreign exchange contracts.
2016 Annual Report
63
Amounts Recorded in Accumulated Other
Comprehensive Loss
As of May 29, 2016, the aft er-tax amounts of unreal-
ized gains and losses in AOCI related to hedge deriva-
tives follows:
In Millions
Aft er-Tax Gain/(Loss)
Unrealized losses from interest rate cash fl ow hedges
$ (31.3)
Unrealized gains from foreign currency cash fl ow hedges
5.8
Aft er-tax loss in AOCI related to hedge derivatives
$ (25.5)
Th e net amount of pre-tax gains and losses in AOCI
as of May 29, 2016, that we expect to be reclassifi ed
into net earnings within the next 12 months is $1.2
million of loss.
Credit-Risk-Related Contingent Features
Certain of our derivative instruments contain provi-
sions 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 invest-
ment grade, the counterparties to the derivative instru-
ments could request full collateralization on derivative
instruments in net liability positions. Th e aggregate fair
value of all derivative instruments with credit-risk-re-
lated contingent features that were in a liability posi-
tion on May 29, 2016, was $21.9 million. We have
posted $7.5 million of collateral under these contracts.
If the credit-risk-related contingent features underlying
these agreements had been triggered on May 29, 2016,
we would have been required to post $14.4 million of
collateral to counterparties.
Concentrations Of Credit And Counterparty
Credit Risk
During fiscal 2016, customer concentration was as
follows:
No customer other than Wal-Mart accounted for 10
percent or more of our consolidated 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 $14.8
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 29, 2016, $537.0 million of our total
accounts payable is payable to suppliers who utilize this
third party service.
Convenience
Stores and
Consolidated U.S. Retail International Foodservice
Percent of total
Wal-Mart: (a)
Net sales
Accounts receivable
Five largest customers:
Net sales
20%
30%
26%
5%
4%
8%
8%
53%
22%
45%
(a) Includes Wal-Mart Stores, Inc. and its affi liates.
64
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 29, 2016
May 31, 2015
Weighted-
average
Interest
Rate
Notes
Payable
Weighted-
average
Interest
Rate
Notes
Payable
In Millions
U.S. commercial paper
$ —
—%
$432.0
Financial institutions
269.8
8.6
183.8
Total
$269.8
8.6%
$615.8
0.3%
9.5
3.0%
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 29, 2016:
In Billions
Credit facility expiring:
May 2021
June 2019
Total committed credit facilities
Uncommitted credit facilities
Total committed and uncommitted
Facility
Amount
Borrowed
Amount
$ 2.7
0.2
2.9
0.4
$ —
0.1
0.1
0.1
credit facilities
$ 3.3
$ 0.2
In fi scal 2016, we entered into a $2.7 billion fee-paid
committed credit facility that is scheduled to expire in
May 2021. Concurrent with the execution of this credit
facility, we terminated our $1.7 billion and $1.0 billion
credit facilities.
In fi scal 2015, 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.
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 29, 2016.
Long-Term Debt In January 2016, we issued €500.0
million principal amount of fl oating-rate notes due
January 15, 2020. Interest on the notes are pay-
able quarterly in arrears. Th e notes are not generally
redeemable prior to maturity. Th ese notes are senior
unsecured obligations that include a change of control
repurchase provision. Th e net proceeds were used to
repay a portion of our maturing long-term debt.
In January 2016, we repaid $250 million of 0.875 per-
cent fi xed-rate notes and $750 million of fl oating-rate
notes.
In April 2015, we issued €500.0 million principal
amount of 1.0 percent fi xed-rate notes due April 27,
2023 and €400.0 million principal amount of 1.5 per-
cent fi xed-rate notes due April 27, 2027. Interest on
the notes is payable annually in arrears. Th e notes may
be redeemed in whole, or in part, at our option at any
time at the applicable redemption price. 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, our subsidiary, Yoplait S.A.S., issued
€200.0 million principal amount of 2.2 percent fi xed-
rate senior notes due June 24, 2021 in a private
placement off ering. Interest on the notes is payable
semi-annually in arrears. Th e notes may be redeemed
in whole, or in part, at our subsidiary’s option at any
time at the applicable redemption price. Th e notes are
senior unsecured obligations that include a change of
control repurchase provision. Th e net proceeds were
used to refi nance existing debt.
In June 2014, we repaid €290.0 million of float-
ing-rate notes.
2016 Annual Report
65
A summary of our long-term debt is as follows:
NOTE 9. REDEEMABLE AND
NONCONTROLLING INTERESTS
In Millions
May 29, 2016 May 31, 2015
5.65% notes due February 15, 2019
$1,150.0
$1,150.0
5.7% notes due February 15, 2017
3.15% notes due December 15, 2021
1,000.0
1,000.0
1,000.0
1,000.0
Euro-denominated 2.1% notes due
November 16, 2020
555.8
549.4
Euro-denominated 1.0% notes
due April 27, 2023
555.8
549.4
Floating-rate euro-denominated notes
due January 15, 2020
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
2.2% notes due October 21, 2019
Floating-rate notes
due January 29, 2016
Euro-denominated 1.5% notes
due April 27, 2027
0.875% notes due January 29, 2016
Floating-rate notes due January 28, 2016
Euro-denominated 2.2% notes
555.8
500.0
500.0
500.0
500.0
500.0
—
500.0
500.0
500.0
500.0
500.0
—
500.0
444.6
—
—
439.5
250.0
250.0
due June 24, 2021
221.0
219.7
Medium-term notes, 0.02% to 6.44%,
due fi scal 2017 or later
204.2
204.2
Other, including debt issuance
costs and capital leases
(26.1)
(36.5)
8,161.1
8,575.7
Less amount due within one year
(1,103.4)
(1,000.4)
Total long-term debt
$7,057.7
$7,575.3
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 $1,103.4 million in fi scal 2017, $604.7 million in
fi scal 2018, $1,150.4 million in fi scal 2019, $1,056.0 mil-
lion in fi scal 2020, and $555.9 million in fi scal 2021.
Certain of our long-term debt agreements contain
restrictive covenants. As of May 29, 2016, we were in
compliance with all of these covenants.
As of May 29, 2016, the $49.5 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 2017 is a $10.0 million
pre-tax loss.
66
General Mills
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 $7.0
million as of May 29, 2016.
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 all or a portion of
its redeemable interest to us at fair value once per year,
up to three times before December 2024. We adjust
the value of the redeemable interest through additional
paid-in capital on our Consolidated Balance Sheets
quarterly to the redeemable interest’s redemption value,
which approximates its fair value. Yoplait SAS pays
dividends annually if it meets certain fi nancial metrics
set forth in its shareholders agreement. As of May 29,
2016, the redemption value of the euro-denominated
redeemable interest was $845.6 million.
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 agree-
ment with Yoplait SAS for the rights to Yoplait and
related trademarks. Liberté Marques Sàrl earns a roy-
alty stream through licensing agreements with cer-
tain Yoplait group companies for the rights to Liberté
and related trademarks. Th ese entities pay dividends
annually based on their available cash as of their fi scal
year end.
During fi scal 2016, we paid $74.5 million of dividends
to Sodiaal under the terms of the Yoplait SAS and
Yoplait Marques SNC shareholder agreements.
A subsidiary of Yoplait SAS has entered into an exclu-
sive milk supply agreement for its European operations
with Sodiaal at market-determined prices through July
1, 2021. Net purchases totaled $321.0 million for fi scal
2016 and $271.3 million for fi scal 2015.
Th e holder of the GMC Class A Interests receives
quarterly preferred distributions from available net
income based on the application of a fl oating preferred
return rate to the holder’s capital account balance estab-
lished in the most recent mark-to-market valuation
(currently $251.5 million). On June 1, 2015, 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. 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.
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 noncontrolling
interests in our Consolidated Statements of Earnings.
Our noncontrolling interests contain restrictive cove-
nants. As of May 29, 2016, 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.
Share repurchases were as follows:
In Millions
2016
2015
2014
Shares of common stock
Aggregate purchase price
10.7
35.6
22.3
$ 606.7 $ 1,161.9 $ 1,774.4
Fiscal Year
Th e following table provides details of total comprehensive income:
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income (loss):
Foreign currency translation
Net actuarial loss
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 (loss)
Total comprehensive income
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2016
$ 1,697.4
$ 8.4
$ 31.0
$ (107.6)
(514.2)
$ —
188.3
0.2
16.5
(13.5)
206.8
(411.8)
(0.1)
(2.2)
2.5
(78.2)
110.3
(107.6)
(325.9)
0.1
14.3
(11.0)
128.6
(301.5)
$ 1,395.9
2.8
—
—
—
—
—
2.8
$ 11.2
(3.9)
—
—
1.7
1.5
—
(0.7)
$ 30.3
(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.
2016 Annual Report
67
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive 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 loss
Total comprehensive income (loss)
Pretax
General Mills
Tax
Net
Noncontrolling
Interests
Net
Redeemable
Interests
Net
Fiscal 2015
$ 1,221.3
$ 8.2
$ 29.9
$ (727.9)
(561.1)
$ —
202.7
(727.9)
(358.4)
1.3
13.6
0.7
(0.5)
(4.8)
0.5
170.2
(1,103.2)
(65.1)
132.8
0.8
8.8
1.2
105.1
(970.4)
$ 250.9
(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.
In Millions
Net earnings, including earnings
attributable to redeemable and
noncontrolling interests
Other comprehensive income:
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
(4.7)
172.7
438.3
(0.2)
(7.0)
0.2
(65.1)
(193.3)
(71.8)
206.0
0.3
7.4
(4.5)
107.6
245.0
$ 2,069.4
19.1
—
—
—
—
—
19.1
$ 24.9
41.4
—
—
(2.4)
(0.1)
—
38.9
$ 70.0
(a) Gain 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.
68
General Mills
In fi scal 2016, 2015, and 2014, 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
2016
2015
2014
In Millions
May 29, 2016 May 31, 2015
Estimated fair values of
stock options granted
$7.24
$7.22
$6.03
$
(644.2) $
(536.6)
Assumptions:
3.8
(25.5)
3.7
(28.8)
Risk-free interest rate
2.4%
2.6%
2.6%
Expected term
8.5 years
8.5 years
9.0 years
Expected volatility
Dividend yield
17.6%
3.2%
17.5%
3.1%
17.4%
3.1%
Foreign currency translation
adjustments
Unrealized gain (loss) from:
Securities
Hedge derivatives
Pension, other postretirement,
and postemployment benefi ts:
Net actuarial loss
Prior service credits
(1,958.2)
(1,756.1)
11.9
7.1
Accumulated other comprehensive loss $ (2,612.2) $ (2,310.7)
NOTE 11. STOCK PLANS
We use broad-based stock plans to help ensure that
management’s interests are aligned with those of our
shareholders. As of May 29, 2016, a total of 24.3 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 2005,
2006, 2007, and 2009 stock plans, under which no fur-
ther awards may be granted. Th e stock plans provide
for potential accelerated vesting of awards upon retire-
ment, termination, or death of eligible employees and
directors.
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 exer-
cise behavior, dividend yield, and the forfeiture rate. We
estimate our future stock price volatility using the his-
torical volatility over the expected term of the option,
excluding time periods of volatility we believe a market-
place 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 pro-
vide 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 our Consolidated Statements of
Cash Flows as a fi nancing cash fl ow.
2016 Annual Report
69
Stock-based compensation expense related to stock
option awards was $14.8 million in fi scal 2016, $18.1
million in fi scal 2015, and $18.2 million in fi scal 2014.
Compensation expense related to stock-based pay-
ments recognized in our Consolidated Statements of
Earnings includes amounts recognized in restructur-
ing, impairment, and other exit costs for fi scal 2016
and 2015.
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
2016
2015
2014
Fiscal Year
Net cash proceeds
Intrinsic value of
$171.9
$163.7
$108.1
options exercised
$268.4
$201.9
$166.6
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 settled in common stock and are generally subject
to a three year performance and vesting period. Th e
sale or transfer of these awards is restricted during the
vesting 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 our 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 26, 2013
29,290.3 $27.69
47,672.1
$30.22
Granted
Exercised
Forfeited or expired
Balance as of
2,789.8
(6,181.3)
(111.6)
May 25, 2014
29,452.8
28.37
44,169.0
Granted
Exercised
Forfeited or expired
Balance as of
2,253.1
(7,297.2)
(47.7)
May 31, 2015
26,991.5
30.44
39,077.2
Granted
Exercised
Forfeited or expired
Balance as of
1,930.2
(8,471.0)
(134.8)
48.33
24.78
38.74
32.10
53.70
26.68
43.73
34.35
55.72
28.49
48.16
May 29, 2016
22,385.1 $32.38
32,401.6
$37.09
70
General Mills
Information on restricted stock unit and performance share units activity follows:
Non-vested as of May 31, 2015
Granted
Vested
Forfeited, expired, or reclassifi ed
Non-vested as of May 29, 2016
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 2016 was $101.8
million and $133.7 million vested during fi scal 2015.
As of May 29, 2016, unrecognized compensation
expense related to non-vested stock options, restricted
stock units, and performance share units was $93.9
million. Th is expense will be recognized over 18 months,
on average.
Stock-based compensation expense related to
restricted stock units and performance share units
was $76.8 million for fi scal 2016, $96.6 million for fi scal
2015, and $107.0 million for fi scal 2014. Compensation
expense related to stock-based payments recognized
in our Consolidated Statements of Earnings includes
amounts recognized in restructuring, impairment, and
other exit costs for fi scal 2016 and 2015.
Equity Classifi ed
Liability Classifi ed
Share-
Settled
Units
(Th ousands)
Weighted-
Average
Grant-Date
Fair Value
6,235.6
1,287.7
(2,119.9)
(303.0)
$46.44
56.01
46.65
49.45
Share-
Settled
Units
(Th ousands)
Weighted-
Average
Grant-Date
Fair Value
237.0
$44.84
63.8
(69.5)
(19.9)
55.82
40.55
51.45
5,100.4
$48.60
211.4
$48.37
2016
1,351.5
$56.00
Fiscal Year
2015
1,708.2
$53.45
2014
2,144.1
$48.49
NOTE 12. EARNINGS PER SHARE
Basic and diluted EPS were calculated using the
following:
In Millions, Except per Share Data
2016
2015
2014
Net earnings attributable to
General Mills
$1,697.4 $1,221.3 $1,824.4
Fiscal Year
Average number of common
shares - basic EPS
Incremental share eff ect from: (a)
Stock options
Restricted stock units,
performance share units,
598.9
603.3
628.6
9.8
11.3
12.3
and other
3.2
4.2
4.8
Average number of common
shares - diluted EPS
611.9
618.8
645.7
Earnings per share - basic
$ 2.83 $ 2.02 $ 2.90
Earnings per share - diluted
$ 2.77 $ 1.97 $ 2.83
(a) Incremental shares from stock options, restricted stock units, and per-
formance 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
2016
2015
2014
Fiscal Year
Anti-dilutive stock options,
restricted stock units, and
performance share units
1.1
2.1
1.7
2016 Annual Report
71
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 con-
sistent with the requirements of applicable laws. We
made no voluntary contributions to our principal U.S.
plans in fi scal 2016, 2015 and 2014. We do not expect
to be required to make any contributions in fi scal 2017.
Our principal domestic retirement plan covering sala-
ried employees has a provision that any excess pen-
sion assets would be allocated to active participants if
the plan is terminated within fi ve years of a change in
control. All salaried employees hired on or aft er June 1,
2013 are eligible for a retirement program that does not
include a defi ned benefi t pension plan.
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 2016 and $24.0 million in voluntary con-
tributions to these plans in fi scal 2015.
Health Care Cost Trend Rates Assumed health care
cost trends are as follows:
Fiscal Year
2016
2015
Health care cost trend rate
for next year
7.3% and 7.5%
6.5% and 7.3%
Rate to which the cost
trend rate is assumed to
decline (ultimate rate)
Year that the rate reaches the
5.0%
5.0%
ultimate trend rate
2024
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 pro-
vided by our actuaries. Th is information includes recent
72
General Mills
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 7.5
percent for retirees age 65 and over and 7.3 percent for
retirees under age 65 at the end of fi scal 2016. Rates are
graded down annually until the ultimate trend rate of
5.0 percent is reached in 2024 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 2017
$ 3.1
$ (2.7)
Eff ect on the other postretirement
accumulated benefi t obligation as of
May 29, 2016
71.2
(63.8)
Th e Patient Protection and Aff ordable 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 postretirement 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 pay-
able upon death. We recognize an obligation for any
of these benefi ts that vest or accumulate with service.
Postemployment benefi ts that do not vest or accumu-
late 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:
In Millions
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
Defi ned Benefi t
Pension Plans
Fiscal Year
Other
Postretirement
Benefi t Plans
Fiscal Year
Postemployment
Benefi t Plans
Fiscal Year
2016
2015
2016
2015
2016
2015
$5,758.5 $ 5,611.8
$ 582.8 $ 517.3
36.3
23.7
5.7
(277.5)
373.6
24.1
10.3
(244.9)
(6.8)
(16.4)
(0.1)
24.1
14.1
(18.5)
—
44.0
24.1
13.6
(16.2)
—
$5,539.9 $ 5,758.5
$ 602.4 $ 582.8
$6,252.1 $ 5,618.0
$ 1,079.6 $ 1,074.8
$ 146.6
$ 145.3
134.6
267.8
137.0
249.2
0.9
7.1
1.9
19.9
19.0
44.1
—
0.5
22.4
46.9
(42.4)
3.4
7.6
3.9
1.1
10.7
7.5
4.3
—
9.5
5.7
—
65.2
(278.0)
(6.9)
10.3
—
479.7
(245.5)
(18.4)
$ 6,448.5 $ 6,252.1
14.1
3.5
(64.5)
(66.4)
(1.0)
13.6
3.2
23.5
(62.8)
(3.0)
$ 1,028.9 $ 1,079.6
—
—
11.2
(16.9)
(0.1)
$ 164.1
—
—
(0.4)
(19.1)
(0.5)
$ 146.6
obligation as of fi scal year end
$ (908.6) $ (493.6)
$ (426.5) $ (496.8)
$ (164.1)
$ (146.6)
Assumed mortality rates of plan participants are a critical estimate in measuring the expected payments a par-
ticipant 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 in fi scal 2015.
Th e accumulated benefi t obligation for all defi ned benefi t pension plans was $5,950.7 million as of May 29, 2016,
and $5,750.4 million as of May 31, 2015.
Amounts recognized in AOCI as of May 29, 2016 and May 31, 2015, 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
2016
2015
2016
2015
2016
2015
2016
2015
Net actuarial loss
Prior service (costs) credits
$(1,886.0) $(1,674.9)
(13.8)
(6.8)
$(57.6)
19.9
$(72.2)
23.8
$ (14.6)
(1.2)
$ (9.0)
(2.9)
$(1,958.2) $(1,756.1)
7.1
11.9
Amounts recorded in accumulated
other comprehensive loss
$(1,892.8) $(1,688.7)
$(37.7)
$(48.4)
$(15.8)
$(11.9)
$(1,946.3) $(1,749.0)
2016 Annual Report
73
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
2016
2015
2016
2015
2016
2015
$5,490.3
$512.3
$
— $
—
$ 4.8
$ —
4,998.3
4,498.5
440.6
1,024.7
1,074.8
159.3
143.5
—
602.4
582.8
—
—
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
2016
2015
2014
2016
2015
2014
2016
2015
2014
$ 134.6 $ 137.0 $ 133.0
$ 19.0
$ 22.4
$ 22.7
$ 7.6
$ 7.5
$ 7.7
Expected return on plan assets
(496.9)
(476.4)
(455.6)
Amortization of losses
189.8
141.7
151.0
267.8
249.2
239.5
44.1
(46.2)
6.6
46.9
(40.2)
4.9
Amortization of prior service
costs (credits)
Other adjustments
Settlement or curtailment
4.7
5.0
13.1
7.4
15.1
18.0
5.6
—
—
(5.4)
2.3
(1.0)
(1.6)
3.3
1.3
50.5
(34.6)
15.4
(3.4)
—
(2.9)
3.9
—
0.7
2.5
10.7
—
4.3
—
0.7
2.4
9.5
—
4.1
—
0.6
2.4
3.7
—
Net expense
$ 118.1 $ 92.0 $ 73.5
$ 19.4
$ 37.0
$ 47.7
$ 25.4
$ 24.4
$ 18.5
We expect to recognize the following amounts in net periodic benefi t expense in fi scal 2017:
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
$190.3
2.5
$2.5
(5.4)
$1.8
0.6
Assumptions Weighted-average assumptions used to determine fi scal year-end benefi t obligations are as follows:
Defi ned Benefi t
Pension Plans
Other
Postretirement
Benefi t Plans
Postemployment
Benefi t Plans
Fiscal Year
Fiscal Year
Fiscal Year
2016
2015
2016
2015
2016
2015
4.19%
4.38%
3.97%
4.20%
2.94%
3.55%
4.28
4.09
—
—
4.35
4.36
Discount rate
Rate of salary increases
74
General Mills
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
2016
2015
2014
2016
2015
2014
2016
2015
2014
Discount rate
4.38%
4.54%
4.54%
4.20%
4.51%
4.52%
3.55%
3.82%
3.70%
Rate of salary increases
4.31
4.44
4.44
—
—
—
4.36
4.44
4.44
Expected long-term rate of
return on plan assets
8.53
8.53
8.53
8.14
8.13
8.11
—
—
—
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 benefi t plans’ assets and their
respective levels in the fair value hierarchy at May
29, 2016 and May 31, 2015, by asset category were as
follows:
2016 Annual Report
75
In Millions
Level 1
Level 2
Level 3
Total
Assets
Level 1
Level 2
Level 3
Total
Assets
May 29, 2016
May 31, 2015
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
$ 1,543.7 $ 943.7 $ 458.0 $ 2,945.4
$ 1,634.4 $ 1,010.3 $ 542.9 $ 3,187.6
903.8
745.8
—
1,649.6
486.3
1,158.5
—
1,644.8
193.6
160.8
395.0
749.4
124.3
116.7
498.1
739.1
—
195.1
—
—
0.4
—
0.4
—
195.1
186.6
—
—
0.4
—
0.4
186.6
of pension plan assets
$ 2,836.2 $ 1,850.3 $ 853.4 $ 5,539.9
$ 2,431.6 $ 2,285.5 $ 1,041.4 $ 5,758.5
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
$ 128.9 $ 124.1 $
23.4 $ 276.4
$ 134.0 $ 120.6 $
23.7 $ 278.3
18.0
—
—
8.9
83.4
30.6
171.3
—
—
101.4
13.8
44.4
—
—
171.3
8.9
14.0
0.2
—
5.4
73.7
25.7
168.9
—
—
87.7
16.6
42.5
—
—
168.9
5.4
plan assets
$ 155.8 $ 409.4 $
37.2 $ 602.4
$ 153.6 $ 388.9 $
40.3 $ 582.8
(a) Primarily publicly traded common stock and private equity partnerships for purposes of total return and to maintain equity exposure consistent with policy
allocations. Investments include: United States and international equity securities, mutual funds, and equity futures valued at closing prices from national
exchanges; and commingled funds, privately held securities, and private equity partnerships valued at unit values or net asset values provided by the invest-
ment managers, which are based on the fair value of the underlying investments. Various methods are used to determine fair values and may include the
cost of the investment, most recent 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 and futures for purposes of total return, managing fi xed income exposure to policy allocations, and
managing duration targets. 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.
76
General Mills
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 29, 2016 and May 31, 2015:
In Millions
Pension benefi t plan assets:
Equity
Real asset investments
Other investments
Balance as of
May 31, 2015
Net
Transfers
Out
Fiscal 2016
Net Purchases,
Sales, Issuances, Net Gain Balance as of
(Loss) May 29, 2016
and Settlements
$ 542.9
$ —
$ (92.6)
$ 7.7
$ 458.0
498.1
0.4
—
—
(72.8)
—
(30.3)
395.0
—
0.4
Fair value activity of level 3 pension plan assets
$ 1,041.4
$ —
$ (165.4) $ (22.6)
$ 853.4
Postretirement benefi t plan assets:
Equity
Real asset investments
Fair value activity of level 3 postretirement benefi t plan assets
In Millions
Pension benefi t plan assets:
Equity
Real asset investments
Other investments
$
23.7
16.6
$
40.3
$ —
—
$ —
$ (1.2)
$ 0.9
$
(1.8)
(1.0)
$ (3.0)
$
(0.1)
$
23.4
13.8
37.2
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)
0.2
(86.6)
498.1
(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
Fair value activity of level 3 postretirement benefi t plan assets
$
21.1
17.9
$
39.0
$ —
—
$ —
$ 0.3
$ 2.3
$
0.5
(1.8)
$ 0.8
$ 0.5
$
23.7
16.6
40.3
Th e net change in level 3 assets attributable to unre-
alized losses at May 29, 2016, was $108.2 million for
our pension plan assets and $3.2 million for our postre-
tirement 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.
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
2016
2015
2016
2015
Asset category:
United States equities 30.5%
28.9%
37.2%
38.7%
International equities 19.0
Private equities
Fixed income
Real assets
8.3
28.6
13.6
18.4
9.5
30.3
12.9
23.4
3.9
29.4
6.1
24.1
4.1
26.3
6.8
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
2016 Annual Report
77
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 Payments 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 2017. Actual
fi scal 2017 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 2017 to
2026 as follows:
In Millions
2017
2018
2019
2020
2021
Other
Defi ned
Benefi t
Pension
Subsidy
Benefi t Plans
Plans Gross Payments Receipts
Postretirement Medicare Postemployment
Benefi t
Plans
$ 277.7
$ 61.3
$ 4.8
$ 22.1
287.9
297.1
306.8
316.4
65.5
67.1
68.3
69.2
5.2
5.6
5.2
4.2
23.2
20.6
19.2
17.8
17.0
75.6
2022-2026
1,731.5
355.2
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
78
General Mills
(ESOP). We sponsor another money purchase plan for
certain domestic hourly employees with net assets of
$21.0 million as of May 29, 2016, and $21.9 million as
of May 31, 2015. 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
$61.2 million in fi scal 2016, $44.0 million in fi scal 2015,
and $44.8 million in fi scal 2014.
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 6.9 million as
of May 29, 2016, and 7.5 million as of May 31, 2015. Th e
ESOP’s only assets are our common stock and tempo-
rary cash balances.
Th e Company stock fund and the ESOP collectively
held $711.5 million and $655.6 million of Company
common stock as of May 29, 2016 and May 31, 2015,
respectively.
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:
In Millions
2016
2015
2014
Fiscal Year
Earnings before income
taxes and aft er-tax earnings
from joint ventures:
United States
Foreign
$1,941.4 $1,338.6 $2,181.4
462.2
423.3
473.6
Total earnings before income
taxes and aft er-tax earnings
from joint ventures
$ 2,403.6 $ 1,761.9 $ 2,655.0
Income taxes:
Currently payable:
Federal
State and local
Foreign
Total current
Deferred:
Federal
State and local
Foreign
Total deferred
Total income taxes
$ 489.8 $ 392.7 $ 526.7
30.8
114.0
634.6
123.0
(6.9)
4.5
120.6
29.3
139.5
561.5
70.3
(8.7)
(36.3)
25.3
37.8
146.3
710.8
159.1
21.3
(7.9)
172.5
$ 755.2 $ 586.8 $ 883.3
Th e following table reconciles the United States statu-
tory income tax rate with our eff ective income tax rate:
Fiscal Year
2016
2015
2014
United States statutory rate
35.0%
35.0%
35.0%
State and local income taxes,
net of federal tax benefi ts
Foreign rate diff erences
Repatriation of foreign earnings
Non-deductible goodwill
Domestic manufacturing deduction
Other, net (a)
Eff ective income tax rate
0.7
(2.2)
—
2.6
(2.0)
(2.7)
0.7
(3.1)
4.5
—
(2.9)
(0.9)
1.4
(0.1)
—
—
(2.3)
(0.7)
31.4%
33.3%
33.3%
(a) Fiscal 2016 includes a 0.6 percent tax benefi t related to the divestiture of
our business in Venezuela. See Note 3 for additional information.
Th e tax eff ects of temporary diff erences that give
rise to deferred tax assets and liabilities are as follows:
In Millions
May 29, 2016 May 31, 2015
Accrued liabilities
$
89.9
$
98.0
Compensation and employee benefi ts
491.5
536.2
Unrealized hedges
Pension
Tax credit carryforwards
Stock, partnership, and
—
0.8
322.0
169.0
4.5
5.6
miscellaneous investments
353.6
384.1
Capital losses
Net operating losses
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Brands
Fixed assets
Intangible assets
Tax lease transactions
Inventories
Stock, partnership, and
14.5
97.9
84.1
1,458.0
227.0
1,231.0
1,311.7
476.3
221.8
48.0
53.0
6.1
89.3
74.5
1,363.6
215.4
1,148.2
1,346.3
446.5
208.4
50.8
59.7
miscellaneous investments
476.0
472.5
Unrealized hedges
Other
22.6
21.2
—
14.2
Gross deferred tax liabilities
2,630.6
2,598.4
Net deferred tax liability
$ 1,399.6
$ 1,450.2
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
realize suffi cient taxable income of the appropriate
character (e.g., ordinary income versus capital gain
income) within the carryforward period to allow us to
realize these deferred tax benefi ts.
Of the total valuation allowance of $227.0 million,
the majority relates to a deferred tax asset for losses
recorded as part of the Pillsbury acquisition in the
amount of $167.9 million, $44.1 million relates to var-
ious state and foreign loss carryforwards, and $13.0
million relates to various foreign capital loss carryfor-
wards. As of May 29, 2016, we believe it is more-likely-
than-not that the remainder of our deferred tax assets
are realizable.
We have $113.1 million of tax loss carryforwards. Of
this amount, $100.5 million is foreign loss carryfor-
wards. Th e carryforward periods are as follows: $72.6
million do not expire; $4.7 million expire in fi scal 2017
and 2018; and $23.2 million expire in fi scal 2019 and
beyond. Th e remaining $12.6 million are state operating
loss carryforwards, the majority of which expire aft er
fi scal 2024.
We have not recognized a deferred tax liability for
unremitted earnings of approximately $2.0 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 indefi -
nitely reinvested. In fi scal 2015, we approved a one-time
repatriation of $606.1 million of historical foreign earn-
ings to reduce the economic cost of funding restruc-
turing initiatives and the acquisition of Annie’s. We
recorded a discrete tax charge of $78.6 million in fi scal
2015 related to this action. We have previously asserted
that our historical foreign earnings are permanently
reinvested and will only be repatriated in a tax-neu-
tral manner, and this one-time repatriation does not
change this on-going assertion.
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
2016 Annual Report
79
liabilities, as well as the related interest, in light of chang-
ing facts and circumstances. Settlement of any particu-
lar 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.
Th e Internal Revenue Service (IRS) is currently audit-
ing our federal tax returns for fi scal 2013 and 2014.
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 IRS concluded its fi eld exam-
ination of our federal tax returns for fi scal 2011 and
2012. Th e audit closure and related adjustments did not
have a material impact on our results of operations or
fi nancial position. As of May 29, 2016, we have eff ec-
tively settled all issues with the IRS 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
period of such change.
Th e following table sets forth changes in our total
gross unrecognized tax benefit liabilities, exclud-
ing accrued interest, for fi scal 2016 and fi scal 2015.
Approximately $79 million of this total in fi scal 2016
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 recog-
nized. We also would record a decrease in U.S. federal
income taxes upon recognition of the state tax benefi ts
included therein.
In Millions
Fiscal Year
2016
2015
Balance, beginning of year
$161.1
$150.9
Tax positions related to current year:
Additions
31.6
34.8
Tax positions related to prior years:
Additions
Reductions
Settlements
Lapses in statutes of limitations
23.9
(25.7)
(4.0)
(10.4)
17.4
(21.8)
(12.0)
(8.2)
Balance, end of year
$176.5
$161.1
As of May 29, 2016, we expect to pay approximately
$14.7 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 2016, we recognized a net benefi t of
$2.7 million of tax-related net interest and penalties,
and had $32.1 million of accrued interest and penalties
as of May 29, 2016. 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.
NOTE 15. LEASES, OTHER COMMITMENTS,
AND CONTINGENCIES
The Company’s leases are generally for warehouse
space and equipment. Rent expense under all operating
leases from continuing operations was $189.1 million,
$193.5 million, and $189.0 million in fi scal 2016, 2015,
and 2014, 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.
80
General Mills
Noncancelable future lease commitments are:
In Millions
2017
2018
2019
2020
2021
Aft er 2021
Total noncancelable future
lease commitments
Less: interest
Operating
Leases
Capital
Leases
$ 107.9
$ 0.9
83.5
67.2
49.6
39.6
49.8
0.7
0.6
0.3
0.1
0.1
$ 397.6
$ 2.7
(0.2)
$ 2.5
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 $1 million. Depreciation on capital leases is
recorded as depreciation expense in our results of
operations.
As of May 29, 2016, we have issued guarantees and
comfort letters of $383.2 million for the debt and other
obligations of consolidated subsidiaries, and guarantees
and comfort letters of $239.1 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 $397.6
million as of May 29, 2016.
NOTE 16. BUSINESS SEGMENT AND
GEOGRAPHIC INFORMATION
We operate in the consumer foods industry. We have
three operating segments by type of customer and
geographic region as follows: U.S. Retail, 60.4 percent
of our fi scal 2016 consolidated net sales; International,
28.0 percent of our fi scal 2016 consolidated net sales;
and Convenience Stores and Foodservice, 11.6 percent
of our fi scal 2016 consolidated net sales.
In fi scal 2015, we changed how we assess operating
segment performance to exclude the asset and liability
remeasurement impact from hyperinfl ationary econo-
mies. Th is impact is now included in unallocated corpo-
rate items. All periods presented have been changed to
conform to this presentation.
In 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 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.
Our U.S. Retail segment refl ects business with a wide
variety of grocery stores, mass merchandisers, mem-
bership stores, natural food chains, drug, dollar and
discount chains, and e-commerce grocery providers
operating throughout the United States. Our product
categories in this business segment are ready-to-eat
cereals, refrigerated yogurt, soup, meal kits, 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 meals, unbaked and
fully baked frozen dough products, and baking mixes.
2016 Annual Report
81
Many products we sell are branded to the consumer
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.
Operating profi t for these segments excludes unallo-
cated corporate items, gain on divestitures, and restruc-
turing, impairment, 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 a-
tionary economies, restructuring initiative project-re-
lated 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 posi-
tions 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 manage-
ment. Under our supply chain organization, our man-
ufacturing, 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:
Net sales by class of similar products were as follows:
In Millions
Snacks
Convenient meals
Yogurt
Cereal
Dough
Baking mixes and ingredients 1,704.3
Super-premium ice cream
Vegetables
Other
Total
Fiscal Year
2016
2015
2014
$ 3,297.2 $ 3,392.0 $ 3,232.5
2,779.0
2,760.9
2,731.5
1,820.0
731.2
532.3
206.7
2,810.3
2,938.3
2,771.3
1,877.0
1,867.7
769.5
937.3
266.9
2,844.2
2,964.7
2,860.1
1,890.2
1,996.4
756.6
1,014.7
350.2
$16,563.1 $17,630.3 $17,909.6
Th e following table provides fi nancial information by
geographic area:
In Millions
Net sales:
Fiscal Year
2016
2015
2014
United States
$11,930.9 $12,501.8 $12,523.0
Non-United States
4,632.2
5,128.5
5,386.6
Total
$16,563.1 $17,630.3 $17,909.6
In Millions
Cash and cash equivalents:
United States
Non-United States
Total
May 29,
2016
May 31,
2015
$ 118.5 $
22.9
645.2
311.3
$ 763.7 $ 334.2
May 29,
2016
May 31,
2015
$ 2,755.1 $ 2,727.5
988.5
1,055.8
$ 3,743.6 $ 3,783.3
Fiscal Year
In Millions
In Millions
Net sales:
U.S. Retail
2016
2015
2014
$10,007.1 $10,507.0 $10,604.9
International
4,632.2
5,128.2
5,385.9
Convenience Stores
and Foodservice
1,923.8
1,995.1
1,918.8
Land, buildings, and equipment:
United States
Non-United States
Total
Total
Operating profi t:
U.S. Retail
International
Convenience Stores
$16,563.1 $17,630.3 $17,909.6
NOTE 17. SUPPLEMENTAL INFORMATION
$ 2,179.0 $ 2,159.3 $ 2,311.5
441.6
522.6
535.1
Th e components of certain Consolidated Balance Sheet
accounts are as follows:
and Foodservice
378.9
353.1
307.3
Total segment operating profi t 2,999.5
3,035.0
3,153.9
Unallocated corporate items
Divestitures (gain)
Restructuring, impairment,
288.9
(148.2)
413.8
—
258.4
(65.5)
In Millions
Receivables:
Customers
May 29,
2016
May 31,
2015
$ 1,390.4 $ 1,412.0
Less allowance for doubtful accounts
(29.6)
(25.3)
and other exit costs
151.4
543.9
3.6
Total
$ 1,360.8 $ 1,386.7
Operating profi t
$ 2,707.4 $ 2,077.3 $ 2,957.4
82
General Mills
In Millions
Inventories:
Raw materials and packaging
$ 397.3 $ 390.8
Finished goods
1,163.1
1,268.6
consumer promotions
May 29,
2016
May 31,
2015
In Millions
May 29,
2016
May 31,
2015
Grain
Excess of FIFO over LIFO cost (a)
Total
72.6
95.7
(219.3)
(214.2)
$ 1,413.7 $ 1,540.9
(a) Inventories of $841.0 million as of May 29, 2016, and $867.5 million as
of May 31, 2015, 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
May 29,
2016
May 31,
2015
Other receivables
Prepaid expenses
Derivative receivables,
primarily commodity-related
Grain contracts
Miscellaneous
Total
In Millions
Land, buildings, and equipment:
Land
Buildings
$ 159.3 $ 148.8
177.9
169.3
44.6
1.8
15.4
80.9
3.3
21.5
$ 399.0 $ 423.8
May 29,
2016
May 31,
2015
$
92.9 $
96.0
2,236.0
2,272.7
Other current liabilities:
Accrued trade and
Accrued payroll
Dividends payable
Accrued taxes
Accrued interest, including
interest rate swaps
Grain contracts
Restructuring and other exit costs reserve
Derivative payable
Miscellaneous
Total
$ 563.7
386.4
23.8
110.5
$ 564.7
361.8
27.9
20.7
90.4
5.5
76.6
35.6
302.5
$1,595.0
91.8
7.8
120.8
122.9
271.5
$1,589.9
Other noncurrent liabilities:
Accrued compensation and benefi ts,
including obligations for underfunded
other postretirement benefi t and
postemployment benefi t plans
Accrued taxes
Miscellaneous
Total
$1,755.0
204.0
128.6
$2,087.6
$1,451.4
202.5
90.9
$1,744.8
Certain Consolidated Statements of Earnings
amounts are as follows:
Prepaid expenses and other current assets:
In Millions
May 29,
2016
May 31,
2015
Buildings under capital lease
0.3
0.3
In Millions
Equipment
Equipment under capital lease
Capitalized soft ware
Construction in progress
5,945.6
6,091.1
3.0
523.0
702.7
9.8
499.0
622.2
Total land, buildings, and equipment
9,503.5
9,591.1
Depreciation and amortization
Research and
development expense
Advertising and media expense
(including production and
Fiscal Year
2016
2015
2014
$608.1
$588.3
$585.4
222.1
229.4
243.6
Less accumulated depreciation
(5,759.9)
(5,807.8)
communication costs)
754.4
823.1
869.5
Total
$ 3,743.6 $ 3,783.3
In Millions
Other assets:
Investments in and advances
to joint ventures
Pension assets
Exchangeable note with related party
Life insurance
Miscellaneous
Total
May 29,
2016
May 31,
2015
$ 518.9 $ 530.6
90.9
12.7
26.3
102.9
138.2
30.7
26.6
85.1
Th e components of interest, net are as follows:
Fiscal Year
Expense (Income), in Millions
2016
2015
2014
Interest expense
Capitalized interest
Interest income
Interest, net
$319.6
(7.7)
(8.1)
$303.8
$335.5
(6.9)
(13.2)
$315.4
$323.4
(4.9)
(16.1)
$302.4
Certain Consolidated Statements of Cash Flows
$ 751.7 $ 811.2
amounts are as follows:
In Millions
2016
2015
2014
Cash interest payments
Cash paid for income taxes
$292.0
533.8
$305.3
562.6
$288.3
757.2
Fiscal Year
2016 Annual Report
83
NOTE 18. QUARTERLY DATA (UNAUDITED)
Summarized quarterly data for fi scal 2016 and fi scal 2015 follows:
In Millions, Except Per Share Amounts
2016
2015
2016
2015
2016
2015
2016
2015
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
$4,207.9 $4,268.4
$4,424.9 $4,712.2
$4,002.4 $4,350.9
$3,927.9 $4,298.8
1,554.6 1,438.7
1,540.6 1,619.1
1,357.5 1,375.9
1,376.8 1,515.5
426.6
345.2
529.5
346.1
361.7
343.2
379.6
186.8
$ 0.71 $ 0.56
$ 0.88 $ 0.58
$ 0.61 $ 0.57
$ 0.63 $ 0.31
$ 0.69 $ 0.55
$ 0.87 $ 0.56
$ 0.59 $ 0.56
$ 0.62 $ 0.30
Dividends per share
$ 0.44 $ 0.41
$ 0.44 $ 0.41
$ 0.44 $ 0.41
$ 0.46 $ 0.44
Market price of common stock:
High
Low
$ 59.55 $ 55.56
$ 59.23 $ 53.82
$ 60.14 $ 55.11
$ 65.36 $ 57.14
$ 54.36 $ 50.15
$ 55.41 $ 48.86
$ 54.12 $ 51.13
$ 58.85 $ 51.70
During the fourth quarter of fi scal 2016, we sold our General Mills de Venezuela CA subsidiary to a third party
and exited our business in Venezuela. As a result of this transaction, we recorded a pre-tax loss of $37.6 million. In
addition, we sold our General Mills Argentina S.A. foodservice business in Argentina to a third party and recorded a
pre-tax loss of $14.8 million.
Th e eff ective tax rate for the fourth quarter of fi scal 2016 was 19.2 percent, primarily driven by tax credits and the
impact of the divestiture of our business in Venezuela.
During 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, 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.
84
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).
Adjusted average total capital. Notes payable, long-
term debt including current portion, redeemable inter-
est, noncontrolling interests, and stockholders’ equity
excluding AOCI, and certain aft er-tax earnings adjust-
ments are used to calculate adjusted return on average
total capital. Th e average is calculated using the aver-
age of the beginning of fi scal year and end of fi scal
year Consolidated Balance Sheet amounts for these line
items.
Adjusted operating profi t margin. Operating profi t
adjusted for certain items aff ecting year-over-year com-
parability, divided by net sales.
Adjusted return on average total capital. Net earn-
ings including earnings attributable to redeemable and
noncontrolling interests, excluding aft er-tax net inter-
est, and adjusted for certain items aff ecting year-over-
year comparability, divided by adjusted average total
capital.
Average total capital. Notes payable, long-term debt
including current portion, redeemable interest, noncon-
trolling interests, and stockholders’ equity are used to
calculate return on average total capital. Th e average is
calculated using the average of the beginning 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 equity
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.
Free cash fl ow. Net cash provided by operating activ-
ities less purchases of land, buildings, and equipment.
Free cash flow conversion rate. Free cash flow
divided by our net earnings, including earnings attrib-
utable to redeemable and noncontrolling interests
adjusted for certain items affecting year-over-year
comparability.
2016 Annual Report
85
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.
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 conversion rate. Net cash pro-
vided by operating activities, divided by net earnings,
including earnings attributable to redeemable and non-
controlling interests.
Operating cash fl ow to debt ratio. Net cash provided
by operating activities, divided by the sum of notes pay-
able and long-term debt, including the current portion.
Organic net sales growth. Net sales growth adjusted
for foreign currency translation, as well as acquisitions,
divestitures, and a 53rd week impact, when applicable.
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 includ-
ing earnings attributable to redeemable and noncon-
trolling interests, excluding after-tax net interest,
divided by average total capital.
Segment operating profi t margin. Segment operat-
ing profi t divided by net sales for the segment.
SKU. Shop keeping unit.
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.
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.
86
General Mills
Total Return to Stockholders
Th ese line graphs compare the cumulative total return
for holders of our common stock with the cumula-
tive 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 beginning of the applicable period, and assume
the reinvestment of all dividends.
On June 13, 2016, 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 11
May 12
May 13
May 14
May 15
May 16
Total Return to Stockholders
10 Years
340
320
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
May 06 May 07 May 08 May 09 May 10 May 11 May 12 May 13 May 14 May 15 May 16
General Mills (GIS)
S&P 500
S&P Packaged Foods
2016 Annual Report
87
Board of Directors (cid:2)As of August 1, 2016
Bradbury H. Anderson 2*,5
Retired Chief Executive Officer
and Vice Chairman,
Best Buy Co., Inc.
(electronics retailer)
R. Kerry Clark 3,4,**
Retired Chairman and
Chief Executive Officer,
Cardinal Health, Inc.
(medical services and supplies)
David M. Cordani 1,2
President and Chief Executive
Officer, Cigna Corporation
(health insurance and services)
Paul Danos 3,5,†
Dean Emeritus, Tuck School
of Business and Laurence(cid:455)F.
Whittemore Professor of
Business Administration,
Dartmouth College
Roger W. Ferguson Jr. 3,4
President and Chief Executive
Officer, TIAA
(financial services)
Henrietta H. Fore 4,5*
Chairman and
Chief Executive Officer,
Holsman International
(manufacturing, consulting
and investment services)
Maria G. Henry 1,2
Senior Vice President and
Chief Financial Officer,
Kimberly-Clark Corporation
(consumer products)
Heidi G. Miller 1*,3
Retired President,
J.P. Morgan International,
J.P. Morgan Chase & Co.
(banking and financial services)
Steve Odland 2,4*
President and Chief Executive
Officer, Committee for
Economic Development
(public policy) and Former
Chairman and Chief Executive
Officer, Office Depot, Inc.
(office products retailer)
Kendall J. Powell
Chairman and Chief Executive
Officer, General Mills, Inc.
Michael D. Rose 2,4,†
Retired Chairman of the
Board, First Horizon National
Corporation (banking and
financial services)
Robert L. Ryan 1,3*
Retired Senior Vice President
and Chief Financial Officer,
Medtronic, Inc.
(medical technology)
Senior Management (cid:2)As of August 1, 2016
Richard C. Allendorf
Senior Vice President;
General Counsel and Secretary
Ricardo Fernandez
Vice President;
President, Latin America
Gary Chu
Senior Vice President;
President, Greater China
John R. Church
Executive Vice President,
Supply Chain
David V. Clark
Vice President; President,
Yogurt USA
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,
International Yogurt and Ice
Cream Strategic Business Unit
John M. Foraker
Vice President; President,
Annie’s Foods
Jeffrey L. Harmening
President; Chief
Operating Officer
David P. Homer
Senior Vice President;
Chief Executive Officer,
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 Officer
James H. Murphy
Senior Vice President;
President, Big G Cereals
88
General Mills
Kimberly A. Nelson
Senior Vice President,
External Relations; President,
General Mills Foundation
Elizabeth M. Nordlie
Vice President;
President, Baking
Jonathon J. Nudi
Senior Vice President;
President, Europe, Australia
and New Zealand
Shawn P. O’Grady
Senior Vice President;
President, Sales and
Channel Development
Christopher D. O’Leary
Executive Vice President;
Chief Operating Officer,
International
Kendall J. Powell
Chairman and
Chief Executive Officer
Bethany C. Quam
Vice President; President,
Convenience Stores
and Foodservice
Eric D. Sprunk 1,5
Chief Operating Officer,
NIKE, Inc.
(athletic footwear and apparel)
Dorothy A. Terrell 4,5
Managing Partner,
FirstCap Advisors
(venture capital)
Jorge A. Uribe 2,5
Retired Global Productivity and
Organization Transformation
Officer, Procter & Gamble
Company (consumer products)
Board Committees
1 Audit
2 Compensation
3 Finance
4 Corporate Governance
5 Public Responsibility
* Denotes Committee Chair
** Independent Lead Director
† Retiring from the board
September 2016
Ann W. H. Simonds
Senior Vice President;
Chief Marketing Officer
Anton V. Vincent
Vice President;
President, Snacks
Sean N. Walker*
Senior Vice President
Jacqueline R. Williams-Roll
Senior Vice President;
Chief Human Resources Officer
Keith A. Woodward
Senior Vice President;
Treasurer
Jerald A. Young
Vice President; Controller
*on leave of absence
Shareholder Information
World Headquarters
Number One General Mills Boulevard
Minneapolis, MN 55426-1347
Phone: (763) 764-7600
Website
GeneralMills.com
Markets
New York Stock Exchange
Trading Symbol: GIS
Independent Auditor
KPMG LLP
4200 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-3900
Phone: (612) 305-5000
Investor Inquiries
General Shareholder Information:
Investor Relations Department
Phone: (800) 245-5703 or (763) 764-3202
Analysts/Investors:
Jeff Siemon
Director, Investor Relations
Phone: (763) 764-2301
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.
Notice of Annual Meeting
The annual meeting of shareholders
will be held at 8:30 AM, Central Daylight
Time, Tuesday, Sept. 27, 2016, at the
Radisson Blu Hotel in downtown
Minneapolis at 35 South Seventh Street,
Minneapolis, MN 55402. 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
For 150 years, General Mills has been serving the world by making food people love.
Our goal is to continue doing so by treating the world, its resources and people
with(cid:455)care. We are committed to providing convenient, nutritious food for consumers
globally. We promote environmentally and socially responsible practices to protect the
resources upon which our business depends. And we work to strengthen communities
through philanthropy and volunteerism and by increasing food security worldwide.
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:
2016 General Mills Holiday Gift Box
Department 11045
P.O. Box 5016
Stacy, MN 55078-5016
Or you can place an order online at: GMIHolidayGiftBox.com
Please contact us after October 15, 2016.
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This report is printed on recycled paper.
© 2016 General Mills
Number One General Mills Boulevard
Minneapolis, MN 55426-1347
GeneralMills.com